SULFUR, COKE, AND CRUDE QUALITY-CONCLUSION U.S. CRUDE SLATE CONTINUES TO GET HEAVIER, HIGHER IN SULFUR

Edward J. Swain
Consultant
Houston

A review of the API gravity and sulfur content of crudes input to U.S. refinery stills indicates a continuing trend toward processing poorer-quality crudes. Over the past 10 years, gravity has declined by 0.17'/year, and sulfur content has increased 0.029 wt %/year.

Additionally, as the production of U.S. crudes continues to decrease, foreign crude oils will be imported in greater quantities to fill the needs of U.S. refineries.

A review of the historical data on foreign crude oils indicates that, in the coming years, foreign crudes imported into the U.S. will become heavier. Refiners on the East Coast and Gulf Coast need to modify their heavy-end processing units-as many already are doing-to accept these heavier crudes and produce light, clean transportation fuels.

CRUDE QUALITY

The U.S. Department of Energy (DOE) has been reporting monthly and yearly composite values of the API gravity and sulfur content of crude oils processed in the U.S. for 12 years. The latest 10-year (1984-1993) historical composite of these values is shown in Table 1 (20687 bytes). The five Petroleum Administration for Defense (PAD) districts, or PADDS, are identified in Fig. 1 (15144 bytes).

A simple regression analysis was conducted on each set of data and plotted for comparison with the DOE data.

The quality of crude oil processed by refineries is determined by:

Crude types available domestic and foreign sources
Refinery configuration-downstream processing capabilities to handle crude oil quality variations
Crude oil quality price structure (light vs. heavy, sweet vs. sour)
Marketable product slate to give reasonable refinery operating margins.

PADD 1

Refineries operating in PADD 1, roughly the entire U.S. East Coast, have increased the use of foreign crudes from a low of more than 80% in the early 1980s, to more than 97% in 1993. The crude quality appears to have declined slightly over the last 10 years, with a decrease in API gravity of about 0.07'/year, and a slight-to-moderate increase in sulfur content-0.012 wt %/year.

The 5 and 10-year trends are:

1984 to 1993 0.07 API/year, +0.012 wt % sulfur/year
1989 to 1993 - 0 API/year, +0.036 wt % sulfur/year.

Crude oil quality trends over the last 5 years indicate that API gravity has averaged about 31.23 and sulfur content has increased at a fairly rapid rate. This has come about because of the increasing quantities of high-gravity, low-sulfur crudes being imported from African countries (mainly Angola and Nigeria) and the North Sea (mainly from the Norway and U.K. sectors).

Some data to consider about refineries in PADD I during 1993 are:

Crude runs were 1,356,600 b/cd.
Refineries operated at 88.0% of operable capacity.
Crude runs to refineries had a composite API gravity of 31.36 and a sulfur content of 0.99 wt %.
Foreign crude receipts were 1,339,500 b/cd.
No Alaskan crude receipts were received during 1993 (as in 1991 and 1992).

The top five countries whose crudes were processed by PADD 1 refineries were:

Nigeria-369,200 b/cd
Venezuela-179,700 b/cd
Angola - 160,600 b/cd
Saudi Arabia-157,600 b/cd
U.K. - 103,500 b/cd.

PADD 2

Refineries operating in PADD 2, the Midwest, have increased the use of foreign crude oils from a little more than 20% in the mid-1980s to 44% in 1993.

Crude quality appears to have declined moderately over the last 10 years, with API gravity falling about 0.23'/Year, and a moderate increase in sulfur content of 0.025 wt %/year.

The 5 and 10-year trends are:

1984 to 1993 0.23 API/year, +0.025 wt % sulfur/year
1989 to 1993 0. 25 API/year, + 0.028 wt % sulfur/year.

Crude oil quality trends over the last 5 years indicate that the rate of decrease in API gravity increased slightly, as did the rate of sulfur content increase, as compared to the 10-year rates. Each year, crude oil production in PADD 2 states is decreasing by about 36,000 b/cd. In order for PADD 2 refineries to maintain crude runs, crude oil imports must increase.

The pipelines that bring crudes from the Gulf Coast receiving terminals are reported to be reaching maximum deliverable capacities; therefore, more Canadian crudes will be imported. Canadian crudes are usually medium-gravity, medium-sulfur, and would aid in further decreasing the API gravity and increasing the sulfur of the composite crude processed by PADD 2 refineries.

Some data to consider about refineries in the district during 1993 are:

Crude runs were 3,139,100 b/cd.
Refineries operated at 95.0% of operable capacity.
Crude runs to refineries had a composite API gravity of 33.74 and a sulfur content of 1.10 wt %.
foreign crude receipts were 1,346,800 b/cd.
alaskan crude receipts were 21,700 b/cd, about a 14.8% increase from 1992 receipts.

The top five countries whose crudes were processed by PADD 2 refineries were:

canada - 666,300 b/cd
venezuela - 141,700 b/cd
Mexico - 133,300 b/cd
Nigeria - 100,100 b/cd
Saudi Arabia - 82,100 b/cd.

PADD 3

Refineries operating in this district-the U.S. Gulf Coast-have increased the use of foreign crude oils from nearly 30% in the mid1980s to more than 60% in 1993. Crude quality appears to have declined rather rapidly over the last 10 years, with API gravity decreasing about 0.23/year, and sulfur content increasing 0.042 wt %/year.

The 5 and 10-year trends, as shown in Table 2 (19424 bytes), are:

1984 to 1993 - 0.23 API/year, + 0.042 wt % sulfur/year
1989 to 1993 - 0.30 API/year, + 0.035 wt % sulfur/year.

Crude oil quality trends over the last 5 years indicate that the rate of decline in API gravity increased moderately, and the rate of increase in sulfur content decreased slightly, compared to the 10-year rates.

Crudes from Mexico, Saudi Arabia, and Venezuela are major sources of non-U.S. crudes for PADD 3. These crude oils are medium-to-heavy, in terms of API gravity, and have a medium sulfur content, which affects the average characteristics of the crude processed by PADD 3 refineries.

Three U.S./non-U.S. joint venture refineries in PADD 3 are being modified to process crude oils from Mexico and Venezuela. The trend toward lower API gravity and higher sulfur, therefore, should continue.

Some data to consider about PADD 3 refineries during 1993 are:

Crude runs were 6,140,700 b/cd.
Refineries operated at 92.1% of operable capacity.
Crude runs to refineries had a composite API gravity of 32.32 and a sulfur content of 1.20 wt %.
Foreign crude receipts were 3,735,700 b/cd.
Alaskan crude receipts were 32,600 b/cd, about a 72.7% drop from 1992 receipts.

The top five countries whose crudes were processed by PADD 3 refineries were:

Saudi Arabia 1,041,700 b/cd
Venezuela - 676,100 b/cd
Mexico - 638,200 b/cd
Kuwait - 279,800 b/cd
Nigeria - 252,700 b/cd.

PADD 4

Refineries operating in this district are fairly well isolated from foreign crudes, other than those from Canada. PADD 4 refineries process mostly local crudes from Colorado, Montana, Utah, and Wyoming. Canadian crude oils have averaged about 17% of crude runs during the last 5 years, however, up from the 10% processed in the mid-1980s.

The crude quality appears to have declined moderately over the last 10 years, with API gravity decreasing about 0.15'/Year, and a moderate increase in sulfur content of about +0.030 wt %/year.

The 5 and 10-year trends are:

1984 TO 1993 - -0.15 API/YEAR, +0.030 WT % SULFUR/YEAR
1989 to 1993 - -0.31 API/year, +0.082 wt % sulfur/year.

Crude oil quality trends over the last 5 years changed rather rapidly compared to the 10-year trends. The rate of decrease in API gravity doubled and the rate of increase in sulfur content grew 173%.

High-gravity, low-sulfur crude production in PADD 4 states is decreasing by about 20,000 b/cd annually. The lost high-quality domestic crudes are being replaced by imported Canadian crudes. The decline in gravity and increase in sulfur content, therefore, should continue.

Some data to consider about PADD 4 refineries during 1993 are:

Crude runs were 447,300 b/cd.
Refineries operated at 87.4% of operable capacity.
Crude runs to refineries had a composite API gravity of 34.51 and a sulfur content of 1.18 wt %.
Foreign crude oils imported were from Canada at a rate of 90,300 b/cd.
No Alaskan crude oil was received during 1993, same as in 1991 and 1992.

PADD 5

Refineries operating in PADD 5, the U.S. West Coast, have decreased their use of foreign crudes from a high of about 14% in 1980 to a low of about 10% in 1993.

The crude oils processed by PADD 5 refineries had an average API value of about 25.31 over the last 10 years, although the yearly values varied between a high of 25.85 (1989) and a low of 24.88 (1986). The sulfur content experienced a moderate increase of +0.015 wt %/year.

The 5 and 10-year trends, as shown in Table 3 (19630 bytes), are:

1984 to 1993 - 0.002 API/year, +0.015 wt % sulfur/year
1989 to 1993 - 0.16 APT/year, +0.018 wt % sulfur/year.

Crude oil quality trends over the last 5 years indicate a moderate increase in the rate of API gravity decline, and the sulfur content rate trend has increased slightly, compared to 10-year rate.

Two refineries in Hawaii process crudes from the Pacific Rim and Middle East, plus some Alaska North Slope (ANS). The refineries in the Pacific Northwest process ANS and Canadian crude oils.

The major crude oils processed by California refineries are California crudes and ANS. The California crudes are rather poor quality 25.0-26.0 API and a sulfur content of 1.05-1.10 wt %.

ANS cannot be exported under current legislation. There has been, however, some action to change the restriction to allow the export of ANS. A recent DOE study, "Exporting Alaskan North Slope Crude Oil Benefits and Costs," (June 1994) has reviewed exporting 100,000, 200,000, and 300,000 b/cd of ANS crude.

If the export ban is lifted, the first 100,000 b/cd would probably go to refineries in PADDs 2 and 3, which in 1993 used only 54,300 b/cd of ANS. If ANS crude oil is exported in the future, volumes will not be large before the year 2000. ANS production is declining, and new production fields are required in the North Slope region.

The loss of ANS crude will increase use of California crudes, and thus will affect the declining quality of the crudes processed in refineries in the Pacific Northwest and California.

Some data to consider about PADD 5 refineries during 1993 are:

Crude runs were 2,528,800 b/cd.
Refineries operated at 88.5% of operable capacity.
Crude runs to refineries had a composite API gravity of 25.39 and a sulfur content of 1.16 wt %.
Foreign crude oil receipts were 274,700 b/cd.
Alaskan crude receipts were 1,394,200 b/cd, about a 0.8% drop from 1992 receipts.

The top five countries whose crudes were processed by PADD 5 refineries were:

Canada - 70,900 b/cd
Indonesia - 59,600 b/cd
Ecuador 40,100 b/cd
Kuwait 24,600 b/cd
China - 19,600 b/cd.

TOTAL U.S.

The quality of the crude processed in U.S. refineries appears to be declining at a moderate rate, with API gravity falling about 0.17'/year over the last 10 years (Fig. 2) (8881 bytes). There has been a moderate increase in sulfur content of the lower-quality crude oils-about 0.029 wt %/year over the 10-year period (Fig. 3) (9511 bytes).

The 5 and 10-year trends, as shown in Table 4 (15994 bytes), are:

1984 to 1993 - -0.17 API/year, +0.029 wt % sulfur/year
1989 to 1993 - -0.22 API/year, +0.024 wt % sulfur/year.

Crude oil quality trends over the last 5 years indicate that the rate of decrease in API gravity was about 30% greater than the 10-year rate. The rate of increase in sulfur content declined by about 17%. These changes suggest that domestic and imported crudes have become lower-gravity material, with only slightly reduced sulfur content.

In 1989, crude imports averaged about 5.843 million b/cd, whereas 1993 imports averaged about 6.787 million b/cd. As domestic crude production continues to fall, an increase in crude imports will be required to meet U.S. refinery runs.

The API grouping and the volume percent of crudes imported during the past 5 years are:

20.1-25.0 API - 16.4 Vol %
25.1-30.0 API - 19.5 Vol %
30.1-35.0 API - 33.8 Vol %
35.1-40.0 API - 22.0 Vol %
40.1-45.0 API - 2.8 vol
45.1+ APR 1.8 vol %.

It is expected that imported crudes will follow a similar distribution in the near term. However, in the next 5-10 years, imported crudes will tend to be heavier.

Some reasons that crudes imported into the U.S. will be of lower quality are:

The worldwide increase in crude oil demand (mainly in Pacific Rim countries)
The price spreads related to crude gravity
The political stability of crude-producing countries
The decreasing production of high-gravity, low-sulfur crude oils.

The top five sources of imported crudes during 1993 were:

Saudi Arabia 1,282,000 b/d
Venezuela - 1,010,000 b/d
Canada 900,000 b/d
Mexico 863,000 b/d
Nigeria 722,000 b/d.

These five countries supplied more than 70% of the imported crudes used by U.S. refiners during 1993. A total of 37 countries supplied crude oils to the U.S. refining industry during 1993.

It should be noted that a crude oil source country may produce and export more than one grade of crude oil. For example, Saudi Arabia produces and exports four grades of crude oils:

Arabian Extra Light-37.2 API, 1.15 wt % sulfur
Arabian Light-33.4 API, 1.77 wt % sulfur
Arabian Medium-28.8 API, 2.49 wt % sulfur
Arabian Heavy-27.4 API, 2.80 wt % sulfur.

One therefore needs to know not only the crude's country of origin, but also the grade and quantity that is being received by the importing country,

IMPORTED CRUDES

Crudes imported into the U.S. between 1984 and 1993, grouped by API gravity subgroups, are presented in Table 5 (7442 bytes). The imported crudes are further grouped into two main groups, greater and less than 30 API. This grouping is illustrated in Fig. 4 (11445 bytes).

During the 1981-1982 crude oil price spike, there was some movement to import more heavier crudes than lighter crudes. However, the 1989-1993 period has seen a leveling out of the ratio of heavier crudes to lighter at about 1:1.52.

LANDING COSTS

Landing costs of crudes imported into the U.S. between 1984 and 1993 grouped into API subgroups, are shown in Table 6 (6902 bytes). It is obvious that crude prices fell significantly between 1984 and 1986, and were generally cycling upward in the 1986-1993 period. More important, however, is the delta price value between the API groups during this time period.

In an attempt to see how delta crude prices changed, crudes in the 30.1-35.0 API group were assumed to be the base price.

LIGHT CRUDES

The base crude price was subtracted from the prices of crudes in the 40.1-45.0 API group and the 35.1-40. 0 API group. These "delta" values are illustrated in Fig. 5 (10699 bytes).

In viewing Fig. 5 (10699 bytes), the delta prices indicate that there is hardly any premium for 40.1-45.0 API group crudes over the 35.1-40.0 API group crudes in the 19841988 period. The delta price for the 35.1-40.0 API crudes and the 40.1-45.0 API crudes cycled around $0.92/bbl and $1.04/bbl, respectively; therefore, the premium price spread was only about $0.12/bbl.

Delta and premium prices improved somewhat in the 1989-1993 period. The delta price for the 35.1-40. O API crudes and the 40.1-45.0' API crudes cycled around $1.55/bbl and $1.99/bbl, respectively; therefore, the premium price spread increased to at least $0.44/bbl.

HEAVY CRUDES

Crude prices in the 25.130.0 API group and the 20.1-25.0' API group were subtracted from the base crude oil price. The delta values are illustrated in Fig. 6 (10397 bytes).

Delta prices were at their maximum values in 1984 and, especially, 1991. The delta price for the 25.1-30.0 API crudes and the 20.125.0 API crudes cycled around $0.84/bbl and $2.54/bbl, respectively, during the 1984-1988 period. The premium price spread was about $1.70/bbl.

Delta prices for the 25.130.0 API crudes collapsed during the 1989-1993 period. In fact, the delta price became $-O.41/bbl in 1990. This may have been caused by the Iraq-Kuwait situation.

The delta price for the 25.1-30.0 API crudes and the 20.1-25.01 API crudes cycled around $0.56/bbl and $3.25/bbl, respectively, during the 1989-1993 period. Therefore, the premium price spread was about $2.72/bbl.

It will be interesting to see what happens to these delta values in 1994 and 1995, as some U.S. refiners begin to bring on line portions of major upgrade programs.