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Petroleum Lifecycle

How gas gets to your car and the factors that affect it

Robert Mielish

on 20 February 2012

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Transcript of Petroleum Lifecycle

PETROLEUM LIFECYCLE water Global Supply Choke Points Global Market Benchmark Prices WTI Brent Futures Cushing, OK Strategic Petroleum Reserve U.S. Gulf Coast Regular U.S Crude Inventory Refineries Terminals Wholesaler Local Distributer Local Market Pricing Mechanism Pipelines Global Demand SPOT Market Algeria Equador Iraq Libya Qatar U.A.E Angola Iran Nigeria Saudi Arabia How Safe or stable are these countries? How does it get from "there" to "here" Straight of Malacca-
Links Indian Ocean to So. China Sea.
Supply to China and Indonesia
China is a growing economy!! Bab-el-Mandab-
Closure prevents tankers from
reaching the Suez/Sumed Pipeline
Result- long way around So. Africa Suez Canal-
Located in Egypt
Connects Red Sea to Gulf of Suez
Closure would result in 6,000
additional miles of travel The Bosporus-
One of the busiest and
most dangerous chokepoints.
Supplies Western and Southern Europe Danish Straits-
Supplies Europe with
Russian exports... Federal Off Shore=50%
New Mexico=5%
Alabama=1% The Butterfly Effect? Does a butterfly flapping its wings "over there" affect us "over here?" Where does our gas come from? Gasoline is derived from Crude Oil. Crude Oil is extracted from the ground "somewhere" and pumped to "someplace" by "some method" Crude oil is refined "somewhere" and "refined" into several products such as:
Jet Fuel
Asphalt/Road Oil
Raw Material for Petro Chemicals such as:
Ethylene, Benzene, Polyester Where is "somewhere" or "over there?" ... these countries? OR Brazil Canada Columbia Mexico Russia How about Domestic Production Futures are based on the delivery of a "Physical Commodity" at some point in the future.

The futures "VALUE" is affected by weather, geo-political events, global economic activity, volatility, real value of the resource, and the current strike price. The futures can be affected by media. Real Value of the commodity= The actual cost of the product minus and interest or estimated return. Futures usually come in the following delivery periods. Prompt (upcoming month for delivery), 1-month, 2-month, 3-month 4-month and so on. West Texas Intermediate or WTI.

AKA: Texas light sweet
Used as a benchmark in oil pricing at the NYSE

It is a light (low density) and sweet (low sulfur) crude oil

It is easily refined and converted to motor fuel products. Go to: http://online.wsj.com/mdc/public/page/mdc_commodities.html Brent.

AKA: Brent Crude or Brent Sweet Light Crude Brent Blend, London Brent

Used to price two thirds of the world's internationally traded crude oil supply.

Obtained from the North Sea Refineries change the density of crude oil through several processes such as Distillation, Conversion, and Alkylation.

Distillation= Heat+Chemicals+Catalysts+Pressure=

Conversion= Coker, Hydrocracker and Fluidized Catalytic Cracker (FCC)

Alkylation= Takes products too light for gasoline and adds heavy material to a heavier high-octane product Crude
Oil Vacuum COKER Uses pressure and high temperature to convert the heavy products into lighter products. Hydro Cracker Uses hydrogen and catalysts to change products into lighter products. FCC converts heavy products into lighter products. Uses Aklylation to combine light prducts with heavy products to obtain a high octane product Gulf Cost Refineries:

The following account for 10-15% of domestic production

USA ALON-80,000 bbls/day
Placid Port Allen- 58,000 bbls/day
Exxon, Baton Rouge- 524,000 bbls/day
Motiva Convent- 227,000 bbls/day
Valero- St Charles- 250,000 bbls/day
Marathon- GaryVille-436,000 bbls/day
Motiva Norco- 220,000 bbls/day
Murphy Meraux 125,000 bbls/day
Conoco-Phillips- Belle Chase-247,000 bbls/day
Chalimette- 189,000 bbls/day OPEC and Non-OPEC What affects refinery output Hurricane
Scheduled Maintenance
Unscheduled Maintenance
Product Availability Emergency crude oil is stored in the Strategic Petroleum Reserve. Salt caverns along the Texas and Louisiana coastline, provide a secure and affordable storage. Coastal salt caverns cost 10 times less than aboveground tanks and 20 times less than hard rock mines. The Gulf Coast salt caverns were selected because they provide the most flexible means for connecting to the Nation's commercial oil transport network. Strategic Reserve oil can be distributed through interstate pipelines to nearly half of the Nation's oil refineries or loaded into ships or barges for transport to other refineries. During the 1970's the U.S. Government decided to create the Strategic Petroleum Reserve after the supply disruption of the 1970's. The U.S. Government initially 250 million barrels of crude oil and has since created more storage. Today's inventory of 726.6 million barrels is the highest ever held in the SPR. Actual physical capacity is 727 million barrels. Since oil floats on water, fresh water is pumped into the bottom of a cavern. The water displaces the crude oil to the surface. Once on the surface, oil is extracted, packaged and shipped using a network of pipelines. The pipeline deliver the oil to terminals and refineries around the nation. How do we get the oil out of the SPR? How much oil is in the SPR? When was the SPR created? What is the SPR? What is the SPR? Louisana Offshore Oil Port
(LOOP) LOOP WTI Cushing, OK How many days of supply are in the SPR? Approximatley 75 days worth of oil are kept in the SPR.

It takes a Presidential or Energy Secretary aurhority to release portions of the SPR. Can we buy some of the SPR? Yes, But....

State must pay cash and assume all costs for delivery and refining... Scheduled Maintenance:

Usually occurs when consumption is the lowest i.e. Jan, Feb and Mar or in Oct and Nov when demand is reduced. Unscheduled Maintenance:

Can occur anytime, however, from a vulnerability point of view the following is important to consider:

Distillation affects every stage of production and may impede any movement.

Fluidized Catalytic Cracker (FCC) failures have a great affect, as the FCC is what ultimatleyproduces the gasoline. RBOB RBOB= "reformulated gasoline blendstock for oxygen blending." It is the benchmark gasoline contract on NYMEX. RBOB is an unfinished gasoline product that does not contain MTBE. Colonial Pipeline Colonial Pipeline Co. is an interstate common carrier of petroleum products. Each day, it delivers an average of 100 million gallons of gasolines, kerosenes, home heating oils, diesel fuels and national defense fuels to shipper terminals in 12 states and the District of Columbia. Colonial system transports these fuels primarily from refineries in Texas, Louisiana, Mississippi and Alabama to 267 marketing terminals serving the communities across the South and Eastern United States. Plantation Pipeline Plantation Pipeline delivers approximately 600,000 bbls/day of gasoline, jet fuel, diesel and biodiesel through its 3,100-mile pipeline network, which originates in Louisiana and ends in the Washington, D.C. area. Along the way it serves various metropolitan areas including Birmingham, Alabama; Atlanta, Georgia; Charlotte, North Carolina; and the Washington D.C. area. Greensboro
Wilmington Pipeline?
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