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Summary Crude Oil Quality Association Houston, TX May 30, 2002 The meeting agenda was distributed to those in attendance. There were 31 attendees of which 12 paid the attendance fee. Legal Review of Anti-Trust - Harry Giles, COQA Facilitator, reminded all attendees to review the Standard Setting Rules prior to each meeting. Please refer to the Information section of coqa-inc.org for a copy of the Rules. Mercury Occurrence in Crude and Impact on Refineries was presented by Dr. Mark Wilhelm of Mercury Technology Services. Mercury in oil comes in several species such as elemental, organic mercury, mercuric sulfide and ionic mercury compounds. The different species in crude oil distribute to different distillation cuts, thus possibly affecting a wide area of refining operations. There are commercial removal techniques available but not all removal techniques remove all species of mercury. In general, removal systems are not in widespread use in refineries, as opposed to gas processing where they are more common. Detection of the mercury, differentiation of the species and determining where the species go in a refining process are technically difficult methodologies, and are not routinely undertaken. Proper sampling of crude oil and process fluids is critical to achieve accurate results. Mercury Technology Services is working with the US EPA, API and NPRA to determine an average concentration of mercury in crude oil processed in the U.S. Operational issues related to mercury in crude oil are discussed in several MTS published reports. The COQA facilitator has copies of those reports available for those who wish in-depth coverage. Mercury in Crude-Mercury Technology Services - View
this Document** Minerals Management Services Operations and Organization - Ms. Stacy Leyshon is Manager of Crude Oil Operations for the Royalty in Kind (RIK) office of Minerals Management Services (MMS). Royalties from the federal leases administered by MMS have provisions for payment in cash or an "in kind" option. The producing oil and gas leases under MMS control are mostly marketable, viable volumes so RIK is an alternative often explored. Examples of RIK programs are SPR fills and the Small Refiner Program. In 2001, almost 35 million barrels of oil were received in royalties and sold for over $750 million. The RIK office has an interest in learning about quality management, both to assure true value in assessing the volumes they receive and, when dealing with the SPR, to assure the volumes are viable with SPR criteria. They currently address gravity and sulfur only but are considering other quality parameters. Minerals Management Services - View
this Document** Panel Discussion on Contracts and Crude Oil Quality - The panel members were:
Tim Blackmore opened the discussion with a few comments from the pipeline's point of view. In his position, he rarely hears from the traders. There are no requirements for them to meet specifications so they don’t usually inquire as to the quality of different types of crude. A trader is the "middleman" between producer and refiner and obviously is instrumental in determining the dollars involved, but there is rarely follow through to ensure that the money is economically spent. Steve Dove is a physical trader of crude for Vitol’s Newfoundland refinery and numerous terminals. Vitol’s contracts only refer to quality with standard language such as "normal export blend" and "normal at a specified date, time, and location". Vitol would not be adverse to contract language that includes references to specific quality parameters but it must be understood that contracts change constantly and the quality language would need to be flexible enough so as not to impair producers’ efficiency. Vitol deals in generally accepted crudes, which helps to minimize possible quality excursions. They do require assay information, but do not have any reference to that assay in contacts or, currently, any means to enforce assay information. Don Hamilton is the trader and quality manager for Gary-Williams’ refinery. Don has instituted controls that require, by contract, High Temperature Simulated Distillation information for each crude before the purchase is complete. A sample of the crude the refinery received is taken and an HTSD run. The refinery sample must be "materially like" the pre-purchase sample. Gary-Williams’ contracts also have specialty specifications, such as metals or Nitrogen, dependent on the crude. All HTSD samples are run at the same lab with the same column, and, if possible, with the same operator. This eliminates the difficulty caused by the fact that there are currently no precision measurements available for HTSD tests. Gary-Williams does not have economic penalties if the crude does not pass the quality test but there are provisions, such as a quick disconnect to the contract, to help ensure the quality specifications are met. By virtue of the quality program, the refinery has increased runs from 47MBD to 56MBD with no capital investment. Michael Czeskleba is a quality professional. He relayed the point of view of Marathon Ashland traders who were not able to attend. One of MAPLLC’s major concerns with quality language in a contract is the possible loss of flexibility and economic efficiency to the trading company that is first. Many refineries that, for example, are on a major pipeline system with large volumes of common stream crude are not able to exercise the same control as Gary-Williams. Also, if specifications are adopted, producers may opt to blend to that spec and, in effect, the crude stream could be worse. There was a great deal of audience participation during these discussions. The projected "worsening" of the crude stream due to blending specifications is, as with all quality parameters, a relative term. Ratability and consistency are the goals of crude oil specifications. Changes in a crude stream, up or down in value, will be market adjusted. However, one batch of crude that is very different could cause a refinery upset, with lost runs that will never be made up. Quality banks are another possible way to control stream parameters. If the cost adjustment tables are calculated correctly, it will be uneconomic to blend, for example, sour into sweet crudes. Also, although most quality banks are currently gravity and sulfur, tables for HTSD could be instituted. Quality tables can be especially useful in areas such as West Texas where logistics dictate some of the crude blending that has always occurred. One possible drawback to quality banks is that the adjustment dollars usually involve the producers, not the refineries who might have taken an economic hit. The question was asked as to what crude quality parameters are the most important for possible inclusion in a quality bank. It was generally agreed that gravity, sulfur, metals (nickel plus vanadium), distillation as measured by the high temperature simulated distillation (HTSD) test, light and heavy ends, nitrogen and acidity are critical, in varying degrees, to all refineries for all crudes. Additionally, some crudes have special safety issues which must be addressed individually. Update on the CCQTA – Mr. Bruce Kennedy of Petro-Canada updated us on the quality initiatives of the Canadian Crude Quality Technical Association. Even though a phosphorous-free gelling system is available, phosphorous related problems have resurfaced, necessitating the continuation of work on this issue. The Heavy Oil BS&W project is currently tracking properties of specific batches of Lloydminster crude from injection in Alberta to delivery in Saskatchewan, Wisconsin and Ontario. Progress has been made on the additive tracking project; final documentation of the procedures defined during this program is underway. Details on each project can be found on www.ccqta.com. Mr. Bill Lywood of Crude Oil Quality Inc. updated us on the Canadian producers’ quality initiatives. Quality monitoring data is available on www.CrudeMonitor.ca, a program funded by the producers to make information on their crudes readily available. One of the current focus areas for CAPP (Canadian Association of Petroleum Producers) is on targets for light ends in certain market streams. All COQA members who have an interest in Canadian crudes are urged to show their support for these producer initiatives. Status on Pipeline Quality Initiatives - Mr. Max Cummings of Allocation Specialists Inc., which administers the Gravcap quality bank for Capline, indicated that the Gravcap board approved investigating possible expansion to the Basin system. Of course, no quality bank will be implemented there without full approval from all shippers. Max reiterated the point that a quality bank table could be drafted to cover any quality parameters, such as metals. However, it might be easier to start with gravity and sulfur as those are commonly accepted. In any event, progress toward a quality bank on Basin will be somewhat curtailed during this ownership transition period. Shippers on Basin who support a quality bank are urged to contact Max with suggestions or comments on a path forward. The COQA Facilitator presented quality graphs for the Capline LLS stream. The graphs show gravity, sulfur, metals, Light Ends, MCRT and the 20% and 50% cut points for LLS from 1995 (before specifications were implemented) through March, 2002. From these data, it seems apparent that the test results indicate considerable tightening upon implementation of the specifications. LLS - Sulfur - View this Document LLS - Gravity - View this Document LLS - Metals - View this Document LLS - Light Ends - View this Document LLS - MCRT - View this Document LLS - 20% Cut - View this Document LLS - 50% Cut - View this Document COQA Water Measurement Subcommittee – At the subcommittee meeting, Mr. Bruce Williams of ITS Caleb Brett presented a synopsis of the various test methods for measuring water in crude, with emphasis on what can cause miscalculations in each method. Mr. Clifford Mills of Conoco presented data on Conoco’s experience with water and sediment measurements. One of the difficulties Conoco encountered was that many measurement tests may not address the fact that a great deal of what is counted as a solid is actually water. Patti Edens of Shell Pipeline and Tim Blackmore of Enbridge Pipeline indicated that each of their companies are still interested in pursuing Karl Fischer for water testing but issues with sediment measurement and use of the equipment in designated hazardous areas still remain.Report on Additives Meeting – Ms. Pat Donahoe of Brinkmann Instruments introduced the group to their oven sample-processor, which could be adapted to use in measurement of minute amounts of, for example, additive in a sample. The group also discussed ways to get producers more involved in our work on additives. Some suggestions were: publishing the survey findings in an industry journal or a production symposium, building a database of cause and effects of refinery problems, including anecdotal stories, that could be linked to the induction of an additive, and, in general, more communication with the upstream side of the business. Report on the Trading Subcommittee – All attendees agreed that this important issue warrants continued study. There was much discussion and many good ideas as to the path forward. Non-attendees who would like the meeting details should please contact the COQA Facilitator. COQA Web Site and Budget Report – The COQA Facilitator presenteda report on the first four months of 2002. You may review past minutes, our Retrospective Review and Mission Statement and a complete membership listing (name, company, email, phone) on coqa-inc.org. All members are encouraged to take advantage of our forum page. Next Meeting - The next meeting will be held in
Houston on October 3, 2002.
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