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Proceedings Crude Oil Quality Association Meeting

Salt Lake City, UT, 9 June 2011

The Association gratefully acknowledges the following:

 

 

     Gavilon Group hosted a continental breakfast;

 

        Plains Pipeline hosted the refreshment breaks; and

 

                   NCRA and PBF Energy jointly hosted a reception.

 

Their generosity is greatly appreciated.

Domestic Trading Center Subcommittee (DTC)

“Domestic Sweet / WTI Specifications”, Dennis Sutton, Marathon Petroleum.  Dennis provided a brief review of the Subcommittee’s activities to date. The effort toward adoption and implementation of the recommended additional specifications is progressing as evidenced by the following:

 

Ø  CME/NYMEX coordinated a meeting in Cushing, OK on April 6, 2011, attended by shippers, operators, and others.

Ø  Recent articles by Bloomberg and Argus have helped draw attention to COQA’s efforts.

Dennis provided some recent Marathon data illustrating that WTI/Domestic Sweet at Cushing will meet the recommended specifications and liquidity will not be limited. In closing, Dennis noted there have been reports indicating NYMEX supports adoption of the COQA recommendations. Moreover, several laboratories at Cushing have the requisite capabilities to test for the full range of specification tests.

►Mr. Sutton’s presentation (document).

Canadian Crude Quality Subcommittee

Bill Lywood, Crude Quality Inc., co-chair of the subcommittee together with Ron Fisher of BP provided a brief report, but without a slide presentation.

 

Ø  The subcommittee was formed to address quality issues related to the increasing market penetration of Canadian crude oils.

Ø  Bill was “pleased” to say that common quality issues are not in the foreground.

Ø  Present emphasis in on encouraging Canadian technology and business presentations, such as the one being presented at this meeting by Joe Gasca and Michel Chornet.

Ø  He and Ron continue to be open to suggestions for issues the subcommittee should consider.

Ø  Finally, an updated version of the “Canadian Crude Quick Reference Guide” is available and copies were distributed.

 “CCQTA Association Activities and Project Updates”, Dennis Sutton, Marathon Petroleum.  randy provided background on the CCQTA, the Scope and Current Activity of the eight active projects within the association, and discussed several project proposals that are under consideration.  The currently active projects are:

      ·         Condensate Quality

·         Oilsands Bitumen Processability

·         Phosphorus in Crude Oil

·         TAN Phase IV

·         H2S in Crude. Bill Lywood discussed this project in greater detail and noted the following:

Stanhope-Seta visited Edmonton in April to discuss adaptations of IP570 to use for crude oil. A report has been submitted on work to date. Development of the IP570 modifications is now moving to three prototypes. Starting at the end of June 2011, field trials will be conducted. Following these, Alberta Innovates will conduct laboratory tests comparing the modified IP570 with UOP163, and ASTM D5705 and D5623.

·         Heavy Oil Compatibility

·         Fluorocarbons in Crude

·         Crude Quality Tutorial

Project proposals are currently under consideration are:

      ·         On-line Contaminant Monitoring

·         Emulsion Characterization

·         Bitumen Dewatering

·         Shrinkage Calculation

·         H2S PVT Modeling

In closing, Dennis noted that the next joint CCQTA/COQA meeting is now scheduled for the week of June 18, 2012. It will be held at the Kananaskis Resort, located 90 km west of Calgary, Alberta.

►CCQTA update (document).

“Reducing Diluent Required in the Transportation of Heavy Oils and Bitumen”, Joe Gasca and Michel Chornet, Fractal Systems. Fractal Systems has patented technology to improve quality of heavy oil and bitumen. Their JetShearTM technology has been tested in a 1,000 bpd pilot plant in Canada. Results from this test indicated a 90% reduction in viscosity and a 2.5° increase in API gravity for both a bitumen-diluent blend and a heavy oil. Detailed assay results on two pilot plant samples were provided. These indicated that the process reduced the acid number (TAN) of the samples, but also resulted in an increase in the olefins content of the naphtha fraction.

►Fractal Systems presentation (document).

General Meeting

 “The Value of Bakken”, Jay Mick, Sinclair Oil Corporation. For many years, Bakken Sweet ((also known as North Dakota Sweet (NDS) and North Dakota Light (NDL)) experienced large lease discounts relative to the WTI benchmark. Recently, expansion in both outbound pipeline capacity and unit train capacity have narrowed discounts dramatically. An examination of NDL from a blend and relative refining values shows there is more value in NDL than is apparent. As additional outbound capacity grows, NDL values will likely continue to go higher. In support of his presentation, Jay provided data examining the relative refining value of NDL versus several other crude oils of comparable quality.

Jay concluded that NDL is a highly valuable light sweet crude oil that will grow in value as outbound capacity increases. Rockies refiners will need to adjust pricing of NDL to remain competitive with export values. Rockies refiners will also have added pressure from lower value sweet blends from Montana and Wyoming that can degrade the pool of high valued NDL.

► Mr. Mick’s presentation (document).

 “Crude in the Spotlight”, David Friedman, National Petrochemical and Refiners Association (NPRA).  A number of issues pertaining to crude oil quality are receiving greater scrutiny by national (state and federal) and international (European Union) regulatory bodies. In his presentation, David focused on two of these under the jurisdiction of the U.S. Environmental Protection Agency (EPA).

 

Ø  Greenhouse Gas (GHG) Mandatory Reporting Rule; and

Ø  Refinery Information Collection Request (ICR).

The GHG Mandatory Reporting Rule requires reporting both stationary source emission and petroleum products. All sources over 25,000 tons must report – which includes all re3fineries and petrochemical facilities in the U.S. Affected emission sources include stationary combustion, flares, catalytic cracking units, and storage units among others. Much of the required data is already provided to the Energy Information Administration. NPRA has made a number of recommendations to EPA that would make the requirement more reasonable.

 Under Section 114 of the Clean Air Act, EPA gathers data for rulemakings through ICR’s. The original intent of the Refinery ICR was to include nine refining companies, but EPA has since expanded this to include all refineries in the U.S. This ICR includes four components, the third of which -“Distillation Feed Sampling” - includes crude oil testing. Analytes include heating value, density, and concentrations of a number of elements including mercury, sulfur, and beryllium. NPRA has expressed its concerns to EPA and, together with API, have filed a legal challenge to the ICR with EPA and the D.C. Circuit Court.

► Mr. Friedman’s presentation (document).

 “Development of Bakken Formation Resources”, Bruce Hicks, North Dakota Department of Mineral Resources.  Currently, drilling activity is focused on four North Dakota counties, with 171 rigs active in June 2011. Of these, 95% are active in the Bakken play. North Dakota is now producing 360,000 barrels per day crude oil, with 80% coming from the Bakken. Today, North Dakota is the 4th largest crude oil producer in the U.S., trailing Texas, Alaska, and California.

 In illustrating his presentation, Bruce provides an explanation of horizontal drilling and production techniques as they relate to the Bakken. Hydraulic fracture stimulation (fracking) requires, on average, over 2 million gallons of water, more than 3 million pounds of sand, and costs greater than $2 million per well to complete. It is estimated that over 2 billion barrels of crude oil are potentially recoverable from the Bakken.

Bruce then presented slides prepared by Justin J. Kringstad, Director, North Dakota Pipeline Authority related to pipeline and rail transportation of crude oil from the state. Justin’s presentation covered four pipeline systems and development of unit train capability. The existing crude oil pipeline network currently has insufficient capacity to transport the volume of crude oil being produced. A number of locations exist throughout the state for loading unit trains, and additional locations are planned. In 2010, capability existed for loading approximately 100,000 bpd. In 2011, this has grown to 300,000 bpd, and is expected to increase to 450,000 bpd in 2010.

 ► Mr. Hicks’ presentation (document).

”Black Wax Issues”, Prof. Milend Deo, University of Utah. Most of Utah’s crude oil production is high pour point, paraffinic in nature – Black Wax. The crude oil has a relatively high API gravity and low sulfur content, but high gas oil and residuum yields. The bulk of this production is trucked from the fields to Salt Lake City refineries, with relatively small amounts being mixed with non-paraffinic crude oils and pipelined. Associated cost and environmental considerations together with refining challenges have limited better utilization of this resource.  From 1990 to 2003, production declined by more than 50%, but since then has increased and today is on the order of 20,000 bpd.

A number of technologies have been studied to solve handling issues. Among these are:/span>

·         Use of pour point depressants

·         Use of diluents

·         Slurry transport as an emulsion

·         Partial upgrading at wellhead or a central location

·         Microbial processing

The University of Utah has been investigating a combined thermal/catalytic processing scheme as a solution to help solve transportation issues. If successful, this will ultimately result in significant benefits to all stockholders.

► Prof. Deo’s presentation (document).

“Enbridge Bakken Expansion Program”, Ashok Anand, Enbridge Pipelines Inc.  Production of Bakken crude oil has been increasing dramatically in recent years, and by 2015 is forecast to be in excess of 1 million bpd. To help transport this volume, Enbridge has studied several options for its system that will increase its throughput capacity. Chief among these are:

 

Ø  North Dakota Pipeline capacity increase from 185,000 to 210,000 bpd;

Ø  Bakken Expansion program, increasing throughput capacity from 145,000 to 325,000 bpd.

 

These require a number of regulatory approvals, applications for which have been filed. 

To help bring light crude such as Bakken to markets in the U.S. Gulf Coast, Enbridge has also proposed a “greenfield” Monarch Pipeline project. This will be a 475 mi pipeline from Cushing, OK to an interconnect near Houston, TX. Design is based on 350,000 bpd of WTI with an in-service target date of 4Q2013.

 

► Mr. Anand’s presentation (document).

“California’s Low Carbon Fuel Standard – Potential Implications for Crude Oil”, Ms. Gina Grey, Western States Petroleum Association (WSPA).  WSPA is a non-profit trade association, representing 26 petroleum companies with operations in six western states (AZ, CA, HI, NV, OR, WA). California’s Low Carbon Fuel Standard (LCFS) was designed to reduce the per-gallon carbon intensity og gasoline and diesel fuel. It is a performance-based standard, intended to drive market toward innovative, low carvon fels, and reduce dependence on petroleum. Although dating to a 2007 California Executive Order, the program is incomplete, and a number of issues related to crude oil remain to be resolved.

The LCFS regulation separates crude oil into two categories, based on a 2006 carbon intensity (CI) table for gasoline and diesel fuel values. If a crude oil is not in the 2006 table, approval must be sought from the California Air Resources Board (CARB). This involves four screening steps, as discussed by Gina. For 257 crude oils, 66 or 25% fail. In closing her presentation, Gina discussed the importance of Canadian crude oils to the U.S. petroleum industry and the impact the LCFS would have on these. WSPA is strongly advocating that CARB restore equitable “crude is crude” treatment for all crude oils, and that CARB reverses its crude oil treatment approach.

► Ms. Grey’s presentation (document).

“Liquid Shale Plays: Niobrara and Eagle Ford Focus – Production, Logistics and Refining Market Outlooks”, Joseph J. Leto, Energy Analysts International (EAI). In the Western Interior Seaway, several important carbonate and shale tends are being developed:

·         Eagle Ford, where drilling is ramping up and focus is shifting from gas to liquids production

·         Niobrara, where potential is being tested in the Powder River and Denver/Julesburg (DJ) Basins

·         Bakken, where drilling is expanding in the Tyler and Spearfish formations

For his presentation, Joe focused on the first two of these.

Eagle Ford. The majority of new liquid is coming from gas wells with high condensate and natural gas liquid yields and from high gas-oil ratio oil wells. Historically, the refineable liquids have been delivered to San Antonio, Three Rivers, and Corpus Christi. Companies such are studying options for increasing eastbound transportation to Houston and Cushing markets. Production could potentially increase from today’s 210 – 250 thousand barrels per day (MBPD) to 550 – 780 MBPD by 2013. Much of the production is coming from horizontal wells.

Niobrara. In the DJ Basin, horizontal development is expected to persist as an alternative to high density vertical development. Data indicate that operators appear to be finding a greater proportion of marginal to economic wells, which is typical of resource plays. Currently, production the Niobrara is just over 50 MBPD, and is forecast to increase to about 125 MBPD in 2014/2015.

► Mr. Leto’s presentation (document).

“IOGCC/GWPC Chemical Disclosure Registry for Hydraulic Fracturing”, John Baza, Utah Division of Oil, Gas and Mining. The Interstate Oil and Gas Compact Commission (IOGCC) serves as the collective voice of member governors on oil and gas issues and advocates states’ rights to govern petroleum resources within their borders. The Ground Water Protection Council (GWPC) is a national association of state ground water and underground injection control agencies whose mission is to promote the protection and conservation of ground water resources. The GWPC provides a forum for communication and research in order to improve government’s role in the protection and conservation of ground water.

On April 11, 2011, IOGCC and GWPC unveiled a new website www.FracFocus.org which provides a web-based national registry disclosing chemical additives used in hydraulic fracturing. Participating companies voluntarily upload information. As of launch date, 24 companies are participating. In his presentation, John used a number of screen shots from the Website.

► Mr. Baza’s presentation (document).

“OMMICATM – Analyzing Crude for Methanol and Monoethylene Glycol”, Dr. Anne-Marie Fuller, LUX Assure. LUX Assure, based in Edinburgh, UK, develops chemical monitoring technology for the oil & gas industry. Promising techniques are then commercialized through industry partners. Their focus is on:

 

Ø  Monitoring difficult to detect chemicals

Ø  Simple methods

Ø  Improved limit of detection

Methanol in crude oil can cause a number of problems at terminals and refineries.

 

Ø Poisons catalysts – leading to coke formation

Ø  Poisons molecular sieve beds used for H2O and H2S removal

Ø  Causes upsets in wastewater treatment systems

The ASTM test method for determination of methanol in crude oil (D7059) is limited to crude oils containing less than 0.1% water, requires 30 – 45 minutes to run, and relies on an operator proficient in gas chromatography. The OMMICATM detection method, on the other hand, is simple and specific with good sensitivity, can be used to analyze several samples concurrently, and the equipment is suitable for use offshore. In illustrating her presentation, Anne-Marie presented data illustrating the techniques specificity for methanol or monoethylene glycol – depending on spectrophotometer wavelength – and freedom from interference by other chemicals such as ethanol.

Dr. Fuller’s presentation (document).

“Hydraulic Fracturing, Well Construction, and Natural Gas Production”, Dr. J. Mike Brown, Baker Hughes. Mike provided a detailed discussion of oil and gas well drilling and completion, and the hydraulic fracturing process. Fluids used for the latter are largely (~99%) water and sand, with the balance comprised of a host of chemicals. These include: 

Ø  Gelling agents and friction reducers

Ø  Buffering agents

Ø  Surfactants

Ø  Biocides

Ø  Scale and corrosion inhibiters

Ø  Acids

Ø  Oxygen scavengers

Well completion confines the fracturing process and chemicals to the targeted oil & gas zone. Many of these chemicals are recovered with flowback following completion of the fracturing process. Since 1947, tens of thousands of oil & gas wells have been successfully and safely stimulated in the U.S. using hydraulic fracturing.

Dr. Brown’s presentation (document).

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This concluded the June 9, 2011 meeting of the COQA.  The next meeting of the association will be on October 26 – 27, 2011, in Tulsa, OK. One of the two days will be devoted to a trip to Cushing, OK, to visit terminals and laboratories. Details will be posted to the COQA Website in late July.

Harry N. Giles

Director, COQA

dir.COQA@verizon.net