Proceedings Crude Oil Quality Association Meeting
Cushing, OK, 26 October, and Tulsa, OK, 27 October 2011
On October 26th, COQA arranged a tour of five crude oil
related facilities in Cushing, OK. The attached booklet provides
information on the tour, on which 83 people participated. At
Enbridge, Maury Wilmoth gave a presentation on their facility as
well as an overview of overall Cushing operations. A copy of Mr.
Wilmoth’s presentation is also attached. The association is grateful
to each of the five participating facilities for providing tours,
and to Intertek for hosting a lunch and for providing for the bus
transportation between Tulsa and Cushing.
►Cushing tour booklet (document).
►Wilmoth presentation (document).
On October 27th, COQA convened its general meeting in
Tulsa, OK. This meeting set a record for attendance with at least
115 people present.
The Association gratefully acknowledges the following for their
hosted a continental breakfast;
provided general support;
hosted the refreshment breaks; and
co-hosted the 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. At least two major terminal operators at Cushing
are routinely testing WTI/Domestic Sweet for the complete (Nymex and
COQA recommended) specifications. Data from one of the two indicate
all of the recommended specifications are routinely being met. Data
from the second on batches destined for Marathon indicate all
specifications are being met except those for HTSD. These latter are
In closing, Dennis noted that the recommended specifications have
been developed on proven, established practices and that industry
responses have generally been favorable. Considerable data show that
the specifications recommended by COQA will not limit liquidity of
►Mr. Sutton’s presentation (document).
“Nymex WTI Futures: Overview of Quality Issues”, Daniel Brusstar,
Director, Energy Research & Product Development, CME Group. In his
presentation, Dan first discussed the history, liquidity, and
quality specifications’ of WTI / Domestic Sweet. Nymex
has consulted with industry on the COQA recommended additional
specifications and feedback has been favorable. Dan commented “We
haven’t finished some of the work that has got to go before we can
make an announcement … but we are hoping to wrap it up in the next
couple of months. Then we will give (terminals) four or five months
to implement it.” He continued “At this point we don’t see any
impact on the value of the contract” and Dan indicated the
additional specifications should be in place by mid-2012.
►Mr. Brusstar’s presentation (document).
“COQA Executive Director”, Dennis Sutton, Marathon Petroleum. As
first reported at the June 2011 meeting in Salt Lake City, Harry
Giles has announced that he will be resigning as Executive Director
at the end of 2012. A search committee has been formed to find a
successor. Dennis discussed the responsibilities of the position and
the attributes of the “ideal” candidate.
►Executive Director Vacancy presentation (document).
Update”, Randy Segato, CCQTA Vice-president.
In opening his presentation, Randy provided background on the
association and the five technical areas in which it has projects,
Refinery & Upgrader Processing;
Environmental & Safety;
Specialized Research; and
Open Industry Reference.
For each he listed the projects that are ongoing or have been
completed. CCQTA currently has 57 member companies. These were shown
on a matrix together with the projects in which they are involved.
Bill Lywood then provided an update on progress made in the H2S
in Crude since the COQA meeting in Salt Lake City in June 2011.
Tests will begin soon on a modified instrument, and Bill requested
samples for use in these.
In closing, Randy discussed plans for the CCQTA/COQA joint meeting
scheduled for the week of June 18, 2012. It will be held at the
Kananaskis Resort, located 90 km west of Calgary, Alberta. Randy is
going to look into possibly arranging a trip to Fort McMurray to
view some of the oil sands mine operations. This will be a full day
trip involving flying between Calgary and Fort McMurray. Details
will be sent out once they are available.
►CCQTA update (document).
“KAM® ML Measurement Loop”, Mustafa Khan, Kam Controls,
Inc. Accurate oil/water measurement is a function of velocity. In
production, insufficient or inconsistent velocity leads to
inaccurate oil/water measurements. Other factors such as viscosity,
inconsistent droplet ratio, and temperature can make it difficult to
achieve a homogeneous mixture for accurate measurement.
The KAM ML Measurement Loop creates a consistent measurement
environment at velocities above 7 fps and regardless of viscosity
and temperature of the stream. The system can be used in both
horizontal and vertical installations. It is suitable for automated
well tests (AWT), separators, production management and automation,
and custody transfer applications. Mustafa illustrated his
presentation with data from an AWT installation at a field in
►Mr. Khan’s presentation (document).
“Lonestar™ Analyzer. Rapid Analysis of H2S Scavengers,
Methanol and VOCs in Crude Oil”, Steve Freshman, Owlstone, Inc.
Owlstone manufactures, sells, and supports high performance chemical
analyzers. They have developed a propriety variant of Field
Asymmetric Ion Mobility Spectrometry (FAIMS) that combines
sub-parts per million sensitivity with high selectivity. This has
been incorporated into their Lonestar analyzer for rapidly detecting
a range of analytes in crude oil, including H2S scavengers,
methanol, and organic chlorides. These are measured in the headspace
above a sample rather than in the liquid phase. Analyses can be
performed at-line, by any operator, and without time consuming
sample preparation. Application of the instrument to determination
of several analytes in crude oil was illustrated, as well as a water
quality analyzer for detection of a range of common taste and odor
compounds and pesticides.
►Mr. Freshman’s presentation http://portal.sliderocket.com/AEFAV/COQA-presentation
“HollyFrontier Corporation”, Tom Shetina, HollyFrontier. The $7
billion combination of Holly and Frontier created the most
profitable independent refiner on a per barrel basis in the U.S. The
merger resulted in a company with over 440,000 bpd of crude capacity
across five complex refineries. Tom summarized the assets of the two
HollyFrontier has five refineries operating in the Southwest,
Rockies and Mid-continent / Plains states markets.
Holly Energy Partners (HEP) has over 2500 mi of product and
crude oil pipelines; 11 terminals and 8 loading rack facilities
in 7 Western and Mid-continent states; over 6 million barrels of
product & crude oil storage; and 25% interest in Salt Lake
Pipeline – a joint venture with Plains delivering crude oil into
Salt Lake Valley.
Tom provided a detailed overview of each of the five refineries, and
closed by discussing investment highlights of the two companies.
►Mr. Shetina’s presentation (document).
“Magellan Midstream Partners, LP”, Scott Devers, Magellan Midstream
Partners. Magellan’s asset portfolio includes the longest U.S.
refined petroleum products pipeline system. This provides access to
over 40% of refining capacity in the continental U.S. as well as
imports. More than 80 petroleum terminals with over 75 million
barrels storage are available. Magellan’s crude oil asset profile is
growing and, today, includes, but not limited to:
· 12 million barrels of storage at Cushing, 7.8 million barrels of
which were acquired from BP in 2010, and the remainder constructed
in 2011. This makes it one of the largest owners of crude oil
· Two million barrels of storage at East Houston terminal;
Cushing-to-Tulsa and El Dorado-to-Cushing pipeline segments; and
Houston-to-Texas City pipeline segment.
Magellan is proceeding with reversal and conversion of the eastern
leg of the former Longhorn pipeline to provide for 135,000 bpd of
crude oil capacity – expandable to 225,000 bpd. This is expected to
be operational by mid-2013. Its Houston area distribution system
includes nearly 40 mi of crude oil pipelines running between Houston
and the Texas City refining area. This is strategically positioned
to be the “last leg” in the distribution conduit to the refinery
gate for growing domestic and Canadian crude oil production.
Magellan is a truly independent storage provider, and does not have
a crude oil trading group or take ownership of the crude oil in its
►Mr. Devers’ presentation (document).
“North American Renaissance: The outlook for oil production in the
US and Canada”, Barbara Shook, Houston Bureau Chief, Energy
Intelligence Group. For more than 30 years expectations have been
that the US would become increasingly dependent on oil and gas
imports. Federal legislation has mandated ethanol for environmental
reasons and to reduce dependence on foreign sources. Numerous LNG
import terminals were proposed in anticipation of growing reliance
on foreign sources of natural gas. All were wrong!
The U.S. renaissance began with development of the Barnett Shale in
North-Central Texas. This has become the largest gas field in the
U.S. with production at 5.2 Bcf/d. Shale gas production has since
spread to other areas including the Haynesville in Louisiana, the
Marcellus in Pennsylvania, New York, and West Virginia, and the
Utica in Ohio among others. Shale deposits exist in Canada and in
Alaska and, although largely unexplored or undeveloped, are likely
to hold recoverable gas reserves.
Now, liquids are being produced from shale deposits including the
Bakken in North Dakota and neighboring Canada, the Niobrara in
Colorado and Wyoming, and the Eagle Ford in Texas. Bakken production
has doubled in the last two years to 425,000 b/d, and forecasts call
for 2015 production to reach 1.3 million b/d.
Let’s not forget about oil sands. Western Canadian production is now
at 1.8 million b/d, and by 2020, could reach 3 million b/d. Most of
this will likely come to the U.S. And, conventional production will
remain an important source well into the future, despite some
setbacks such as Macondo. Added to all these are Sasol’s natural
gas Fischer-Tropsch (F-T) project in North America, biofuels from
algae, and hybrid synthetic fuels from F-T and other coal-to-liquids
We are not running out of either gas or oil in the U.S. or Canada.
There are challenges ahead, such as GHGs, but the petroleum industry
is possessed with ingenuity and continues to successfully overcome
adversity and the challenges it faces.
The comments expressed by Ms. Shook are solely hers and do not
necessarily reflect the views of EIG’s ownership or management.
►Ms. Shook’s presentation (document).
“U.S. Midcontinent Crude Oil Outlook”, Geoff Houlton, Purvin & Gertz.
In June 2011, Purvin & Gertz released a “U.S. Midcontinent Crude Oil
Market Analysis.” Based on this, Geoff’s presentation focused mainly
North American Crude Oil Supply; and
Regional Refining Balances / Logistics.
Strong activity continues in both shale plays, such as Bakken and
Eagle Ford, and in conventional and oil sands production. With the
lifting of the Federal moratorium on drilling in deep waters, Gulf
of Mexico production will revive, but may be flat through this
decade. Rig activity in shale plays is steadily increasing. But,
well completions will be a limiting factor because of shortages in
qualified personnel, equipment, and supplies. Despite this, output
is forecast to increase and reach 900,000 b/d by 2015. Western
Canadian supply also will continue to increase and may reach 3
million b/d by 2015. On balance, crude oil runs will continue at
about 15 million b/d through this decade, with North American crude
oil production remaining at less than 9 million b/d until perhaps
A number of midcontinent refineries have begun investment programs
designed to process increasing volumes of Canadian heavy crude oils.
If completed, these will add 95 mb/d of crude capacity, 186 mb/d of
coker capacity, and 27 mb/d of FCCU capacity. Increased flows of
Canadian crude oils are currently constrained by a lack of outbound
pipeline capacity from hubs such as Cushing. A number of pipeline
projects and proposals would ease this constraint.
► Mr. Houlton’s presentation (document).
“Cushing Canadian Congestion & Keystone XL: A review of logistics
options”, Martin Tallett, EnSys Energy. In 2010, EnSys prepared an
assessment of Keystone XL (KXL) for the U.S. Departments of Energy
and State in which it evaluated alternative pipeline outlooks
through 2030. In this study, EnSys studies various options of KXL
and no KXL among others, and against two U.S. petroleum demand
outlooks. EnSys updated its assessment in 2011. Cushing congestion
has become “structural” with
Line capacity into the hub well in excess of output capacity;
Midcontinent, Bakken, and WCSB supply growth exacerbating broad
inland imbalances: and
Both resulting in major crude oil discounts.
Pipeline capacity into Cushing is approximately 1.6 million b/d, but
output capacity is just less than 1 million b/d. Storage companies
at Cushing are literally racing to add new capacity, and it is
estimated that by yearend 2011, capacity will total 65 million
Midwest refining projects will help relieve some of the pressure on
WCSB heavy crude oils, but startup of some of these projects will
not be before 2013 at the earliest. Meanwhile, production of these
streams continues to grow. The Keystone Mainline and Keystone XL
projects would help alleviate some of the in/out imbalance, but the
latter has become the focal point for considerable political debate
resulting in uncertainty about its future.
Several options exist for moving WCSB crude oils to market if KXL
and other major pipeline projects are delayed or cancelled. These
include modifying existing pipelines, using existing pipeline rights
of way for new lines, and transporting crude oil by rail and by
barge. Both of the latter are being used, and a number of unit train
projects are in existence or under development.
► Mr. Tallett’s presentation (document).
“Rangeland Energy LLC, COLT (Crude Oil Loading
Terminal) Introduction”, Brian Freed, Rangeland Energy.
Rangeland Energy, founded in 2009, focuses on developing, acquiring,
and operating midstream crude oil and natural gas assets. Its
initial focus has been on crude oil infrastructure in North Dakota’s
Bakken Shale play. The COLT project is being developed as a merchant
/ 3rd party, fee-for-service facility that will provide a
combination of rail, pipeline, and truck options including:
Truck gathering services with both unloading and loading
Pipeline gathering services;
Terminal services for custody transfer measurement and sampling,
dedicated tankage, and fungible tankage options; and
Connectivity to multiple markets.
The COLT HUB will include 8 truck bays, 4-120 MB tanks, 2-8,600 ft
unit train loops, and pipeline connectivity. The facility is
expected to be in operation in 1Q2012.
► Mr. Freed’s presentation (document).
”TU Fluid Flow Research and Technology Development”, Prof. Cem
Sarica, TheUniversity of Tulsa. Flow assurance in pipeline systems
is governed by four main factors:
Restrictors and blockers, including organic deposits, hydrates &
ice, and mineral deposits
System integrity, affected by sand management and erosion /
Rheology, influenced by gellation, viscosity, and dispersions
Hydrodynamics involving impaired and natural transients and steady
The University of Tulsa has been investigating many of these through
a number of joint projects with industry, three of which were
discussed by Prof. Sarica:
TU Fluid Flow for investigating solutions for multiphase
production and transportation problems and developing software
for different multiphase flow applications;
TU Paraffin Deposition to enhance understanding of paraffin
deposition in single and multiphase flows; and
TU High Viscosity Oil to conduct experiments and model various
multiphase flow combinations of high viscosity oil, water, and
gas for heavy oil production and transportation.
► Prof. Sarica’s presentation (document).
“Opportunity Crudes: To process or not to process?”, Claire Weber
and Serena Yeung, Hydrocarbon Publishing Co. Hydrocarbon Publishing
Company recently published results of a survey of oil companies
worldwide on their experience with opportunity crude oils (opcrudes).
The majority of responses indicated heavy, sour crude oil was the
dominant opcrude being processed, followed by high-TAN, Brazilian,
and several Canadian “syncrude” streams. For approximately one-third
of the respondents, opcrudes comprised 5 – 20% of the crude slate.
Only 8% of the respondents were processing >50% of opcrudes in their
runs. The primary driver was price discount, followed by crude
access and security of supply. A number of barriers were cited to
processing opcrudes, among them corrosion, fouling, and
A number of technologies are available for upgrading the additional
resid associated with heavy, sour crude oils, but many of these are
high cost. Approximately 70% of the respondents indicated that they
had performed a major revamp to process opcrudes.
Opcrudes will be an important part of refinery crude oil slates
going forward. Keys to successful processing include:
Reduce fouling and corrosion;
Maximize diesel production; and
Minimize HSFO production.
► Weber and Yeung presentation (document).
This concluded the October 27, 2011 meeting of the COQA. The next
meeting of the association will be in late February or early March
2012, in Houston, TX. At that meeting, COQA hopes to arrange a
meeting to a crude oil trading floor the day before the general
meeting. Details will be posted to the COQA Website as they become
Harry N. Giles