Petroleum Production, Transportation, & 

Refining

John Jechura – [email protected]
Updated: January 4, 2015
Topics
• Energy consumption & petroleum’s place
• Oil reserves
• Oil sources & production
• Pipelines
• Petroleum Refining

3
Energy Markets Are Interconnected

https://publicaffairs.llnl.gov/news/energy/energy.html

5
Petroleum Pathway

Crude Transportation Crude Refining

Crude Production

Crude Storage &

Transportation Retail Distribution Consumer Use

6
Worldwide trade of refined products
• In general, United States prefers 
gasoline to diesel whereas the rest of 
the world prefers diesel to gasoline
 FCC‐based refineries will still 
produce a great deal of gasoline 
even when trying to maximize 
diesel production. Foreign 
incentive to ship excess gasoline to 
US, especially to the East Coast 
from Europe.
• 2008 gasoline imports suppressed 
the cost of gasoline relative to crude 
oil

 US refineries increasing the 
installation of Hydrocracking to 
produce diesel for export,  Ref: Valero, UBS Global Oil and Gas Conference, May 21‐22, 2013
especially along the Gulf of Mexico

7
Oil Producing Locations

9
Proven Oil Reserves

10
Hubert’s Peak

11
Hubert’s Peak

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Origins of Oil & Gas
• Organic life buried in 
sedimentary rock
• Transformation to 
hydrocarbons
• Migration from source rocks
• Accumulation of oil & gas
• Flow of oil & gas through 
porous media

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Types of Oil Traps

http://www.maverickenergy.com/oilgas.htm

15
Characteristics of Reservoir Rock

Porosity Permeability

http://www.maverickenergy.com/oilgas.htm

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Oil Production

http://www.maverickenergy.com/oilgas.htm

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Well Completions

Perforating Acidizing
Fracturing

http://www.maverickenergy.com/oilgas.htm

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Rotary Drilling Rig

http://www.britannica.com/EBchecked/topic‐art/1357080/113917/A‐land‐based‐rotary‐drilling‐rig

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Beam Pumping Unit

http://www.britannica.com/EBchecked/topic‐art/37157/113919/The‐artificial‐lift‐of‐petroleum‐with‐a‐beam‐pumping‐unit

20
Directional & Horizontal Wells

• Directional drilling can get you to pay zones that you normally couldn’t reach
• Horizontal wells can expose a much greater drainage area – especially valuable in a tight 
reservoir
• Cost per well is 2X – 3X that of vertical well but productivity can be 15X – 20X. 

http://www.horizontaldrilling.org/

21
Unconventional Resources
• Petroleum & natural 
gas formed from 
decomposing organic 
matter in “source rock”
• Conventional – gas & 
liquids migrate 
through permeable 
rock toward the 
surface until it is 
stopped by some 
trapping mechanism
• Unconventional – gas 
& liquids are trapped 
at the source rock 
because of extremely 
low permeabilities

Dec. 5, 2012 update, http://www.eia.gov/energy_in_brief/article/about_shale_gas.cfm

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 What is hydraulic fracturing?

Source: ProPublica, http://www.propublica.org/special/hydraulic‐fracturing‐national

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What is hydraulic fracturing?

http://c1wsolutions.wordpress.com/2014/07/30/a‐solution‐to‐frackings‐water‐problems/

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 Major tight‐oil production in U.S.

http://www.economist.com/news/united‐states/21596553‐benefits‐shale‐oil‐are‐bigger‐many‐americans‐realise‐policy‐has‐yet‐catch/

25
 Canadian Oil Sands
• Heavy oils produced by various technologies
 Surface mining & hot water extraction
 In situ heating
• CSS (Cyclic Steam Stimulation)
• SAGD (Steam Assisted Gravity Drainage)
 Upgrading
• Exported product much lighter than feedstock
http://www.ogj.com/unconventional‐resources/oil‐sands.html

http://newenergyandfuel.com/http:/newenergyandfuel/com http://www.bp.com/sectiongenericarticle.do?catego
/2009/08/12/making‐syncrude/ ryId=9036694&contentId=7067647

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Oil Platforms

27
Deep Sea Production

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Major U.S. Pipelines

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Proposed Keystone Pipeline Expansion
• Keystone XL Pipeline important to 
bring oils sands & northern tight 
oil to Gulf Coast
• Section south from Cushing 
important to improve flow of all 
mid‐continent oil. 
 Started flow early 2014, up to 
700,000 bpd capacity

http://www.washingtonpost.com/wp‐srv/special/nation/keystone‐xl‐map/

31
How Pipelines Work

Association of Oil Pipelines, http://www.aopl.org/aboutPipelines/?fa=howPipelinesWork

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Batching in Product Pipelines
• Goal is to minimize product downgrade during shipping
• Preferred sequence to ship these products our of refinery:

• Considerations
 Interface between the two gasolines can be “downgraded” to the 87 octane (because of octane 
effects)
 Interface between the ULSD & Heating Oil can be downgraded to the Heating Oil (because of sulfur 
effects)
 Interface between 87 octane gasoline & ULSD have similar sulfur contents but different boiling point 
properties – typically returned to refinery for additional processing – “transmix”

RefinerLink, http://www.refinerlink.com/blog/Pipelines_Ship_Refinery_Products_to_Pump/

33
Louisiana Offshore Oil Port (LOOP)

http://blog.nola.com/tpmoney/2009/05/louisiana_offshore_oil_port_is.html

http://www.economicpopulist.org/content/gustav‐eying‐gulf‐oil‐and‐loop

34
Transportation Infrastructure is Key
• Keystone XL Pipeline important to bring oils  • Rail has become preferred method to bring 
sands & northern tight oil to Gulf Coast incremental barrels out of Bakken & Eagle Ford
 Section south from Cushing important to improve   Safety concerns – train derailments July 2013 Quebec 
flow of all mid‐continent oil. Started flow early  (40 dead) & December 2013 ND 
2014, up to 700,000 bpd capacity
 Concerns about increased emissions, especially in 
California
 ANSI & API released new recommended practices for 
shipping crude by rail (ANSI/API Recommended 
Practice 3000) in September 2014
• Available for free at this web page

http://www.cpr.ca/en/ship‐with‐cp/where‐you‐can‐ship/bakken‐
http://www.washingtonpost.com/wp‐srv/special/nation/keystone‐ shale/Documents/bakken.pdf
xl‐map/

35
Transportation by Rail in U.S.

Each rail car holds about 30,000 gal (714 bbls)

https://www.aar.org/keyissues/Documents/Background‐Papers/Crude‐oil‐by‐rail.pdf

http://peoriastation.blogpeoria.com/2012/03/24/b
nsf‐galesburg‐yards‐new‐tracks‐are‐in‐service/

36
What Does Tight Oil Mean for U.S. Refiners?
• Until Marketlink pipeline (southern leg of Keystone XL) operational expect prices for Mid 
Continent crude oils to be below market
 January 2014 expected to start shipments
• Tight oil production should ensure domestic 
supply to refineries needing sweet crude in the 
next 10 – 15 years
 Expected to peak @ 4.8 million bpd in 2021
(EIA, Dec. 2013)
• Recent investments to allow refiners to process 
heavy sour crudes might limit the ability to 
utilize tight oil
 Exporting tight oil while importing heavy oil is very 
possible if permitted by U.S. government
http://www.hydrocarbonprocessing.com/Article/3223
• Environmental concerns could put the brakes on  989/Channel/194955/Innovative‐solutions‐for‐
processing‐shale‐oils.html
this production
 High energy requirements for producing Canadian oil sands
 High water quantities needed for tight oil & oil sands production
 Public concerns about hydraulic fracturing
 Public concerns about oil transport by rail

37
World & U.S. Refining Capacity

“Western Europe leads global refining contraction”, Oil & Gas  EIA, Jan. 1, 2014 database, published June 2014
Journal, pp 34‐48, Dec. 2, 2013 http://www.eia.gov/petroleum/refinerycapacity/

39
Number & Capacity of World & U.S. Refineries 

“Western Europe leads global refining contraction”, Oil & Gas  Source: 
Journal, pp 34‐48, Dec. 2, 2013 EIA, Jan. 1, 2014 database, published June 2014
http://tonto.eia.doe.gov/dnav/pet/pet_pnp_cap1_dcu_nus_a.htm

40
Crude Oil as Refinery Feedstock

• Crude Oil
 Complex mixture of hydrocarbons & heterocompounds
 Dissolved gases to non‐volatiles (1000F+ boiling material)
 C1 to C90+
• Composition surprisingly uniform

Element Wt%
Carbon 84 ‐ 87
Hydrogen 11 ‐ 14
Sulfur 0 ‐ 5
Nitrogen 0 ‐ 0.2
Other elements 0 ‐ 0.1

41
Primary Hydrocarbon Molecular Types
• Paraffins H
H H
H
H
 Carbon atoms connected by single bond H
H H
H H
 Other bonds saturated with hydrogen
n-Butane n-Butane

• Naphthenes
H
 Ringed paraffins (cycloparaffins) H
HH
H
 All bonds saturated with hydrogen H
H

H H
H H
H
• Aromatics
 Six carbon ring (multiple bonding) Cyclohexane
H
CH3
 All bonds are unsaturated H H

H H
H
• Olefins
 Usually not in crude oil Toluene
Benzene
 Formed during processing 
H H
H
 At least two carbon atoms connected by H
double bond H
H
H H

1-Butene

42
Example Heterocompounds

Composition & Analysis of Heavy Petroleum Fractions
Petroleum Refining Technology & Economics – 5th Ed.
K.H. Altgelt & M.M. Boduszynski
by James Gary, Glenn Handwerk, & Mark Kaiser, CRC Press, 2007
Marcel Dekker, Inc., 1994, pg. 16

43
Characteristics of Petroleum Products

Refining Overview – Petroleum Processes & Products, 
by Freeman Self, Ed Ekholm, & Keith Bowers, AIChE CD‐ROM, 2000

44
 100
97.8°F
Ethane & Lighter
180°F
90
Propane

80
Butanes

70
350°F Pentanes
400°F
60 Light Naphtha
Barrels

50 Heavy Naphtha

40 Distillate
650°F

30 AGO

LVGO
20 850°F

HVGO
10
1050°F
Vacuum Resid
0
Total Continuum Fractions

47
Crude Oils Are Not Created Equal

48
Petroleum Products

 There are specifications for over 2,000 
individual refinery products
 Intermediate feedstocks can be routed 
to various units to produce different 
blend stocks
• Depends upon the local economics 
& contractual limitations

Ref: Unknown origin.  Possibly Socony‐Vacuum Oil Company, Inc. (1943)

49
Raw Crude vs. Refined Product

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Petroleum Products
• Refinery Fuel Gas (Still Gas) • Wax
• Liquefied Petroleum Gas (LPG) • Asphalt & Road Oil
 Ethane & Ethane‐Rich Streams • Petroleum Coke
 Propanes • Petrochemicals
 Butanes • Sulfur
• Gasoline
 Naphtha
• Middle Distillates
 Kerosene
 Jet Fuel
 Diesel, Home Heating, & Fuel Oil
• Gas Oil & Town Gas
• Lubricants

EIA, refinery yield – updated April 20, 2014
http://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_m.htm

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Motor Gasoline Volatility Classes (ASTM D 4814‐13)

52
What are Octane Numbers?
• References:
 iso‐octane  100 (2,2,4‐trimethylpentane)
 n‐heptane  0
iso-Octane
• Tendency for auto‐ignition upon compression
 Gasoline — bad n-Heptane
 Tendency of gasoline to cause “pinging” in engine
 Higher octane needed for higher  140

compression ratios 120

• Different types (typically RON > MON) 100

 RON — Research Octane Number 80

Research Octane Number
60
• Part throttle knock problems
40
 MON — Motor Octane Number
20
• More severe — high speed & 
0
high load conditions Aromatics
‐20 Naphthenes
 (R+M)/2 – Road Octane Number Olefins & Cyclic Olefins
‐40 Iso‐paraffins

• Average of MON & RON Normal Paraffins
‐60

• Reported at the pump 0 50 100 150 200 250 300 350 400 450 500

Boiling Point [°F]

53
 14 30
Conventional Gasoline Conventional Gasoline

12
25

10
20

Reformulated Gasoline Reformulated Gasoline

Aromatics (vol%)
8
Olefins (vol%)

15

10

5 Averaged Summertime Parameters

2 Averaged Summertime Parameters
Averaged Wintertime Parameters Averaged Wintertime Parameters

0 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 1997 1998 1999 2000 2001 2002 2003 2004 2005

350 1.4

Conventional Gasoline
300 1.2

Conventional Gasoline

250 1.0

200 Benzene (vol%) 0.8

Sulfur (ppm)

150 0.6

Reformulated Gasoline Reformulated Gasoline

100 0.4

Averaged Summertime Parameters 0.2 Averaged Summertime Parameters

50
Averaged Wintertime Parameters Averaged Wintertime Parameters

0 0.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 1997 1998 1999 2000 2001 2002 2003 2004 2005

http://epa.gov/otaq/regs/fuels/rfg/properf/rfg‐params.htm
Middle Distillates
• General classifications • Properties
 Kerosene  Flash point
 Jet fuel  Cloud point / Pour point
 Distillate fuel oil  Aniline point
• Diesel   Cetane number
• Heating oil  Viscosity
 Water & sediment

55
What are Cloud & Pour Points?
 Indicate the tendency to form solids at low temperatures – the higher the temperature 
the higher the content of solid forming compounds (usually waxes)
• Cloud Point
 Temperature at which solids 
start to precipitate & give a 
cloudy appearance
 Tendency to plug filters at 
cold operating temperatures
• Pour Point
 Temperature at which the oil 
becomes a gel & cannot flow Melting Points of selected long‐chain normal & iso paraffins
typically found in middle distillates

Solidification of diesel fuel in a  fuel‐filtering device after sudden temperature drop
“Consider catalytic dewaxing as a tool to improve diesel cold‐flow properties”, 
Rakoczy & Morse, Hydrocarbon Processing, July 2013

56
Comparison of Boiling Ranges

57
Product Economics — Crack Spread
• Estimates the value added by refining as an industry
• 4 standard spreads
 5‐3‐2
• 5 bbl crude  3 bbls gasoline + 2 bbls heating oil/diesel
 3‐2‐1
• 3 bbl crude  2 bbls gasoline + 1 bbls heating oil/diesel
 2‐1‐1
• 2 bbl crude  1 bbls gasoline + 1 bbls heating oil/diesel
 6‐3‐2‐1
• 6 bbl crude  3 bbls gasoline + 2 bbls heating oil/diesel + 1 bbl residual fuel oil

• Rule of thumb for profitable operating environment
 Long held view – greater than $4 per bbl as strongly profitable
 Current view – should be greater than $9 per bbl to be profitable

59
 Crack Spread Calculation
• Example — Bloomberg, 1/4/2015
 Prices
• WTI Cushing Spot  $52.69 per bbl
• Brent $56.42 per bbl
• RBOB Gasoline  $1.4334 per gal
• Heating Oil $1.7957 per gal

 5‐3‐2 Spreads
• WTI:

42   3  1.4334  2  1.7957   5  52.69 http://www.bloomberg.com/energy/

 $13.60 per bbl
5
• Brent: 
42   3  1.4334  2  1.7957   5  56.42
 $10.09 per bbl
5

60
 Prices Are Crude Specific

Ref: Statistics, Oil & Gas Journal, January 27, 2014

61
 Historical Crude Prices & Margins

Updated  Jan. 2, 2015
Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm

62
 Prices Are Crude Specific

EIA published monthly production data– updated Jan. 2, 2015
http://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htm
http://tonto.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=IMX2810004&f=M

63
 Historical Crude Prices & Crack Spreads

Updated Jan. 2, 2015
Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm

64
 Historical Crude Prices & Crack Spreads

Updated Jan. 2, 2015
Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm

65
Description of Petroleum Refinery
• Manages hydrocarbon molecules
• Organized arrangement of manufacturing processes
 Provide physical & chemical change of crude oil
 Salable products with specifications & volumes as demanded by the marketplace

• Complete refinery will include:
 Tankage for storage
 Dependable source for electric 
 power
 Waste disposal & treatment 
 facilities
 Product blending facilities
 Around the clock operations
 Conversion units

66
Petroleum Refinery Schematic 

67
Petroleum Refinery Schematic 

68
Petroleum Refinery Block Flow Diagram 
Gases

Polymer- Sulfur
Sulfur
ization Plant
LPG
Sat Gas
Gas
Plant
Butanes Fuel Gas
Alkyl
Feed Alkyla- LPG
Gas tion
Separation Polymerization
Naphtha
& Isom-
Stabilizer erization
Light Naphtha
Alkylate
Aviation
Isomerate
Gasoline
Automotive
Reformate
Gasoline
Naphtha Naphtha Solvents
Heavy
Naphtha Hydro- Reform-
treating ing Naphtha
Atmos-
pheric
Distillation
Jet Fuels
Kerosene
Crude
Oil
Desalter Kerosene
Distillate Cat Solvents
AGO
Hydro- Naphtha Distillate
cracking Treating &
Hydro- Heating Oils
Blending
Gas Oil Fluidized treating
Cat Diesel
LVGO Hydro- Catalytic Distillates
treating Cracking
Vacuum
Distillation Fuel Oil
HVGO
Cycle Oils
Residual
Fuel Oils
DAO
Solvent
Deasphal-
SDA
ting Coker Bottoms Asphalts
Naphtha Naphtha

Visbreak-
Distillates
ing Heavy Fuel Oil
Coker Bottoms
Gas
Vacuum Oil Lube Oil Lubricant
Residuum
Solvent
Greases
Dewax-
ing Waxes
Waxes

Coking Light Coker

Gas Oil

Coke

70
Catalytic Cracking
• Catalytically crack carbon‐carbon bonds in 
gas oils 
 Fine catalyst in fluidized bed reactor allows 
for immediate regeneration
 Lowers average molecular weight & produces 
high yields of fuel products
 Produces olefins
• Attractive feed characteristics
 Small concentrations of contaminants
• Poison the catalyst
 Small concentrations of heavy aromatics
• Side chains break off leaving cores to 
deposit as coke on catalyst
• Must be intentionally designed for heavy 
resid feeds
• Products may be further processed
 Further hydrocracked
 Alkylated to improve gasoline anti‐knock 
properties

72
Naphtha Reforming
• Purpose to enhance aromatic content of  Dehydrogenation
naphtha CH3 CH3
 Improve the octane rating for gasoline
+ 3 H2
 Hydrogen as by‐product
• Used in hydrotreating to remove sulfur 
& nitrogen
• Primary reactions Isomerization
 Dehydrogenation CH3
Naphthenes → Aroma cs CH3
 Isomerization
Normal Paraffins → Branched Isoparaffins CH3
CH3
CH2
• Reformate desirable for gasoline but … 
 High octane number, low vapor pressure, 
very low sulfur levels, & low olefins 
concentration
 US regulations on levels of benzene,  Dehydrocyclization
aromatics, & olefins – air quality concerns CH3
CH3 + H2

CH3

CH3 + H2

74
Delayed Coking
• Process heavy residuum to produce distillates 
(naphtha & gas oils) that may be catalytically 
upgraded
Gas

 Hydrotreating, catalytic cracking, and/or 
hydrocracking Naphtha

• Attractive for heavy residuum not suitable for 
catalytic processes
Coke Drums

 Large concentrations of resins, asphaltenes, &  Light Gas O

Heavy Gas O
heteroatom compounds (sulfur, nitrogen, oxygen, 
metals)
Fractionator
• Metals, sulfur, & other catalyst poisons generally  Coke

end up in coke
Fired Heater
 Sold for fuel & other purposes Steam

Fresh Feed
• Carbon rejection process

75