Fuel Oil
A Refiner’s Perspective
Gary Wright
ConocoPhillips
Fuel Oil / Energy Buyers Conference
Miami, Florida
October 2007
Typical Fuels Refinery
Crude Oil Distillation
PLPG LPG
Light St. Run Gasolines
Naphthas Jet Fuel / Kero
Distillates Diesel /
Further
Crude Oil Refining
Heating Oils
Gas Oils
Bunker/Fuel Oils
Residual
Misc. Products
(0 - 40%)
Coke (carbon)
Sulfur
2
Crude Oil Yields
LPG
Lighter 100%
LSR
90%
Naphtha
80%
Kero
70%
60%
Diesel
API Gravity
50%
40%
30% Gasoil
20%
10% Resid
0%
Cossack ANS Maya Merey
Heavier API=47.3 API=27.6 API=21.3 API=15.3
Sulfur = 0.3% Sulfur = 1.1% Sulfur = 3.5% Sulfur = 2.5%
Low High
Refinery Complexity
3
Crude Oil Properties
Crude Type Origin Crude Crude Residual Residual
API Sulfur (vol. %) Sulfur
(wt.%) (wt. %)
Arab Extra Light Saudi 38 1.2 7.7 2.9
Arabia
West Texas Interm. US 40 0.4 10 1.2
Brent UK 38 0.4 11 1.3
Basrah Light Iraq 33 2.3 17 5.8
Alaskan North US 28 1.1 21 2.0
Slope
Rabi Light Gabon 34 0.1 20 0.4
Oriente Ecuador 25 1.1 27 2.5
California SJVH US 12 1.4 28 1.9
Arab Heavy Saudi 21 3.1 28 5.7
Arabia
Maya Mexico 21 3.5 35 5.7
4
Refining Trends
5
6
$/BBL
O
ct
-9
10.00
12.00
14.00
16.00
18.00
20.00
0.00
2.00
4.00
6.00
8.00
7
Ap
r-9
8
O
ct
-9
8
Ap
r-9
9
O
ct
-9
9
Ap
r-0
0
O
ct
-0
0
Ap
r-0
1
O
ct
-0
1
Ap
r-0
2
O
ct
-0
2
Ap
r-0
3
O
ct
-0
3
Ap
r-0
4
O
ct
-0
4
Overall refining margins have increased
Ap
r-0
5
O
ct
-0
5
Ap
r-0
6
O
ct
-0
6
NYH 6:3:2:1 Brent Crack
Ap
r-0
7
Fuel Oil Price / Brent Price
7
10
/1
6/
19
9
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
4/
16 7
/1
10 99
/1 8
6/
19
4/ 9
16 8
/1
10 99
/1 9
6/
19
4/ 9
16 9
/2
10 00
/1 0
6/
20
4/ 0
16 0
/2
10 00
/1 1
6/
20
4/ 0
16 1
/2
10 00
/1 2
6/
20
4/ 0
16 2
/2
10 00
/1 3
6/
20
4/ 0
16 3
/2
10 00
/1 4
6/
20
4/ 0
16 4
/2
10 00
/1 5
6/
20
1% Fuel Oil vs Brent Price
0
Fuel oil price relative to crude has declined
4/
16 5
/2
10 00
/1 6
6/
20
4/ 0
16 6
/2
00
7
Gasoline and Fuel Oil Price History
NYH Prices
100.00
90.00
Spread between gasoline and fuel oil has widened
80.00
making resid upgrade highly desirable
70.00
60.00
$/BBL
50.00
40.00
30.00
20.00
10.00
0.00
7 8 8 9 9 0 0 1 1 2 2 3 3 4 4 5 5 6 6 7
ct-9 pr-9 ct-9 pr-9 ct-9 pr-0 ct-0 pr-0 ct-0 pr-0 ct-0 pr-0 ct-0 pr-0 ct-0 pr-0 ct-0 pr-0 ct-0 pr-0
O A O A O A O A O A O A O A O A O A O A
Gasoline LSFO
8
Fuel Oil Components
And Processing Options
9
Fuel Oil Blend Components
• Light Cycle Oil (LCO) – from FCC
– Used as cutter for viscosity
– Desirable for ULSD feedstock if hydrotreater is capable of
converting
• Heavy Cycle Oil (HCO) – from FCC
– Heavier cut still a good cutter stock
• Decant / Slurry Oil – from FCC
– Potential carbon black feedstock
– Fuel oil cutter stock
• Atmospheric Gas Oil – may be used if needed for
gravity / viscosity control
– Undesirable due to large downgrade relative to cat cracking
• Vacuum Resid
– Has the most processing optionality
10
Refinery Options for Resid
• Blending to Bunker Fuel & Utility Fuel Oil
• Asphalt Production
• Resid Conversion to Gasoline / Diesel
– FCC Feed (light straight run resid)
– Delayed Coking (heavy, sour resid)
– Visbreaking
11
Refinery Options for Resid
- Fuel Oil Blending
Advantages Disadvantages
• Low capital requirements • Negative margin relative
to process to crude
• Provides outlet for non- • May require downgrade
clean product streams of lighter products to
meet gravity / viscosity
specifications
12
Refinery Options for Resid
- Asphalt Production
Advantages Disadvantages
• Provides opportunity for • May result in gas oil
product upgrade vs fuel downgrade from cat
oil cracking to asphalt to
• May be able to run meet specifications
advantaged crude slate • May limit crude selection
• Specifications more
difficult to meet
13
Refinery Options for Resid
- Catalytic Cracking
Advantages Disadvantages
• Upgrades resid to • Resid feed rate limited by
gasoline and diesel concarbon - air blower
• Improved clean products limit
yield • Feed rate may also be
• Improved margin limited by metals in resid
– higher catalyst additions
or metals passivation
• Can impact crude
selection requiring more
expensive, higher quality
crudes to accommodate
processing
14
Refinery Options for Resid
- Delayed Coking
Advantages Disadvantages
• Enables processing of • Requires significant
cheaper heavy sour capital investment
crude • Additional hydrotreating
• Upgrades resid to • Sulfur processing
gasoline and diesel • Amine treating
• Sour water processing
15
Fuel Oil Sales
Sales are the best option when:
• Running low resid yielding crudes
– Clean products yield is high (>90%)
• Capital investment for resid conversion is
not desirable
• The refinery has waterborne product
distribution options
16
….If Fuel Oil Sulfur is Regulated to
1.5% Sulfur
A Refiner’s Options: Economic Option?
• Sell to export market Possible
• Blend with low-sulfur streams A few refineries?
• Switch to lower-sulfur crudes A few refineries?
• Asphalt market Limited market
• Resid Desulfurization Unlikely / costly
• Resid Destruction Possible
17
A Refiner’s Decision
• Where will market economics steer us?
– Relative Prices
• Crude Oil vs. Fuel Oil vs. Motor Fuels
– Cost of Capital Investment
– Operating Cost
18
.
Thank you !
Special thanks to
Steve Smith and
Marla Benyshek
at ConocoPhillips
for their help
19
Backup Slides
20
ConocoPhillips U.S. Refinery Sites
21
Refining Margins
East Coast 6:3:2:1 Brent crack (or margin)
6 Barrels of sweet crude produces:
3 barrels of gasoline
2 barrels of heating oil
1 barrel of fuel oil
6:3:2:1 = (3 x gasoline price + 2 x diesel price + 1
x fuel oil price – 6 x Brent crude price) / 6
22
23
Price vs Brent
10
/1
6/
19
9
0.50
0.70
0.90
1.10
1.30
1.50
1.70
4/
16 7
/1
10 99
/1 8
6/
19
4/ 9
16 8
/1
10 99
/1 9
6/
19
4/ 9
16 9
/2
10 00
/1 0
6/
20
4/ 0
16 0
/2
10 00
/1 1
6/
20
4/ 0
16 1
/2
10 00
/1 2
6/
20
4/ 0
1% No 6 / Brent
16 2
/2
Price vs Brent
10 00
/1 3
6/
20
4/ 0
16 3
/2
10 00
/1 4
6/
Gasoline / Brent
20
4/ 0
16 4
/2
10 00
/1 5
6/
20
4/ 0
16 5
/2
10 00
/1 6
6/
20
4/ 0
16 6
/2
00
7
Gasoline & LSFO Price History