Crude Moves

Streamlining the crude supply chain is one way to help bring down fuel costs.

History will judge the impact of crude oil as unparalleled. Wars are fought over it. Petrodollars are derived from it. Countries lucky enough to possess it are maintained by its existence. In fact, since 1971, oil has sustained the buoyancy of the US dollar. With OPEC pricing oil in dollars, after all, countries are obligated to maintain dollar reserves to purchase petroleum, thus reinforcing the greenback’s strength and demand. In a sense, the gold standard has stepped aside for the oil standard.

In an operational sense, crude oil has many functions. Asphalt roads, plastics, polymers, and petrochemicals all derive from the crude stuff. However the most valuable derivative is gasoline. Consumed daily by motorists around the world, demand remains at an all-time high. Factor in the exponential growth of countries like China and India, and their unquenching thirst for black gold, and you begin to understand just how immersed in petrol the global economy has become. By all accounts, the world needs oil.

It is no coincidence then that the distribution and refinement industries of crude are raking in record profits. Exxon Mobil, Halliburton, BP and Shell are all acknowledging billions in newfound revenues. Whether you perceive their intentions as good or bad, their roles within the economy are vital.

Therefore, it should come as no surprise that oil refineries remain an essential staple in our modern society. Often going unnoticed, their role in the oil-petrol supply chain is a crucial one. Costing billions of dollars to construct and millions more to maintain and operate, their sole intention is to refine and produce on a massive scale. Running 365 days a year, large refineries can be complex operations, often employing thousands of people. Their jobs are thankless ones, in that few consider just where that gasoline they’re pumping into their cars comes from, or how it got to the pumping station.

So how do they do it?

There are three basic steps common to all refining operations, regardless of a refinement facility’s size or complexity. First, the separation process separates crude oil into various chemical components. Next, the conversion process goes a step further by breaking these chemicals down into molecules called hydrocarbons. Lastly, the treatment process combines and transforms hydrocarbon molecules and other chemical additives, to create a host of new products, notably gasoline.

The distribution of crude oil and its derivatives remains diverse. From tankers to pipelines to trains to trucks, each has a defined role within the petrol supply chain. Tankers often carry the oil from exporting country to overseas importing countries.

Pipelines remain the safest, most efficient and economic way of transporting the oil, often long distances. Made from steel or plastic tubes with an inner diametre typically 10 to 120 centimetres, most are buried underground at a depth of one to two metres. Pump stations placed along the pipeline every 80 to 100 kilometres keep the oil flowing at a rate of one to six metres per second.

When transporting crude through pipelines, especially in colder climates, wax has a tendency to buildup, causing flow restrictions. Often pipeline inspection gauges (pigs) will be launched from station to station to clean any wax deposits that may have accumulated inside.

Trains are used to transport the refined crude to major distribution hubs. More efficient than trucks, train tankers have been in operation since the early 1900s. Today, oil transport remains a significant portion of rail freighters’ profits, however, more efficient pipelines are emerging as a cheaper alternative.

Terminals play an important role in oil transportation as well. These facilities allow for the collection of oil and its introduction into long distance pipelines. Terminals can receive shipments via truck or rail, storing the oil in high volumes. Batches of 80,000 barrels each are assembled before they are introduced into the long distance pipelines. Some terminals are also capable of receiving shipments from feeder pipelines. Here again, storage is important and some terminal operators provide leased storage in tank farms where amounts of over one million barrels of crude can be stockpiled, either for later shipment or as a hedge against price fluctuations.

Because of slow production, coupled with the long lead times for the industry, oil supply chain movements are crucial to maintaining stability in the market. Like all industries, crude transportation must be dependable, streamlined and perhaps most importantly, cost efficient.

The Oil Refining Process

Separation

Separation, or distillation, begins by pumping crude oil into pipes running through hot furnaces and heating the oil to vaporise it. The resulting vapours and liquids are then discharged into distillation towers, the tall narrow columns that give refineries their distinctive skyline.

During this process, the lightest materials, such as propane and butane, vaporise and rise to the top of the first atmospheric column. Medium weight materials, including gasoline, jet and diesel fuels, condense in the middle. Heavy materials, called gas oils, condense in the lower portion of the atmospheric column. The heaviest tar-like material, called residuum is referred to as the “bottom of the barrel” because it never really rises.

Conversion

Conversion is where fractions from the distillation towers are transformed into streams (intermediate components) that eventually become finished products. This also is where a refinery makes money, because only through conversion can most low-value fractions become gasoline.

The most widely used conversion method is called “cracking” which uses heat and pressure to literally crack heavy hydrocarbon molecules into lighter ones. A cracking unit consists of more tall, thick-walled, bullet-shaped containers called reactors and a network of furnaces, heat exchangers and other vessels.

Fluid catalytic cracking, or “cat cracking”, is the basic gasoline-making process. Using intense heat (1,000 degrees Fahrenheit), low pressure and a powdered catalyst (a substance that accelerates chemical reactions), the cat cracker can convert most relatively heavy fractions into smaller gasoline molecules.

Treatment

Treatment is the final step before tanker trucks and railroad cars head out of the refinery to deliver gasoline to the local stations. A major part of the refining treatment involves blending, purifying, fine-tuning and otherwise improving products to meet government standards and specifications.

To make gasoline, refinery technicians carefully combine a variety of streams from the processing units. Among the variables that determine the blend are octane level, vapour pressure ratings and other special considerations, such as whether the gasoline will be used at high altitudes. Often performance additives and dyes are added to distinguish the various grades of fuel.

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