Rising levels of natural gas liquids (NGLs) and corrosive additives are being blended into Permian light sweet WTI crude, prompting concerns about inconsistent quality in the absence of an agreed market standard.
NGLs and other additives are being blended into WTI early in the production process as part of efforts to maintain profitability in the face of lower crude prices and rising production costs. But the higher NGL levels being blended upstream are increasingly causing problems downstream.
One key problem is the lack of an acknowledged market standard for the amount of butane allowed in Permian WTI, participants heard at a Crude Oil Quality Association (COQA) meeting in San Antonio, Texas, in early October. Since NGLs occur naturally, it is also difficult to determine where the additional volumes are being introduced along the delivery line, conference participants heard.
COQA efforts in the past led to industry adoption of light-end limits for Nymex-deliverable domestic crude and light sweet grade LLS.
Elevated butane levels lighten a crude, but some refineries are not equipped to handle grades with a higher level of light-end yields, and this can lead to capacity bottlenecks at their processing units. Crude blended with NGLs can also take up more pipeline space relative to standard crude.
Mercaptans — naturally occurring sulphur compounds — have also become a quality concern, although there is a lack of consensus on how the problem is arising. Mercaptans are harder to treat and remove than other impurities, pose corrosion risks and damage refinery catalysts. High mercaptan levels can make it harder to produce lighter products that meet quality specifications. The jet fuel produced can exceed the regulated maximum amount of sulphur.
WTI volumes accepted in the North Sea Dated benchmark-setting process have a mercaptans limit of 75ppm. A US-wide standard has yet to be adopted, although some US pipelines from the Permian use the 75ppm limit to better align standards, including Plains' 600,000 b/d Epic and Phillips 66's 900,000 b/d Gray Oak to Corpus Christi lines. Plains recently informed shippers that it will charge a 50¢/bl premium if WTI mercaptans exceed the 75ppm limit on its lines.
WTI intended for export also has to meet stricter quality specifications in relation to several metals and has an upper limit for Reid Vapor Pressure (RVP), which can be affected by increased NGLs blending. Variability in gravity, sulphur, mercaptans, metals and RVP levels can undermine export demand for WTI.
Zinc contamination
Quality issues are not limited to WTI. Elevated zinc levels in offshore US Gulf medium sour Mars led to the US Strategic Petroleum Reserve having to provide a crude loan to ExxonMobil. The problem also contributed to the widest discounts for Mars against Nymex-quality WTI since December. Chevron found that the quality problem was connected to the start-up of a new offshore well, but not before the contamination had disrupted trade. The Shell-operated Mars pipeline system comingles crude from a variety of deepwater US Gulf oil fields, which it carries into the Mars stream.
Reports of unexpected wax content in onshore US crude also suggest that Uinta Basin crude is sometimes entering the onshore mix. Uinta Basin crude contains high levels of paraffin and is mostly transported by rail because otherwise it needs to be moved in heated pipelines.
As crude prices soften, Permian wells mature and drilling shifts to less optimal rock formations, some quality variability seems likely and blending may increase, which could present more problems for refiners in the future.
