WTI quality issues cause concern

Buyers of US WTI still face variable quality issues because of different specifications governing pipelines running from the Permian basin to the Texas Gulf coast.

Most of the main pipelines that carry WTI from the Permian basin in Midland, Texas, to the Gulf coast have standardised gravity and sulphur specifications — 36-44°API and less than 0.45pc — but not every line has specific requirements listed for metals and mercaptans. Metals such as iron can spoil the catalysts that refineries use in their catalytic crackers, while high mercaptans can make it harder to produce lighter products such as jet fuel.

Midstream operators have been trying in recent years to standardise the light sweet WTI stream. But concerns have risen about the quality of Midland-origin WTI cargoes loading in the Houston area over the past eight months. Buyers now say they prefer to receive WTI cargoes at Corpus Christi, Texas, owing to the stricter quality specifications in force on key pipelines linking the Permian basin to the hub. Midstream firms tightened quality parameters following concerns over mercaptans and the high iron content of Corpus Christi WTI cargoes. Some producers have invested in sulphur reduction treatment at the wellhead to reduce the fouling of gathering lines. Chemicals manufacturer Q2 Technologies is among the contractors working with producers and midstream operators to clean up Permian barrels, citing one case where it helped bring more than 50,000 b/d of Permian production to mercaptan levels of less than 75ppm, compared with pre-treatment levels of up to 600ppm.

The relatively new 600,000 b/d Epic pipeline and Phillips 66's 900,000 b/d Gray Oak line have each instituted a 75ppm mercaptan limit on WTI shipments, from April 2020 and November 2020, respectively. Crude shipped along Epic generally loads from the Epic crude marine terminal in Corpus Christi, Buckeye Partners' South Texas Gateway terminal, Flint Hills Resources and the Enbridge Ingleside Energy Center. Gray Oak also delivers to the South Texas Gateway terminal and can deliver 100,000 b/d of crude to the 300,000 b/d Kinder Morgan crude and condensate pipeline to the Houston area.

The tariff regulations for Plains All American's 670,000 b/d Cactus 2 pipeline to Corpus Christi and Ingleside refrain from listing specific mercaptan limits, although Plains adheres to the same 75ppm maximum for WTI and West Texas Light shipments on its crude gathering system in west Texas.

Quality concerns

There are additionally no mercaptan specifications on Magellan Midstream's 275,000 b/d Longhorn and 440,000 b/d BridgeTex pipelines from the Permian basin to the Magellan East Houston (MEH) terminal, which has historically acted as the main trade hub for Midland WTI at the US Gulf coast.

Magellan allowed WTI crude from third-party pipelines to make use of its MEH terminal in October 2020, simultaneously specifying that all deliveries into the WTI pool must have a gravity of 41.0-43.5°API, a sulphur content of less than 0.2pc and maximum 75ppm mercaptan levels. Yet European buyers have said they have received off-specification WTI cargoes from Magellan's Seabrook terminal, which receives crude deliveries from MEH, KMCC and various points in the Houston distribution system.

The new 1.5mn b/d ExxonMobil-led Wink-to-Webster pipeline system, which went into service at the start of 2022, is expected to adhere to the MEH-WTI quality parameters, and may deliver a better-qualityWTI to Enterprise Products' Echo terminal, which connects to most of the Houston-based marine infrastructure along the Houston Ship Channel.

By Amanda Hilow