Likely boost in LPG output seen as more refiners use heavy crude

09 November 2010 23:39  [Source: ICIS news]

HOUSTON (ICIS)--Propane and butane production as a refinery by-product could rise on pipeline shipments of Canadian heavy crude oil to the US midwest and Gulf coast, an analyst said on Tuesday.

“The shift from light crude to heavy crude will affect relatively few refineries and will probably not reduce the supply of light ends [lighter materials that are processed from crude, such as liquified petroleum gas, kerosene and heating oil],” said Dan Lippe, president of Petral Worldwide. “If anything, the shift may increase the supply of light ends due to the increases in feed rates to cokers and FCC [fluid catalytic cracking] units.”

The refinery upgrades, mainly adding coker units to process the higher density crude, would allow for higher processing rates. Refineries would process heavier material, which would yield a higher percentage of liquid petroleum gas (LPG), such as propane and butanes.

Stephen Jones, a senior analyst with Purvin & Gertz, said heavier crude oil run through a coking refinery could yield 25-35% more LPG than the same grade of heavier crude run through a refinery that only has cracking capabilities.

The Keystone Pipeline, a project of TransCanada, was expected to begin shipping Canadian crude oil at a full rates 1.1m bbl/day to the US by the third quarter of 2013. The pipeline would run from western Canada to the US Gulf.

Secretary of State Hillary Clinton recently mentioned the importance of granting the permit for the pipeline in order to reduce dependence on oil from the Middle East.

LPGs have predominantly been used in the chemical industry for injection moulding, fibres, film, piping, latex, rubber and packaging feedstock. Both have also been used as a source for heating or cooking, and propane has been used as an alternative fuel for motor vehicles.

However, the most desired chemical feedstock has been ethane, which the heavy crude processing would not affect.

Upgrades at refineries to process heavier crude oils mainly involve adding more conversion units to break down the heavier hydrocarbons, such as crackers and coker units. Refiners have invested millions of dollars for upgrades to process the heavy crudes to take advantage of a discount of around $15/bbl for heavier Canadian crude compared with West Texas Intermediate (WTI) crude.

Upgrades for heavier crude are being made are for at least five large US facilities, including Marathon’s Garyville refinery in Louisiana, BP's Whiting refinery in Indiana, ConocoPhillips's Wood River refinery in Illinois, Motiva's Port Arthur refinery in Texas and Total's Port Arthur refinery.

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By: Sheena Martin
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