Crude Oil Blending James Ignatovich Area Manager WGC

Crude Oil Blending James Ignatovich – Area Manager, WGC Intertek - Commodities Division total customer focus www. intertek. com

Crude Oil Blending • Transportation and Logistics • Pipeline economics • Quality Management total customer focus www. intertek. com

1. Blending Heavy Crude for Pipeline logistics total customer focus www. intertek. com

In-line blending for transportation Heavy crude (A) Viscosity! Horsepower Pour Point! Pipeline Heavy crude Receiver (B) Density! $$$$ As. The theefficiency viscosity of increases, moving crude the flow oil through the this. One pipeline solution decreases is totally is to acquire dependent and the a light pressure oncrude some or of its As theproperties density increases does under the amount of horsepower required to push the increases. physical All pipelines including must so operate DENSITY, VISCOSITY theanother Maximum AND acceptable Operating POUR hydrocarbon POINT Pressure they that are iscrude through will cost on an incremental pipeline tariff! designed for, the sopipeline…. which it may not be possible to more pumpreadily untreated accessible high viscosity and useproduct an inline at all. blender to create a blend with a lower Density, Viscosity and Pour Point. Light crude or other diluents www. intertek. com

In-line blending for transportation Heavy crude (A) Viscosity! Pour Point! Density! Medium crude blend $$$$ Receiver (B) Pipeline Inline blender One The solution problematic is to physical acquire aproperties light crude will or another now be acceptable eradicated hydrocarbon and the blendthat will isbe readily easily pumped accessible to and the reciever. use an inline blender to create a blend with a lower Density, Viscosity and Pour Point. Light crude or other diluents www. intertek. com

2. Sharing a Common Pipeline total customer focus www. intertek. com

Shared Pipeline blends Medium sour • • • you Using the benchmark value Here see wells three platforms Now let’s say with differing can be calculated how all producing the same quality • drilled And the owners of the Ait sweet crude well and quality are nearby…. the sour crude lower value souris stream crude. Itamuch is all comingled and Are the owners going to sour crude well are may not want to give up decreasing the streams they will connect pumpedconstructed to. No, shore via amiles single lay miles and close byof Medium sour such compensation! and the owner to this common pipeline. value The allocations will be pipeline to keep the be penalized. based metered streams One solution to the allocationonly of funds ispipeline. to onsegregated? Sourfocuses $$$ volumes. set up a quality bank that on key quality parameters for the medium sour crude. Each quality parameter will set a benchmark for the value for the original crude. Common Carrier Medium sour www. intertek. com Sweet $$$ • • But what about Likewise it canthe beowners of the higher value calculated howstream? much the They will want to be sweet crude is increasing compensated for the sweet the value and the owner product they are introducing to will be compensated. the system.

3. Blending Crude Oil for Margin Optimization (Quality Management) total customer focus www. intertek. com

• The “B” word……. Blending high quality crude oil with low quality crude oil in order to change the value of the product has been around for decades. • It has been a taboo subject in years past and some of the crude oil blending that took place was very controversial resulting in what was known as “Dumb Bell” crudes. • The industry standard for defining crude oil quality was by analyzing and measuring only two parameters, Gravity and Sulfur. • Therefore the quality could be easily manipulated by blending a very heavy crude with a very light crude. total customer focus www. intertek. com

Historical and controversial dumb bell crude blending • As this blend passes through the refinery units the metals would Heavy Sour Crudedeactivate or “poison” catalysts and upset other sensitive equipment V • Blending a heavy crude with a • condensate But the other characteristics and would give a parameters be very resulting blendwould that has different a desirable crude Gravity andfrom Sulfur parameters heavy metals!! theoil…. such same as aasdesirable sweet crude. • • This The didheavy not fair and well light with product refiners andyields because would of be thisvery the high COQA butand other theindustry desirable associations middle distillate pushed for yields more parameters would be very to be low. Fe analyzed Hence when the term defining “Dumb the bell” quality Ni of crude oil. Condensate www. intertek. com

Pipeline Specifications • • Here you can see some typical Pipeline crude results for asale virginspecs sweet crude that meets spec along with Test Unit other domestic and foreign crudes that do not meet spec. API: Min Max 34. 0 41. 0 Here you can see a typical sweet crude pipeline spec taken from a public website. with the Virgin Medium Along. Heavy traditional Gravity and. Sour Sulfur we. LS Cond Sweet Sour now have other specifications. 36. 1 25. 0 29. 0 45. 0 MCRT: • %Wt. If a marketer has the use of 0. 336 a blending 0. 400 1. 90 0. 05 0. 400 facility and has access to each of these • 2. 98 The light 2. 62 ends and residue specs 20. 0 1. 40 %w/w 6. 0 crudes they can blend them together and still should eliminate “Dumb bell” 2. 9 8. 6 crudes and %w/w potentially 4. 0 meet all 12. 0 of the requirements of thetotal 23. 0 metals spec 0. 1 pipeline and the refinery. (V, Ni & Fe) will stop heavy metals 0 %Wt 2. 0 1. 7 Metals: mg/kg TAN: mg KOH/g Sulfur: Light Ends: (C 2 -C 5 total): Sim Dis: (1020+): www. intertek. com 8. 0 0. 70 from poisoning the catalysts. 3. 3 There is 4. 2 also an acid 75. 0 number specification. 0. 37 0. 28 0. 51 5. 0 0. 05

Tank blending Virgin Sweet 0. 33% Sulfur $100 Pipeline Spec 0. 4% Sweet Blend $100 MARS 6 MB EIC 28 MB SAH 38 MB • Virgin crude oil available for the operation of supplying a 0. 40% sulfur sweet crude blend through a pipeline. www. intertek. com Virgin sweet 200 MB • Target blend for contract sale

Tank blending Virgin Sweet 0. 33% Sulfur $100 Pipeline Spec 0. 4% Sweet Blend $100 MARS 6 MB LS Cond 0. 05% Sulfur $95 EIC 28 MB LS Cond 38 MB 238 MB Sweet light Blend 0. 29%200 MB Virgin Sweet www. intertek. com

Tank blending Virgin Sweet 0. 33% Sulfur $100 Pipeline Spec 0. 4% Sweet Blend $100 MARS 6 MB LS Cond 0. 05% Sulfur $95 Med Sour 1. 00% Sulfur $90 www. intertek. com Med Sour 28 MB 266 MB 238 MB Sweet Blend Sweet 0. 36% light Blend 0. 29%

Tank blending Virgin Sweet 0. 33% Sulfur $100 Pipeline Spec Sweet Blend $100 Heavy Sour 6 MB LS Cond 0. 05% Sulfur $95 Medium Sour 1. 00% Sulfur $90 Heavy Sour 1. 90% Sulfur $90 www. intertek. com 272 MB 266 MB Sweet Blend Common Carrier Sweet Ready for. Blend Pipeline 0. 36% Virgin Sweet 200 MB $98. 05/Bbl Gross profit $530 k

Tank Sampling • If this shore tank was to scale then this tiny, little dot would …. . this shows how difficult represent 1000 quarts of it can be and how important it is the to get product. This means that good representative analysis we run is on a samples sample from a crude shore tank th 1000 the size of this dot……. . 300, 000 Barrel Shore Tank 300, 000 x 42 = 12, 600, 000 Gallons 12, 600, 000 x 4 = 50, 400, 000 quarts • The samples would go back to our lab for testing. Based on the results the lab would produce a Report of Analysis for the whole tank based on that one quart sample. www. intertek. com • . Here is a representation of a 300 MB crude oil shore tank that our inspector would climb and take quart samples from each level (U/M/L) along with running averages.

• A lot of pipelines converge at this • area Here is a. Midwest. map of the in the At a little crude oil pipelines in Known town called Cushing, OK. North locally as. America. the “Pipeline crossroads of the world”. The large crude oil terminal here has been upgraded and expanded (50 M Bbls) recently for mass storage and blending of crude oil. www. intertek. com

Intertek Crude Oil Laboratory, Cushing, OK Crude oil and fuel testing Intertek has committed to opening a full crude oil laboratory in Cushing, OK. Capabilities include almost all ASTM crude oil methods, including GC light ends & HTSD Metals by ICP, Nitrogen, Sulfur, Gravity, RVP, Chlorides and many, many more…. Opening March 2011 total customer focus www. intertek. com

Questions? Bruce Carlile – 832 -861 -4053 Bruce. Carlile@Intertek. com James Ignatovich – Area Manager, WGC Intertek Commodities Division total customer focus www. intertek. com

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