Make Money, Literally Out of Stone! And How Blending Can Help…

I was fortunate to get a grand tour of the Port Of Fujairah in UAE with the gracious harbormaster, Capt. Tamer Masoud (kindly offering me water).

The tour was unforgettable, the ultramodern installations, from the state of the art tugboats to the matrix manifolding connecting the 10 or so different oil tank storage terminals to the port, the control tower, barge and VLCC jetties, deep sea berths, etc. And all this was done by grinding down the mountains to make artificial land…

Truthfully I was more than a bit envious when I recalled some of the decrepit installations we have on the Houston ship channel, where we have always to beg for money to maintain and modernize facilities…

It is no wonder that Fujairah is the second largest bunkering port in the world, in 2014 more than 14,000 vessels called there, fully 60% for bunkering.

Looking to the future, UAE’s ADNOC built a 48 in crude pipeline from the Habshan oil fields to Fujairah, where it is stored in 8 gigantic 1 million barrels tanks for export, all this outside the Straits of Hormuz. IPIC, UAE government investment arm, is building a 200,000 BPD refinery to make refined products for both export and domestic market.

With oil prices expected to vary within $30 to $60/bbl in the next couple of years, UAE’s neighbor, Iran, will also become a big Fujairah customer to meet its ambitious export goals, so it’s a win-win situation…..

To learn more about making money making bunker fuel with smart blending, register for my next bunker blending course in Singapore. http://www.cconnection.org/Event.php?id=42  

To learn more about making money making gasoline and diesel fuels with smart blending, (without crushing mountains!) register for my next gasoline blending course in London: Registration for Gasoline and Diesel Blending: http://www.peice.com/eventdetails.aspx?event=112447

Detailed course content here http://www.refautom.com/NewsDB/Gasoline.pdf

$30 oil is here-I told you so-Blending can help

This week WTI crude price dropped to $38/bbl, and this is BEFORE Iran dumps another couple of million barrels to an oversupplied market, and lousy economic climate.

I Told You So!!!

This was predictable (see my Blending Insight Newsletter of December 2014), but it’s in human nature to avoid “bad news”. Fundamentals have not changed, so the downward spiral will continue…The BIG date is December 2015 when IAEA certifies that Iran has met its obligations under the agreed-upon nuclear deal…So be prepared..

Blending To The Rescue

The product prices take 4 to 6 months to track crude oil prices, thus providing REFINERS and TRADERS that blend fuels (gasoline, diesel, marine bunkers) an opportunity to exploit this time-price gap, and make a “killing” in the market.

To survive $30 oil you need to move fast to exploit the price-time gap, and sell or undersell your competitors to both existing and new customers (there is no shame in stealing your competitors customers). This is where blending excels…so…

Learn how to blend profitably…Ignorance IS NOT Bliss!

       

• Blend various components into more than 15 different finished gasoline grades with emphasis on optimizing blend ratios to maximize profitability
• ·       Learn how to decide to Buy or Not To Buy blend components
• ·       Calculate blend component prices when not available
• ·       Manage inventories: learn how to determine whether you have enough required components to blend finished grades 1 week to 2 months in advance

Register Today! London  Gasoline/Diesel Blending Course (Sept 16-18, 2015)

So I hope to see you in London:

Registration for Gasoline and Diesel Blending: http://www.peice.com/eventdetails.aspx?event=112447

Detailed course content here http://www.refautom.com/NewsDB/Gasoline.pdf

Make Millions with Cheap Butane

At $10 to $20 per barrel, Butane is a very cheap, abundant, high octane and high vapor pressure gasoline blending component. At today’s gasoline prices of about $77/barrel, being able to include 6% to 8% butane in the gasoline blend will increase profit by decreasing the cost of the gasoline blend by about $3/barrel. If you blend 50,000BPD, that’s a cool $150,000 per day in your pocket.

Why many people are afraid to use Butane? Because of ignorance; many fear that they will “blow” the RVP specs and RVP-related volatility specs like TVL and VOC.

How can you meet the specs without losing sleep?

1.     First, know “your” Butane properties. Don’t copy numbers from a book or magazine. Have a Lab do an actual compositional analysis using e.g. gas chromatograph, and then do the math per ASTM D-2598.

2.     Second, you need a blend optimizer which uses non-linear property calculations to “hit” multiple specs simultaneously while maximizing blend profit.

What else do you need?

If you have an in-line gasoline blender, you’ll need an on-line RVP analyzer, like a Grabner, connected by the shortest line feasible to the blend header, without giainormous filters, coalescers, etc. to keep time delay (transport lag) to a minimum. The reason is that the precision of the RVP measurement worsens with the time delay, e.g. Grabner precision (reproducibility) of 0.1 psi deteriorates to 0.3 psi if the time delay increase to 10 minutes because of having to flush filters, etc. before getting a “fresh” sample. This 0.2psi giveaway will cost you millions/year, i.e. penny-wise and pound-foolish????

If you blend butane in a finished gasoline blend tank, you can insert the analyzer equipment in the circulation line pipe, but it’s more tricky (need to homogenize the tank!!!... A pain in the neck), and you will get about half the benefits compared with in-line blending.

How much will it cost?

1.     “Your” Butane sample Lab analysis ~ $1,000

2.     Single blend optimizer software license fee~ $15,000

3.     Grabner on-line analyzer ~ $100,000

4.     Analyzer filed installation ~ $25,000

5.     Analyzer interface to blend property control system ~ 15,000

Overall, a small price to pay to capture these butanization benefits

The Ostrich and 2020/2025 Bunker Global Specs

The Ostrich and 2020/2025 Bunker Global Specs

Recall the familiar old saying that someone is "burying their head in the sand" when they refuse to acknowledge a problem!

How does that “ostrich parable” apply to marine bunker global Sulfur specs? Well, for one thing, we cannot practically and economically make that kind of fuel with 0.5% S. The Global Marine Bunker Fuels Sulfur 2020/2025 Specs of 0.5%S will kill the (Residual) Bunker Business worldwide. Meanwhile, we waste time on golf outings and dinners, and everybody’s sitting on their hand waiting for somebody else to do something, or praying that it will not happen, in effect, zero effort to change specs.

 The consequences?

Goodbye Singapore, Fujairah, Rotterdam...your 60 to 70 million ton/year bunker

business will disappear together with about US$25 billion in annual bunker sales plus

associated port services. The same fate will befall smaller bunker hubs... so adios, Algeciras, Gibraltar, Malta, Piraeus, Panama, etc.

Selling MGO will not compensate for that loss of bunker sales, and forget about scrubbers saving the day...less than 0.5% of world’s sea-going vessels have scrubbers..

Finally, residue desulfurization (RD) does not pay for making 0.5% S marine bunkers from typical 2%S residue. RD units costs $ 500 million to a billion per unit, and produce mostly naphtha and distillates that have a much higher $-value than IFO bunkers, so nobody in his right mind will use it for 0.5% S bunker.

Bunkers use residue (cheap atmospheric, vacuum, visbreaker residues) and cutter stock (cheap black gasoils) to make IFO380 at the lowest possible cost. Most crudes around the world produce residues with about 2 to 4% Sulfur, which cannot produce 0.5% S bunker with acceptable properties (see Table 1 in my June 2015 Fuel Bunker Insights newsletter).

On the other hand, if the global specs are changed to 1% S, there are plenty of low Sulfur crudes producing residues with around 1.5 to 2.5% S that can be blended down economically to meet 1% S specs.

This IMO Global Spec was pushed by Europeans down the throat of the rest of the world. Yes, they are free to kill themselves if they wish, but have no right to do the same to the rest of the world. At the International Maritime Organization (IMO) Marine Environment Protection Committee (MEPC) meetings in London, the loudest dominant voices are from Europe.

The feeling is that the other countries don’t care or are too stupid to understand the consequences, particularly the “flag-of-convenience” micro-countries run by Europeans for Europeans; and nobody seems to object.

2020 or 2025 is not that far away, and the issue cannot and will not be resolved at the last moment. As is always the case, “we pay for our stupidity through the nose”....

What Can Be Done

What is needed is a UN IMO member country representative to object and introduce a resolution amending MARPOL VI annex replacing the 0.5% S specs with 1% S specs. That is still a 350% reduction from today’s global 3.5% S specs.

I am planning to start an organization modeled after the API (American Petroleum Institute), as a lobbying organization to change the global bunker specs. Membership will include bunker suppliers, traders, brokers, and ship owners.

Such a project will involve countless man-hours and serious technical and legal resources.

I am seeking support and backing for this effort, and I hope I can count on you. Please email me at jabarsa@refautom.com

Remember, DO NOTHING is not a solution.

Can you survive $30 oil?

Now that US and Iran agreed to a nuclear deal, Iran will be ready to ramp up crude oil shipments, staring in the next 2 months or so, and ramping up to maybe a half million barrels/day in December. In 2016, Iran will make an effort to increase shipments to maybe a million barrels/day around June-July.

Recalling that there is already a 3 million barrels/day surplus, plus lingering recession in most of the world, there will be irresistible market forces to lower prices further, possibly to $30 to $35/barrel.

Surviving $30 oil

Saudi Arabia can afford to pump and make a profit above $15/bbl. Even fully 30% of US frackers can make a profit above $25 to 30/bbl. High cost producers of poor quality crude (in terms of yields and contaminants) will suffer loss of business.

And Iran needs the money to refurbish its oil infrastructure no matter what the price of a barrel is…

As a refiner, you MUST look very hard at market opportunities, relying on arbitrage price differentials:

• ·       For US, export markets to Mexico, South America, and West Africa of gasoline and diesel
• ·       For European refiners, exports primarily to Africa, Middle East, and Asia-Pacific
• ·       For Middle Eastern refiners, primarily supplying the domestic market and Asia-Pacific
• ·       For Asia-Pacific refiners, primarily supplying the domestic market and “Asian Tigers”

Another thing to consider is the new 2020/2025 global marine bunker Sulfur caps of 0.5% S. This will KILL the marine bunker business……more later…