Читать книгу Fuel Hedging and Risk Management - Gajjala Vishnu N. - Страница 11

Energy commodities come in different physical forms: solids such as coal and wood, liquids like petroleum, and gases such as natural gas and propane and butane (that are converted into Liquefied Petroleum Gas (LPG)). Most energy commodities in use are hydrocarbons, although nuclear energy and hydroelectric power are notable sources of power that are not hydrocarbon-based.

The main sources of primary energy are oil, natural gas, coal, nuclear energy, hydroelectric power, and renewables. Many of these primary sources are used in the generation of electricity, a secondary form of energy. The International Energy Agency (IEA) provides details on the supply and consumption of oil and other energy commodities. A breakdown of the total primary energy supply (TPES) of the world is shown in Figure 1.1. Oil and coal are the biggest sources of energy, with natural gas not far behind. Of these forms of energy, oil, coal, natural gas, and biofuels are traded in regional and global markets.

FIGURE 1.1 Total primary energy supply for 2012; TPES totaled 13,371 Mtoe (million tons of oil equivalent)

Source: International Energy Agency, © OECD/IEA 2014, Key World Energy Statistics, IEA Publishing; modified by John Wiley and Sons Ltd. License: www.iea.org/t&c/termsandconditions.

The total final consumption of energy provides a picture of the end uses of primary energy (without including backflows from the petrochemical industry). It can be inferred by comparison with primary energy supply that a significant proportion of primary energy sources, especially coal and natural gas, are converted into electricity for final use. As per the IEA, 63.7 % of oil is consumed for transportation, while industrial use of coal accounts for 80 % of its annual consumption (Figure 1.2).

FIGURE 1.2 Total final consumption for 2012; TFC totaled 8979 Mtoe (million tons of oil equivalent)

Source: International Energy Agency, © OECD/IEA 2014, Key World Energy Statistics, IEA Publishing; modified by John Wiley and Sons Ltd. License: www.iea.org/t&c/termsandconditions.

Let us now briefly consider individual energy commodities, starting with crude oil.

Crude Oil

Crude oil or petroleum, derived from the Latin: petra (rock) + oleum (oil), refers to the thick, usually dark-colored liquid that occurs naturally in different parts of the world and is commonly retrieved by drilling. Petroleum is a fossil fuel, which was formed when a large number of dead organisms were buried under sedimentary rock and subjected to enormous heat and pressure over millions of years. Crude oil is the most prominent of the hydrocarbon-based fuels, compounds composed mainly of carbon and hydrogen in varying proportions.

Since crude oil on its own is not of much use and needs to be processed for most modern applications, the value of crude oil is derived from the value of the underlying refined products that are obtained after processing. The products that can be obtained from refining a particular grade of crude oil depend on the chemical characteristics of the crude oil. Since crude oil obtained from an oil well will differ slightly in quality from oil drilled from any other well, it is instructive to look at the overarching physical properties and characteristics that determine the value of a particular grade of crude.

The major properties of crude oil that are referenced in most contracts and specifications are the density, sulfur content, viscosity, pour point, volatility, water content, and sediment and other impurities. Other properties that are applicable to oil products include the flash point, cloud point, stability, dye, etc.

Density is measured using the American Petroleum Institute (API)s gravity scale, which is a measure of how much heavier or lighter the petroleum liquid is compared with water. A reading of above 10 indicates that the liquid is lighter than water and floats on it. Crude oil with a high API gravity value is referred to as light crude oil and would yield a higher percentage of lighter or less-dense products such as gasoline and kerosene upon refining. Crude oils with a low API gravity value are termed heavy crudes and are more difficult to refine, yielding lesser quantities of the high-value lighter products.

Sulfur is an undesirable impurity as it is corrosive and foul smelling, and it needs to be removed during the refining process. Crude oils with a sulfur content of less than 0.5 % are referred to as “sweet” crude oils, while those with a sulfur content greater than 0.5 % are termed “sour” crudes.

Viscosity is a measure of the thickness of the fluid or the resistance that it offers to pouring. It is measured in centistokes or Saybolt universal seconds. The pour point is the lowest temperature at which the crude oil retains its flow characteristics and below which it turns semi-solid. These measures are essential to determine the means of storage and transportation for liquids.

Volatility of crude oil and other products is measured using the Reid vapor pressure test and is important for handling and treatment considerations. Vapor pressure is especially important for gasoline as it affects starting, warm-up, and vapor locking tendency during use. Water content and sediment content are measured, as they are indicative of the effort needed to remove these impurities.

The main crude oil benchmarks are West Texas Intermediate (WTI) Crude Oil, which is a US crude oil, and Brent Crude Oil (North Sea crude oil). Both of these crudes are light sweet crude oils, where the API gravity is greater than 31.1°. Dubai Crude Oil is a major benchmark in the Asian region and is classified as a medium crude oil (API between 22.3° and 31.1°). Some of the major crude oil streams, along with their properties, are shown in Table 1.1.

TABLE 1.1 Major crude oil streams and their properties

1.3.2 Oil Products

Crude oil is too volatile to be used on its own, and hence distillation of crude oil into various fractions of different volatility is needed. The main types of oil products in descending order of volatility are:

• gases and LPGs

• gasolines/naphthas

• kerosenes

• gasoils/diesels

• fuel oils

• lubricating oils, paraffin wax, asphalt, tar, and other residuals.

Methane and ethane are gases found with petroleum. Methane, which is also referred to as “natural gas,” is used for energy generation while ethane is used as a feedstock for petrochemical production, where it is converted into plastics. LPGs refer to propane, butane, or and a mixture of the two. They are used for cooking and industrial purposes. Gasoline is used mainly for motor transportation. Gasolines or naphthas are also used as feedstock for the petrochemical industry and refineries.

Kerosenes are mainly used as aviation turbine fuel (ATF). They are also still used for lighting and cooking in some parts of the world. Gasoils are used principally for home heating or as diesel engine fuel. They are also used as petrochemical feedstock. Fuel oils are used in marine transportation (also known as bunker oil) or as a source of fuel at refineries or power stations.

The refining process involves the separation of hydrocarbons by state and size, processing and treating individual products for the purpose of removing impurities and converting, or cracking, heavier hydrocarbons into lighter, more desirable compounds (Figure 1.3). The first stage of refining involves fractional distillation, whereby the crude oil is heated to a high temperature, usually around 350 °C, and pumped into a distillation column where a temperature gradient is maintained between the top and the bottom. Lighter components of the crude oil, which boil at lower temperatures, condense at higher levels of the column while heavier compounds settle at lower levels of the column. Off-take pipes at different heights of the column withdraw fractions of different compounds, with gases and LPG at the top of the tower and fuel oils and residuals at the bottom. This residue from atmospheric distillation can further be subjected to vacuum distillation to remove more volatile components of the residue, leaving behind asphaltenes and other heavy residues.

FIGURE 1.3 Simplified refining process diagram

Following distillation, the oil products are subjected to hydro-treating or Merox treating, whereby the sulfur present in the products is removed. Hydro-treating involves mixing hydrogen gas with the oil product (usually naphtha or gasoline) and passing the mixture over a catalyst at high temperature and pressure, resulting in the sulfur being removed as hydrogen sulfide gas.

The next major step in the refining process is the conversion of fractions into lighter, more desirable compounds. Naphthas are subjected to a process of catalytic reforming or platforming, whereby the “octane number,” a measure of performance of motor fuels, is increased using a catalyst like platinum. Heavy residues are subjected to thermal cracking (heating to temperatures in excess of 400 °C) or catalytic cracking, where a finely divided catalyst is mixed with the feedstock and heated, to produce catalytic-cracked gasoline and other light products. Hydro-cracking, another catalytic cracking process that uses hydrogen, can also be used for this purpose.

The final step in the process is blending, where different products produced at the refinery are mixed in certain proportions to form the finished products, which conform to certain standards. For example, oxygenates are blended with motor gasoline to reduce the lead content and increase the octane number of the fuel.

Prior to refining, a crude oil assay is conducted to get a good idea of the product yield (i.e., the fraction of each product that can be obtained from the particular grade of crude oil). With crude oils of a similar origin, the crude grade with a higher API gravity value is likely to yield higher-end products; however, an assay is the best means of getting a reliable estimate of product yield. Sample product yields from primary distillation of Brent Crude Oil and Dubai Crude Oil are shown in Tables 1.2 and 1.3.

TABLE 1.2 Brent Crude Oil distillation yields by percentage of weight

TABLE 1.3 Dubai Crude Oil distillation yields by percentage of weight

A test of the types of hydrocarbons present in the feedstock for the refinery can also be conducted to identify the appropriate feedstock to be used. This is called a PONA (paraffins, olefins, naphthenes, and aromatics) analysis. Feedstock that is rich in paraffins is better used as a petrochemical feedstock as it cracks easily. Olefins do not occur naturally in crude oils but are produced by refining processes and are present in other feedstock like naphthas and gasolines. Naphthenes and aromatics have higher octane numbers and are more suitable for refineries.

The product yields are used to calculate the gross refining margin. This is calculated by multiplying the product yields with the prevailing product prices and subtracting the cost of crude oil used. Some of the popular local product benchmarks are listed in Table 1.4. Calculating refining margins is essential to maintain the profitability of the refining operation, as refineries have flexibility in terms of choosing the optimum crude oil grade to use, changing the operation of the refinery to produce different fractions of products, blending, and the storage of products.

TABLE 1.4 Selected local product benchmarks

Natural Gas

Natural gas is another fossil fuel, which is naturally found along with crude oil or coal and is formed in a similar manner (i.e., the exertion of high pressure and temperature over millions of years, by geological processes, on the remains of plants and animals). The main constituent of natural gas is methane (CH₄). Natural gas, when produced along with crude oil, is called associated gas. When crude oil is found in small quantities along with primarily natural gas, it is called condensate. Natural gas can also be extracted from coal reservoirs (known as coalbed methane), and landfill gas and biogas also contain high quantities of methane. Natural gas usually occurs with impurities such as water vapor, carbon dioxide, mercury, nitrogen, and hydrogen sulfide, as well as other gases such as ethane, propane, butane, and heavier hydrocarbons, which when liquefied are called natural gas liquids (NGLs). These impurities need to be removed before natural gas can be transported.

Natural gas is transported through pipelines or is liquefied to transport using liquefied natural gas (LNG) carriers. In this case, regasification facilities are required at the terminal where LNG is transported to. Since the heating use of natural gas is seasonal, gas needs to be stored for the winter season. Natural gas is “injected” into underground facilities like depleted gas reservoirs, salt caverns, and aquifers or stored within pipelines or as LNG.

Natural gas is the cleanest-burning hydrocarbon and is increasingly being used for electricity generation. It is used for heating and cooking and as feedstock for chemical manufacturing. It is also used as fuel for vehicles, which run on either compressed or liquid natural gas, and it can further be converted to other fuels using gas-to-liquid processes. Ethane is used for manufacturing plastics, while propane and butane are used as LPG. Heavier NGLs consist of gasoline, naphtha, and kerosene fractions and can be blended with crude oils.

Natural gas markets are much more localized than other energy markets and multiple pricing methods prevail globally; this has allowed only a few benchmark prices to attract sufficient market liquidity. The benchmarks that have gained popularity include Henry Hub Natural Gas in the USA, the National Balancing Point (NBP) in the UK, and Zeebrugge and TTF (Title Transfer Facility) in Continental Europe.

Coal

Coal is a black or dark-brown combustible sedimentary rock that is formed by the carbonization of vegetation and is composed primarily of carbon, along with varying proportions of hydrogen, nitrogen, sulfur, and oxygen. It generally occurs in rock strata, in layers called coal beds or coal seams. There are various grades of coal, classified based on the amount of time spent under intense heat and pressure, which affects their chemical properties. Lower-rank coals such as peat, lignite, and sub-bituminous coals have lower amounts of carbon by weight and are more volatile. Higher-rank coals include anthracite and bituminous coal, which have higher carbon and, thus, higher heat content.

Anthracite coal is primarily used for heating. Bituminous coal can be divided into two types – thermal or “steam coal” and metallurgical or “coking coal.” Steam coal is mainly used for power generation and as an energy source for cement production, while coking coal is used to produce coke, which acts as a reducing agent in the production of pig iron and subsequently, steel. Lignite and sub-bituminous coals are mainly used for power generation. Coal can be converted into liquids to use as alternate fuels for transport, cooking, power generation, and in the chemicals industry. Coal can also be converted to syngas, a mixture of carbon monoxide and hydrogen gas, and subsequently used to produce electricity or other transport fuels.

Global coal markets can be split into two major regions – the Pacific basin and the Atlantic basin. The major benchmarks for thermal coal are based on delivery at ports where coal is exported from or imported to, and include Newcastle coal (Australia), API4 coal (Richards Bay, South Africa), and API2 coal (Amsterdam Rotterdam Antwerp, ARA). Further, local coal markets like the USA have their own benchmarks.