With crude oil accounting for about 80% of a refinery’s costs, there are large opportunities for refiners to increase margins by including lower-priced, opportunity or niche crudes in their diet. They may also go further and invest in revamps to enable increased flexibility for their bulk crude diet. Naturally, there are concerns about the potential impact of such oils on assets, so how should a refiner assess the risks of a crude diet change?
Most refineries were configured to process a specific diet of crude oils that lies within a narrow quality window. However, over time, the crude diet may change and the quality window may not be fully exploited. Lower-priced, opportunity crudes provide a chance to increase margin, but steps must be taken to ensure that they do not adversely affect plant performance.
For a typical 200,000-bbl/d refinery, changing the crude diet to include 10% of an opportunity crude with a relative discount of $1.0/bbl could increase the gross refinery margin by some $7.0 million per year. Moreover, this will typically require no capital expenditure.
Crude flexibility is also valuable for the refinery’s core, or bulk diet. This is because it:
- enables the refinery to take advantage of short-term fluctuations in crude pricing; and
- increases the refinery’s economic robustness against longer-term market disruption and trends.
Studies by Shell Global Solutions have shown that refiners with full flexibility to take crudes of differing qualities from several supply regions can also capture margin benefits of up to $0.5/bbl compared with those that have a restricted feed diet. This could unlock a total value of up to $31.5 million if applied to all 90% of the core diet of a 200,000-bbl/d refinery.