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A Conservative’s Guide To Keystone XL
Conservatives need to get their facts straight if they want to win the argument on Keystone XL. In order to do that, you need to understand that there are different types of crude oils that are not all the same physically or chemically. Next, you need to know that not all crude oil refineries are alike or have the same product slates. Then, you need to understand logistics. After that, you can consider sources and stability.
Canada has increased its production of crude oil. It’s not just strip-mined oil sands being converted to synthetic crude oil: the increase in production in Canada comes from very heavy crude oils—think of a can of Kiwi shoe polish at room temperature—being pumped out of the ground. This type of crude oil is high in asphaltenes. Here in the U.S. we have very little of this type of crude oil, though there are some commercially viable deposits in Bakersfield, California and Railroad Valley, Nevada. Outside of Canada, the closest source of this type of crude oil is Venezuela. The API gravity of this oil is between 8 and 12, making it Very Heavy Crude Oil; not just heavy, but very heavy. It won’t even flow unless its temperature is above 130 Fahrenheit (54 celsius).
Now, let’s talk about refining. There are many modern processes, including crude distillation (atmospheric and vacuum), fluid catalytic cracking, hydroprocessing (desulfurization), reforming, sulfur, and coking. There are others as well, but these are the ones that are key to this discussion. Products of crude oil refining include gasoline, diesel, naphtha, kerosene (jet fuel), lubricant base stock, fuel oil, asphalt, hydrocarbon gases, and petroleum coke. It is important to understand the uses of petroleum coke—a solid derivative of petroleum—in this discussion. Its major uses include sacrificial carbon anodes (required for aluminum and electric arc steel), cement, and low-sulfur clean coal electric power generation.
Good old logistics come next, something people rarely consider. There’s a product pipeline network from Texas and Louisiana that ships gasoline, diesel, and jet fuel to all areas from Washington, DC down to northern Florida (south Florida still receives most of its refined products via sea). Large dry bulk carrier terminals load ships and barges with petroleum coke to ship to points overseas—Europe and the Far East just love petroleum coke—and also along the coast and throughout the Mississippi/Missouri/Ohio river valleys. In comparison, rail is a far more expensive and less reliable form of transportation; trucking is cost prohibitive. The next time someone suggests that rail can replace 700,000 barrels per day of Canadian heavy blend crude shipped via pipeline, point out that that would require an additional 60,000 tank cars to be built. We don’t have them. No rail carrier can handle that much extra freight. Ain’t happening. Get over it. They also cannot get all the products from Canada to where the consumption occurs.
Now comes stability. First, why is there a need on the Gulf Coast, almost exclusively Texas and Louisiana? Since the 1980s, a number of Midwestern refineries have each spent billions of dollars reconfiguring their facilitates and adding new process units to enable them to process Canadian heavy blend, received via pipelines. Two things coincided back then: First, petroleum coke became a value-added product rather than the nuisance it had previously been considered. During the early 1980s, its value soared from around $10 per ton to over $150 per ton, thanks to marketing by a division of Otto Wolff of Germany for use as fuel in the cement kilns of Europe to replace lower BTU coal. At the same time, a number of Central and South American heavy crude oils came on the market, including heavily-discounted and relatively close crudes from Venezuela (only five days away via tanker). Building of coking units and everything needed to process heavy and very heavy crude oil was in full throttle mode at just under a dozen very major refineries in Texas and Louisiana. All were near the coast and adjacent to dry bulk terminals, with new ones built to handle the new export cargo explosion.
When new clean coal requirements for electric power generation were passed in the 1990s, the need for low-sulfur petroleum coke increased. “Clean coal” basically comes from the Powder River Basin of southwest Wyoming. It is a very low sulfur coal, but also a very low grade, very low BTU value coal. If it were not for the new regulations, it would still all be sitting there as a less than undesirable fuel.
Today, Venezuela is entirely unstable as a source of such crude oil, and their delivery infrastructure is in sad disrepair due to Chavez’ mismanagement. A year ago, PDVSA—the Venezuelan state-owned energy company—was selling several million barrels a month of very heavily discounted, very heavy crude, but it has been unable to deliver on time. PEMEX’s Mayan heavy blend production has declined substantially. Few people outside the industry know that PDVSA’s white collar employees went on a general strike in 2003 and 2004, and a dozen U.S. refineries had to go scrambling to fill the heavy crude oil void. PEMEX came to the rescue but cannot up production to that level for more than a few months at a time without severely damaging those reservoirs. T0day, the U.S. imports only about 800,000 barrels per day from Venezuela. It’s time to kick it to the curb. Keystone XL accomplishes that.
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Fascinating stuff, sir. Thanks!
I should have added that the most complex refineries in the world are along the TX and LA coast. There is no greater concentration of complex refining capacity elsewhere in the world. All are within easy pipeline reach of the southern terminus of Keystone XL.
Wow – this is why I love Ricochet – there is always someone here who can teach me something.
I am curious about the density. The comparison to Kiwi is impressive, although I don’t think I have seen Kiwi shoe polish since I was about 13 on a Saturday night getting ready for Church on Sunday. If it needs to be 130 degrees, is the pipeline heated along its length? That seems expensive.
Thanks for all the information
No need for heat if diluent is added to thin it enough to flow. This is why a heavy blend is put into the pipeline. Syncrude (40 API) is blended with the very heavy produced crude (8-12 API) to come up with a heavy blend of around 20 API. Also condensate (between 50 and 80 API) is added near the wellhead in just enough quantities to get it to flow to the terminals at the northern terminus of these pipelines. The condensate comes from natural gas wells in the area and also via pipeline from the Gulf Coast where places like Eagle Ford have a plethora of it. The propane shortages in the norther Great Plains of 2013/4 were in part due to Kinder Morgan converting a pipeline used to bring propane to the north from the Gulf Coast to carrying condensate to Canada.
Ships coming from Venezuela and Mexico with very heavy crude have steam coils in the cargo tanks and kept heated for ease of pumping.
This is very interesting, and thank you for posting it. But I don’t think you need to have a lot of facts straight to support the pipeline (Lord knows the opponents don’t.) It’s common sense that a pipeline would be the most economical and environmentally safe way to transport anything that can flow. Opponents aren’t really arguing that; they don’t want oil to be economical, they don’t want any environmental disturbance for any reason, they don’t expect to suffer the economic consequences of that attitude and they do not care about the people who will.
The idea that Keystone XL lessens imports from Middle Eastern countries is preposterous. Motiva Refinery, Port Arthur, TX is 50% owned by the Saudis and expanded capacity by 325,000 BPD specifically for heavy crude. It wants Keystone XL. It also receives all of its tanker imports via the same terminal that is the southern terminus of Keystsone XL at nearby Nederland, TX.
A shout out to the editor who helped my weak narrative writing skills. Thank you whoever you are.
You’re very welcome, sir. And welcome to Ricochet!
Thank you for the fantastic primer on the economics of the petroleum industry that is so essential to our civilization. Would not Keystone XL result in lower carbon emissions for a given level of production? All those locomotives uber-Democrat Warren Buffett is using to pull tank cars run on diesel fuel, no? How does a overburdened and dangerous rail system help the environment? Green opposition to Keystone XL seems reflexive and emotional. If the Left were pushing for a carbon tax/pipeline compromise, I would have more respect for them. Opposition to the pipeline on the Left has solidified to the point that it is part of the tribal creed. Check the fundraising letters and emails.
There’s a lot of ignorance that must be overcome. My wife got into an argument with a friend because he insisted that all the Keystone XL crude will be shipped to foreign markets. He did not deem this to be an adequate trade-off considering that Midwestern farmers would have to sacrifice their beautiful farmland for the Keystone monstrosity.
Of course, some of the products from the Canadian oil may find foreign markets. Commodities go where they are demanded. That’s the way markets work. What my wife’s friend did not understand is that the crude will be processed in U.S. refineries. When a raw material is converted into various products through a manufacturing process in the U.S., are U.S. citizens not kept employed? Does the manufacturing not contribute to the nation’s GDP? Do the profits from the manufacturing not contribute toward capital expenditures, construction, share price increases, dividends, etc.?
My wife’s friend also did not understand that once a pipeline is buried in the ground, you barely even know that it’s there.
Especially since the 1960s, liberals have had a reflexive disdain for corporations and industry, much like teenagers who have disdain for the parents who provide them everything. Oil companies are a target for the most extreme varieties of this fear and loathing. Liberals would love to wish the industry away. I have had numerous progressive friends say to me some version of, “Why can’t we convert entirely to alternative energies, right now?” The question is so naive that it shouldn’t have to be answered – but it must be.
Necessity is the mother of invention. I have no doubt that years and decades from now we will have energy alternatives that we haven’t yet dreamed of. In the meantime, we have an economy that is built mostly on a particular form of energy which is still plentiful, though most plentiful in areas of the world that are geopolitically problematic. To oppose a supply of this energy from our friendly neighbor to the north is beyond ill-advised – it borders on insane.
If you were to place an pipeline pig in a heavy oil pipeline, how fast would it travel?
Try yelling that you want bacon when you launch it. ;)
Actually as fast as the flow would be is my best guess.
If the United States was still a free country we wouldn’t be having this sort of conversation.
The pipeline would have been built- or not- as the investors believed the economics dictated.
Instead, we’re supposed to marshal arguments to advocate for the obvious in front of fools who will never accept those arguments, because Gaia,or something even worse.
I’m not interested in playing that game.
I submit that we need to simply defang the dirt-worshipping neo-pagans of the left, and end their ability to block civilization whether that desire arises from religion, ignorance, or treason.
End it. Don’t pretend it can be mended, reasoned with, or appeased.
It cannot.
A few years ago a longtime self avowed liberal Democrat who was also a retired engineer asked me what we were going to do with all that sand from the “tar sands” when it reached Texas. I had to explain, but not without a few chuckles.
Ignorance abounds.
The southern terminus is at the pipeline terminal adjacent to where much of the imported crude oil for ALL the refineries in the Beaumont/Port Arthur area is offloaded. Why in the world would someone want to pay double freight?
Well, that is my question then: How fast does crude oil flow?
Could you talk more about the existing Pipelines? There is a big one that goes from TX and LA to Patoka IL and then from there throughout Illinois, Indiana, Ohio, Kentucky etc. The next phase of Keystone comes down to Patoka. In addition there are crude oil tank farms in Illinois and Indiana, and refineries in the midwest as well.
My dad, who works for a pipeline as a power engineer, tells me you could walk along the pipeline as fast as the crude flows, a few MPH. So its much slower than you might think. But the shear volume of product is quite large. His company got a third ownership in one pipeline just for initially filling it with crude.
Cool. Thanks.
Putting aside ownership of refineries (e.g. the Saudis) why won’t Keystone reduce our dependence on foreign oil? From reading your post it seems VHC is not refined into gasoline- so what is the primary end product once it is refined? What industries are the primary beneficiaries of more Very Heavy Crude easily available in the US?
The largest is from St. James, LA to Lemont, IL known as Capline. 1.2 million barrels per day is its capacity. It has yet to be reversed and could easily connect with Enbridge’s already approved expansion from Canada. Marathon controls Capline now. It has a refinery in Cattlesburg, KY which is receiving LLS (Louisiana Light Sweet) crude from the Gulf of Mexico. Additionally, some of the Eagle Ford condensate (legally classified as crude oil but isn’t) is being shipped via U.S. flagged tankers to LOOP (Louisiana Offshore Oil Port), the only supertanker port in the Lower 48 where it is discharged and piped up to St. James.
The Enbridge expansion combined with a Capline reversal and Keystone XL would not be needed.
Pipeline network is not really my area of expertise.
Well it is refined into gasoline. Keystone XL reduces our dependence on VENEZUELAN crude oil. BTW, Venezuela is THE founding member of OPEC.
Coker units were initially used to squeeze the last fractions possible out of the bottom of the barrel for gasoline, diesel, etc… The coking drums are like giant pressure cookers where the residual of all other processes is “cooked” for hours under high pressure and heat. The products are gases, light liquids and almost pure carbon residue. The gases are polymerized into synthetic fuels and/or utilized as refinery fuel gas (instead of natural gas). The petroleum coke (carbon residue) was sold as a byproduct. In the early 80’s demand rose for fuel grade petroleum coke as fuel to replace coal with a higher BTU value.
As more cokers were put into service, lower priced crude oil was purchased as a major feedstock source rather than to blend with very light crude oil.
Refiners like a continuous stable supply of similar crude oil. There are a lot of efficiencies to consider with catalysts used in other process units. A fraction of percentage change in metals such as iron, vanadium, etc… suspended in crude oil can undercut such efficiencies.
Kermit,
A long time ago in a galaxy far far away I sold some fancy German flash point testers to Gulf’s Corporate Research Facility outside of Pittsburgh. Nice commission, oh yes I remember it well.
Kermit, if you don’t mind me summing up your excellent post.
LET’S CRANK THAT DAMN PIPELINE UP AND LET HER RIP!!!!!
I feel so much better now.
Regards,
Jim