We will be drilling deeper into Downstream oil and gas segments, starting with refining. We’ll be sure to put the link to the Downstream Oil and Gas Overview in the program notes in case you missed it or just want a review since it’s been a while.
The complete Refining Module includes lessons on crude oil and products, refinery processes, key business drivers that impact refining profitability, and more.
Refining Related Podcasts:
Crude oil cannot be used as it occurs in nature, other than burning for fuel, which is wasteful, It must be refined to manufacture finished products such as gasoline and heating oil.
In the refinery, crude oil components can first be split by carefully applying heat to capture various parts, called fractions, within certain boiling ranges. This is called distillation. The quality of these initial fractions produced is not sufficient to be sold directly as petroleum products without further treatment.
Moreover, the yield of products from straight distillation of crude oil is not the same as the “demand barrel” needed for the marketplace. Crude oil must therefore be further processed using both heat and pressure to improve qualities and meet market demand.
A large part of refinery processing is concerned with converting unwanted heavy fuel oil into marketable gasoline and diesel, using various processing methods.
Distillation – A Boiling Process
As we mentioned, the distillation of crude oil is the start of the refining process, and is primarily a boiling operation.
Crude oil is first washed to remove salt, heated in a furnace, and introduced to the Crude Distillation Unit (called a CDU).
In this tower, the crude oil is separated by boiling range into a number of fractions.
A fraction is the term used for a specific hydrocarbon which is produced and captured according to its molecular weight and boiling point. Some fractions from the distillation process have all the qualities needed as refined products and are ready for sale.
Others require further processing before they are sold to customers.
The lightest fractions, like liquid petroleum gas (or LPG), are boiled off the crude at the lowest temperature of 150º F.
The second fraction boiled off is kerosene or distillates which occurs at 450º F.
Next is gas oil which is an intermediate fraction that requires further processing in the plant with temperatures reaching 750º F.
The heaviest fraction, with the highest boiling point in the distillation process is fuel oil. These heavy fractions require more severe processing to be useful.
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History of Refining
The history of refining innovation is really driven by the evolution of product demand.
The earliest petroleum refineries in the 1880’s were really little more than stills – like those to make “moonshine” alcohol in the old movies!
They were designed to extract both kerosene from crude oil for use as lamp oil and petroleum grease, which at the time was exported around the world from the US. Whatever products remained, including gasoline, was treated as waste.
The advent of the internal combustion engine and the subsequent explosion in automotive transport changed everything. By the early 1920’s the automobile and airplane were firmly established as major modes of transportation in the developed economies.
This growth forced global refiners to expand.
Along with an expansion in capacity, refiners also developed new refining technologies to increase yields of gasoline and other motor fuels. After the Second World War, rapid growth in jet fuel consumption also placed new demands on refineries around the world.
Today, refiners produce a wide range of fuels and specialty oils used in transportation, electricity generation, industrial processing, home heating, petrochemical production, and thousands of other uses.
These modern facilities cost billions of dollars to build. They can also incur billions of dollars in annual operating costs, to employ a variety of high pressure and high temperature technologies which squeeze the most out of a barrel of crude oil. This also gives refiners the flexibility required to meet shifting seasonal and global product demand patterns.
The rapidly growing emerging economies are now adopting the best of western refining technologies to meet growing demand for their transportation fuels.
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Lessons in the Refining Module
- Introduction to Refining
- Crude Oil Characteristics
- General Refinery Layout
- Preparation and Separation
- Treatment and Blending
- Refinery Complexity
- Margins and the Crack Spread
- Refinery Profitability
- Maintenance and Turnarounds
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Along with an expansion in capacity, refiners developed new methods to increase yields of gasoline and other motor fuels. After the Second World War, rapid growth in jet fuel consumption also placed new demands on refineries around the world.
Today, refiners produce a wide range of fuels and specialty oils used in transportation, industry, electricity generation, heating, and petrochemical production, and in thousands of other uses.
These modern facilities, which cost billions of dollars to build and can incur billions of dollars in annual operating costs, employ a variety of technologies to squeeze the most out of a barrel of crude oil and to provide the flexibility required to meet shifting seasonal product demand patterns.
The rapidly growing emerging economies are rapidly adopting the best of western refining technologies to meet growing demand for transportation fuels.
Upon completing the Refining Module, participants will be able to:
- Identify the key characteristics of crude oil and petroleum products
- Demonstrate comprehension of the key refinery processes used to convert crude oil to useful products
- Recognize how refiners can alter the operation of a refinery
- Describe the major business processes used by refiners to manage the refinery
- Explain the key business drivers that impact refining profitability
- Define how refineries are impacted by environmental regulations
- List the major global refining industry trends
Refining is part the Downstream operations of an integrated petroleum company, which has all the functions shown in the diagram.
The other Downstream oil and gas functions include crude oil acquisition and transportation, supply and bulk distribution, and marketing (retailing, distribution, and terminals/wholesalers).
Independent refiners have few marketing assets but have the crude acquisition and bulk distribution functions supporting their refinery operations.
Learn more about the difference between Upstream and Downstream with our short video on the topic!