Petroleum refining problems probably aren't Y2k related.greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread |
I snipped this from an e-mail sent to an associate. I thought I'd post it here and invite rebuttal/comments. Have at it....I personally don't think these refining probs are y2k related. Look at the way product and crude stocks dropped steadily ~~~> '99 before y2k. Why aren't other industries having the same probs? Why is 85% of refining capacity running OK? Why aren't there any crude production, pipeline, tanker or power probs? This conversion refining capacity can only be run flat out so long. I think the reasons for probs is refiners knew there would be big pre-rollover Dec gasoline stock draws and stock piling. They ran units too hard. They maxed out gasoline at the expense of distillate production. In Jan we're paying the price with refining probs compounded by the cold weather. Or maybe I should say NE diesel, kero, jet fuel, and heating oil consumers are paying the price...
-- Downstreamer (downstream@bigfoot.com), January 26, 2000
At last! A voice of reason!
-- RPGman (tripix@olypen.com), January 26, 2000.
What stockpiling?What stock draw down?
There was no panic. Those who "stockpiled" did it WELL before December.
The price of crude and gas was rising post rollover in spite of two weeks of balmy weather and virtually no winter weather prior to rollover.
Why does crude continue to rise even though most of the reported problems have been with refineries?
"Why is 85% of refinery capacity running OK?"
I could easily ask why is refinery capacity which was 98% last year at this time only running at 85% capacity this year? Bad luck?
The assertions don't make any sense.
-- nothere nothere (notherethere@hotmail.com), January 26, 2000.
Downstreamer:"They ran units too hard". This statement makes no sense from a technical view point. This person, obviously, has little industrial experience. We could discuss what this means about the physical state of the units involved, but that would be depressing. Sorry!
Best wishes,,,,
-- Z1X4Y7 (Z1X4Y7@aol.com), January 26, 2000.
Agreed. It sounds like this person doesn't really know what they're talking about.
-- (daveO@quedfire.net), January 26, 2000.
Summary, to use the poster's own words, would be "I personally don't think".Just because other facilities with remotely comparable technology are not having explosions which draw press attention does not mean they are not having problems, and many such valve problems have been posted here. Look it up.
There HAVE been crude production, pipeline, and tanker problems.
The poster uses no technical info to support his argument, and instead relies on armchair psycho-babble. There have been greater economic opportunities in the past, to suggest current refinery problems are due to "(them) running the units too hard" for financial gain is assinine. Greed as a motivator for trashing refineries may make sense to the poster, but not to anyone who has been following the story.
-- Hokie (Hokie_@hotmail.com), January 26, 2000.
Very interesting observation. Why haven't we seen similar production capacity disruptions in the food industry(Hershey?), car manufacturing (Saturn),banking(disruptions all the time),natural gas(interruptible clause of industrial/power generating plants enacted), pipelines (explosion frequency 3 standard deviations abnormal, can't work a pipeline too hard can you). And if refineries were worked too hard for CDC rollover, why the failures in Taiwan and SE Asia(BP Amoco) where they hadn't even heard about Y2k? Nope, looks like it's gotta be a conspiracy by Buffet/Gates to corner the market. Or, its just our after shock to losing RC from this forum. So Downstreamer, don't over react just yet, let's see what the next few months brings and we can tally score cards in the summer on the banks of the MO
-- solarhermit (solarhermit@hotmail.com), January 26, 2000.
Downstreamer,Do you know what type of technical expertise the author of this mail has? Any engineering background, etc.?
Thanks much,
-- Dee (T1Colt556@aol.com), January 26, 2000.
What stockpiling?All the comercial fuel that was parked in tankers. All the railroads that scattered fuel tohrough their system, All the consumers that topped tanks and all us 5 gallon types.
What stock draw down?
On the primary level (Pipelines terminals and refineries) I don't have time to go back and dig up the API stats but those weekly reports reflected summer time type gasoline draws and cold weather type distillate draws due to the stockpiling cited above.
There was no panic. Those who "stockpiled" did it WELL before December.
Where did I say there was a panic? Many did early and many did in late Dec.
The price of crude and gas was rising post rollover in spite of two weeks of balmy weather and virtually no winter weather prior to rollover.
Agreed. I caught me on the wrong side of the move also.
Why does crude continue to rise even though most of the reported problems have been with refineries?
Remember Iraq cutting exports through most of Dec? Crude fundamentals are truely tight and getting tighter. US crude stocks are at 292 million barrels vs 321 last year or 312 for an average of the last 5 years in late Jan. Meanwhile demand is increasing at 2.4% a year according to the IEA.
"Why is 85% of refinery capacity running OK?" I could easily ask why is refinery capacity which was 98% last year at this time only running at 85% capacity this year? Bad luck?
Wrong. It was 91% last year (API) Thats what we're debating, why's it down?
-- Downstreamer (downstream@bigfoot.com), January 26, 2000.
Dave & Z1,"They ran units too hard". This statement makes no sense from a technical view point.
If you're saying conversion (octane enhancing-extremely complex, high pressures and temps) can't be run to hard, I'll beg to differ and I'll say this will over 20 years in the business. I was the Midcontinent Marketing Manager for an independent refiner. Maybe thats non technical but I can guarantee I stived hard to assimilate the technical aspects. If you'll go back over RC's old posts, he's also contended that refineries can be run too hard.
Dee, I wasn't clear. I wrote the starting quote to an associate.
-- Downstreamer (downstream@bigfoot.com), January 26, 2000.
Itallics still on?? Oh well, I didn't say I knew the technical aspects of HTML.Futhermore I want to say I'm not annonymous. I'll reveal my name and background to anyone. And unlike a guy like Gordon, I don't currently work for someone else, so I don't have to watch what I say. I've been entrepreneurial for 10 years. I don't work for someone else. I don't slant things, and I don't pull punches. I calls 'em as I sees 'em.
-- Downstreamer (downstream@bigfoot.com), January 26, 2000.
Downstreamer:"I was the Midcontinent Marketing Manager for an independent refiner." I must admit, I've never been that. My background is technical. Engineer. We had a maximum rated capacity. The equipment was usually never up to that capacity. At best we could run at 100% of rate capacity. If equipment degraded too far, running at capacity could be called running too hard; it could also be called foolish. I never did that. You are saying that these people are so foolish that they are willing to destroy their unit for a short gain. It may be true; but I never saw this during periods of extended production. It usually just leads to unacceptible products [things are red-tagged and returned]. I can't argue with you about specific cases; you gave no specific cases. This person still doesn't sound like someone in a technical field. Sorry. No offense intended!
Best wis
-- Z1X4Y7 (Z1X4Y7@aol.com), January 26, 2000.
Excuse my imprecisions Downstreamer, you are the expert after all, but the questions remain unanswered. We haven't heard the full story on this issue yet, and this email snip doesn't do it for me. Let me know what you think. Oh, and the email is real even if the name isn't.My rhetorical questions about stockpiling and draw downs were directed at the fact that there was no general panic prior or since rollover in the gasoline markets. Otherwise, we would have seen larger prices at the pump and gas lines. Neither or which materialized. Can the stockpiling and draw downs explain the runup of spot and futures prices? You tell me, but I would think not.
Are the crude fundamentals so tight that they would explain a similar runup in their spot and futures prices? Maybe. You tell me.
I could have sworn I read 98% on your petromarkets site, but even a loss from 91% to 85% would appear a little strange, no?
I know nothing about the pressures of running an oil refinery (although I have toured a Pennzoil refinery which placed a great deal of emphasis on safety), but what do the numbers indicate about distillate production prior to rollover. Does it look like they were cranking up production? How big was the % increase? If it was less than 6%, I guess it wasn't worth the effort.
-- nothere nothere (notherethere@hotmail.com), January 26, 2000.
fix italics
-- Possible Impact (posim@hotmail.com), January 26, 2000.
Must be more than one lurking about...
-- Possible Impact (posim@hotmail.com), January 26, 2000.
I found the source of my sloppiness.
It was from two of your paragraphs on the petromarkets site. The first was:
"Its also very apperant that the PADD 1 refineries are having the most trouble. East Coast refinery processing rates dropped again this week and are only 80% of capacity vs an operational rate of 95.8% last year. Consider the Spring maintenance turnarounds are still ahead of us and I think this translates into Spring gasoline shortages. Don't forget the Venz problem at Amuay Bay."
The font is small on my screen so 95.8% looked like 98%. Then I took the stat of 85% from the post.
Still, that leaves a 6% drop nationwide and an almost 16% drop for PADD 1 compared to last year. What causes a drop in capacity this big?
-- nothere nothere (notherethere@hotmail.com), January 26, 2000.
Possible Impact:You turned the italics off. You should learn to fit in ;0).
Best wishes,,,,
Z
-- Z1X4Y7 (Z1X4Y7@aol.com), January 26, 2000.
Does not address production problems like Ukraine (national fuel emergency due to lost production), and ten refinery failures in the US alone since January 1. Then we have two Force Majeures (Singapore's two large shipments and Venezuela). We also have a ton of pipeline issues that have sprung up.We have OPEC problems, for sure, but we have production and delivery problems too, and they are on a scale that seems unusual.
-- paul leblanc (bronyaur@gis.net), January 26, 2000.
Thank you Downstreamer.
-- Dee (T1Colt556@aol.com), January 26, 2000.
Downstreamer, I agree with you in that refinery problems are definetly not related to Y2K.Actually, haven't you heard?, its a brand new syndrome called
"SHSIOAAFOUOISMBACDC"
which stands for "Statistically High Significant Incidence Of Accidents And Failures Of Unknown Origin Some Months Before And After The Century Date Change"
Didn't you know?
-- George (jvilches@sminter.com.ar), January 26, 2000.
I think that there is a lot of conclusion jumping going on here, and no real basis to jump, not just yet.Things are not exactly normal, but they are a long way from broke down, too.
I think what is happening is a number of problems, computer, mechanical, product availability, etc., that are here at the same time. People are finding solutions to keep things running, pretty good so far, even if the prices are a little uncomfortable.
Can't pin it all on just one of them, even if that makes it easier to think about it.
Harvey
-- Harvey Ballwhanger (harvey@whang.com), January 26, 2000.
Harvey, of course that Y2K didn't land in a vacuum. Life has problems, things do break down, flu and cold weather exist, etc, etc, it's just that Y2K doesn't make any of these problems any better, actually a lot WORSE, because it was underestimated, unremediated, fixonfailured, and, in a way, unexpected. Remember, Y2K is officially dead. DEAD my friend, and it will bite worldwide with everybody's guard LOW. So much so that being alive and kicking, still people worldwide have a terrible time acknowledging ANY y2k problems whatsoever, maybe even yourself. So, CEO's and politicians are left mostly blindfolded while everybody worldwide keeps beating around the bush and Y2K just keeps compounding. Remember Y2K does exist. Otherwise the world wouldn't have spent one trillion dollars ($ 1,000,000,000,000) trying to dodge it.Take care
-- George (jvilches@sminter.com.ar), January 26, 2000.
Harvey:I didn't read it that way at all. I didn't see anyone saying that Y2K was the problem. It was about running units too hard; whatever that means. I still don't know.
Best wishes,,,,
Z
-- Z1X4Y7 (Z1X4Y7@aol.com), January 26, 2000.
nothere:The Amuay Bay problem seems to be soon resolved if one believes the report in Hokie's thread:
thread mentioned
-- Anita (notgiving@anymore.com), January 26, 2000.
Nothere,Underlying crude and products fundamentals are truly tight. OPEC has a different agenda than they did in the last 10+ years because the Saudis are more supportive of higher prices. US crude stocks (API stats) have dropped down to 292 MM barrels. Normal operating levels are usually up around 320-30 million barrels. For the last 10 months weve had real strong economic demand, maxed out refining runs, and an OPEC & non-OPEC pact thats held up. This JIT time talk is overdone when referring to the oil sector. When theres a carry in the NYMEX and spot values, theres economic reasons to stockpile (big price drops in each subsequent month). When values are backwardated (opposite of a carry market) oil companies dont hold stocks. Theres other factors on corporate inventory levels but the international fundamentals override. As far as I know, this y2k isnt a factor on crude inventories.
On refined products, the oil companies ran refineries hard in the 4th quarter due to a strong economy, decent refiners margins, and year end stockpiling concerns. Refiners hit it hard and produced into the strong demand maxing out gasoline production at the expense of distillate output. Theres about 10-20% of the streams off the crude distillation units that can go either way. NE tankage is tight because of all the different products that are mandated. These trading squeezes are going to continue to happen.
Z1,
I figured the reason for part of our differences. After re-reading your first post, you have an industrial background. Im sure your capacity contentions are legit there, but were talking mostly chemical factors here. Were talking catalyst regeneration, fluidized catalyst beds, hydrotreating, isomerization and high temp, high pressure conversion operations. The timing of maintenance turarounds and such is a big factor.
I dont have a formal technical education. But Ive written a daily faxed oil market analysis that went out to lots of traders, marketers, distributors and international concerns. Unlike this type of free-for-all, I was charging big $. I had to do my homework ( in the pre Internet days - at a technical engineering library right in my neighborhood-Linda Hall) and know my stuff, or I didnt keep customers. Ive done it for most of the last 12 years.
At rollover, nothing much happened. Even though most posters thought that if there were going to be problems with embeddeds, we'd see most of them on the rollover. We didn't. RC and a few others said give it a few weeks. Here it is almost Feb and I don't know of one oil industry problem confirmed as a y2k glitch. I'm expecting to see more refinery problems just because we're sucking up hydrocarbons like there's no tomorrow at the same time we're tighening the ability to produce octanes and diesel fuels due to environmental mandates.
-- Downstreamer (downstream@bigfoot.com), January 26, 2000.
Opps, Carry market definition= each subsequent month trades at a premium so there's an incentive to build stocks.
-- Downstreamer (downstream@bigfoot.com), January 26, 2000.
It was OFF for a second.Let's see if we can turn it OFF again.
Tick... To (you know)...
-- Sysman (y2kboard@yahoo.com), January 26, 2000.
Downstreamer:Can't disagree with much of your last statement. For me, it is just impossible to have enough data to determine the present situation. Go after it!
Best wishes,,,,
Z
-- Z1X4Y7 (Z1X4Y7@aol.com), January 26, 2000.
There`s much discussion in reference to refineries. Has anyone obtained any relative/pertinent information related to crude oil production facility problems(computer induced or "otherwise") in any of the OPEC countries. It appears to this observer that information from this part of the world has been very slow in coming.
-- NoJo (RSKeiper@aol.com), January 26, 2000.
I don't think we will ever know what problems are being caused by Y2K. The increase in problems in January causes me to believe some of them are being caused by Y2K. However, I realize that many people will refuse to believe that Y2K is causing problems and it will be difficult to offer any proof that would change their minds. Many people have studied the 1930's depression and there is still no agreement on what caused it. How can we ever expect any agreement on the effects of Y2K? Even if a serious recession begins this year, there won't be any agreement on what caused it.
-- Dave (dannco@hotmail.com), January 26, 2000.
Folks, during the past 20 some years the price of oil has remained below $20. The only events that made oil go above $30 were(1) the Iran hostages crisis (2) the Iran-Irak war (3) Desert Storm
So whatever we are facing, Y2K or not Y2K, has an equivalent importance and if it lasts long enough it WILL cause equivalent problems to the world economy (stagflation?)
Take care
-- George (jvilches@sminter.com.ar), January 27, 2000.