Why not oil?

[Anonymous]

Our newspaper reported yesterday that a company is planning to build a pipeline from Superior, WI (Duluth) to Wood River, IL (St. Louis) that will transport 250,000 barrels of crude oil per day. It will cost 600 million $$$$$$ to build the 700 mile pipe.

Why doesn't BNSF use its coal hauling experience to move that oil by tank train on their mostly water level, low grade route between the two cities? Or maybe some rail-oriented outfit that wants to make things happen like Wisconsin Central did when it was rockin'?

Isn't moving trainloads of a bulk commodity a long distance day in and day out one of the best and most profitable uses of railroad technology?

Thanks,
tomtrain

[Anonymous]

It might be wrong but it seem like buliding and maintaining a pipeline is cheaper than transporting it via rails. Besides, when the pipeline is built, you don't have to worry about contracts and other stuff. But railroad might be a good idea.

[edblysard]

Hi Tom,
Heres part of the explanation.

Oil is not purchased on a as needed basis.
I live and work in Houston, Texas, so oil is a major part of our lives and economy.

So when a company, say Lubrozoil, buys a comodity like oil or natural gas, they are buying for a project that may not start until a year from then.

The oil is "put" in the pipe line, not physicaly, but on paper, the amount Lubrozoil purchased is billed to them, and when they need the oil, or natural gas, its already there, "in the pipe" so to speak.
Because most manafactures who use oil, natural gas and such do not have huge storage facilities, its actually"stored" in the pipe line, on paper, ready for use when needed.

Say the year has passed, and its time for Lubrozoil to use the oil they bought.
Instead of having to unload hundreds of tank cars, all they do is open a valve, and there it is.
Because they are part of the pipelines network, they dont have to store any raw material, it was added to the flow at a certain date, which they requested a year ago when they purchased, so it would be on hand when they need it.

Keep in mind these refineries run 24/7, so the oil usage is almost constant, along with natural gas, and almost all of it was purchased quite some time before it was actually used/needed.

They know that a project started today needs 100,000 barrels of oil per day, so a year ago, they signed a contract with the pipelines operater to provide that 100,000 barrels per day, to start today, a year later.

By the way, the big flares, or the tall stacks you see with flames on top are used to burn off excess product, or excess natural gas they didnt need for their job.

You cant put this stuff back in the pipe, you have no where to store it, so they just burn it off.
You can sit in Pasadena, and watch millions of gallons of gasoline burn up every night when they exceed their production level.
They litteraly make more of the stuff than they can store, so it just gets torched.

They will also burn off excess, when production exceeds demand, just to keep the sell price stable.

Its cheaper to use the pipe line than a rail service, as you dont have to provide trackage, car storage or switching cost, you just pay a yearly fee for the pipeline service.

And a last little thing is the price of oil changes so quickly.

Today, sweet crude might be selling for $50.00 a barrel, but this time next year, it may be $55.00 a barrel.
Manufactors have projected prices in hand, so they often buy when the cost is low, as a hedge against it costing more by the time their project starts.

Because its already in the pipe and paid for, the pipeline suppliers can't charge the current price, you already paid for it at last years cost.

The other side is the price per barrel may drop by the time your project starts, so it a gamble, but one these guys are used to.

It takes about six months to retool a refinery to change production of products, you cant just go from making super unleaded gasoline today, to refining 10w 30 motor oil tomorrow, so buying ahead, or on consignment, is the only way to insure a steady flow of raw material at a know price.

When they have finised their product, it does go out by rail.

If they refine the crude into, say, motor oil, or a special lubricant, it cant be piped out because it will be contaminated, and the buyers are scattered all over the country.
Gasoline, kerosene, light oil products go via tank truck, heavy oil, lubes, plastics and such by rail.
You will notice a lot of refineries and manufactering facilities spring up along this new pipeline.
Ever notice how refineires seemed to be all grouped in the same goegraphical area?
They all share the same raw material pipeline supply.
Crude in by pipe, refined out by rail.
Stay Frosty,
Ed

[Anonymous]

Ed you've got that one nailed. Out here in the San Francisco Bay area, we have 5 refineries, 2 produce fuels and 3 produce heavy lube oils and greases. I just wish we had more gasoline plants so our prices might go down a little. $1.80 a gallon sucks!!

[edblysard]

What really hurts is filling up your car, then going to work, and watching millions of gallons of gasoline go up the stacks!
Artifical inflation of the price, shorten the supply, and charge more for the limited amount left, just to cover the cost of manufacturing.
And we are sending how many billions of $$ overseas?
Go figure!
Stay Frosty,
Ed

[Modelcar]

....Boy, Ed that deal with the stacks is really ugly to hear....I assumed when seeing them and the flame burning out the top that they were just burning off stray vapors, etc. and kinda a safety feature so no fire started down at grown level to do damage, etc...That is terrible burning off quantities in the amounts you were talking about..

Just for trivia: in this part of the country now..[Central Indiana], Nonleaded regular $1.40.

[kevarc]

Most of the gases are waste gases that are of no use to anyone. If they are burning product, then the bean counters will have their head. Though there are times when a unit is starting up or shutting down they do flare product, but the product is usually not within specs. There are limits on what they can burn in the flares.

[Puckdropper]

So why not burn the bad oil and use it to make steam to turn power plants? You'll have the heat and atmospheric waste anyway, so why not make electricity where it's needed?

Or do something useful with the heat...

[edblysard]

Kevarc is right, quite a lot of the time, what you see burning is the waste.
Or, someone goofed, and they burn off the screw up.
But, they have flared off excess several times down here.
My next door neighbor was a chemical engineer/production manager for SHell Deer Park, and he let me in one that.

If you see the flares running or burning full blast, more than what you think it should, they have a major problem, and are emptying out the cat crackers and such, to prevent a explosion in the plant proper.
Have had a few of those just this year.
Sad, the kids in Pasadena and Deep Park schools learn about sheltering in place when this happens, sorta like my generation learning "tommy turtle says duck and tuck" if the russians hit us with the H bomb.
Like either one would really make a difference.

Puckdropper, the reason you cant use the waste or over flow product is two fold.
One, you would have to transport it to a generating plant, which would cost, and two, its several different products, from natural gas, to un-usable by products of refining, and they all burn at different temps, so there would be no way to regulate the heat produced, and some of this stuff can burn hotter than oxygen.
As a side note, some of the refineries do have their own co generation plants, and do use the excess natural gas to produce electricity for themselves, and by law, the excess electricity they dont use themselves has to be purchased by the local power company, Entex, and added to the local power grid.
Not that it makes a dent in what Entex charges us consumers, but still...

Like railroading, oil production and pipeline services fit into the "weird way to make a living" catagory.
Stay Frosty,
Ed

[Anonymous]

Being a consultant to the oil and gas industry I must take exception to some of the comments made on this subject. The refineries are prohibited from flaring due to conservation and pollution laws. A small safety flare is permitted which will increase when there is a plant upset. Misblends are sold to discounters rather than being flared. A large refinery, such as Exxon/Mobil's at Baytown Texas, has a throughput capacity of approximately 500,000 barrels per day (one barrel = 42 gallons). To burn off even 10% of the refinery capacity would make a flare bigger than a Nasa launch at Cape Canaveral. Simply it is not done!

Virtually all the shipping of finished fuel product (gasoline, diesel, or heating oil) is by product pipelines. By maintaining the pipeline velocity in the turbulant range there is very little admixing in the pipeline. The refined product is shipped to terminals in metreopolitan areas where it is stored in tanks. Tanker trucks then deliver the product to your neighborhood filling station (note I did not say "service" station). Lube oils are blended and canned at the refinery and shipped by truck to the selling point. Some is shipped in bylk to the quick lube stores.

Approximately 50% of our crude oil is produced in foreign countres and shipped by tanker to US ports with product from Canada and Mexico being the exception. The tanker shipments can be either crude oil or refined product. It is off loaded from the tanker into storage tanks for shipping via pipeline to the refineries (crude oil) or the product terminals. Many of the producing countries have refineries dedicated to the export trade.

Refineries are purpose built to handle a specific crude type. The Gulf coast refineries that handle the paraffinic base sweet crudes from the Gulf of Mexico are different from the refineries in California tha handle the asphaltic sour crudes produced there. The cost of gasoline is based on the quality of the crude oil entering the refinery more than the shortage of refineries. The gasoline yield from the California type of crude is less than the yield from the Guld Coast crudes. Since it takes more crude to make a gallion of gasoline from California crudes the cost will be higher. Additional refineries could be built in California to handle sweet crudes brought by tanker from Indonesia, however, remember that is the cerial state-full of fruits, flakes, and nuts. Try getting a permit to build a new refinery or modify an existing plant in California. Think of the electrical brownouts in California a year or so ago.

Most pipelines, like railroads are common carriers. Say ExxonMobil at Baytown wants 100,000 barrels per day through a given pipeline for their refinery. They will either produce or purchace that amount at the inlet of the pipeline to feed their refinery. Storage in the pipeline is at most one week-the time required for the oil to flow from inlet to outlet.

Gasoline, like food, is what the economists call a perfect inelastic supply/demand scenario. No matter what the price you as a consumer cannot significantly change your rate of consumption. If gasoline would drop to 5 cents per gallon (it was there during oil gluts in the '20s) how much more could you use? Same for food. If steak dropped to 5 cents per pound how many additional steaks could you eat. If prices soar to high levels how much less could you consume. Yes, you could cut back on pleasure driving, but there is a basic minimum driving to commute to work, etc that you cannot avoid. Check out the United Kingdom where gas is approaching $6.00 per gallon. They still drive a lot, but in much smaller cars. No SUVs there. Same goes for food. You can tighten the belt, but there is a minimum amout of calories required to live.

I could go on for ever, but do not want to hog the forum.

*** Watkins
Professional Engineer and Dart Board of Directors

[Anonymous]

Ok, I know why the SP oil cans disappeared, but after the service was ended, what did SP do with all those specialized tank cars. Scrap them?

[edblysard]

Hi Mr Watkins,
Most of the refineries along the ship channel were built long before the EPA was even a concept.
Almost everyone falls under several grandfather clauses.
I have watched ICT, Phillips and Solvey discharge waste/spillage directly into the ship channel.

The Texas Parks and Wildlife folks were down here two years ago, and did sediment testing for micro life forms, and concluded that even the sediment at a foot below bottom was devoid of life, all the way from the turning basin out to the Shell Deer Park plant.

One of the reasons the refineries along the channel dont tear down or remove, or update a lot of their older facilities is because they are grandfathered in under the EPA, and as long as they dont substantialy alter that part of the plant, they dont have to comply with a lot of the requirements in that portion of the plant.
And they dont.
I know officaily they report that they function within guidlines, but I also deal daily with a lot of the guys who work in these refineries, and who do flare off a lot of things they shouldnt, or dump stuff in the channel that would scare the crud out of you.

Arco has even errected a sign on the side of their "wax plant" proclaiming that it was built in 1920.
Talked to one of the shift foremen, and he said the inside of the building looks as old as the outside, and that most of the machinery inside is original.

Stay Frosty,
Ed

[Anonymous]

Interesting discussion. I enjoy reading stuff like this.

It's almost better than the History / TLC / Discovery Channel. [;)]

[adrianspeeder]

This is so cool! Most kids at my school would be bored silly with this topic, but I think it is one of the better topics in this forum in a while. Ed, Mr. Watkins, keep it up.

Adrianspeeder

[Anonymous]

Hi Ed,
Your reply up at the top is absolutely top notch. What a remarkably well explained reply.
Thanks for sharing that.

Stack.[8D]