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RE: PetroChina & Venezuela Talks Oil Refinery & Upgrader – Orimulsion use still on China table?

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Charles Randall

China too far away = relative term.  It is freight & time disadvantaged to the European, US Gulf & Venezuelan markets but  often the comparative price of energy (oil, diesel/gasoline, coal & petcoke ect) is priced higher than these markets to absorb some of that differential. China is about 30-40 days away from the US Gulf & Venezuela which are only 14 days away from Europe markets. However the US West Coast is only 14-16 days away from China.  Although we like to talk about freight cost in terms of $/ton or $/Bbl – it is usually priced by shipowners in terms of $200,000/day capes & $100,000/day panamex (for example at 2007 peak market price on larger vessels).  The cost also incude fuel adjustment factors when Bunker markets (like today) are way outside normal averages.
Having said this remember Heavy Fuel Oil & Bunkers for ships and power plants are often priced off Conventional Crude Oil prices (historical averages are in 70-80% Crude price) so having a Bitumen Crude source like Venezuela that has more than the 20% or  $20/Bbl or more discount for heavy conventional sour crudes (Maya & Oman) off marker/index crudes like Brent, WTI (probably Dubai or Tapis for China)  would also help reduce differentials.
Additionally Orimulsion is about 40-50% water so economically this would mean China could avoid half the transportation cost on barrel of orimulsion by making it in thier plant. This in addition to gaining the PDVSA/Bitor technology for making Orimulsion would be a large interest for China that also has Bitumen reserves in at least 9 of its 14 crude oil fields and future use implications now that it has passed point of domestic production covering use & must import crude to meet demands.
Since China Refinery complexity averages in 4-7 range except for new coastal world scale Refinery/Petchem complex’s – it is not currently in position for meeting higher consumption rates (ie above the 330 MBD contracted now) that PDVSA needs to offset falling demand from US partners & market (ie Citgo stations) it has alienated with its policies & rehtoric. Since it takes over 3 years to get fuel oil coking unit in place and both PDVSA/China currently lack the Heavy Oil technology application for Suncor/COP/XOM/Total/Chevron & other majors – Orimulsion would help with short term consumption application that could be adapted to asphalt, coker feedstock or fuels at later date.  Hope this helps – like always coker answers are in shades of gray with posibilities on both sides of the issue.

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