The US secretary of state wants Reliance to refine more Venezuelan crude. The thick, sulphur-heavy oil needs costly equipment that only some refineries have.
US Secretary of State Marco Rubio said in Mumbai on Tuesday he would encourage Reliance Industries, which runs the Jamnagar refining complex in Gujarat, to refine more Venezuelan crude.
Behind the request is a complex set of immediate circumstances – particularly, multiple theatres of conflict that have driven oil prices, and in turn pump prices around the world, to uncomfortable levels. But a more fundamental factor is how crude oil, once nicknamed black gold, varies from one oilfield to the next, and how refineries that turn it into fuel are set up to handle a specific range and type of it.
The oil range
Crude oil comes in varieties. Some of it is thin and runny. Merey, Venezuela's main export blend, is thick and slow-moving, more like treacle than diesel. The heaviest oil from the Orinoco belt in central Venezuela is denser than water.
The industry measures density on a scale called API gravity, named after the American Petroleum Institute, an industry body. Water scores 10 on this scale. Oil above 10 floats on water, and oil below it sinks.
The US Geological Survey (USGS) counts oil scoring 22 or less as heavy, and anything below 10 as extra-heavy.
The second measure is sulphur. Low-sulphur crude is called sweet, and high-sulphur crude is called sour. Refineries need dedicated units to strip the sulphur out.
Merey scores between 15 and 18 on the API scale and carries 2% to 3% sulphur, which puts it firmly among the heavy, sour grades.
The best-known price benchmarks are lighter. Brent, from the North Sea, and America's West Texas Intermediate are light and sweet. Dubai and Oman, the Gulf's markers, are medium and sour.
The USGS says heavy oil is what remains of oil that was once light, after bacteria, water and evaporation stripped away its lighter parts. It also carries significant amounts of sulphur, nitrogen and heavy metals.
Lighter, lower-sulphur crude sells at a premium, and far simpler refineries can process it, according to the US Energy Information Administration (EIA), the US energy department's statistics agency.
Venezuela has more of the thickest kind than anywhere else in the world. The Orinoco belt holds about 90% of the world's extra-heavy oil in the ground, the USGS estimated in 2003. Oil that thick cannot be shipped as it comes out of the ground. It has to be thinned with lighter oil, or partly processed in plants near the field called upgraders. In January, the first US cargo of naphtha, a light oil used for that thinning, was loaded for Venezuela.
The role of refineries
A refinery's job is to turn crude into fuels such as petrol and diesel. The first step takes place in a distillation column, a tall tower found in every refinery, which heats crude and splits it into lighter and heavier fractions according to their boiling points.
For light, sweet crude, that step does much of the work, so a refinery with little other equipment can process it efficiently. Heavy crude is harder. Run through the distillation column, it leaves a lot of thick, low-value residue.
To deal with that residue, complex refineries add secondary equipment that upgrades low-value products, such as residual fuel oil, into high-value ones, such as distillates like diesel. Three kinds of unit do most of this work. A coker uses heat to break the heaviest residue into lighter products such as diesel and petrol. Hydrocrackers do similar work with hydrogen, and desulphurisation units remove the sulphur.
Venezuela's heaviest oil needs this kind of treatment. The USGS says the heaviest grades, extra-heavy oil and bitumen, "must usually be upgraded by reducing their carbon content or adding hydrogen" before an ordinary refinery can use them.
This equipment is expensive too, and the industry ranks refineries by how much of it they have. In the 1960s, WL Nelson, who wrote on refining for the trade publication Oil & Gas Journal, devised a way to score all this equipment. His index gives the distillation column a value of 1 and rates every other unit by what it costs to build relative to that column. A coker scores 6. The more such equipment a refinery has, the higher its score.
Reliance says Jamnagar scores 21.1 and has processed more than 216 grades of crude.