Is it much of a problem to switch a refinery to a different crude oil?
Russian oil embargo considerations have also touched upon an issue of the European refineries being tooled specifically for the Russian crude and the difficulties they might face when switching to a different supply source. Let us try to figure out, whether this is really a showstopper.
Short answer – it will cause some problems and reduce refineries’ productivity and profitability, but it is a factor of lesser importance.
I will have to go to some engineering, chemistry, and operations management details here to explain, if you do not care about these matters, you will not miss much by stopping right here.
Let me start with an analogy. Imagine, you have a coin-sorting machine. A simple device with 3 sieves one under the other, you pour your coins stream from the top, the topmost sieve has the largest holes, and filters quarters out, letting nickels and dimes through, the second one captures nickels and the third one captures copper cents, and dimes go to a bucket at the bottom. Let’s assume that each sieve has an outlet that takes away the captured coins and it has maximum throughput capacity, and over that, it floods and the machine does not work anymore. You want to run your machine at a rate of 1000 unsorted coins per hour. The safest bet would be to design every level to handle 1000 coins as well, but this is costly. So you allow for 300 of each coin denomination per hour. This is already some safety margin for 50 coins in each denomination, and if you get a slightly uneven mixture of quarters, nickels, dimes, and cents, everything is working fine,
But what if you get a bag of 600 cents, 200 dimes and 100 each of quarters and nickels? Turns out, your plant would work twice as slowly. The cents level would not be able to handle not more than 300 coins per hour, so total productivity will drop to 500 coins per hour. What’s even worse, quarters and nickels productivity will drop five-fold, while the machine was able to “make” 250 of each per hour from the uniform mixture, it will “make” only 50 of each from the cents-rich feed. Of course, if a designer has a rough idea of the proportion of the coins in the feedstock, the machine would be designed accordingly and this would not happen.
But enough of the coins and the analogy, let’s get back to oil. Crude oil is a mixture of various hydrocarbons (various length chains of carbon atoms with single links between them with hydrogen atoms attached to the rest of the carbon links) plus certain other compounds – sulfur, metals, and more complex hydrocarbons. As this is a naturally occurring substance, its composition varies from field to field, depending on the geological history that led to the occurrence of the deposit.
Gasoline, jet fuel, diesel, and other things that we get from oil refineries are also mostly mixtures of hydrocarbons of various chain lengths, however, they have to adhere to rather tight specifications and in most cases need not only extraction from the raw material, but also some additional processing to become a modern motor fuel, lube or chemical feedstock.
Every oil refinery starts with an atmospheric distillation unit, which works pretty much like a coin sorting machine, except it uses the difference in boiling points of various hydrocarbon fractions as the filtering criteria instead of the coin diameter. It separates crude oil into naphta (proto-gasoline, so to say), kerosene (proto-jet fuel), gasoil (proto-diesel) and atmospheric residue (fuel oil, which can also be processed in hydrocrackers to make diesel or catcrackers to make gasoline). There are also some other important units in a refinery, which take the straight-run liquids from the distillation column and treat them to make high-spec fuels, required by modern engines, desulfurization unit, which allows to make low-sulfur fuel from sulfury crudes to satisfy today stringent environmental norms, etc. Needless to say, all these units are a) specialized and b) have limited throughput capacity.
There are refineries that are able to work with almost any kind of crude and make almost any product slate (to vary the proportion of gasoline and diesel in their output to a very significant degree), but this means that they have a very vast toolkit on their site, and most of the time a large number of the installations are not fully loaded. Considering that these installations may easily cost a good part of a $1 bln each, one can imagine, why most refiners try to avoid such configurations. Sure we would all love to have a Swiss knife or a Leatherman with a few dozen blades, just in case, but only before we see the price tag. Oil refining is a very capital-intensive business with low margins and low return on capital, so very few refineries have the luxury of the wide flexibility.
So, most refineries are specialized for the feedstock that is common to their regions, and in Europe, the Russian Urals blend is, probably, the most ubiquitous one, and for inland refineries in Central Europe, getting their oil via the Druzhba pipeline, it is pretty much the only feedstock they ever get. What happens if the Russian supply vanishes? First, the refineries would try to find some crudes that are similar to the Urals. Urals is a crude with a high sulfur content (negative) but also with a high proportion of medium distillate (proto-diesel) fraction (positive for a European refinery sitting in the diesel-hungry market). And sulfur is not a problem – most European refineries have got their desulfurization units a long time ago. Arab Light from Saudi Arabia would do to some extent, but it is a finite supply. Next, they would resort to blending – buying different crudes that, when mixed together, would have a similar composition to Urals. When these options would be exhausted, they would run on whatever oil they can get – but then the refineries would run into bottlenecks and both their total productivity and output of the key elements of their refining slate will go down. And in the meanwhile, when and if the owners of the refineries come to the conclusion that the situation is not temporary, they might invest in a reconfiguration of the refinery – but this is an expensive and slow process (1 to 3 years), and at least some refinery owners may decide to shut them down altogether, as on one hand, they are not making enough money anymore, and on the other, they would not have enough time to recoup the investment, before demand for motor fuels in Europe goes into strong decline because of electrification.
So, as I have said in the beginning – crude switching is not a catastrophe, but a bit of a headache and it makes a shortage a bit more acute.
PS A picture to illustrate the point how variable different crudes could be – here is a simplified fractions chart of the crudes, sold by Equinor trading arm (I’ve pulled the data from their website https://www.equinor.com/energy/crude-oil-assays)