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The great condensate con: Is the oil glut just about oil?
_(14596437839).jpg "The great condensate con: Is the oil glut just about oil?")
My favorite Texas oilman Jeffrey Brown is at it again. In a recent email he’s pointing out to everyone who will listen that the supposed oversupply of crude oil isn’t quite what it seems. Yes, there is a large overhang of excess oil in the market. But how much of that oversupply is honest-to-god oil and how much is so-called lease condensate which gets carelessly lumped in with crude oil? And, why is this important to understanding the true state of world oil supplies?
In order to answer these questions we need to get some preliminaries out of the way.
Lease condensate consists of very light hydrocarbons which condense from gaseous into liquid form when they leave the high pressure of oil reservoirs and exit through the top of an oil well. This condensate is less dense than oil and can interfere with optimal refining if too much is mixed with actual crude oil. The oil industry’s own engineers classify oil as hydrocarbons having an API gravity of less than 45–the higher the number, the lower the density and the “lighter” the substance. Lease condensate is defined as hydrocarbons having an API gravity between 45 and 70.
Refiners are already complaining that so-called “blended crudes” contain too much lease condensate, and they are seeking out better crudes straight from the wellhead. Brown has dubbed all of this the great condensate con.
Brown points out that U.S. net crude oil imports for December 2015 grew from the previous December, according to the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy. U.S. statistics for crude oil imports include condensate, but don’t break out condensate separately. Brown believes that with America already awash in condensate, almost all of those imports must have been crude oil proper.
Brown asks, “Why would refiners continue to import large–and increasing–volumes of actual crude oil, if they didn’t have to–even as we saw a huge build in [U.S.] C+C [crude oil plus condensate] inventories?”
Part of the answer is that U.S. production of crude oil has been declining since mid-2015. But another part of the answer is that what the EIA calls crude oil is actually crude plus lease condensate. With huge new amounts of lease condensate coming from America’s condensate-rich tight oil fields–the ones tapped by hydraulic fracturing or fracking–the United States isn’t producing quite as much actual crude oil as the raw numbers would lead us to believe. This EIA chart breaking down the API gravity of U.S. crude production supports this view.
Exactly how much of America’s and the world’s presumed crude oil production is actually condensate remains a mystery. The data just aren’t sufficient to separate condensate production from crude oil in most instances.
Brown explains: “My premise is that U.S. (and probably global) refiners hit in late 2014 the upper limit of the volume of condensate that they could process” and still maintain the product mix they want to produce. That would imply that condensate inventories have been building faster than crude inventories and that the condensate is looking for an outlet.
That outlet has been in blended crudes, that is heavier crude oil that is blended with condensates to make it lighter and therefore something that fits the definition of light crude. Light crude is generally easier to refine and thus more valuable.
Trouble is, the blends lack the characteristics of nonblended crudes of comparable density (that is, the same API gravity), and refiners are discovering to their chagrin that the mix of products they can get out of blended crudes isn’t what they expect.
So, now we can try to answer our questions. Brown believes that worldwide production of condensate “accounts for virtually all of the post-2005 increase in C+C [crude plus condensate] production.” What this implies is that almost all of the 4 million-barrel-per-day increase in world “oil” production from 2005 through 2014 may actually be lease condensate. And that would mean crude oil production proper has been nearly flat during this period–a conjecture supported by record and near record average daily prices for crude oil from 2011 through 2014. Only when demand softened in late 2014 did prices begin to drop.
Here it is worth mentioning that when oil companies talk about the price of oil, they are referring to the price quoted on popular futures exchanges–prices which reflect only the price of crude oil itself. The exchanges do not allow other products such as condensates to be mixed with the oil that is delivered to holders of exchange contracts. But when oil companies (and governments) talk about oil supply, they include all sorts of things that cannot be sold as oil on the world market including biofuels, refinery gains and natural gas plant liquids as well as lease condensate. Which leads to a simple rule coined by Brown: If what you’re selling cannot be sold on the world market as crude oil, then it’s not crude oil.
The glut that developed in 2015 may ultimately be tied to some increases in actual, honest-to-god crude oil production. The accepted story from 2005 through 2014 has been that crude oil production has been growing, albeit at a significantly slower rate than the previous nine-year period–15.7 percent from 1996 through 2005 versus 5.4 percent from 2005 through 2014 according to the EIA. If Brown is right, we have all been victims of the great condensate con which has lulled the world into a sense of complacency with regard to actual oil supplies–supplies he believes have been barely growing or stagnant since 2005.
“Oil traders are acting on fundamentally flawed data,” Brown told me by phone. Often a contrarian, Brown added: “The time to invest is when there’s blood in the streets. And, there’s blood in the streets.”
He explained: “Who of us in January of 2014 believed that prices would be below $30 in January of 2016? If the conventional wisdom was wrong in 2014, maybe it’s similarly wrong in 2016” that prices will remain low for a long time.
Brown points out that it took trillions of dollars of investment from 2005 through today just to maintain what he believes is almost flat production in oil. With oil companies slashing exploration budgets in the face of low oil prices and production declining at an estimated 4.5 and 6.7 percent per year for existing wells worldwide, a recovery in oil demand might push oil prices much higher very quickly.
That possibility is being obscured by the supposed rise in crude oil production in recent years that may just turn out to be an artifact of the great condensate con.
57 Comments on "The great condensate con: Is the oil glut just about oil?"
Boat on Sun, 17th Jan 2016 12:55 pm
Trouble is, the blends lack the characteristics of nonblended crudes of comparable density (that is, the same API gravity), and refiners are discovering to their chagrin that the mix of products they can get out of blended crudes isn’t what they expect.
So fracking for oil took off in 2009. The US refineries are processing almost 5 mbpd of fracked oil. Now this post suggests that refineries are just now figuring out what kind of oil their processing? Doesn’t pass the smell test.
cottager on Sun, 17th Jan 2016 1:25 pm
All US recessions were caused by oil price spikes, why now it should be different? Although economy is weak I think price will spike, then another, more harsh recession (Depression, capital letter) will begin with some nicely bursting bubbles. Wait and see.
Davy on Sun, 17th Jan 2016 1:41 pm
Cottager, where is it written that oil spikes always caused recessions. Reality does not follow human conventions found in economics or a short history of modern man. I suggest you read this piece from over at zero hedge:
“The Fed’s Stunning Admission Of What Happens Next”
http://www.zerohedge.com/news/2016-01-17/feds-stunning-admission-what-happens-next
(June) “[No episode is more comparable to what is about to happen] than what happened in the US in 1937, smack in the middle of the Great Depression. This is the only time in US history which is analogous to what the Fed will attempt to do, and not only because short rates collapsed to zero between 1929-36 but because the Fed’s balance sheet jumped from 5% to 20% of GDP to offset the Great Depression. Just like now.”
“When it became evident after the spring of of 1937 that commodity prices were not going to continue upward, the basis for the inventory accumulation was undermined, and first in textiles, then in steel, the reverse procees took place. Oil anyone?”
“And then this: “The steepest economic descent in the history of the United States, which lost half the ground gained for many indexes since 1932, proved that the economic recovery in the United States had been built on an illusion.”
“Which, of course, is what we have been saying since day 1, and which even such finance legends as Bill Gross now openly admit when they say that the zero-percent interest rates and quantitative easing created leverage that fueled a wealth effect and propped up markets in a way that now seems unsustainable, adding that “the wealth effect is created by leverage based on QE’s and 0% rates.”
“Yes, it was the Fed itself who, in its Federal Reserve Bulletin from June 1938 as transcribed in the 8th Annual General Meeting of the Bank of International Settlements, uttered the following prophetic words: The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending. 1937 has taught us that an abundant supply of gold and a cheap money policy do not prevent prices from falling.”
onlooker on Sun, 17th Jan 2016 1:55 pm
So now we have discovered that we have an economy build upon delusion built upon an energy source (oil companies) that also has been deluding the world as to its true accessibility ,value and quantities. Houston we have a problem.
Kurt Cobb on Sun, 17th Jan 2016 2:51 pm
@Boat There is a difference between the light tight oil that the fracking boom provided to refineries which is very high quality light sweet crude and the blended crudes that I’m talking about in this piece. Perhaps you would find it helpful to read the linked Reuters piece explaining the problems with blended crudes.
Refiners who have the right setup have been happy to have the light tight oil available in the last several years from fracked wells. What’s being peddled to many of them now is a product that technically qualifies as light oil–blended crudes–but doesn’t provide the mix and quantity of refined products they expect from light crude.
ghung on Sun, 17th Jan 2016 3:22 pm
“Lease condensate consists of very light hydrocarbons which condense from gaseous into liquid form when they leave the high pressure of oil reservoirs…”
Sounds backwards to me. I’m quite familiar with temperature pressure gradients and generally, liquids turn to vapor as pressures drop. Maybe “lease condensates” liquefy when their temperature drops below their condensation point at/near atmospheric pressure? Just color me curious….
marmico on Sun, 17th Jan 2016 3:39 pm
Oil traders are acting on fundamentally flawed data,” Brown told me by phone
Ya, right. Brown’s Export Land Model (ELM) is dead and he now looks for lazarus-like redemption with the Condensate Con (CC.
Cobb was more than happy to lap up the ELM. Ditto with CC.
Kurt Cobb on Sun, 17th Jan 2016 3:48 pm
@ghung Typically, at the temperatures and pressures inside an oil reservoir, condensates are gaseous. As they move toward the surface, ambient pressures and temperatures are much lower and so they become liquids.
Boat on Sun, 17th Jan 2016 3:49 pm
Kurt Cobb,
The gulf refineries set up their refineries to process heavy oil from Venezuela and Canadian tar sands. Why? Refineries get price breaks for the quality. That and US refineries have the tech to make a profit off the cheaper prices. Before fracking in the US took off the US imported large amounts of light sweet oil to blend, now they don’t have to.
To your point about the quality of condensate. Do not refineries take an assessment test and price the quality accordingly? This is my understanding.
Each refinery is set up different. They will require compensation for any grade of oil or condensate or not buy it if it drives higher costs in the refineries efficiency.
I read that motiva, a US large gulf refinery set up for heavier oil in a 10 billion upgrade just a few years ago. Now they are considering a reconfiguration geared more to handle light grades. oops This sounds like a reaction to your point about to much oil with a high API.
mike on Sun, 17th Jan 2016 4:14 pm
This is all about nothing. Hocus Pocus. If they can’t know what is crude and what is the other thing, then you can’t draw ANY conclusions. It could be any amount. To suggest that somehow this dark matter of crude condensate means there is NO over supply is just another denier. Make me laugh with this article.
marmico on Sun, 17th Jan 2016 4:33 pm
What’s being peddled to many of them now is a product that technically qualifies as light oil–blended crudes–but doesn’t provide the mix and quantity of refined products they expect from light crude.
Ya, right. Refineries are such bozos that they can’t perform an assay. View Exhibit 2, here, for Bakken & Eagle Ford assays and compare it to WTI.
Nony on Sun, 17th Jan 2016 4:44 pm
1. If condensates are “not oil” than why has the supply of condensates affected the price of WTI (and heavier blends)? Clearly the market sees these as substitute goods. They are sold in the same price lists. They go to similar customers. They both are blended in storage tanks before distillation. When one drops in price, the other does too.
1.1 Condensate has traditionally actually been worth MORE than WTI. In Asia, it still often is.
1.2 Condensate goes through a refinery and makes products similarly to “oil”. It is actually more suited to simpler and cheaper refineries (no coker, no visbreaker).
1.3. Peakers were complaining we would only find extra HEAVY oil in 2005. Now they are shown we have extra WTI and condensate. HAHAHA.
2. Jeff has been pushing this “45” boundary, but you can find plenty of people who use 50 as the boundary. For instance Eagle Ford 47 is routinely sold as “oil”. Platts, etc. list it as oil.
3. In any case, there is nothing magically different about condensate and “oil”. Both are the same hydrocarbon substance (mix of hundreds of compounds), just differing in density. There is no magical difference from 44 API to 46 API versus 33 API to 35 API.
4. Condensate is almost always “sweet” (low sulfur). This makes it worth more, often than heavy sour blends of oil. Jeff never mentions sulfur, only API gravity (density).
ennui2 on Sun, 17th Jan 2016 4:56 pm
“All US recessions were caused by oil price spikes, why now it should be different?”
Because it’s not true that all recessions were caused by oil spikes. The dot com bubble for one, or the credit crisis (IMHO).
Plantagenet on Sun, 17th Jan 2016 5:36 pm
The DOE redefined condensate as oil several years ago, at the same time they refined biofuels as “oil”.
Boat on Sun, 17th Jan 2016 6:24 pm
I have never figured out the big fuss over conventional vrs unconventional oil. My car doesn’t care. If you can make money on it it will be developed. How is condensate any different.
eugene on Sun, 17th Jan 2016 7:08 pm
One thing I learned long ago, when things start to deteriorate people lie to beat hell. My understanding is condensate is not oil but, few yrs ago, when things started to deteriorate, all kinds of things started getting called oil. But if you’re so inclined, call it whatever you like. In the end, reality will rule whether you twist things or not. Way too much optimistic hype for me anymore but gotta keep those charge cards on the counter. Without massive debt at all levels, the US economy folds.
geopressure on Sun, 17th Jan 2016 7:13 pm
“Sounds backwards to me. I’m quite familiar with temperature pressure gradients and generally, liquids turn to vapor as pressures drop. Maybe “lease condensates” liquefy when their temperature drops below their condensation point at/near atmospheric pressure? Just color me curious….”
Yes, when you expand a gas, that gas looses temperature – then the heavier molecules of that gas condense & ‘rain’ out of the gas stream…
—
Molecules that are light enough to be carried in a gas stream are typically lighter than Hexane (C-6)… These short hydrocarbon molecules are not suited for making gasoline – at least not in the way that US Refineries are set up…
—
There still exists a lot of confusion over what “Condensate” is… The molecules that “rain” out of a gas stream would be at the very HIGHEST end of the API spectrum >60 Degrees for sure… There is no way that 45 Degree API Crude oil can be carried in a stream of gas…
GregT on Sun, 17th Jan 2016 7:15 pm
“My car doesn’t care.”
Your car isn’t in the oil business, and doesn’t require infinite exponential growth.
geopressure on Sun, 17th Jan 2016 7:34 pm
NOTE: Cars will run off condensate… I’ve seen it…
Probably highly corrosive though…
LewW on Sun, 17th Jan 2016 7:39 pm
Refineries can handle any feedstock, they just cannot handle any feedstock on any day.
What this article is saying is the oil being sent to refineries isn’t what they are set up for, not that it can’t be used.
To get maximum refinery efficiency, it needs to be set up for the feedstock being received.
The refineries will have to reconfigure to match what they are receiving. That’s not cheap or simple to do, but it’s not impossible.
marmico on Sun, 17th Jan 2016 7:43 pm
then the heavier molecules of that gas condense & ‘rain’ out of the gas stream…
So many heavier molecules “rain out” of the Marcellus gas stream, that Pennsylvania produced 14,000 b/d of lease condensate in November 2015. It’s a frigging decimal point rounding error in U.S. oil production.
Kurt Cobb on Sun, 17th Jan 2016 7:49 pm
It is useful to know that refineries are set up to accept a certain range of inputs. Different refineries are designed to run optimally (that is, most profitably) with different inputs. You cannot shove 100 percent lease condensate into a refinery that isn’t designed to process it at those levels.
So, while refineries certainly test what they buy so they know its composition, some of them are now seeking out nonblended crudes directly from wellsites because this provides them a more optimal output.
It’s not that they can’t use blended crudes, it’s that the blended crudes don’t result in the most profitable output of refined products.
If refineries want to, they could change their configurations to allow them to accept more condensate. But this can be expensive and in order to justify such an expense, the refinery owners would want to know that they had access to the new types of input over a long period of time to amortize their costs.
The fact that this kind of retrofitting isn’t taking place on a widespread basis tells me that refiners don’t think the tight oil shale boom is durable enough to amortize those costs.
geopressure on Sun, 17th Jan 2016 8:07 pm
U.S. Refineries are designed to take large hydrocarbon molecules & do the following:
1) Cut them down to 6-10 carbons in length
2) Turn single bonded carbons into double bonded carbons
3) Turn straight alkenes into cyclics such as benzene, hexane, octane (which is the most stable under pressure, hence the octane rating)
—
U.S. Refineries, for the most part, are not capable of taking short hydrocarbons (C6 or less) & adding to them in order to make them capable of being refined into gasoline or diesel… Refineries that can do this are VERY expensive to build & very expensive to operate… I can’t recall why though, the process either requires extreme refrigeration or extreme vacuum – one of the two…
geopressure on Sun, 17th Jan 2016 8:12 pm
marmico: There is a lot of confusion in the terms “Condensate” & “Natural Gas Liquids”….
Condensate implies that it is something that rains out of a gas stream, but the DOE classifies it as 45 Degree API Crude & up… The names’ implication does not agree with the DOE’s Definition…
—
These concepts are probably a lot more complex than can be reasonably addressed on this comments board.
geopressure on Sun, 17th Jan 2016 8:15 pm
Kurt Cobb: There is not enough oil to go around & these refineries are looking for anything & everything that they can find to process… Refineries all around the world are totally shut down due to lack of crude oil to process, especially in 3rd world countries…
I know that this is counter to the oil glut narrative, but it is true…
marmico on Sun, 17th Jan 2016 8:25 pm
There is a lot of confusion in the terms “Condensate” & “Natural Gas Liquids”….
No confusion here between lease and plant condensate. What’s your point?
The Marcellus, being the largest natural gas production basin in the U.S., “rains out” 14,000 b/d of lease condensate in Penn.
makati1 on Sun, 17th Jan 2016 8:29 pm
A game of smoke and mirrors…
geopressure on Sun, 17th Jan 2016 8:34 pm
Marmico… I think I misunderstood your previous post… did not mean to imply that you didn’t understand…
geopressure on Sun, 17th Jan 2016 8:40 pm
Here’s an interesting fact:
when developing the Haynesville shale, Operators started drilling 2+ wells from one location. Drilling one well directly up-dip & one well directly down-dip… The Up-dip wells were drilled at an angle >90 degrees & the Down-dip wells at an angle <90 degrees…
Operators quickly realized that all the Up-dip wells produced WAY more condensate than the down-dip wells…
This is because a "sump" is formed in the heel of the well & the gas produced from the entire lateral of the well-bore must pass through this "sump" where the natural gas becomes saturated with heavier molecules & delivers them to the surface…
The Down-dip oriented wells also had a sump, but it was at the toe of the well & therefore less produced gas flowed through the sump…
I always thought that was interesting…
marmico on Sun, 17th Jan 2016 8:44 pm
Geo, the point being that Brown’s Condensate Con argument rests on the increase in lease condensate in natty gas production. Marcellus Penn data proves that it is bullshit.
Those interested know the API markers and prices for Bakken, Eagle Ford and Permian oil.
Boat on Sun, 17th Jan 2016 8:46 pm
geopressure,
That was very interesting. Thank you.
I have read that old fields leave as much as 50% because they were drilled with older tech. Do you know if this technique has been tried in any of them.
Boat on Sun, 17th Jan 2016 9:30 pm
marmico,
I used API markers and prices for Bakken, Eagle Ford and Permian oil as a keyword.
Found a lot of information. You and Nony are great sources of information.
geopressure on Sun, 17th Jan 2016 9:33 pm
I think the phenomenon mentioned above is limited to unconventional production in the Wet-Gas Window…
But you absolutely right, many old fields have were only able to recover a fraction of the reserves before the operators deemed then uneconomic & Plugged/Abandoned them…
Geology is far more complex than operators were able to understand back in the 60’s, 70’s & 80’s… Not only can new technology increase the recovery from old fields, but just the application of science that was misunderstood back in the day can unlock additional reserves…
The Oil & Gas Industry is/was plagued by a 2 things that I personally believe led to significant amounts of reserves being overlooked: 1) there is a huge disconnect between the people drilling the well & the guys who are paying for the well… 2) The Oil & Gas Industry & Personality types that are usually successful in the industry create an environment for misconceptions to abound – In other words, people who think they understand things about the geology but they really don’t – it is difficult to understand things that you cannot see… Misconceptions & the disconnect have let to significant reserves being overlooked over the years…
Nony on Sun, 17th Jan 2016 9:49 pm
Kurt:
What you are talking about is very much something on the margin (concerns about a fluffed barrel). Sure, it can occur but at the most it just means some barrels get a buck more/less for being more consistent supply. Not also that some buyers just specify a Reid Vapor Pressure (main issue is too many light ends to handle in the existing distillation tower). All that product is still getting moved and has been getting moved for years. People are buying it…
marmico on Sun, 17th Jan 2016 9:57 pm
You and Nony are great sources of information.
Sheesh, the Cro-Magnons on this board will take a break foraging in the maize patch and rip out your heart at any moment.
I will be posting by the end of the month proof of my March 2015 prediction: household gasoline spending relative to cash wages will be the lowest in 10 years.
Boatk humans can on Sun, 17th Jan 2016 10:00 pm
geopressure,
Your points 1 & 2 happen in probably in every industry. LOL They are run by humans.
JV153 on Mon, 18th Jan 2016 3:44 am
We already knew that lease condensate / fracked oil is a very light blend. That’s why there isn’t that much asphalt to be had.
rockman on Mon, 18th Jan 2016 7:27 am
“But how much of that oversupply is honest-to-god oil and how much is so-called lease condensate which gets carelessly lumped in with crude oil.” Condensate is oil. Condensate is oil. Condensate is oil. Condensate is oil that is suspended in the gaseous phase with NG. When the condensate reaches the surface it CONDENSES (and thus the term “condensate”) into a liquid phase we call oil. And there has been much oil produced over the last 80 years that has had a lighter gravity then many condensates produced during the same time period.
Consider how these liquid hydrocarbons are classified in the largest OIL producing state in the country – Texas. Here the distinction between oil and condensate is not based upon its API gravity: there is 36 API condensate in Texas and 42 API oil in Texas. The determination is dependent upon that phase of the production IN THE RESERVOIR…not of the surface. Which is why production from a well might be classified by the TRRC as condensate early in its life when the higher reservoir pressure maintains that liquid in the gaseous phase. But late, when the reservoir pressure falls in a depletion drive reservoir the liquid falls out of the gaseous phase into a liquid phase. And this isn’t just a matter of nomenclature: it has huge financial implication. The spacing of the wells can vary greatly between a gas/condensate reservoir and an oil/NG reservoir. Which can change over time. It has also had a huge impact over the rate at which a well can be legally produced: a very different schedule for gas/condensate and oil/NG reservoirs.
And as far as “condensate” interfering with the refining process: utter bullsh*t. As pointed out many time before US refineries are optimized to crack oil with a rather narrow API range: 31 to 33. IOW the lighter oil (regardless of whether they are classified as “oil” or “condensate”) is REQUIRED to blend with the heavier oils. So no: US refineries are not designed to crack 45 API optimally. Nor are they designed to handle 24 API optimally. Before the shale boom that delivered a large amount of lighter oil the US refineries also had to import lighter oil to make the blends. In fact US condensate/lighter oils are in huge demand by NE Canadian refineries where they blend it with their heavy oil imports. This is why those refineries where not only paying $90+/bbl for EFS condensate before the [price collapse but also paid to have it shipped half way around the country to eastern Canada.
And while we’re discussing bullsh*t let’s touch on the completely misleading statements about the “first shipment of US oil exported” after the POTUS lifted the so called” US oil export ban”. Not only has was 200 million bbls of US oil exported during 2015 during the “ban” a total of 1.5 BILLION bbls of US oil has been exported since the “ban” bill was passed. And that first “post-ban” 600,000 bbls of US oil now heading towards Italy from Corpus Christi, Texas: 1.2 MILLION bbls were also shipped from CC to Italy last Oct/Nov. That January “post-ban” export was contracted and scheduled to ship long before the POTUS cancelled the “ban”. While the bulk of oil has been exported to Canada (which by CONGESSIONAL LAW has always been exempt from the “ban law”) much has gone to Europe so their refineries could blend it with their heavy oil imports. I’ve posted it before so I’ll skip it now but the US condensate refinery yields are not very different then the yields from the oil blends but they also produce much more valuable yields then our heavy oil imports. One more reason US refineries REQUIRE the lighter OILS/CONDENSATES.
AS before I’m sure there will still be some who refuse to accept this reality and must follow the preachings of the MSM. After all, if it weren’t true they couldn’t print it, could they? lol.
Nony on Mon, 18th Jan 2016 8:17 am
Kurt:
That condensate is getting sold. Refineries ARE using it. Blended stock is a little bit more of a pain, especially if light ends are high, but it’s nothing stopping the use of this product. (Get over JB pimping a topical story from months ago.) How can you simultaneously say the increase in production was mostly condensate and WTI-like light crap* and then say no one can use it? Where do you think it is going if it is no good in refineries??
Hint, hint: it is being refined. Condensate oversupply just affects pricing and the differentials amongst oil grades. And that’s maybe a buck or so difference. Sometimes, not even.
*Still hilarious to me that people are complaining about too much low 40s API oil! That stuff STILL gets the best prices and certainly did 10 years ago when the peakers were all saying we would only find more sulfurous asphaltic oil sands crap! That the world was running out of light sweet crude!
Check out this link (slides 23 and 24) for the distillation cuts for EF and Bakken crude.
http://inside.mines.edu/~jjechura/Refining/02_Feedstocks_&_Products.pdf
Nony on Mon, 18th Jan 2016 8:51 am
“Condensate” and “oil” come from the same process and are just different densities. Condensate just has a little more small hydrocarbons and less big hydrocarbons than crude oil. [And to some extent downhole pressure regime. Rock is correct that you can have a higher API crude and a lower condensate, at the boundary.]
If you believe in evolution and geology and the dinosaurs, you should know how oil and gas are made:
*hundreds of millions of years ago, critters lived and died (mostly microbes in the ocean).
*They fell to the bottom and made organic rich sediments that were anaerobic (no extra oxygen sources).
*With heat and pressure and time these organic materials were converted into large polymeric materials called kerogen are formed). These are oil and gas precursors. Think: oil shale. but NOT shale oil.
*With more heat and time, the oxygen is removed from kerogen and the macromolecules are sheared to shorter ones that are hydrocarbons. This process is accelerated if there is an escape pathway for the hydrocarbons. The initial soluble hydrocarbon is called bitumen and consists of very large hydrocarbon molecules, many of which are asphaltic (high number of conjoined hexagonal rings). Think: “tar sands”
*With more time and pressure, the bitumen is converted to shorter hydrocarbons (rings broken, etc.) Think “crude oil”.
*With more time and pressure, the crude oil is converted to methane. (CH4). Think “natural gas”.
Note that hydrocarbons are a SOUP of different molecules. This is a NATURAL PRODUCT, not a purified chemical. Even the nicest crude oil has hundreds of different molecules: different chain lengths, different amounts of branching, rings, etc. etc.
Crude oil and natural gas are FOUND TOGETHER. They live together in the reservoir! They are made from the same process.
Over time, all the crude will eventually become natural gas. So when you find some crude, you always find some natural gas (that the crude was gradually turning into). And when you find natural gas, you find some remnant crude that wasn’t done turning into gas.
When crude is pumped (or flows) to the surface, it goes into a 3 phase separator. At atmospheric temperature and pressure, the crude is separated into water (at the bottom), liquid hydrocarbon (“oil”) in the middle, and natural gas at the top. The water goes to treatment, the oil goes to sales (perhaps minor stabilization [heating] to drive a little more natural gas off, and the natural gas goes to gas separation plants.
Note that this initial separation is NOT a perfect process. There remains natural gas within the separated oil (even heavy crudes have some CH4, you see it when you distill them in a refinery). Hydrocarbons are soluble in each other. Like dissolves in like…chemistry 101!
Also, there remains remnant liquid hydrocarbons (pentane and higher) in the “wet gas” stream. In the gas plant, cold temperatures are used to separate the last liquids out (pentanes plus, also called “plant condensate”). [In addition, the methane (“dry gas”) is separated from the other natural gas that have 2-4 carbons: ethane, propane, butane and isobutene. Note that all of these “NGLs” are actually GASSES at room temperature.]
In a natural gas well, a similar separation takes place, but the majority stream is natural gas and you have droplets of liquid hydrocarbon entrained in the gas stream. At the atmospheric separator, these droplets will condense (“lease condensate”). They are just oil that was in the gas stream! [Further plant condensate is also recovered later by refrigeration.]
If you believe in evolution and physics and chemistry and biology and thermodynamics than you should know that there is nothing magically different about “condensate” and “crude”. Condensate tends to be a bit higher density and have a bit more short hydrocarbons and less long ones. [And per Rock’s point, at the boundary, the difference can actually depend on down hole pressure, temperature and even flow conditions.]
Nony on Mon, 18th Jan 2016 8:57 am
Minor corrections: “isobutene” NOT “isobutene” (typo).
(last para): condensate tends to have lower density, not higher (dyslexia). [Note that API gravity is just a mathematical transformation of density. Higher API is lower density. I think the oil people just put that in there to feel all badass and keep the general public mystified. I prefer specific gravity as it is more intuitive!]
geopressure on Mon, 18th Jan 2016 9:02 am
The Rockman’s explanation is good, but I am still not content with it… The huge molecular weights of the molecules that comprise 40 Degree API Crude Oil (for example) cannot exists in the reservoir nor on the surface in the gaseous state…
I will accept that wells that are classified as “Gas” Wells can also produce crude with it (of virtually any API Gravity), and if the well is classified as a gas well, then the crude oil accompanying that gas is considered “condensate”…
After the gas & crude oil is separated, anything that condenses out of the gas stream is the referred to “natural gas liquids” & is usually comprised of 2 to 6 carbon atoms… It is this stream that is difficult to refine into gasoline.
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It is a very confusing topic… the definition of Condensate is not compatable with the implications of the name “Condensate”…
geopressure on Mon, 18th Jan 2016 9:05 am
Hydrocarbon molecules that are condensed out of a gas stream cannot have a very high molecular weight… Rarely more than 6 Carbons… Therefore is at the very high end of the API Spectrum…
geopressure on Mon, 18th Jan 2016 9:16 am
I also prefer specific gravity references, Nony…
SG = 141.5/(API Gravity + 131.5)
geopressure on Mon, 18th Jan 2016 9:25 am
Shell’s PEARL, Gas-to-Liquids [GTL] Plant is an example of a facility that is designed to take short hydrocarbons & make them longer…
Such plants use the Fischer-Tropsch Process… A series of reaction developed by the Nazis during WWII to make fuel because they could not secure a sufficient source of crude oil… I thought that the process required refrigeration or a vacuum, but I might have been wrong…
Nony on Mon, 18th Jan 2016 9:45 am
Isobutane. A, not e after the t. Is it spell correct messing up, or me?
Nony on Mon, 18th Jan 2016 10:18 am
Geo:
Rich gas lease condensate is typically about 20% C7+. Lean gas condensate much less so (especially plant condensate). “Lease condensate” is just a mist within a flowing gas. It is not dissolved in the gas (or it would be a gas). The dropout is mostly a function of low flow within the separator.
Consider also the API gravities of some pure hydrocarbon components. Yes, blends will have a tendency to “fit together” and have non-ideal (denser) liquids. And yes, branching helps out some. But still, you can basically see that to have a 50 API fluid, you can’t be all C6-.
http://www.gly.uga.edu/railsback/PGSG/APIGravityvsSpecificGravPlot02.pdf
Nony on Mon, 18th Jan 2016 10:22 am
Note that many people use 50 API as a boundary, not 45. OPEC, OK, etc.
http://www.coqa-inc.org/docs/default-source/october-2014–san-francisco–joint-coqa-ccqta/10302014–powell–eia–coqa-condensate-definition-types.pdf?sfvrsn=2
Jeff Brown just wants to define 45 as the boundary so he can make some peaker argument that we have less oil being produced. Of course the rocks don’t care, the molecules don’t care, the refineries don’t care, and the $1.50 gasoline consumers don’t care. It is just a silly terminology game.
And of course, Eagle Ford 47 is flowing liquid and “oil” per the Texas state definitions. (see slides in link)
Nony on Mon, 18th Jan 2016 10:39 am
Explanation of the Eagle Ford 47 marker oil.
[Which I have personally seen bought and used without concern. Little moderate blending within the crude tank down to 39 API. And yeah some heat exchanger issues from the light ends affecting the preheat, but you just reduce distillation throughput a tad and the economics still work out. Remember running a lighter slate can reduce maintenance of the downstream units, catalyst changeouts, etc.]
https://www.platts.com/IM.Platts.Content/MethodologyReferences/MethodologySpecs/eaglefordmarker.pdf
Note Table 1 which shows a substantial cut of heavy naphtha all the way through VGO and resid. That is C7+.
That is black oil. Look at it, smell it, taste it, get it on your Nomex. It’s oil!
Dutchwayne on Mon, 18th Jan 2016 3:15 pm
Actually, this article is both right and wrong. The condensate does matter, BUT it is used differently by each refinery. In some cases the condensate is used to dilute super heavy high sulfur oil for processing. Several refineries I know of have the ability to separate out the condensate from heavy crude at the front door. The condensate is used to make the oil easy to pump in pipelines and often the condensate is sent back. The condensate that acts as heavy oil thinner is part of the “accumulation”. I know of several refineries that actually have the ability to use the condensate at later stages of production. One I know of uses condensate to boost jet fuel yields.
The simple truth is the condensate raw materials are very useful for the chemical industry and for light products. One of the biggest of the condensate products is propane which has surged in uses as its price has fallen. The large availability of condensates is also boosting synthetic oil products such as motor oil as well. In truth, the refineries are finding ways to adjust the processes and make the existing facilities far more flexible because of the condensates. The days when US refineries could process 2 o3 grades of oil are long gone. Soon the digestion issues from condensate will disappear and the refineries will be able to use whatever oil is available. The revolution in refinery operations to match the drilling revolution is just beginning. And when they are done, refiners will have the upper hand of producers. That is the real development in this.