So ran the caption to one of René Magritte’s most famous paintings, and at times the debate over the $7 billion Keystone XL pipeline has been as surreal as anything produced by the Belgian master, prompting all manner of ‘Keystone Cops’ (or ‘Keystone Cop-out’) headlines. Originally conceived as a way of carrying up to 830,000 bbl/d of oil sands syncrude from northern Canada to processing facilities on the US Gulf Coast, the 2,700km Keystone XL pipeline was approved in March 2010 but thereafter rapidly became mired in controversy. Local opposition was strongest in Nebraska, where the pipeline was due to pass through the ecologically Sandhills area, but environmental opposition has grown to the entire project. As a trans-national pipeline, a final decision rested with the US State Department, and with an eye to presidential and congressional elections scheduled for November next year, President Obama has decided to kick a decision further down the line, with a State Department review now not scheduled for completion until early 2013. Developer TransCanada had proposed a re-routing of the most contentious section, in Nebraska, but it seems that the re-routing the president desired most was around next year’s election, and fears that the pipeline would become an election issue appear to have made the delay irrevocable.
So what now for Canada’s oil sands? The European Union has recently weighed in with its own contribution to the debate by rating oil sands crude’s global warming potential much higher than conventional crude in its new Fuel Quality Directive, and meanwhile Canada is now seriously considering a pipeline to the coast so that the crude can be exported to energy-hungry China, where environmental concerns loom much lower. But US Gulf refiners have already begun construction of up to 700,000 bbl/d of new capacity to process the syncrude there, so it seems highly likely that some of it will end up there, one way or another.
At this year’s Sulphur Conference in Houston in early November, the whole tangled knot was examined by Chris Smith, Pipelines Editor of Oil and Gas Journal, who looked at the various options for getting the syncrude to the US Gulf. There is still spare capacity in the rail network between the US and Canada, he noted, which could allow between 500,000 and 1.0 million barrels per day to be transported that way. And of course Keystone has all manner of rival pipeline schemes, including the Enbridge Northern Gateway pipeline across British Columbia, allowing oil sands crude to be exported from Kitimat (with China and India major potential customers), and another Enbridge proposal to run from Cushing to Houston, linking up with other pipelines such as ExxonMobil’s Pegasus and Keystone’s Cushing line.
At the moment Canada is looking at an extra 3 million bbl/d of oil sands bitumen production by 2020, containing up to 7.5 million t/a of sulphur, and for the sulphur industry, as described by Jim Hyne in our September/October issue, at stake is whether this 7.5 million t/a of sulphur is extracted in Canada, the southern US, or even in China. At present most syncrude is produced at upgraders in Alberta, and most of the sulphur is extracted during the process, producing a sweet syncrude for export. However, one of the fears of environmental protestors was that the pipeline would carry ‘dilbit’ – a dilute bitumen slurry, with several percent sulphur encapsulated within it. Chris Smith argued that if more rail transport rather than pipeline capacity was used, more bitumen would be transported un-upgraded. His calculations put likely shipments of oil sands crude to the Gulf Coast between 210-700,000 bbl/d, with a figure of 300-400,000 bbl/d most likely, and a mixture of rail and pipeline transport (and hence syncrude and dilbit) being used. Sulphur encapsulated in this mix would be 480,000 – 720,000 t/a, recovered at the Gulf’s refineries.
In spite of environmental objections, Canadian oil sands production currently seems likely to increase no matter what. Whether this results in a sulphur boom for Canada, the US or China – or some combination of all three – has yet to be determined.
Wednesday 7 December 2011
A message to the oil patch - sulphur IS your business
From our guest columnist: 'Thiophilos'
Big Oil’s attitude toward sulphur is not hard to understand. There was a time, not so long ago, that sour natural gas associated with many prolific oil producing fields was routinely flared to atmosphere, until the LNG business become fashionable. The same selectivity as to whether sulphur is an appropriate business to be in has been associated with the more recent heavy oil and oil sands, which have even attracted the moniker of ‘dirty oil’, partly because of their high sulphur content. The simple scientific facts, however, leave little doubt that there is a common factor in all subdivisions of the energy business. In this World Year of Chemistry it is worth noting that the chemical process of “oxidative release of chemically stored energy” is the common factor throughout the spectrum of such “businesses”. If you are involved in one of them then, by association, you are involved in all of them – whether you like it or not.
The earliest days of Oil Patch involvement in the sulphur business came with the desire to rid the sour crudes of their bad smell and even worse effects (corrosion) on production and combustion equipment. The relatively small amounts of sulphur involved were ‘tolerable’ until sweeter crudes began to be harder to find. Half a century ago by far the largest source of elemental sulphur for world industrial needs came from mining of pre-existing elementary sources of the yellow element. It was mined in lock step with the world demand for the stuff, largely for sulphuric acid manufacture.
Then came sour gas and sour oil processing and a huge new source of recovered sulphur. In the middle of the 20th century 70% of the world supply of sulphur was from mined sources (elemental sulphur or mined iron sulphide ore). By the beginning of the 21st century the source situation has reversed: 90%+ of world sulphur supply is recovered from sour hydrocarbon processing. Big Oil is in the sulphur business – Big Time.
If you are at all familiar with the commercial history of either the Oil Patch or the Sulphur Patch over this fifty year period you will also be familiar with the struggles that emerged between the two over the supply and control of the world’s sulphur supply. The US vested interests in the Frasch mining business, the Alberta sour gas recovered sulphur market (producing the element and energy), the rise and fall of the Polish sulphur mining venture and, most recently, the heavy oil and oil sand sulphur sources of both Alberta and Venezuela, again producing both energy and sulphur.
However the sulphur market place may be viewed, the hydrocarbon industry is and will continue to be the prime producer of the element. That is where the ultimate control of supply rests. That is where the challenge to improve recovery efficiency is placed by the environmental protectionists. And that is where the money supply is to be found to establish and maintain the new products and markets that will be essential to maintain a balance between production and consumption of the yellow element in a world wide marketplace.
Sulphur magazine’s market graph tells a tale of instability far more succinctly that any words can hope to do. For the better part of half a century – most of it while the Oil Patch did not have control of the production – the elemental sulphur commodity price fluctuated between $25 - 100/ton f.o.b. production source. Then came the wild times of the past few years; from $100 to $700/ton within months and crashing back down to near zero in an equally short time. Even market economists with the most accommodating of views look at these numbers and gasp in disbelief. “Who was at the controls?” they ask. “How did it happen?” they ponder. And looking at the very recent rise back up to near $250/ton f.o.b., the question is now “Could or even IS it happening again?”
To opine that there has been no answer offered to any of these questions might be unjustified. But to question the explanations that have been offered is nothing if not justified. The considered opinion of Thiophilos is not complex. It is traditional market psychology. The fewer options there are for sales in any market, the less stable that market will be. The vested interests control. And that, dear readers, (and some detractors) is the current situation with respect to the sulphur business. A multimillion ton/annum world wide market with two – yes only two – really significant market outlets, which can be reduced to one of you chose to name it as chemical technology. That single outlet is sulphuric acid, and its two commercial subdivisions are fertilizer/ore processing and as an energy source for the chemical industry. It should be a black eye for the scientific curiosity and inventiveness in this World Year of Chemistry that, with the myriad of sulphur market opportunities staring society in the face, genuinely new uses for the yellow element are as ignored as they are. Many have been identified and written about in the technical media, even advertised as being available commercially. But they remain unattractive to those who claim the lion’s share of profits from the other contents of Mother Nature’s purse from which the really raw materials cometh.
Can we muster the effort, ingenuity and enterprise to break out from our safe established commercial havens in to the exploratory developments that will take us the next step along the road to discovery of new horizons? We may well find that there lie an assembly of riches to match those our forefathers left for us. Look around you at sulphur’s opportunities – many are there.
‘Thiophilos’
Big Oil’s attitude toward sulphur is not hard to understand. There was a time, not so long ago, that sour natural gas associated with many prolific oil producing fields was routinely flared to atmosphere, until the LNG business become fashionable. The same selectivity as to whether sulphur is an appropriate business to be in has been associated with the more recent heavy oil and oil sands, which have even attracted the moniker of ‘dirty oil’, partly because of their high sulphur content. The simple scientific facts, however, leave little doubt that there is a common factor in all subdivisions of the energy business. In this World Year of Chemistry it is worth noting that the chemical process of “oxidative release of chemically stored energy” is the common factor throughout the spectrum of such “businesses”. If you are involved in one of them then, by association, you are involved in all of them – whether you like it or not.
The earliest days of Oil Patch involvement in the sulphur business came with the desire to rid the sour crudes of their bad smell and even worse effects (corrosion) on production and combustion equipment. The relatively small amounts of sulphur involved were ‘tolerable’ until sweeter crudes began to be harder to find. Half a century ago by far the largest source of elemental sulphur for world industrial needs came from mining of pre-existing elementary sources of the yellow element. It was mined in lock step with the world demand for the stuff, largely for sulphuric acid manufacture.
Then came sour gas and sour oil processing and a huge new source of recovered sulphur. In the middle of the 20th century 70% of the world supply of sulphur was from mined sources (elemental sulphur or mined iron sulphide ore). By the beginning of the 21st century the source situation has reversed: 90%+ of world sulphur supply is recovered from sour hydrocarbon processing. Big Oil is in the sulphur business – Big Time.
If you are at all familiar with the commercial history of either the Oil Patch or the Sulphur Patch over this fifty year period you will also be familiar with the struggles that emerged between the two over the supply and control of the world’s sulphur supply. The US vested interests in the Frasch mining business, the Alberta sour gas recovered sulphur market (producing the element and energy), the rise and fall of the Polish sulphur mining venture and, most recently, the heavy oil and oil sand sulphur sources of both Alberta and Venezuela, again producing both energy and sulphur.
However the sulphur market place may be viewed, the hydrocarbon industry is and will continue to be the prime producer of the element. That is where the ultimate control of supply rests. That is where the challenge to improve recovery efficiency is placed by the environmental protectionists. And that is where the money supply is to be found to establish and maintain the new products and markets that will be essential to maintain a balance between production and consumption of the yellow element in a world wide marketplace.
Sulphur magazine’s market graph tells a tale of instability far more succinctly that any words can hope to do. For the better part of half a century – most of it while the Oil Patch did not have control of the production – the elemental sulphur commodity price fluctuated between $25 - 100/ton f.o.b. production source. Then came the wild times of the past few years; from $100 to $700/ton within months and crashing back down to near zero in an equally short time. Even market economists with the most accommodating of views look at these numbers and gasp in disbelief. “Who was at the controls?” they ask. “How did it happen?” they ponder. And looking at the very recent rise back up to near $250/ton f.o.b., the question is now “Could or even IS it happening again?”
To opine that there has been no answer offered to any of these questions might be unjustified. But to question the explanations that have been offered is nothing if not justified. The considered opinion of Thiophilos is not complex. It is traditional market psychology. The fewer options there are for sales in any market, the less stable that market will be. The vested interests control. And that, dear readers, (and some detractors) is the current situation with respect to the sulphur business. A multimillion ton/annum world wide market with two – yes only two – really significant market outlets, which can be reduced to one of you chose to name it as chemical technology. That single outlet is sulphuric acid, and its two commercial subdivisions are fertilizer/ore processing and as an energy source for the chemical industry. It should be a black eye for the scientific curiosity and inventiveness in this World Year of Chemistry that, with the myriad of sulphur market opportunities staring society in the face, genuinely new uses for the yellow element are as ignored as they are. Many have been identified and written about in the technical media, even advertised as being available commercially. But they remain unattractive to those who claim the lion’s share of profits from the other contents of Mother Nature’s purse from which the really raw materials cometh.
Can we muster the effort, ingenuity and enterprise to break out from our safe established commercial havens in to the exploratory developments that will take us the next step along the road to discovery of new horizons? We may well find that there lie an assembly of riches to match those our forefathers left for us. Look around you at sulphur’s opportunities – many are there.
‘Thiophilos’
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