US swap for Mexican heavy sour crude oil good for Gulf refineries

Mexican refineries will use Eagle Ford sweet light crude oil to produce lower-sulfur gasoline

The US is swapping 100,000 b/d of light crude oil for Mexican heavy sour crude, which the US Energy Information Administration expects will provide economic and environmental benefits to both countries.

Source: U.S. Energy Information Administration, based on Chevron crude assay library. Note: Kerosene includes a small amount of distillate and naphtha material.

U.S.-Mexico crude oil swaps approved last month by the U.S. Department of Commerce’s Bureau of Industry and Security under longstanding regulations governing U.S. crude oil exports will likely involve Mexican heavy sour crude already being exported to the United States. The swaps will allow a greater degree of operational efficiency in both Mexico and the United States while allowing for increased supply of lower-sulfur gasoline from Mexican refineries.

With significant coking and desulfurization capacity, U.S. Gulf Coast refineries are well-suited to process heavy sour crude, but much of the recent crude oil production gains in the United States have been light sweet crudes coming from plays such as Eagle Ford.

There are six major refineries in Mexico. Three of them, representing 42 per cent of total capacity, have coking units and can produce lower-sulfur gasoline. The other three refineries do not have cokers and related upgrading units. Consequently, they produce only limited amounts of lower-sulfur products and are not well-configured to process heavy sour crude oil.

In 2014, the six refineries processed 1.2 million barrels per day (b/d) of crude oil, which included 658,000 b/d of Isthmus, a medium sour crude, and 497,000 b/d of Maya, a heavy sour crude blend.

Although the full effects of crude oil substitution in refineries can be complex, EIA analyzed the relative product yields and the sulfur levels of the resulting products for three Mexican crude oils (Maya, Isthmus, and Olmeca) along with the same information for U.S. crude oil and condensate produced from the Eagle Ford formation of southern Texas.

As shown in the figure, both product yields and the sulfur levels of the distillation products vary among the different crude oils. Notably, while Olmeca has similar product yields to some of the Eagle Ford crude produced in the United States, the Eagle Ford crude has lower sulfur content.

The difference in sulfur content is particularly important for the naphtha cut, which is blended or further refined to make motor gasoline.

Mexico hopes to achieve a level of 30 parts per million (ppm) for all gasoline nationwide; fuel meeting this sulfur specification is currently available only in major Mexican metropolitan areas or in premium fuel.

The partial substitution of Eagle Ford crude for Mexican crudes (such as Isthmus and Olmeca that are run either straight or blended with heavier Mexican crudes such as Maya) in Mexican refineries would free up sulfur removal capacity in the Mexican refining system.

This would, in turn, allow that capacity to be used to produce more lower-sulfur gasoline than is currently possible.

Any increased supply of lower-sulfur gasoline to Mexico’s motor gasoline market, which consumed 761,000 b/d in 2013, would result in reduced sulfur emissions and other environmental benefits.