Crude oil: different elements affect values: thick and thin, sweet and sour, all flow through TAPS.

• Author: Bradner, Mike
• Position: OIL & GAS

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Oil is Alaska's financial lifeline, but the values of the crude oil produced in the state can vary significantly with the differing quality of the oil. This is important, not only to the companies that produce the oil and sell it to refineries, but also to the State treasury. That's because oil royalties and taxes are calculated on the basis of the crude oil value as well as the number of barrels produced and sold. Crude oil is a complex stew of chemical compounds, mainly of carbon and hydrogen combined in various ways. These range from simple to complex and are the "hydrocarbons" that make up the various components of the crude oil. These components, called "fractions" in industry jargon, have different values based on the products like gasoline, diesel and jet fuel made from them. Also a detriment, how easily refineries can extract these fractions from the crude oil and make the products.

HEAVY/LIGHT

Different oil fields in Alaska, even those near each other on the North Slope, produce crude oil with different quality and combinations of heavy and light hydrocarbons. There are also other elements in the crude oil that can affect value, like sulfur and heavy metals, and which must be dealt with by the refineries. If a crude oil has more sulfur or metals, it has less value because of costs imposed on refiners to deal with these.

Higher sulfur content leads to crude oils being labeled "sour." A lower sulfur content results in a crude being labeled "sweet." Cook Inlet crude oil produced to date has low sulfur and is considered a sweet crude. North Slope oil has more sulfur and is a bit on the sour side, but not as sour as many other crude oils.

Crude oils are also valued according to the weight of the oil. The American Petroleum Institute (API) gravity index is the most common expression of this. Weight, expressed through the API gravity index, is used as a kind of proxy for judging value of a crude oil. Oils lighter in weight (and which ranks higher on the API gravity index) typically has more of the higher-value "lighter" hydrocarbons, those with simpler molecules, which are more valuable for refineries in making products like gasoline, diesel and jet fuel.

Price/barrel Crude oil Gravity Sulfur (in 2005) WTI 39.6 0.24 $56.43 (WTI: West Texas Intermediate) Brent 38.3 0.37 $54.72 (Brent. North Sea Crude) ANS 30.0 1.09 $53.35 (ANS: Alaska North Slope) Maya 21.8 3.33 $40.40 Crude oils that are heavier in weight (and have...