SIC 2911 Petroleum Refining
SIC 2911
This category covers establishments engaged primarily in producing gasoline, kerosene, distillate fuel oils, residual fuel oils, and lubricants through fractionation or straight distillation of crude oil, redistillation of unfinished petroleum derivatives, cracking, or other processes. Establishments primarily engaged in producing natural gasoline from natural gas are classified in mining industries. Those manufacturing lubricating oils and greases by blending and compounding purchased materials are classified in SIC 2992: Lubricating Oils and Greases. Establishments primarily engaged in manufacturing cyclic and acyclic organic chemicals are classified in various chemicals and allied product manufacturing industries.
324110
Petroleum Refineries
The U.S. refinery industry, with shipments valued at $419.48 billion in 2005 (up considerably from $186.76 billion in 2002), continues its path toward consolidation and cost efficiency in the face of price instability and tightening environmental regulations. There were fewer than 200 companies in this industry during the mid-2000s. Tensions in the Middle East, culminating with the U.S. attack on Iraq, caused oil prices to spike as high as $40 per barrel in early 2003 before returning to the mid-$20s. By the close of 2004, prices had increased to between $35 and $50 per barrel, and by mid-2006 prices had shot up above $75 per barrel. After dropping as low as $50 per barrel, they rose again above $70 per barrel by mid-2007.
A traditionally volatile industry, refining experienced a significant change in composition during the early 2000s as "Big Oil" gradually gave over market share to independent refiners. Total U.S. refinery capacity, of which non-Big Oil companies had a major share, was estimated to be 16.5 million barrels per day (b/d) in 2004, while demand was 21.0 million b/d. In 2004 refineries were operating at 93 percent, compared to the dismal 78 percent in 1985. Growth was under way in the mid-2000s to keep up with forecasted increased demand, which was expected to reach 28 million b/d by 2007.
The process of turning crude oil into refined products, the "downstream" side of the oil business, involves several key participants and cannot be fully understood without a rudimentary knowledge of the "upstream" side of the oil business, the process of obtaining crude oil. Upstream operations consist of exploration, geological evaluation, and the testing and drilling of potential oilfield sites; that is, all of the procedures necessary to get oil out of the ground (see SIC 1311: Crude Petroleum and Natural Gas). Downstream operations include pipelining crude oil to refining sites, refining crude into various products, and pipelining or otherwise transporting products to wholesalers, distributors, or retailers.
Because many downstream companies are subsidiaries of conglomerates that also maintain upstream subsidiaries, the sale of raw materials to refiners is often essentially a transfer of products between different operating units of the same corporation. Petroleum refiners, therefore, often depend on the upstream arms of their parent corporations for supplies of crude and then, in turn, supply wholesalers (who then sell to independent retailers) and retailers (company-owned gasoline stations, for example) that are also part of the same corporation. The major oil companies operating in this system are known as "integrated oil companies," and non-integrated companies are often referred to as "independents."
This tendency toward massive, integrated supply systems affects the oil industry and refiners in that any shift in condition at any point in the crude-to-product chain is felt equally at all levels; economic trickle-down, as it exists in other industries, offers no stabilization.
Petroleum refineries turn crude oil into a variety of intermediate forms that are then used in a wide range of products, from asphalt to plastics. All products begin in much the same way: with the distillation, or vaporization, of crude. Distillation begins when crude oil boils; components within crude condense at different rates and so are extracted at progressive points along a time/temperature continuum. Lighter, high-value products—such as propanes, butanes, gasoline, and jet fuel—condense at lower temperatures while heavier compounds require high temperatures or a special extraction method to be transformed into such products as diesel fuels, heavy fuel oil, and asphalts. The components of distillated crude vary according to the makeup of the raw crude, with some batches containing large amounts of sulfur, for example, while others may be bituminous and full of heavier compounds.
Before distillation, crude is stored in groups or "farms" of steel tanks. Distillation then occurs in a fractionating tower, in which the various fractions, or portions, of the crude are separated. The "straight runs" obtained in the fractionating tower are treated in secondary stages to create final products.
Some secondary processing involves simple heat and pressure manipulations, while other processes include complex chemical reactions. Thus, not all refineries are capable of all processing techniques. Some of the most common processes include coking, which creates gasoline and gas oils from the heaviest molecules of the crude. Catalytic cracking uses heat, pressure, and a chemical catalyst to double the gasoline yield in a barrel of crude by converting heavy cuts to lighter products. Hydrocracking uses hydrogen to make 100 percent gasoline from the light gas oils that catalytic cracking and coking produce. Hydrofining removes sulfur from the crude, making a cleaner-burning base fuel and allowing the sulfur to be sold as a by-product. Reforming rearranges molecules in a low-octane gasoline to produce a higher octane. Alkylation enlarges propane and butane molecules, allowing them to be mixed with gasoline.
From these processes emerge products that can be sorted into three main headings. Gas and gasoline, or "white" products, comprise the lighter end of the barrel, usually about 20 percent of the total yield, and are used for automobile gas, aviation fuel, and feedstocks for petrochemicals. Middle distillates, the middle quarter of the barrel, yield kerosene and light gas-oil, heating oil, diesel oils, and waxes. Fuel oil and residuals, comprising the heaviest, bottom 55 percent, make up heavy fuel oils (for use in power stations and ship furnaces), asphalt, and bitumen.
Petroleum products have a wide variety of uses. Solvents, for example, go into ink, oil-base paints, dry cleaning solutions, rubber cement, and metal cleaners. Sodium hydrosulfide improves paper pulp and tans leather, while organic chemicals serve an entirely separate spectrum of uses as petrochemicals.
Ethylene, the largest-volume organic produced in the United States, goes mostly into fabricated plastics but is also used in antifreeze, synthetic fibers and rubbers, and detergents. Propylene has several chemical offshoots that are used mainly in film, packaging, and fibers. Butadiene goes primarily into synthetic rubber, but it also is used in ABS resins, latexes, and nylon fibers.
Aromatics, including benzene, toluene, and the xylenes, are primarily useful as blending agents in gasoline, as well as in increasing the octane rating of unleaded gas. Methanol is traditionally used in formaldehyde, acetic acid, solvents, and polymers for adhesives, fibers, and plastics. In years to come, methanol is likely to be in greater demand to make the oxygenate MTBE (methyl tertiary butyl ether). MTBE, used since 1979 when lead additives began to be phased out, is a component of reformulated gasolines in cities designated by the Clean Air Act of 1990. Its use grew rapidly during the 1990s in the effort to comply with air-quality standards; however, by the late 1990s it was found to contaminate groundwater and was being phased out in states like California.
Product yields per barrel have shifted with demand. In 1981, 10.4 percent of a barrel went toward residual fuel oils; only 6.7 percent was used in such fuel oils in 1991. Moreover, while 7.6 percent of a 1981 barrel went for jet fuel, 10.3 percent of a 1991 barrel was used in jet fuel. This trend should continue and may become more pronounced as various emissions regulations are adopted. Federal requirements for low sulfur diesel fuel and reformulated gasoline should change the yield of a barrel of crude; at the same time, wastewater and toxic solids limitations will change the methods of obtaining yields.
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