Oil Refinery

What Is an Oil Refinery?

An oil refinery is an industrial plant that changes, or refines crude oil into different usable petroleum products like diesel, gasoline, and heating oils like lamp fuel. Oil treatment facilities basically act as the second stage in the crude oil production process following the genuine extraction of crude oil up-stream, and refinery services are viewed as a down-stream segment of the oil and gas industry.

The most important phase in the refining system is refining, where crude oil is warmed at extreme temperatures to separate the different hydrocarbons.

Grasping Oil Refineries

Oil processing plants serve an important job in the production of transportation and different fuels. The crude oil parts, once separated, can be sold to various industries for a broad scope of purposes. Ointments can be sold to industrial plants following refining, however different products require more refining before arriving at the last client. Major treatment facilities have the capacity to deal with many thousand barrels of crude oil daily.

In the industry, the refining system is usually called the "downstream" sector, while raw crude oil production is known as the "upstream" sector. The term downstream is associated with the concept that oil is sent down the product value chain to an oil refinery to be handled into fuel. The downstream stage additionally incorporates the genuine sale of petroleum products to different businesses, legislatures, or private people.

As per the U.S. [Energy Information Administration](/energy-data administrator) (EIA), U.S. treatment facilities produce — from a 42-gallon barrel of crude oil — 19 to 20 gallons of motor gasoline, 11 to 12 gallons of distillate fuel (the majority of which is sold as diesel), and four gallons of fly fuel. In excess of twelve other petroleum products are additionally created in treatment facilities. Petroleum processing plants produce liquids the petrochemical industry utilizations to make different synthetic compounds and plastics.

"Cracking" Crude Oil

An oil refinery runs 24 hours per day, 365 days per year, and requires a large number of employees. Treatment facilities come offline or stop working for half a month every year to go through seasonal maintenance and other repair work. A refinery can involve as much land as several hundred football fields. Popular oil refining companies incorporate the Koch Pipeline Company, and numerous others.

Crack or crack spread is a trading strategy utilized in energy futures to lay out a refining margin. Crack is one primary indicator of oil refining companies' earnings. Crack permits refining companies to hedge against the risks associated with crude oil and those associated with petroleum products. By at the same time purchasing crude oil futures and selling petroleum product futures, a trader is endeavoring to lay out an artificial position in the refinement of oil made through a spread.

The Nelson Complexity Inde (NCI) is a measure of the complexity of an oil refinery, where more complex treatment facilities are able to deliver lighter, all the more intensely refined and valuable products from a barrel of oil.

The extents of petroleum products a refinery produces from crude oil can likewise influence crack spreads. A portion of these products incorporate black-top, aviation fuel, diesel, gasoline, and lamp oil. At times, the extent delivered differs in view of demand from the nearby market.

The mix of products likewise relies upon the sort of crude oil handled. Heavier crude oils are more hard to refine into lighter products like gasoline. Treatment facilities that utilization more straightforward refining processes might be restricted in their capacity to deliver products from heavy crude oil.

Refinery Services

Oil refining is a purely downstream function, albeit a considerable lot of the companies doing it have midstream and, surprisingly, upstream production. This integrated approach to oil production permits companies like Exxon (XOM), Shell (RDS.A), and Chevron (CVX) to take oil from exploration the entire way to sale. The refining side of the business is really wounded by high prices, since demand for the majority petroleum products, including gas, is price sensitive. In any case, when oil prices drop, selling value-added products turns out to be more profitable. Refining pure plays incorporate Marathon Petroleum Corporation (MPC), CVR Energy Inc. (CVI), and Valero Energy Corp (VLO).

One area service companies and purifiers settle on is making more pipeline capacity and transport. Purifiers maintain that more pipeline should keep down the cost of moving oil by truck or rail. Service companies need more pipeline since they bring in money in the design and laying stages, and get a consistent income from maintenance and testing.

Oil Refinery Safety

Oil treatment facilities can be dangerous work environments on occasion. For instance, in 2005 there was an accident at BP's Texas City oil refinery. As indicated by the U.S. Compound Safety Board, a series of blasts happened during the restarting of a hydrocarbon isomerization unit. Fifteen workers were killed and 180 others were harmed. The blasts happened when a refining tower overwhelmed with hydrocarbons and was over-compressed, causing a spring like release from the vent stack.

Highlights

• Processing plants and oil traders focus on the crack spread, the relative difference in production cost and market price of different petroleum products in the derivatives market to hedge their exposure to crude oil prices.
• Refining is classified as a downstream operation of the oil and gas industry, albeit many integrated oil companies will operate both extraction and refining services.
• An oil refinery is a facility that takes crude oil and distils it into different valuable petroleum products like gasoline, lamp oil, or stream fuel.

FAQ

The amount Crude Oil Does It Take to Make a Gallon of Gasoline?

One barrel of oil (42 gallons) produces 19 to 20 gallons of gasoline and 11 to 12 gallons of diesel fuel.

What number of Oil Refineries Are There in the United States?

As of Jan. 1, 2021, there were 129 operable petroleum treatment facilities in the United States. The last refinery to enter operation was in 2019 in Texas.

What Is the Crack Spread?

In commodities trading, the "crack spread" is the differences in price between a barrel of raw crude oil and the refined products (like gasoline) that are derived from it. Traders hope to changes in the crack spread as a market signal for price developments in oil and refined products.