Why access to Venezuela’s ‘heavy’ oil is ‘tremendous’ news for US refiners

The United States’ bid to power Venezuela’s lipid assemblage aft abducting Venezuelan President Nicolas Maduro has shone a spotlight connected the benignant of crude held by the Latin American country.

Crude oil, which is produced by astir 100 countries, comes successful hundreds of varieties that disagree by viscosity and sulfur content.

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While each grades of crude lipid are valuable, their differing properties marque definite grades much sought aft successful immoderate markets than others.

What is the quality betwixt ‘heavy’ and ‘light’ grades of oil?

Crude oils are rated arsenic “heavy” oregon “light” based connected their viscosities, oregon “gravities”.

Crude is besides classified by sulfur content, with high-sulfur grades called “sour” and lower-sulfur varieties referred to arsenic “sweet”.

Heavy, sour grades are much hard and costly to refine into petroleum products specified arsenic gasoline, diesel, kerosene and pitchy fuel.

Generally speaking, lighter and sweeter crude commands higher prices.

Some countries and regions primarily produce certain grades.

Canada mainly produces heavy, sour crude, for example, while African varieties tend to beryllium lighter and sweeter.

Popular light, saccharine varieties see Saudi Arabia’s Arabian Super Light, Iran’s South Pars Condensate, Malaysia’s Tapis Blend, and Australia’s Cossack.

Among the astir traded heavy, sour varieties are China’s Shengli, the United Kingdom’s Kraken, Iraq’s Basra Heavy, and Iran’s Soroosh.

What benignant of lipid does Venezuela have?

Venezuela has the world’s largest proven lipid reserves, astatine an estimated 303 cardinal barrels.

Most of those reserves are made up of heavy, sour crude located successful the Orinoco Oil Belt successful the centre of the country.

The basin’s lipid is particularly dense and vicious, with a tar-like consistency that necessitates specializer methods specified arsenic steam injection and diluents for extraction.

Industry analysts accidental tapping the basin’s existent imaginable volition necessitate immense concern owed to the degraded authorities of the sector’s infrastructure and cognition base, pursuing precocious person Hugo Chavez’s nationalisation of the manufacture and years of US sanctions that prevented Venezuela from accessing overseas superior and modern technology.

The Latin American country’s output was estimated astatine astir 860,000 barrels per time (bpd) successful November, little than 1 percent of the world’s total, a steep diminution from its 1970s highest of astir 3.5 cardinal bpd.

Rystad Energy, a consultancy based successful Oslo, Norway, has estimated that astir $110bn successful superior concern would beryllium needed to instrumentality to the country’s precocious 2000s output of astir 2 cardinal bpd.

US President Donald Trump, whose determination to kidnap Maduro has been wide condemned arsenic a usurpation of planetary law, has said US lipid companies are prepared to put billions of dollars to revive production.

Why is Venezuela’s dense crude peculiarly charismatic for the US?

Some manufacture analysts person expressed scepticism that US lipid companies volition beryllium drawn to Venezuela – astatine slightest not without important incentives and guarantees.

They constituent to the post-Maduro enactment uncertainty, Chavez’s past expropriation of institution assets, and the excess proviso of lipid successful the planetary marketplace arsenic reasons wherefore firms whitethorn beryllium hesitant to invest.

ExxonMobil and ConocoPhillips, 2 of the biggest US lipid firms, pulled retired of the state successful 2007 pursuing Chavez’s seizure of their facilities, and the 2 companies were aboriginal awarded ample payouts successful planetary arbitration.

At a gathering with Trump astatine the White House connected Friday, ExxonMobil Chief Executive Officer Darren Woods described Venezuela arsenic “uninvestable” successful its existent authorities and said “significant changes” would request to hap successful the state to warrant returning.

As the lone large US lipid shaper successful the state astatine present, Chevron, which operates nether peculiar exemption from Washington’s sanctions, is wide viewed arsenic champion positioned to nett connected Trump’s plans.

While determination are differing views connected the concern lawsuit for the large lipid companies successful Venezuela, analysts are successful statement that 1 radical successful peculiar stands to gain: US refineries.

While the US presently pumps much crude than immoderate different state owed to an detonation successful drilling for lighter shale oil, astir of the country’s refineries were built to process heavier grades.

Nearly 70 percent of US refining capacity is designed for heavier crude, according to the American Fuel and Petrochemical Manufacturers, a relic of dense investment made before the much caller roar successful shale drilling.

“You request what is referred to arsenic a ‘complex’ refinery with heavy conversion capacities. The Gulf Coast has aggregate refineries similar that,” Denton Cinquegrana, main lipid expert astatine Oil Price Information Service, told Al Jazeera.

“The coker units that are cardinal were built to instrumentality vantage of dense crude not conscionable from Venezuela, but besides places similar Mexico and different South American producers.”

Shon Hiatt, manager of the Zage Business of Energy Initiative astatine the University of Southern California, said US refineries would payment “tremendously” from a boost successful exports of Venezuelan crude.

“Many of the US refineries on the seashore – Texas and Louisiana – were built and designed to process Venezuela crude,” Hiatt told Al Jazeera.

“Venezuela has a past of exporting its oil to the US owed to the information that US oil companies were the archetypal to spell in, discover, pump, process, and export Venezuelan petroleum. Hence, refineries on the seashore were built to grip this benignant of petroleum.”

While dense Canadian crude has displaced imports from Venezuela implicit the years owed to sanctions, that could alteration if Trump has his way, Hiatt said.

“If the Venezuelan dense crude exports increase, it volition displace the Canadian dense crude arsenic Venezuelan crude typically is sold astatine a little terms to these refineries,” helium added.