Friday, October 23, 2015 -- Why Canadian Heavy Crude Is So Important For US Manufacturing Industry

Active rigs:

	10/23/2015	10/23/2014	10/23/2013	10/23/2013	10/23/2012
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RBN Energy: Can An Impending Aluminum Industry Petcoke Shortage Be Fixed?

A critical ingredient consumed in the production of aluminum is sourced exclusively from petroleum refineries. Complex refineries use coker units to break up residual fuel left over from initial crude processing to squeeze out the last drops of lighter components – leaving a solid carbon based residue known as petcoke.

Without anode grade petcoke (GPC) there would be no aluminum industry. As we explain today aluminum producers are scrambling to address a looming petcoke shortage that could seriously disrupt their industry.

This blog series is based on the recently published “Alliance Anode Coke Study” prepared by Turner, Mason and Company, AZ China Ltd and Cascade Resources.

In Episode 1 we described how aluminum is made using an electrolysis process at very high temperatures where the anode electrode is made almost exclusively from higher grades of petroleum coke known as GPC.

Every metric tonne (MT) of aluminum produced consumes 0.4 to 0.45 MT of GPC. This makes the aluminum industry highly dependent on petroleum refiners to produce enough GPC to meet their needs.

Petcoke is a residue byproduct of refining that is produced by coker units that extract light components from fuel oil – leaving behind a layer of solid carbon. However the supply of anode grade GPC is not growing fast enough to meet aluminum demand. Part of the reason is to do with crude quality because GPC is only produced from heavy crudes with low impurities and low sulfur whereas many of today’s heavy crudes contain a lot of sulfur and unwanted impurities.

As a result when these crudes are processed through a coker the resultant petcoke is inferior “fuel grade” that is not suitable for GPC. In addition in the U.S. despite rising coker capacity at refineries, the output of petcoke is falling because the overall slate of crude has become lighter with less carbon as a result of the surge in shale production. This time we look at global GPC supply and demand for the next 10 years to understand when petcoke demand will exceed supply in different scenarios.

Huge story. Another reason why I love to blog.