Lee E. Curcio

Refinery Automation Institute, LLC

Morristown, NJ USA

No day passes without publications, the blogosphere, and pundits wringing their hands over the concept of fuel Blending.

In the current low priced crude oil market, the fuel blending business gives the blenders a very competitive edge that grows day by day, attracting new customers and potential new producers intrigued by the possibility of making “easy” money.

USA has more than 330 Oil terminals spread across the country, moving more than 2 billion gallons of oil products and “smart” blending adding potentially another $300 to $400 millions in profits. This cash flow tempts people to think it’s a great “get rich quick” scheme for easy cash, encouraging them to ask banks for money to open a new oil terminal. The expectation is that in a few years they can leave the “slaving for a salary” for suntanning in a tropical paradise with plenty of money.

The real question for prospective facility owners pondering to themselves when undertaking this venture should be WHAT IS BLENDING? This question is pondered obviously after the bank already approved the mortgage for a new oil terminal, maybe with a blending facility, so we have the “blind leading the blind” and subsequent disappointment. The motto seems to be “learning after building”, and as we know, we get the Tower of Pisa .

Blending Vs. Cooking

Let’s focus on the answer of the previous question: WHAT IS BLENDING? Blending is like baking a cake or cooking a delicious dish. What you need are the ingredients, and a recipe to decide the amount to pour in a mixing bowl. After mixing you are ready to taste it and decide whether to adjust the taste by putting more of an ingredient or not.

Since the US is a huge daily “drinker” of gasoline (9 million BPD) with over 300 million cars on the roads, the gasoline blending business is huge, worth over $12 trillions/year.

Keeping the analogy with cooking or baking, the gasoline “cooking” (blending) “ingredients” are called Blend Components or Blendstocks.

In the same way as cooking, we need a recipe to determine the right amount of each ingredient to put in a blend. We can’t afford to make any mistake in our “cooking”, such as pouring more salt or less butter or adding too many eggs, since the result might be inedible. A master chef with the delicate palate could be upset or happy and you could win a cooking contest or not. In contrast, a master blender’s product has to run a car without damaging it or causing undue pollution.

With blending, we are more or less in the same situation, if we add more alkylate or less reformate the quality of the final product may not meet the final specs. This because in the US in order to make sellable gasoline we are obliged to respect regulations, i.e. the octane number has to be more than 87 or the vapor pressure can’t be more than 7 psi (summer), and we have over 28 gasoline specs to meet. This pushes the producers to be very careful on how the blend needs to be made, otherwise isn’t possible to sell the final product and make money of course.

Generally in order to make gasoline which has upward of 28 specifications that need to be met simultaneously, we can have a simple blend recipe with 3 components , or conventional gasolines or complex recipes with about 10 to 20 components for reformulated gasolines..

Keeping the analogy with cooking, if for example the final recipe needs to have 20 grams of fat and 45 grams of carbs, we have to estimate which blend components to blend, i.e. butter (butter-1, butter-2, butter-3) and the number of eggs, and the quantity to meet the final specs.

For example if we choose the butter-1 and 1 egg, we can meet the 20 grams of fat specs of the recipe but we may not meet the amount of carbs (45 grams). On the other way if we choose the butter-1 and 3 eggs we can meet the carbs spec (45) but we may exceed the fat spec (20 grams).

You can understand how beautiful and complicated the blending world is, especially if you have 28+ specs and 4 components.

Arithmetic of Blending

So far we just took into account the final recipe constraints (specs) and the number of blend components (ingredients). But Blending is the arithmetic of properties and prices.

We need to use in blends the cheapest components that allow us to meet specs, because the final goal here is to make money. If the butter-1 is good in terms of properties, may not be good in terms of prices because it’s too expensive.

The basic arithmetic of blending is:

If we use the previous equation, we can go over an “easy” example to calculate the final gasoline blend Octane number and its price:

The goal in the example is to make a 95 RON and to calculate the final blend price.

The example shows how we need to “play” with the recipe, i.e. changing the blend component quantities to meet the final spec on the research octane number (95).

With the same blend equation we can calculate also the prices and understand if there is a profit or not.

The example is applied to one property (Research Octane Number) and uses a linear approximation [1]. The calculation becomes quite complex when we do the same “iteration” for the remaining other 28+ properties.

With Blending we must consider:

· Ingredients (blend components and their properties)

· Recipe (what quantity of each component to blend)

· Inventory (what happens if I need 3 eggs but I have one? Can I still make a blend?)

· Prices (try to make the cheapest blend to have the highest profit)

· Blend sample and analysis (does it meet the final specs? Yes, no? )

· Correcting the blend (If doesn’t meet the final spec, we need to adjust it, maybe adding more butter).

Generally all these factors are taken into account using a special piece of blending calculation software called a “blend optimizer” [2] that does the calculation for us and selects the most profitable blend recipe.

The previous figure shows the final results of a gasoline blend optimization. In the example we have 4 components (ingredients), we can see the recipe, the final blend specs (final cake or dish), and the profit. The chef makes the cake to sell it, same is for an owner of an oil terminal. Profit is the answer.

Conclusion

Why there is so much interest In Blending?

Because of the enormous economic potential of blending.

With the current oil glut and component availability, buying cheap components around the world and blending them together can potentially give a great profit, even with the transportation costs and contango premiums.

Oil terminals owners, new or old, and with or without experience are in this business to increase profits with minimum effort, and this is where blending comes in.

You need:

· a small facility with 3-4 components; many of them using “anchor” components, i.e. light naphtha, cat gas, and butane because they are cheap, widely available, and have great blending properties to make the final blend.

· blending software that helps you achieve the goal with low effort

· A few million dollars to invest, with a break even in a couple of months

References

[1] Barsamian, A., Curcio, L.E., Gasoline Blend Optimization via Linear & Non-Linear Programming Optimizers”, April,2016 (http://refautom.com/NewsDB/Gasoline%20Blend%20Optimization.pdf)

[2] Barsamian, A., Curcio, L.E,.” Use of SmartBlend Gasoliner Blend Optimizer to obtain profitable Gasoline”, August 2017 (http://refautom.com/NewsDB/SMART%20BLEND%20OPTIMIZER.pdf)