War Stories: The devil is in the details
November 16, 2016
by Jeff Kennedy
No matter what, refiners want to run crude, the more the better. It doesn’t matter what comes out of the crude, and if you can get a refiner to process a secondary unit feedstock, then the stars have aligned, or you’ve died and gone to heaven! The trick is getting everybody on board and that takes detailed communication. This story is about how the stars did align, but the detailed communication was a little lacking.
Long ago, in a far away place…we had access to 100,000 barrels of waxy (high pour) vacuum gas oil to take advantage of available capacity on the refinery’s “cat” unit.1 Of course, in deals like these there are always elements to work out. This situation was no different. To get it to the refinery we had to receive it on the water and then pump it several miles under the harbor. Not an easy feat, but we were willing to move mountains to make this happen.
Our Product Supply Operations Manager coordinated with the Pipeline Operations Manager in Dallas to make the movement. The Pipeline Operations Manager promptly refused. His concern was that if there were any problems with the movement, for instance if the movement was stopped, the waxy feedstock would solidify in the pipe and we’d have a two mile long candle to deal with. When my guy relayed this refusal to me, I asked him if he had communicated to the pipeline guy how much this was worth to us. His eyes lit up and he turned and walked out.
Sometime later he returned looking unhappy. He relayed that he contacted the pipeline guy again, although he used a more colorful word than “guy”, and that he still refused the movement. I asked what he told the pipeline guy about the value of the deal, to which he replied, “It’s worth a dime to us!” I reached into my pocket, pulled out a dime and threw it to him. He caught it, looked at it, looked at me, and walked out.
Fast forward a few minutes to his return. He advised that the deal was done and we’d be making the move that evening. What convinced the pipeline guy? The Supply Ops Manager told him, “It’s 100,000 barrels, with a margin of 10 cents per GALLON, or $4.20 per barrel. We’ll make $420,000 on this!”
1 A fluid catalytic cracking unit (FCC) is a refinery unit used to convert the high-boiling, high-molecular weight hydrocarbon fractions of petroleum crude oils to more valuable gasoline, olefinic gases, and other products.