This is a brief report on petcoke – what it is, where it comes from, what it does – which I wrote as we began working on the project in July 2013. It is by no means exhaustive, but provides some scientific context for the project and a starting-point for further research. 

—Niko Block

 

What is petcoke?

The economy of petroleum coke is not independent or isolated; it is intimately linked to oil and coal, and therefore needs to be understood within the broader context of global energy production. As with the tar sands project itself, the recent rise of petcoke is a function of diminishing access to conventional fuels, in particular light sweet crude.

Petcoke is a chemical byproduct of the process of refining oil sands bitumen. Of the many chemical compounds produced by the process of refining tar sands bitumen, aside from tailings and other toxic waste, petcoke is the most worthless. However, it emerges in copious amounts: 15 to 30 percent of a barrel of tar sands bitumen.[1] According to the U.S. Energy Information Administration (EIA), “Oil refiners produce petcoke as a byproduct from refining crude oil. The heavier a particular crude oil is, the more petroleum coke it will generally yield.”[2]

Petcoke is cheaper and dirtier than coal, releasing 5 to 10 percent more CO2 per unit of energy.[3] (It also has higher energy content by weight than coal, so on a per-ton basis it is significantly dirtier: a ton of petcoke emits between 30 and 80 percent more CO2 than a ton of coal.)[4]

Petcoke’s entry onto global energy markets is a recent development, and environmental scientists and economic analysts are only beginning to understand the impact it may have on the global energy sector and on global climate change. Two significant reports have been released in the past year, however. The first is entitled Petroleum Coke: The Coal Hiding in the Tar Sands, by Lorne Stockman of the Washington-based environmental group Oil Change International, which has supplied the bulk of the information in this report. Stockman points out that Canada and the world are already significantly exceeding our limits of safe greenhouse gas emissions, that petcoke will only exacerbate that trend, and concludes that “Increasing petcoke consumption is an inevitable result of the increasing production of tar sands bitumen.”[5] The second report, Petroleum Coke: Global Industry Markets & Outlook, 6^th Edition, comes from a market analysis firm based in London, England, called Roskill Consulting Group and retails at $5,800. (Due too its prohibitive price I haven’t looked at that report, and neither, it seems, has Oil Change International.)

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Where it comes from

The bulk of the bitumen within the tar sands can be found in the McMurray formation, which dates to the Cretaceous period (145-66 million years ago.) The Waterways formation lying underneath the McMurray is older, dating from the Devonian period of about 420-360 million years ago.[6]

This geological pattern is the product of a number of different oceanic inundations the land has experienced throughout its history. The area was under water during the Devonian period, prompting the proliferation of coral reefs, which would later trap oil created by decaying flora and fauna. The ocean subsequently retreated as the land itself was pushed upwards, and by 150 million years ago, around the dawn of the Cretaceous period, northern Alberta was characterized by large deposits of marine sediment and freshwater swamps. During the mid-Cretaceous period, however, the formation of the rockies pushed the Mackenzie River Valley downward, and the Arctic Ocean flowed south, into northern Alberta, again creating an embayment where marine sediment was deposited. This when the McMurray formation was created. Ocean levels subsequently rose significantly, covering these deposits in a thick layer of clay and sandstone and locking them in place.[7]

Rich deposits of light sweet crude oil are typically formed when large amounts of plankton are deposited in a single space and at a very deep altitude. When deposits are rich in larger plants, however, you are more likely to end up with a dirtier and harder form of fossil fuel, such as coal. What makes the Athabasca oil sands unique – aside from the immense size of the formation – is that the succession of oceanic inundations that have been deposited in the basin have created a fairly messy mixture of the two within the McMurray formation. It is also possible that the formation would have generated a richer and cleaner form of fossil fuel if it had been deeper in the Earth throughout the process of hydrocarbon conversion.[8]

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Industrial origin of petcoke

Like coal, the tar sands are an incredibly dirty source of energy, releasing 14 to 37 percent more greenhouse gas than conventional oil.[9] The process of refining tar sands bitumen is also complex and capital-intensive.

Canadian production of petcoke largely takes place at upgrading facilities, where the bitumen is processed into synthetic crude, or “Syncrude.” Heavy elements within the bitumen including the carbon and sulfur are removed from the bitumen, and the oil becomes lighter and more fluid. It is then ready to be shipped out and processed elsewhere into marketable petroleum products such as gasoline. Many of these upgraders are located in Alberta and Saskatchewan, which produced a combined total of 10 million tons of petcoke in 2011.[10]

A large portion of the bitumen extracted from the tar sands is upgraded and refined in the U.S., however. Because raw bitumen is too viscous to flow through a pipeline, it is first mixed with lighter oils and natural gas liquids. This diluted bitumen, or “dilbit” is presently being piped east before being refined into light crude and petcoke.[11]

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Market Trends in petcoke

Until recently, petcoke’s use as an energy source was limited to high-temperature heating in the cement and lime industry, but as petcoke production has grown beyond the demands of that sector, it has begun to enter the broader energy economy. Today, 75 percent of the petcoke on the market is used for energy production. The remaining 25 percent is used in the manufacturing of aluminum and steel, while a small amount is turned into graphite products.[12] Stockman writes, “The availability of petcoke to the power generation sector and other energy intensive industries emerged as a significant market trend only within the last decade. This trend is placing onto the market an alternative fuel that emits more CO2 than any fuel on the market.”[13]

The U.S. is the largest producer of petcoke in the world, accounting for 40 percent of the market.[14] Little or none of the petcoke produced in the U.S. originally comes from U.S., however, but rather arrives in the form of bitumen from Canada and Venezuela. Refineries in the U.S. gulf of Mexico that process Venezuelan oil are also producing large amounts of petcoke, but expansion’s in the U.S. petcoke market are being driven primarily by Canadian oil.[15] The U.S. exports 60 percent of the petcoke it produces,[16] and of that quantity, the largest recipient is China.

Numbers from the EIA indicate that increases in U.S. petcoke use in recent years have been modest, growing from 75m barrels in 1986 to 85m barrels in 2012. (Consumption seems to have peaked in 2006 at 90m.)[17] It is clear, however, that petcoke production is increasing. That trend can clearly be seen in U.S. exports, which in 1986 stood at 8.7m barrels, and after remaining relatively steady through the 1990s have since shot up to 17.7m barrels.

Several data indicate that we may be on the cusp of a large increase in petcoke production. The most salient of these is the growth in petcoke production capacity in the U.S., which has doubled since 1999 and now stands at nearly 180 thousand tons per day.[18] Additionally, Roskill forecasts that we will see the industry grow by 4 percent per year for the foreseeable future.[19]

Numbers on Canadian production, use, and exports of petcoke have been more difficult to verify, although it again bears noting that Canadian oil is responsible for a large portion of U.S. petcoke production. It also appears that neither Canada nor the U.S. levy any mandatory tariff whatsoever on petcoke.[20] However, uses of petcoke as a fuel source in Canadian manufacturing have actually decreased slightly from 2007 to 2011.[21]

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Energy Profile

Petcoke is very cheap and very bulky, and in some ways its cheapness is what makes it so dangerous. As it piles up at refineries, its owners are anxious to bring it to market because they do not want to pay for its storage and it is valuable enough that they do not want to deposit it into landfill either. This aspect of the business is encapsulated by the following statement from Roskill:

Petroleum coke consumption is expected to rise in line with production levels as oil refiners are committed to make sure their by-product finds a market. Petroleum coke is one of several low value solid by-products of the oil refining industry and this is reflected in its pricing. Decisions about production levels are not made based on the markets for petroleum coke, as it is a waste product it is “priced to move” rather than store.[22]

Petcoke itself is similar to coal, but with a higher carbon content, (over 90 percent,) higher levels of sulphur, and high levels of heavy metals such as nickel and vanadium. (Stockman notes that “many of the impurities in tar sands bitumen become concentrated in the petcoke produced from it.”[23]) The compound is therefore very hard, and like coal needs to be ground into very small particles to burn. It is significantly less volatile, however, and therefore needs to be blended with coal in order to ignite.[24] Typically these blends are 20-30 percent petcoke to 70-80 percent coal. Roskill indicates that a typical 1,000 megawatt coal plant could save about $120 million per year by co-firing the resource with petcoke.[25] Stockman writes,

Co-firing a blend of just 20 to 30 percent petcoke can bring substantial cost savings to struggling coal plants. In the Midwest, petcoke production capacity will grow from 10.1 million tons per year prior to November 2012 to 12.9 million tons by mid-2013, a 28 percent increase. While it is currently unclear where all the new petcoke that will be produced in the Midwest will go, it seems unlikely that some of the region’s struggling coal-fired power plants will not take advantage of the cheap dirty fuel that is increasingly available to them.[26]

Coal is already extremely dirty, and the central concern here is that the increasing availability of cheap petcoke will offer a major windfall to the industry. In fact, the dramatic increase in U.S. production capacity since 1999 has been closely related to the expansion of the tar sands, as the energy sector has anticipated increased access to petcoke. Stockman points out that there are nine large refineries in the U.S. gulf region, (where the Keystone XL would lead,) which are already among the largest producers of petcoke in the world. Three of these refineries have expanded their coking capacities significantly in past two years, and another four refineries located further north, (including the Marathon plant in Detroit,) have followed suit.[27]

A good deal of rhetoric on the possible development of “clean coal” using carbon capture and storage (CCS) techniques has been floating around for the past several years. In reality, this technology appears to be too expensive and too limited to make a significant dent in the greenhouse gas emissions of coal or petcoke.[28] There is only one refinery, the Quest project, connected to the tar sands that is attempting to implement CCS technology. It is located in Edmonton, operated by Shell, and came online last September. [29] The governments of Canada and Alberta have subsidized the project to the tune of $865 million, and intend to offer an additional subsidy of $15 million to $30 million, contingent upon the program’s success. At best, however, the technology will capture only 35 percent of the plant’s carbon emissions,[30] and decrease overall emissions from the tar sands by only 2.2 percent.[31]

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The meaning of petcoke

Stockman writes:

Petcoke, though a byproduct, generates tens of millions of dollars in annual profits for the refineries that produce it, so it represents a significant part of the economic incentive for investing in delayed cokers and processing tar sands bitumen. As the bitumen produced from the tar sands can only be refined in specially equipped refineries, it is refinery demand that drives tar sands extraction, rather than direct consumer demand. If profits from petcoke sales form a part of the economic calculus that leads a refinery to invest in cokers and seek tar sands bitumen feedstock, then petcoke cannot be entirely free of association with the impacts of tar sands production. Not to mention the impact its cheaper price may have on the viability of coal-fired power generation.[32] [emphasis added.]

Increasing interest in petcoke can thus be seen as contributing both to the tar sands and to the coal industry. That so many parties within the North American energy sector have pursued it points to a disturbing trend in energy politics, which is that as our access to low-cost, high-yield oil runs out, our modes of energy production are becoming cheaper and dirtier, as opposed to cleaner and more expensive.