Crude oil selection: optimisation by
weight or by volume?
The LP model should optimise crude and products in their trading units for accurate
assessment of crude oil worth and maximisation of gains from product blending
M D Pawde and Sachin Singh
Hindustan Petroleum Corporation Ltd (HPCL)
L
inear programming (LP) is a
technique used widely for
optimisation in petroleum
refineries. LP models of refineries
are used for capital investment
decisions, the evaluation of term
contracts for crude oil, spot crude
oil purchases, production planning
and scheduling, and supply chain
optimisation. Robustness and preci-
sion in the LP model are critical to
the profitability of the refinery. A
good refinery LP model accurately
captures unit operation yields and
properties, stream blending, the
extent of constraints on product
specifications, flexibility on cargo
sizes of crudes and finished prod-
ucts, and other relevant data.
The methodology of crude oil
evaluation using an LP model is as
critical as a good LP model itself.
Each refiner has its unique require-
ments of LP that depend upon the
environment in which the refinery
operates and the market to which it
caters. The methodology of evalua-
tion should address, among other
concerns, the time horizon of opti-
misation, unit of measurement of
crude and product quantities and
prices, the option to import finished
products, and inventory pricing
and accumulation/depletion. Deve-
loping an accurate assessment
methodology, which closely reflects
the realities faced by a particular
refinery, is an interesting process.
This article is based on the
authors’ experiences in setting up a
LP-based crude oil evaluation
system for Hindustan Petroleum
Corporation (HPCL). It discusses
how units of measurement of crude
and product quantities and prices
(the choice between weight-based
www.digitalrefining.com/article/1000480
Yields and densities of crude oils A and B
Crude oil A Crude oil B
Whole crude API 35.0 45.0
Whole crude density 0.8494 0.8013
Expansion, vol% 0.2 0.2
Stream densities1
LPG 0.5738 (0.6755) 0.5413 (0.6755)
Naphtha 0.7455 (0.8777) 0.7033 (0.8777)
Kerosene 0.8048 (0.9474) 0.7592 (0.9474)
Gas oil 0.8624 (1.0153) 0.8135 (1.0153)
VGO 0.9234 (1.0871) 0.8711 (1.0871)
Vacuum resid 0.9907 (1.1663) 0.9346 (1.1663)
Product blend 0.8476 (0.9978) 0.7996 (0.9978)
Product yield, wt%2
LPG 0.6 0.6
Naphtha 18.4 18.4
Kerosene 13.1 13.1
Gas oil 40.3 40.3
VGO 19.6 19.6
Vacuum resid 8.1 8.1
Total 100.0 100.0
Product yield, vol%2
LPG 0.8 0.8
Naphtha 20.9 20.9
Kerosene 13.8 13.8
Gas oil 39.6 39.6
VGO 18.0 18.0
Vacuum resid 6.9 6.9
Total 100.0 100.0
1. Figures in brackets are the ratios of stream density to the respective crude oil density.
2. Yields are hydroskimming; fuel and loss has been assumed to be zero for simplicity of demonstration.
Table 1
and volume-based optimisation) assess them accurately. However,
can give conflicting recommenda- weight-based models need to incor-
tions. The paper also describes porate proper conversion and
options available in Aspen Process comparison methods for the correct
Industry Modelling System (PIMS) evaluation of crude oils.
to specify correctly the desired Let us consider two hypothetical
methodology of optimisation. crude oils, A and B, one heavy (API
35) and the other light (API 45), but
Optimisation of crude oil trades with the same weight per cent
The world over, crude oil is traded (wt%) and vol% yields. Yields in
by volume; it is priced in dollars weight and volume will be the
per barrel. Volume-based LP same if the individual ratios of
models, which capture crude oil stream density to crude density are
yields in volume per cent (vol%) identical for both the crudes (see
and buy/sell crudes by volume, Table 1).
PTQ Q2 2010 67
 Product prices and standard densities
from the fact that both crudes have
the same wt% yields. One hundred
tonnes of either of the crudes will
Product $/bbl $/MT bbl/MT Standard density provide the same revenue to the
LPG 35.40 396.45 11.2 0.5616
refinery; their break-even prices per
Naphtha 53.31 479.76 9.0 0.6989
Kerosene 66.71 527.02 7.9 0.7962 barrel are respectively $62.3 and
Gas oil 66.01 491.77 7.45 0.8443 $58.7. In other words, the refiner
VGO 57.27 400.89 7.0 0.8985 can pay 3.6 $/bbl more for crude
Vacuum resid 47.51 308.80 6.5 0.9677
oil A than for crude oil B to make
the same profit. Let us call this
Table 2 Conclusion 1.
Product values are now recalcu-
lated using vol% yields and $/bbl
Calculation of gross product using wt% yields
prices from Table 2. Both crudes
have the same vol% yields and,
Crude oil A Crude oil B A-B hence, are expected to have the
$/MT 461.0 461.0 0.0 same value per barrel.
bbl/MT 7.405 7.850 -
$/bbl = ($/MT)/(bbl/MT) 62.3 58.7 3.6 The calculation in Table 3b shows
that the refiner cannot pay any
more per barrel for crude oil A than
Table 3a they are paying for crude oil B. Let
us call this Conclusion 2.
Which of these conclusions is
Calculation of gross product using vol% yields
correct? Conclusion 1 is the recom-
mendation of optimisation by
Crude oil A Crude oil B A-B weight, whereas Conclusion 2 is the
$/bbl 60.3 60.3 0.0
bbl/MT 7.405 7.850 -
result of volume optimisation.
$/MT = ($/bbl) * (bbl/MT) 446.8 473.7 (26.9) Optimisation by weight ascribes
higher values to heavier barrels
than to lighter barrels of crude oils
Table 3b (A and B respectively). On the other
hand, optimisation by volume
values heavier and lighter crudes at
Mixed yields starting from wt% yields
par.
A mixed weight-volume optimi-
Crude oil A Crude oil B A-B sation model buys, sells, transfers
$/MT 453.9 474.3 (20.3)
bbl/MT 7.405 7.850 -
and stores crudes and products in
$/bbl = ($/MT) / (bbl/MT) 61.3 60.4 0.9 their actual trading units. Such a
model gives due credit to heavier
and lighter products, and is an
Table 4a accurate way of evaluating crude
oils.
Let us rework the gross product
Mixed yields starting from vol% yields
value for mixed yields, starting first
from weight and then from volume
Crude oil A Crude oil B A-B yields. Let us assume that the
$/bbl 61.2 60.3 0.9
refiner sells gas oil, kerosene and
bbl/MT 7.405 7.850 -
$/MT = ($/bbl) * (bbl/MT) 452.9 473.2 (20.3) VGO by volume and the rest of the
products by weight. Starting with
weight yields, mixed yields are
Table 4b calculated using actual product
densities of products sold by
Product prices and standard Using $/MT prices from Table 2, volume. Starting from volume
densities used for sample calcula- and wt% yields, product value in yields, the mixed yields are calcu-
tions are shown in Table 2. $/MT is determined and divided lated using actual densities of
Conversion factors used for naph- by a bbl/MT conversion factor for products sold by weight. $/bbl
tha, kerosene, gas oil and resid are the respective crudes to arrive at prices for gas oil, kerosene and
from Platts. For liquified petroleum their $/bbl value. It can be VGO, and $/MT for LPG, naphtha
gas (LPG) and vacuum gas oil concluded from Table 3a that both and vacuum resid are derived from
(VGO), typically produced densities crudes have the same value in $/ Table 2.
have been used. MT; the conclusion is also apparent It is evident from Tables 4a and

68 PTQ Q2 2010 www.digitalrefining.com/article/1000480

 4b that both methods draw the
same conclusion: crude oil A -
crude oil B = 0.9 $/bbl. That is, the
refiner can shell out 0.9 $/bbl more
for crude oil A than they can for
crude oil B to make the same
margin. Table 5 summarises the
results.
The value of crude oil A decreases
when it is priced by volume
compared with when it is priced by
weight. On the other hand, the
value of crude oil B increases when
it is priced by volume compared
with when it is priced by weight.
Value in mixed units lies between
weight and volume values for crude
oil A, but is higher than either of
the two for crude oil B. These
observations are explained below.
Notations used for crude proper-
ties are:
b: bbl per MT of the crude
dcrude: Crude oil density, kg/l
dproduct: Product blend density, kg/l
ε: Volume expansion factor, %
The following notations are used
for product ‘i’:
wi: wt% yield
di: density, kg/l
si: standard density, kg/l
pi: price in $/MT
qi: price in $/kL
Product blend density is the
density if all of the product streams
were to be blended together:
dproduct = ∑ wi / ∑ (wi / di)
Mathematically, product blend
density dproduct should have been
equal to the whole crude density;
however, almost all of the crude
oils expand when split into individ-
ual streams, and the final blend is
lighter than the original crude oil.
The expansion is characterised by a
parameter called the volume expan-
sion factor ε, which is expressed in
vol%:
ε = 100 * (1/ dproduct - 1/ dcrude)
Gross product values are calcu-
lated from weight and vol% yields
(GPWw and GPWv respectively):
GPWw = ∑ wi pi / b
70 PTQ Q2 2010
Gross product values and differentials, $/bbl
Finished products Finished products Finished products
priced by weight priced in mixed units priced by volume
Crude oil A (35 API) 62.3 61.3 60.3
Crude oil B (45 API) 58.7 60.4 60.3
Crude oil A - crude oil B 3.6 0.9 0.0
Table 5
where b=6.2898 / dcrude greatest. For crude oil B, GPWv is
GPWv = ∑ (wi/di) * qi / b 1.028 * GPWw; GPWm = 1.029 *
GPWw: value in mixed units is
Since qi = pi * si higher than by either weight or
GPWv = ∑ (wi/di) * pisi / b volume.
Figures 1 and 2 illustrate the
Product worth in volume will be weight and volume cut yields of
greater than product worth in the following crude oils: Cabinda
weight if: (API 32.6), Qua Iboe (API 34.8),
Nemba (API 38.9) and Saharan
∑ (wi/di) * pisi / b > ∑ wi pi / b or Blend (API 44.6). Cabinda is the
heaviest and Saharan Blend is the
∑ wi pi* (si/di) /∑ wi pi >1 lightest crude oil in the set. For all
of the crudes, the wt% yield of naph-
For calculating product value in tha is lower and of vacuum resid is
mixed units (GPWm), si is kept equal higher than their respective vol%
to di for the products that are priced yields. Also, the relative changes are
in weight. The term si/di = 1 for different for different crudes.
these products and does not Pecking order is calculated based
contribute to change in gross prod- on the values of crude oil by weight
uct value from weight to mixed and by volume and is shown in
units. Figure 3.
Calculations for crude oils A and Two points need to be noted from
B are shown in Table 6. For crude the above. First, the absolute value
oil A, GPWv is 0.967 * GPWw; GPWm of product values has changed — it
= 0.985 * GPWw: value by volume is has increased for Saharan Blend
the least and by weight it is the and Cabinda, but has reduced for

6.5 9.9
12.2
 6ACRESID
26.2 6'/
 25.4 20.4
'ASOIL
23.9 +EROSENE
 .APHTHA
,0'
 28.1
24.2
32.9
0ERCENT
 26.3

21.8 18
 15.5
17.4
 10.7
25.2

19.8
11.9 17.2

#ABINDA 1UA)BOE .EMBA 3AHARANBLEND
!0) !0) !0) !0)
Figure 1 wt% cut yields
www.digitalrefining.com/article/1000480
Qua Iboe and Nemba. This has a
significant bearing on decisions
based on the absolute refining 
5.5 10.3 8.2
margins of the crudes. Second, the  23 6ACRESID
relative values of crudes differ  23.4 18.4
21.9 6'/
according to evaluation methodolo-

0ERCENT
 'ASOIL
gies (for instance, Qua Iboe — Saharan 26.9 +EROSENE
 23.3
Blend delta is 3.0 $/bbl by weight, 32.4 25.6 .APHTHA
but only 0.5 $/bbl by volume).  ,0'
Pecking orders are different for the  22.3 18.5
two cases. 16.2
 18.2
 11.6
Optimisation of product blending 28.4
22.7
 14.2 19.6
19.6
Different markets trade finished
petroleum products either by 
#ABINDA 1UA)BOE .EMBA 3AHARANBLEND
volume or by weight, or by a !0) !0) !0) !0)
mixture of both. For example,
Arabian Gulf markets trade naph-
tha in $/tonne, whereas Singapore Figure 2 Vol% cut yields
markets have naphtha traded in $/
bbl. US markets have naphtha in
cents/gallon, another volume unit.
Gasoline and gas oil are traded in 1UA)BOEBBL 1UA)BOEBBL
$/bbl and fuel oil in $/tonne both .EMBABBL .EMBABBL
in Singapore and in the Arabian 3AHARAN"LENDBBL 3AHARAN"LENDBBL
Gulf. Prices of finished products in
Indian markets are indexed to
#ABINDABBL #ABINDABBL
Arabian Gulf prices, but their units
of measurement are not all the
same. For instance, fuel oil is traded
by weight in the Arabian Gulf, but Weight, % Volume, %
by volume in local Indian markets.
Exports of fuel oil by Indian refin- Figure 3 Pecking order according to wt% and vol% yields
eries are again in weight units.
This section illustrates a refiner’s Gross product values
decision to maximise gas oil vs
naphtha. The refinery sells naphtha
Crude oil A Crude oil B
by weight and gas oil by volume.
Whole crude density, dcrude, kg/l 0.8494 0.8013
The refiner has three streams avail- Volume expansion factor ε, % 0.2 0.2
able to blend: light naphtha to Product blend density, dproduct, kg/l 0.8476 0.7996
produce finished naphtha product, ∑ wi pi *(si/di) /∑ wi pi, all products 0.967 1.028
∑ wi pi *(si/di) /∑ wi pi, for ker, gas & VGO 0.985 1.029
a gas oil stream to produce finished
gas oil, and a heavy naphtha
stream, which can be blended either Table 6
to gas oil or to naphtha. It is
assumed that other specifications Available quantities and densities of three refinery streams
such as sulphur or flash point are
not constraining this blending.
Blending streams Quantity, TMT Stream density, kg/l
Refer to Table 7 for the available Light naphtha 100 0.7316
quantities and densities of these Heavy naphtha 25 0.7600
streams. Prices of finished naphtha Gas oil stream 200 0.8600
and gas oil are listed in Table 8.
They correspond to 55 and 65 $/bbl Table 7
with Platts specified bbl/MT
conversion factors of 9.00 and 7.45, units (naphtha by weight and gas that optimises according to weight
respectively. oil by volume). recommends blending to naphtha.
Table 9 summarises the two By blending heavy naphtha to On the other hand, a mixed-unit
options, production quantities and naphtha, the realisation in weight optimisation recommends blending
sales realisation, in each of the two units is $158.7 million, which is to gas oil. An opportunity is lost
cases. Sales realisation is calculated greater than by blending it in gas because of a wrong optimisation of
both in weight units and in trading oil ($158.5 million). An LP model about $1 million (158.0–157.0).

www.digitalrefining.com/article/1000480 PTQ Q2 2010 71

 Prices of refinery naphtha and gas oil
Ratio constraints of crude oil and
finished products
Ratio tables are used for incorporat-
Product prices Unit of trade $/kL $/MT ing the constraints of processing
Finished naphtha $/MT 345.9 495.0
Finished gas oil $/kL 408.8 484.3 crude oils in certain ratios to each
other, or selling certain products in
predefined ratios only. Specifying
Table 8 weight ratio in a weight-based LP
model is equivalent to applying
volume ratios in a volume-based
Production and sales options for refinery naphtha and gas oil streams
model. Since crude oil is traded by
volume, a ratio table can be used in
Heavy naphtha → naphtha Heavy naphtha → gas oil a weight-based model to incorpo-
Quantity Quantity, Product density, Quantity, Quantity, Product density,
TMT TkL kg/l TMT TkL kg/l
rate volume ratio. The following
Finished naphtha 125 169.58 0.7371 100 136.69 0.7316 example illustrates the use of this
Finished gas oil 200 232.56 0.8600 225 265.45 0.8476 table.
A refinery is planning for quar-
Sales realisation, m$
Weight units 158.7 158.5
terly crude oil purchases. It has
Mixed units 157.0 158.0 already scheduled crude cargoes
from its term suppliers.
Table 9 Management has instructed that a
part of the inventory crude oil also
needs to be depleted. To meet the
Refinery term cargoes planned processing rate, the refin-
ery still needs to purchase a spot
TABLE RATIO cargo. For preparation of the peck-
TEXT RT1 ing order, it needs to evaluate each
PURCCR1 Crude 1 (Upper Zakum) 100.0
PURCCR2 Crude 2 (Arab Light) 125.0
spot grade along with the sched-
PURCCR3 Crude 3 (Qua Iboe) 135.0 uled quantity of term crude oil.
PURCCR4 Crude 4 (Azeri Light) 140.0 Total crude oil (inventory + term
PURCCR5 Crude 5 (Arab Heavy) 80.0 + spot) for the quarter is roughly
PURCCR6 Crude 6 (Spot Cargo) 135.0
three times the monthly crude
distillation unit’s capacity specified
Table 11 in the LP model. The refinery needs
to prorate the quarterly crude quan-
These typical production figures are bought and sold in volume units. tity to the monthly throughput. It
from about 6 million bbl of crude Its price is also specified in volume has a weight-based LP model; exact
oil processed. Thus, accurate opti- units. Optimisation of the product optimisation requires that the ratio
misation can save up to $0.17 /bbl. is by volume. of crude oils (term grades with each
On the other hand, VPRICE is the other and term to spot) be in
Modelling in Aspen PIMS price of the product in volume volume units.
Aspen PIMS is widely used LP soft- units; the product is still optimised Table 11 lists the term cargoes of
ware for modelling refinery by weight, and minimum and maxi- the refinery. Upper Zakum (100 000
operations in production planning mum constraints are by weight, tonnes) and Arab Light (125 000
and crude oil purchasing. Two of although final selling is by volume. tonnes) were part of the opening
its features related to mixed-unit We recommend using VOL in inventory; parcels of Qua Iboe (135
optimisation are discussed below. weight-based models and WGT in 000 tonnes), Azeri Light (140 000
volume-based models for mixed- tonnes) and Arab Heavy (80 000
Mixed-unit buying and selling: unit optimisation. tonnes) are scheduled to arrive
VOL and VPRICE The following is an example during the month. One parcel of
PIMS provides the option for using of using VOL in a Sell table in 135 tonnes of spot cargo is to be
VOL/VPRICE and WGT in Buy a weight-based PIMS LP model purchased for processing during
and Sell tables for incorporating (see Table 10). The refiner sells LPG the month. The ratio table ensures
mixed-unit optimisation in weight- and naphtha by weight, but gaso- that the crude oils are prorated to
and volume-based LP models, line in volume units. Specifying the crude distillation unit’s capac-
respectively. VOL for gasoline ensures mixed- ity. This proration is by weight,
However, there is a technical unit optimisation. The constraints which is exactly equivalent to the
difference between using VOL and and price of gasoline are in crudes’ volume proration.
VPRICE in a weight-based model. TkL and $/kL, while for LPG and
Specifying VOL in Buy and Sell naphtha they are in TMT and Conclusion
tables means that the product is $/MT. Optimisation purely by weight and

72 PTQ Q2 2010 www.digitalrefining.com/article/1000480

optimisation purely by volume can
give significantly different recom-
mendations for crude oil purchases
and product blending. A realistic
value for crude oil is assessed when
both crudes and finished products
are priced in their trading units.
Also, the LP analysis should opti-
mise in trading units and not
merely use standard conversions
for presenting the final output in
trading units. Also, if crude and
product densities are correctly
www.digitalrefining.com/article/1000480
captured in the LP analysis, both
weight- and volume-based models
give the same results and either of
them can be used for mixed-unit
optimisation.
M D Pawde is Deputy General Manager,
International Trade and Supplies, at Hindustan
Petroleum Corporation Ltd (HPCL), India.
He holds a bachelors degree in chemical
engineering from Nagpur University.
Email: mdpawde@hpcl.co.in
Sachin Singh is Deputy Manager, International
Trade and Supplies, at Hindustan Petroleum
Corporation Ltd (HPCL), India. He holds a
bachelors degree in chemical engineering from
Indian Institute of Technology, Kanpur. Email:
sachinks@hpcl.co.in
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PTQ Q2 2010 73