What is crude indifference analysis? How does it help selecting the best option from crude assay for processing?Nov-2021
Vincent Divita, Burns & McDonnell, Vince.Divita@gmail.com
With respect to crude, the indifference analysis provides the price you would be willing to pay for a new or substituted crude that would provide the same refinery margin with and without the new crude. This is generally done with refinery LP modelling and the specific analytical techniques are highly varied and user-dependent. In other words, there is no specific "industry standard" for this strategy. Generally speaking, there is a base case LP without the new, or substitute crude. A second LP is done that forces a specific volume of the substitute crude. Simple math can back-calculate what the new crude price would have to be in order for the LP objective value of the new case to equal the base case. Most "LP'ers" will run a handful of cases - often varying the volume of the new crude - in order to better understand the economic and operational drivers. We call this a "penetration" analysis because the indifference price generally changes based on the volume of crude "penetrating" the refinery.