Crude oil and products: Logistics. Customs. Tаxes 20 - 21 April 2009, Moscow, Russia

Session 3. Customs regulation of crude oil and products export operations

Glossary

Oil products are useful materials derived from crude oil as it is processed in oil refineries.

Specialty end products:

• Gaseous fuels such as propane, stored and shipped in liquid form under pressure in specialized railcars to distributors.

• Liquid fuels blending (producing automotive and aviation grades of gasoline, kerosene, various aviation turbine fuels, and diesel fuels, adding dyes, detergents, antiknock additives, oxygenates, and anti-fungal compounds as required). Shipped by barge, rail, and tanker ship. May be shipped regionally in dedicated pipelines to point consumers, particularly aviation jet fuel to major airports, or piped to distributors in multi-product pipelines using product separators called pipeline inspection gauges

• Lubricants (produces light machine oils, motor oils, and greases, adding viscosity stabilizers as required), usually shipped in bulk to an offsite packaging plant.

• Wax (paraffin), used in the packaging of frozen foods, among others. May be shipped in bulk to a site to prepare as packaged blocks.

• Sulfur (or sulfuric acid), byproducts of sulfur removal from petroleum which may have up to a couple percent sulfur as organic sulfur-containing compounds. Sulfur and sulfuric acid are useful industrial materials. Sulfuric acid is usually prepared and shipped as the acid precursor oleum.

• Bulk tar shipping for offsite unit packaging for use in tar-and-gravel roofing or similar uses.

• Asphalt - used as a binder for gravel to form asphalt concrete, which is used for paving roads, lots, etc. An asphalt unit prepares bulk asphalt for shipment.

• Petroleum coke, used in specialty carbon products such as certain types of electrodes, or as solid fuel.

• Petrochemicals or petrochemical feedstocks, which are often sent to petrochemical plants for further processing in a variety of ways. The petrochemicals may be olefins or their precursors, or various types of aromatic petrochemicals.

Diesel or diesel fuel is a specific fractional distillate of petroleum fuel oil  that is used as fuel in a diesel engine.The term typically refers to fuel that has been processed from petroleum, but increasingly, alternatives such as biodiesel or biomass to liquid (BTL) or gas to liquid (GTL) diesel that are not derived from petroleum are being developed and adopted. For clarity, petroleum-derived diesel is increasingly called petrodiesel.

Pipeline transport is a transportation of goods through a pipe. Most commonly, liquid and gases are sent, but pneumatic tubes that transport solid capsules using compressed air have also been used.

Oil pipelines are made from steel or plastic tubes with inner diameter typically from 10 to 120 cm (about 4 to 48 inches). Most pipelines are buried at a typical depth of about 1 - 2 metres (about 3 to 6 feet). The oil is kept in motion by pump stations along the pipeline, and usually flows at speed of about 1 to 6 m/s. Multi-product pipelines are used to transport two or more different products in sequence in the same pipeline. Usually in multi-product pipelines there is no physical separation between the different products. Some mixing of adjacent products occurs, producing interface. This interface is removed from the pipeline at receiving facilities and segregated to prevent contamination.

Types of pipelines:

In general, pipelines can be classified in three categories depending on purpose:

1. Gathering Pipelines - Group of smaller interconnected pipelines forming complex networks with the purpose of bringing crude oil or natural gas from several nearby wells to a treatment plant or processing facility. In this group, pipelines are usually short, couple of hundred meters, and with small diameters. Also sub-sea pipelines for collecting product from deep water production platforms are considered gathering systems.

2. Transportation Pipelines - Mainly long pipes with large diameters, moving products (oil, gas, refined products) between cities, countries and even continents. These transportation networks include several compressor stations in gas lines or pump stations for crude and multiproducts pipelines.

3. Distribution Pipelines - Composed of several interconnected pipelines with small diameters, used to take the products to the final consumer. Feeder lines to distribute gas to homes and businesses downstream. Pipelines at terminals for distributing products to tanks and storage facilities are included in this group.

Freight is a term used to classify the transportation of cargo and is typically a commercial process. Items are usually organized into various shipment categories before they are transported.

This is dependent on several factors:

• The type of item being carried, i.e. a kettle could fit into the category 'household goods'.

• How large the shipment is, both in terms of item size and quantity.

• How long the item for delivery will be in transit.

 Laytime is the number of lay days permitted in a voyage charter to load or discharge a cargo, taking into account handling capacity and conditions in the port.

Demurrage is a daily compensation paid by the charterer to the owner of a ship for delays in loading and discharging beyond the time agreed in the charterparty (laydays).

Contango is a term used in the futures market to describe an upward sloping forward curve (as in the normal yield curve). One says that such a forward curve is "in contango" (or sometimes "contangoed").

Contango - market scenario when the forward price of a commodity is higher than the spot price.

The opposite market condition to contango is known as backwardation.

Backwardation - market scenario when the spot price of a commodity is higher than the forward price

A forward curve is a graph of forward rates all for the same maturity but with different forward periods.

Forward price - the fixed price at which a specified amount of a commodity, currency or security is to be delivered on a fixed date in the future.

Shipping is physical process of transporting goods and cargo. Virtually every product ever made, bought, or sold has been affected by shipping. Despite the many variables in shipped products and locations, there are only three basic types of shipments: land, air, and sea.

Oil tankers, also known as petroleum tankers, or tankers are ships designed for the bulk transport of oil. There are two basic types of oil tanker: the crude tanker and the product tanker. Crude tankers move large quantities of unrefined crude oil from its point of extraction to refineries. Product tankers, generally much smaller, are designed to move petrochemicals from refineries to points near consuming markets. Oil tankers are often classified by their size as well as their occupation. The size classes range from inland or coastal tankers of a few thousand long tons of deadweight (DWT) to the mammoth supertankers of 650,000 DWT.

A barge is a flat-bottomed boat, built mainly for river and canal transport of heavy goods. Most barges are not self-propelled and need to be moved by tugboats towing or towboats pushing them. Barges on canals (towed by draft animals on an adjacent towpath) contended with the railway in the early industrial revolution but were outcompeted in the carriage of high value items due to the higher speed, falling costs, and route flexibility of rail transport.