Chevron identifies zinc contamination in Mars crude, leading to disrupted supply

Chevron has reported that the start-up of an offshore well is responsible for zinc contamination in Mars crude, which has contributed to tightening oil supply in the Gulf Coast refining hub.

This issue has prompted the US Government to release barrels from its emergency stockpile to support regional refineries, according to a Reuters report.

At the end of last week, crude oil inventories along the US Gulf Coast had dropped to their lowest seasonal level in seven years.

This decline was exacerbated by wildfires in Canada, which reduced supplies, and the cancellation of licences for importing Venezuelan crude into the US.

The Mars crude, a medium sour variety produced off the coast of Louisiana, is favoured by Gulf Coast refineries for its quality and proximity.

However, the presence of zinc, which is not a natural component of crude oil, has raised concerns about potential damage to refining units and catalysts used in processing oil.

The Mars crude stream combines oil from various Gulf Coast platforms, with approximately 575,000 barrels per day (bpd) transported to the coast.

Exxon has ceased purchasing the Mars crude oil grade until the contamination issue is resolved, according to a separate Reuters report on Thursday (10 July).

The US Department of Energy (DOE) announced on 11 July that it would provide up to one million barrels of crude oil from the Strategic Petroleum Reserve (SPR) to Exxon Mobil's Baton Rouge refinery in Louisiana due to the offshore supply disruption.

Chevron stated that it is working to address the problem and does not anticipate any impact on its current production guidance.

The supply of medium and heavy crude oil in the US Gulf has been tightening due to several factors. These include the termination of licences for importing Venezuelan crude, declining Mexican oil production, and Canadian supply disruptions due to wildfires.

Additionally, the expansion of the Trans Mountain pipeline has redirected some Canadian oil flows away from the US Gulf Coast.

Demand for refined products, including gasoline and distillates, surged to 20.9 million barrels per day last week, marking the highest seasonal demand in five years, driven by robust driving demand.

In a related development, Energy Transfer has broadened its partnership with Chevron in the LNG market, raising the agreed supply amount to three million tonnes per year (mtpa).

Last month, the company's affiliate, Energy Transfer LNG Export, entered a 20-year extension of its sale and purchase agreement (SPA), committing to supply an extra 1mtpa from its Lake Charles LNG export project.