Understanding API Gravity and Crude Oil Types

• API gravity is the ratio of the density of oil to the density of water, measured at 60 degrees Fahrenheit.
• API gravity calculation: (141.5/Specific Gravity) – 131.5
• Oils with an API gravity above 10 will float on water, while those below 10 will sink.
• Light crude oil has an API gravity of +31.1.
• Medium crude oil has an API gravity between 31.1 and 22.3.
• Heavy crude oil has an API gravity of -22.3.
• Extra-heavy crude oil has an API gravity of -10.
• Crude oil is considered sweet if it contains less than 0.5% sulfur.
• Sweet crude oil is easier to refine and safer to extract and transport, commanding a premium of around $15 per barrel due to its lower corrosiveness.
• Sour crude oil is more prevalent in regions such as the Gulf of Mexico, Mexico, South America, and Canada.
• Upstream activities include exploration and production of oil, gas, and LNG.
• Midstream operations involve transportation (via ship or pipeline), trading, and marketing.
• Downstream encompasses refining, marketing, chemicals, and LNG regasification.
• Ownership is the collection of rights to use and enjoy property, including the right to transfer it to others, granting exclusive possession and use.
• Only the United States, Canada, and Trinidad & Tobago (onshore) allow private ownership of mineral resources.
• State ownership involves the sovereign state owning the natural resources but with the ability to transfer certain property interests.
• Cultural, design, political cycles, adjudication/investment arbitration system and juxtaposed international law principles are relevant forces.
• Cultural forces see oil very much embedded in some countries culture.
• Design forces are, long term contracts, Price volatility, Large sunk costs,Obsolescing Bargain.
• Political Cycle forces are, Time inconsistency.
• Adjudication / Investment Arbitration System forces are, Relatively efficient ADR, Inefficient deterrent. Flawed award enforcement mechanism. Precedent is not binding.
• Juxtaposed International Law Principles forces are, Permanent Sovereignty over Natural Resources vs. Pacta sunt servanda.
• Stranded assets are assets that are devalued due to changes associated with the energy transition.
• Examples of stranded assets include resources awaiting production, exploration and development assets, production and processing facilities, and distribution infrastructure.
• West Texas Intermediate (WTI) has an API gravity of approximately 39.6°, a specific gravity of about 0.827, and a sulfur content of roughly 0.24%.
• Brent has an API gravity of approximately 38.06°, a specific gravity of about 0.835, and a sulfur content of roughly 0.37%.
• Dubai/Oman has an API gravity of approximately 33.6° and a sulfur content of around 1.68%.

Petrobras Options (under Decree No. 9,041)

• If Petrobras waives its right of first refusal, the blocks are offered in competitive bidding rounds, where Petrobras can participate on equal terms.
• If Petrobras exercises its right of first refusal and the government’s profit share matches the minimum in the tender, Petrobras must form a consortium with the winning bidder.
• If Petrobras exercises its right of first refusal but the government’s profit share exceeds the minimum, Petrobras can choose whether or not to join the consortium.
• If Petrobras declines to form a consortium, the winning bidder designates the operator and the working interest of each member, a prerequisite for final award by the ANP.
• In a Risked Service Contract, the contractor develops fields for a fee (possibly in kind), recovers costs, receives an upfront fee plus performance-based adjustments, and production remains state-owned.
• In a Pure Service Contract, the contractor offers specific technical services for a fixed fee, with minimal risk exposure, typically paid from the government’s budget.
• Reducing flaring and venting leads to reducing operation emissions.
• Royalties and rent capture mechanisms are favored by states, but disliked by companies, as they are not linked to profitability.