For many years, the federal government banned the export of Alaskan North Slope (ANS) crude oil. Under the ban, most ANS crude went to U.S. West Coast refineries. In 1996, after an inter-agency policy review, the federal government lifted the ban, allowing ANS crude to be shifted from the West Coast to Pacific Rim countries, such as Japan. In connection with the policy review, the U.S. Department of Energy retained MathPro Inc. to assess the potential effects on West Coast refining economics of allowing ANS exports.

Using our ARMS refinery modeling system, we developed representations of refining operations in Japan and in California. We applied these regional refining models to assess the economic incentives for (1) specified volumes of ANS to displace corresponding volumes of other crudes in the Japanese refining sector and (2) imported crude oil volumes to replace the diverted ANS volumes in the California refining sector. Establishing the equilibrium price differential for ANS crude between the Japanese and California markets required iterative solutions of the respective refinery models.

The analysis indicated an incentive for exporting relatively small volumes of ANS crude to Japan, and replacing these volumes with like volumes of imported heavy crude oils that are commercially available.