Choose Grace Catalysts Technologies, the global leader in specialty inorganic catalysts.
Talent that spans the globe with operations in over 40 countries, knowledgeable R&D teams and industry leading tech service.
Technology leadership #1 in FCC catalysts #1 in resid hydroprocessing catalysts (ART) #1 in independent polyethylene catalystsLeading supplier of hydrocracking catalysts, polypropylene catalysts and polypropylene technology licensing
Trust built through long term partnerships over a 150 year history.
March 2015
HYDROCARBONEN
GINEER
ING
March 2015
ww
w.hydrocarbonengineering.com
@Energy_Globalfollow
Energy Globallike
HydrocarbonEngineering
connect join
Copyright Palladian Publications Ltd 2015. All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers endorse any of the claims made in the articles or
the advertisements. Printed in the UK. Uncaptioned images courtesy of www.shutterstock.com.
2015 Member of ABC Audit Bureau of Circulations
This month's front cover
Join the conversation
contents
HydrocarbonEngineering
(03) Comment(05) Guest Comment
(07) World NewsContract awards, project updates, industry latest, news digest, diary dates, mergers and acquisitions
(14) US refining: new againNancy Yamaguchi, Contributing Editor, discusses the outlook for the US refining industry
(29) Making regulation workPeter Davidson, UKPIA, presents a new approach to regulating major accident hazards in the UK
(33) Making the switchTrish Luedtke, MSA Safety, USA, discusses ensuring safety in LNG/CNG use
(37) Minimising exposureAndy Avenell, Crowcon Detection Instruments Ltd., UK, explains how gas detection technology is evolving to reduce the need for maintenance and therefore operator exposure
(43) Walking the tightropeJohn Williams, Aspen Aerogels, USA, outlines the challenges and opportunities in properly insulating delayed cokers
(49) Comprehensive corrosion controlJoel Lack and Ralph Navarrete, Baker Hughes Incorporated, USA, discuss corrosion control in crude atmospheric distillation units
(56) UK shale gas processing: part oneMatthew Last and Adrian Finn, Costain, UK, look at processing technology for UK shale gas
(64) Surviving 2015Dirk Frame, T.A. Cook Consultants, UK, discusses the prospects for shale in 2015
(67) Compressor lubricationAyman Ali, ExxonMobil, EMEA, outlines challenges and solutions in compressor lubrication
(71) Changing perspectiveMahesh Subramaniyam, James Ondyak, P.N. Ramaswamy, James Noland, and Parag Shah, Dorf Ketal, USA, explain the best way to take advantage of high acid crudes
(76) Maximising deep conversionAngela Jones, Eric Lowenthal and Kent Turner, Grace, USA, describe the need for deep conversion of resid and the use of a high matrix, high activity FCC catalyst for maximising bottoms upgrading
(81) Loading underairTim Campbell, Eurecat, USA, discusses how passivation processes can enable preactivated catalyst loading under air
(86) Guiding the wayMark Hodgins, Endress+Hauser, UK, outlines effective level measurement with the use of guided wave radar transmitters
(91) Compressor dampener optimisation: part oneAttilio Brighenti, Riccardo Bressan, Antonio Tufo, S.A.T.E. Systems and Advanced Technologies Engineering S.r.l., Italy, discuss the optimisation of reciprocating compressor dampeners under variable speed conditions
(99) 3D asset virtualisationSaeed Al Somali, Saudi Kayan Petrochemicals, Saudi Arabia, and Issam Karkoutli, INOVx Solutions, USA, present the benefits of 3D asset visualisation for optimising enterprise asset management
(105) Simulating superior performanceJosep-Anton Feliu, Jos-Mara Ferrer and Jos-Mara Nougus, Inprocess Technology and Consulting Group, S.L., Spain, discuss how simulation technology can lead to higher efficiency, lower production costs and improved plant safety
(112) 15 factsThis month we give you 15 facts on Nigeria
Built on talent, technology, and trust, Grace high performance specialty chemicals and materials improve the products and processes of its customer partners around the world. Grace Catalysts Technologies is recognised as a global leader in specialty inorganic catalysts. Combining its catalytic science expertise with flexible manufacturing and materials science fundamentals, Grace is a leading supplier of catalysts and related products and technologies used in petroleum refining and chemical processing.
March 2015 Volume 20 Number 3 ISSN 1468-9340
SINGLE SOURCE, END-TO-END CAPABILITYFrom a full range of solidi cation solutions, through safe bulk handling, stacking and reclaiming systems, to e cient, environmentally-friendly ship, rail and truck loading facilities, theres one company you can trust to handle it all. Sandvik. We make it simple. And thats why were known as The Sulphur Company.
Engineering and consulting services High capacity sulphur degassing,
block pouring and remelting Small/mid size and high capacity
solidi cation Bagging and ship, rail and truck
loading systems Global service and spare part supply
FROM A ...TO B... TO SEA.
www.processsystems.sandvik.com
Sandvik Process SystemsDivision of Sandvik Materials Technology Deutschland GmbH Salierstr. 35, 70736 Fellbach, GermanyTel: +49 711 5105-0 Fax: +49 711 5105-152 [email protected]
SANDVIK_A-B-sea_ad_A4_MASTER.indd 1 09/02/2015 14:51
SUBSCRIPTION RATESAnnual subscription 110 UK including postage /125/e175overseas (postage airmail) /US$175 USA/Canada (postage airmail). Two year discounted rate 176 UKincluding postage/200/e280overseas (postage airmail) /US$320 USA/Canada (postage airmail).
contact info
15 South Street Farnham Surrey GU97QU ENGLAND Tel: +44 (0) 1252 718 999Fax: +44 (0) 1252 718 992
SUBSCRIPTION CLAIMSClaims for non receipt of issues must be made within 3 months of publication of the issue or they will not be honoured without charge.
APPLICABLE ONLY TO USA & CANADAHydrocarbon Engineering (ISSN No: 1468-9340, USPS No: 020-998) is published monthly by Palladian Publications Ltd GBR and distributed in the USA by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals postage paid New Brunswick, NJ and additional mailing offices. POSTMASTER: send address changes to HYDROCARBON ENGINEERING, 701C Ashland Ave, Folcroft PA 19032
MANAGING EDITOR James [email protected]
EDITOR Claira [email protected]
EDITORIAL ASSISTANT Rosalie [email protected]
ADVERTISEMENT DIRECTOR Rod [email protected]
ADVERTISEMENT MANAGER Chris [email protected]
ADVERTISEMENT EXECUTIVE Will [email protected]
DIGITAL EDITORIAL ASSISTANT Joesph [email protected]
WEB MANAGER Tom [email protected]
WEB EDITOR Callum [email protected]
CIRCULATION MANAGER Victoria [email protected]
SUBSCRIPTIONS Laura [email protected]
OFFICE ADMINISTRATOR Jo [email protected]
CONTRIBUTING EDITORSNancy Yamaguchi Gordon Cope
PUBLISHER Nigel Hardy
I was recently sent an email, and whilst the writer said that they are a fan of Hydrocarbon Engineering, they asked why I discuss outlooks in my editors comment when the world is changing so rapidly and no one can really predict the future? I do indeed fully admit that no one can accurately predict the
future and when it comes to the oil and gas sector I think we can all safely say that peak oil is one phenomenon that was predicted but hasnt come to pass. At the time that M. King Hubbert put forward his theory of peak oil, based on his then research, Im sure it was thought valid. Also in the years that followed there was much debate about peak oil as supply and demand levels fluctuated. Even I wrote about the peak oil debate back in 2012 when I came across a report written by Leonardo Maugeri, which said that we were not yet in a position to announce peak oil as supply was growing worldwide at such a fast pace it was possibly going to overtake consumption. So yes, on one hand, the Hydrocarbon Engineering fan is indeed correct to point out that we cant always make accurate predictions, but on the other, I believe that we can make predictions, as long as they are based on solid information and comment on what is most likely to happen if the status quo remains.
The above moves me swiftly on to the new phenomenon of peak demand, which appears to have placed the peak oil theory firmly on ice. I believe we can clearly see this due to the fact that, despite the dramatic plummet in oil prices from summer 2014
highs, demand for oil hasnt shot up. The general rules of consumption are that as prices go down then more of a product is bought, but this hasn't been the case for oil and this can be attributed to many factors. Firstly, as Bank of America Merrill Lynch said in a recent Global Energy Weekly, the sensitivity of global consumption [of oil] to near term price changes in prices is low. Also, there is now greater energy efficiency globally and this is particularly true for the transportation sector, which is the biggest consumer of oil and oil products. And finally, energy intensive economies are currently going on a bit of a diet, and we all know that China can be taken as a big example of that. So, as more and more oil is pushed on to the market between new unconventional resources coming to fruition and OPEC maintaining its output levels, I think we can safely say that a demand peak is upon us. And that is a prediction I will firmly stand by, be it for this moment in time only, as that is what the data shows me.
As I said at the start, whilst we cannot make 100% accurate predictions, we can make clear comment on outlooks based on the information we have; so, at the moment, peak demand is indeed a valid theory. And Id like to finish with what the International Energy Agency said at the launch of its Medium Term Oil Market Report, this is most definitely not your fathers oil market.
commentClaira Lloyd Editor
chartindustries.com
Chart is at the heart of gas processing
Nitrogen rejection, NGL recovery, natural gas liquefaction and helium recovery all require custom equipment engineered and built by Chart.
Mission CriticalEquipment
Air Cooled Heat Exchangers
Cold Box Assemblies
Brazed Aluminum Heat Exchangers
Guestcomment2014 was a year of inconsistency and uncertainty. It combined a dose of frustration and disappointment, with a splash of optimism for the refining and petrochemical industries. Many of the issues that drove these sentiments in 2014 are expected to persist throughout 2015, leaving companies to face a range of proposed rules, regulations and other administrative actions the scope and effects of which are not yet known. On the plus side, as the 114th Congress convenes, there is some optimism that these administrative excesses can be limited.
This uncertainty and frustration is most clearly evidenced in the Renewable Fuel Standard (RFS) the Environmental Protection Agencys (EPA) decision to make no decision. They decided to delay the announcement on the 2014 Renewable Volume Obligations (RVO), which by law were required to be finalised by 30 November 2013 into this year. This dereliction of responsibility by EPA has meant that refiners have simply had to guess how much ethanol and other biofuels they should be blending into their fuels, in the absence of any rule being announced. Needless to say, AFPM will continue to push for Congress to repeal or significantly reform the RFS, as even EPA has shown the inability to construct a workable programme from a totally unworkable and very unnecessary law. Congress created this mess and it is up to Congress to fix it.
The transportation of crude oil by rail was not on anyones radar until the unfortunate and preventable tragedy in Lac-Megantic. In 2014 the Department of Transport (DOT) proposed a rule that focused primarily on rail tank cars, while neglecting to focus on the root causes of rail accidents: train integrity and human factors. The refining and petrochemical industries are committed to protecting our workers and the communities through which crude oil is transported. We have already invested more than US$3 billion on upgrading tank cars and will undoubtedly do more as the proposed rules are finalised. But, it is also time for the primary causes of rail accidents to be addressed. DOT should place further emphasis on preventing derailments, concurrently with measures that mitigate the effects of derailments. As the number of crude carloads have risen exponentially, from 9500 in 2009 to 450 000 in 2014, track integrity and overall operations must be addressed.
A day in the life of a fuel or petrochemical manufacturer increasingly
Charles T. Drevna, President, American Fuel & Petrochemical Manufacturers
must focus on how to negotiate a growing number of overly stringent and often conflicting air quality regulations. The pace was steady over the course of the last 12 months and AFPM anticipates no slowdown from either EPA or the Obama Administration. Yet, we are fast reaching a point where costly regulations, many that offer little to no benefit to the environment or to the public, will negatively impact states and local
economies and ultimately, harm consumers.Low energy prices have enticed many
businesses back to these shores, and the benefits of a manufacturing renaissance in the US are considerable. However, uncertainty has raised its head again in the form of EPAs unnecessary and overly burdensome ozone proposal. If finalised, this regulation could result in 2.9 million fewer job equivalents per year until 2040, and reduce the U.S. GDP by as much as US$270 million annually. As petrochemical manufacturers are reshoring their operations, with nearly US$100 billion in planned investments announced, this regulation could stop this renaissance in its tracks. With so much investment and the prospects for a robust economic recovery at stake, the nation must focus on a balanced path forward that leads to economic prosperity, innovation, and environmental protection.EPAs ozone proposal falls way short of those
expectations. However, there has been the occasional issue where common sense has prevailed, and it is in these
instances that we can see the beneficial effect certainty can have on a business. This can be seen, most notably, in Congresss reauthorisation of the Chemical Facility Anti-Terrorism Standards (CFATS). The CFTAS programme provides the necessary regulatory certainty so that fuel and petrochemical manufacturers can help to maintain the security of Americas energy and petrochemical infrastructure. We hope this continues in 2015 with the efforts to modernize the Toxic Substances Control Act (TSCA).
As 2015 progresses, it is likely that more issues will arise than will be solved. But with the new Congress, we are hopeful that we will begin to see policies that encourage a free market, as these are the most beneficial to the US economy and are required to drive our nation toward a future of growth and prosperity.
A day in the life of a fuel or petrochemical manufacturer increasingly must focus on how to negotiate a growing number of overly stringent and often conflicting air quality regulations.
5HYDROCARBON ENGINEERING March2015
n Customer: LNG producers throughout the world.
n Challenge: Select a compression partner to ensure years of efficient, reliable production.
n Result: Elliott refrigeration compressors and unmatched experience have been central to successful LNG projects for decades.
They turned to Elliottfor leadership in LNG compression.
From the first commercial LNG baseload plants to todays mega-plants in Russia, the Middle East and Asia, LNG producers have chosen Elliott for efficient, reliable compressors and matchless expertise. Elliotts proven experience with different processes and drivers is supported by manufacturing centers in the US and Japan, and a global network of service centers. Who will you turn to?
C O M P R E S S O R S n T U R B I N E S n G L O B A L S E R V I C Ewww.elliott-turbo.com
The world turns to Elliott.
7HYDROCARBON ENGINEERING
w rld news
March2015
Russia | LONG TERM PARTNERSHIP SIGNED
JSOC Bashneft and Yokogawa Electric Corporation have signed a long term partnership agreement in the area of support of Ufa refining complex production facilities with automatic process control systems and field instrumentation/process control instruments. The document was signed by Alexander Korsik, President, JSOC Bashneft and
Shuzo Kaihori, Chairman and CEO, Yokogawa Electric Corporation.
The agreement concerns the broadening of cooperation between the companies in development and supply of control systems and instrumentation equipment; the design, startup, commissioning, and provision of technical support for Yokogawa equipment; and the provision of consulting to Bashneft specialists.
Colombia | TESTING CONTRACT
Intertek has won a contract for testing and analysis of refined products for a major Latin American oil and gas company. The agreement is for four years, with an option for an additional four year extension on the project. Intertek will perform testing and analysis of refined products being transported by pipeline, delivering quality control data which will help the client better manage their operations and support operational business decisions.
To meet client requirements, Intertek is constructing three fully equipped laboratories in central and western Colombia, equipped with state of the art technology and staffed by personnel trained and experienced in the testing of petroleum refined products.
With the new laboratories Intertek will also provide independent, impartial, and confidential analytical testing services to other customers, effectively expanding Intertek's capabilities and locations in Colombia. This laboratory project allows the company to expand into new markets and provide clients with enhanced service and logistical coverage.
PAS Inc. | NEW DEAL
PAS Inc., has announced a new multi year contract with BP Downstream. BP will use PAS inBound to help manage critical operational limits in their refineries and petrocheimcal assets. PAS inBound captures, visualises, analyses, and alterts opeartors on boundary data within plant operations. Boundary data includes process alarms, safety instrumented and environmental trip points.
Germany | CONCEPT ENGINEERING SERVICES
Jacobs Engineering Group, Inc. has received a contract from BP Gelsenkirchen GmbH for concept engineering services to upgrade a hydrotreater unit at its refinery facilities in Gelsenkirchen, Germany.
BP recently selected Jacobs as strategic supplier of mid cap work for
its downstream business on a global basis. Under the terms of this new regional framework agreement, Jacobs is bringing technical expertise and best practices to help BP reach its goals to optimise operational performance of the BP Gelsenkirchen refining facilities.
Worldwide | CYBERSECURITY SOLUTIONS
Yokogawa Electric Corporation has announced a collaboration with Cisco Systems, Inc. to deliver the SecurePlant initiative at Shell. SecurePlant is a comprehensive security management solution for plant control systems that was jointly developed as an initative between Cisco, a leader in the IT industry, Yokogawa, a leader in mission critical plant automation systems, and Shell. The three companies have agreed to proceed over the next three years with the implementation of SecurePlant at approximatley 50 Shell plants globally.
Industrial producers around the world face a wide range of operational challenges in areas such as cybersecurity that pose a pervasive threat to safety and availability. Most companies with global operations, however, still take a relatively simplistic plant by plant
approach, such as implementing operating system security patches and anti virus pattern file updates. As a result, security levels tend to vary at each plant.
The SecurePlant solution is designed as a standard solution that consists of the delivery of OS patches and anti virus pattern files for control systems and the provision of real time and proactive monitoring of solution delivery, as well as a help desk operation to manage this solution.
Supplier certified Windows security patches and virus signature files are distributed from a SecureCentre to the SecureSite at each plant via Shell's existing global network. Real time and proactive monitoring capabilities will enable to centralised management of plant security.
8March 2015HYDROCARBON ENGINEERING
INBRIEF
w rld news
USA | DOUBLE SIGNING
KBR has announced that it has been awarded a technical services agreement by Magnolia LNG LLC to provide cost verification and other services associated with the delivery of the Magnolia LNG export terminal project located in the Port of Lake Charles, Louisiana. Under the terms of the contract, KBR will complete a FEED gap assessment, work plant and support completion of the remaining FEED activities. This agreement includes the development of a project EPC contract execution plan, schedule, contract and pricing as well
as an EPC bridging plan for the construction of the export facility.
Additionally, KBR signed a Memorandum of Understanding with Magnolia LNG LLC and Korea's E&C USA under which KBR and SKEC agree to form a joint venture to execute engineering, procurement and construction of the initial two LNG production trains with provision for two additional trains. Upon completion, the four train Magnolia LNG facility will have the capacity to export 8 million tpy of LNG.
USA | ADVANCED CATALYST DEVELOPMENT
Anellotech, Inc. and Johnson Matthey Process Technologies have announced an alliance to codevelop advanced catalyst systems for Anellotech's catalytic fast pyrolysis (CFP) process for production of bio based benzene, toluence and paraxylene. Anellotech's newly developed green aromatics products are 'drop in'
replacements for petroleum derived aromatics.
The two partners will collaborate in three major areas: On the technological development of an optimal catalyst for Anellotech's CFP process; for the supply of high quality catalysts manufactured for use in the testing and development of the CFP process, and to manage subsequent commercial implementation.
USA | THE KEY TO DELIVERY
GE Oil & Gas has announced that its downtream technology solutions (DTS) business has been awarded a contract from Sasol North America for the provision of the main compression trains required for its new low density polyethylene plant (LDPE) being developed in Lake Charles, Louisiana. The LDPE plant is a central US$8.9 billion petrochemical complex, which will include a worldscale ethylene plant and ethylene derivatives plant.
The LDPE Hyper compressor, which will sit at the heart of the plant, is a unique 20 cylinder two stage compressor, with discharge pressures of 45 000 psi.
The scale of the plant, one of the largest in the world, reflects considerable growth seen in the North American petrochemical segment in recent years. The complex will produce 1.5 million tpy of ethylene, with approximately 90% of ethylene output converted into a diverse slate of commodity and specialty chemicals.
AustraliaJacobs Enginereing Group, Inc. has been awarded a multi year engineering services agreement by ConocoPhillips to support the sustaining capital programme for the Australia Pacific LNG facility after its completion. The facility is located on Curtis Island in Queensland, Australia.
AfricaHempel's 26th factory, and its first in Africa, marks an important milestone in Hempel's ambition to become one of the world's top 10 largest coatings suppliers by the end of 2015. The new plant will manufacture coatings for the decorative, protective and marine industries and will serve customers in Sub-Saharan Africa.
JapanThe energy segment of Marubeni Corporation has selected Schneider Electric to provide the market intellegence platform to support its global energy trading and development business. Schneider's DTN ProphetX solution will be used to support its wide ranging operations, including oil and gas trading and marketing.
The NetherlandsFluor Corporation has celebrated the grand opening of its new office in Amsterdam with hundreds of employees, clients and business associates. Spanning more than 50 years operating from the Netherlands, Fluor recently moved from Haarlem to its new sustainable office building in Beukenhorst-Zuid business park near Schiphol airport. The office will continue to serve the energy and chemicals, infrastructure and industrial markets across Europe, Africa, the Middle East, Asia and Australia.
A World of SolutionsVisit www.CBI.com
COMPLETE SOLUTIONS FOR YOUR REFINERY OPERATIONSWhether youre dealing with tight oil, more stringent sulfur limits or changing feedstock supplies, CB&I has the answers to help refiners derive maximum value from every molecule.
Were with you through every stage of the process plant life cycle, from feasibility studies through technology selection, full-scope EPC, commissioning and start-up, to plant optimization and upgrades.
Our broad portfolio of both refining and petrochemical technologies, combined with our execution expertise, will help you maximize unit flexibility and achieve margin benefits in the widest range of scenarios.
PROCESS PLANNING AND DEVELOPMENTLICENSED TECHNOLOGIES AND CATALYSTSFULL-SCOPE EPFC SERVICESPROJECT MANAGEMENT AND CONSULTINGAFTERMARKET SERVICES
10March 2015HYDROCARBON ENGINEERING
INBRIEF
w rld news
UK| SHUTDOWN COMPLETE
Neway has announced the completion of a series of skilled and demanding servies for the boiler maintenance shutdown at the Essar Oil UK refinery in Stanlow, Cheshire. The company supplied specialist industrial cleaning operatives to help the completion of the recent shutdown, where safe, effective and efficient working procedures were paramount.
Neway also supplied operatives for standby duties during the shutdown. They were vitally important for confined space working and acted as a
safety lifeline for engineers working inside the boiler.
The company used specialist techniques and equipment to help clean boilers internally such as the deluge wash, which is an effective and efficient low pressure cleaning procedure. Neway supervisors ensured all work was carried out to the highest standards. This required detailed communication throughout the shutdown using radios to pass on crucial information and keep in contact with staff inside the boilers.
China | SECOND UNIT COMMISSIONED
UOP LLC, a Honeywell company, has announced that China commissioned its second unit to produce propylene using its C3 Oleflex process technology. Zhejiang Shaoxing Sanjin Petrochemical Co., Ltd became the second company in China to commission a UOP C3 Oleflex process unit to produce propylene from propane, increasing the global production capacity from UOP
technology to approximately 3.8 million tpy.
Since 2011, UOP has licensed the C3 Oleflex process to more than a dozen producers to meet rising demand, with a majority of licensed capacity in China. China is the world's largest energy consumer and its propylene consumption accounts for more than 15% of worldwide demand, which is growing at approximately 5 - 6% /y.
USA | LIQUEFACTION AND EXPORT PROJECT
Louisiana Governor Bobby Jindal and Martin Houston, Chairman of Live Oak LNG, have announced a new natural gas liquefaction and export project, up to US$ 2 billion investment, to be developed in the Calcasieu waterway. The mid sized project is being designed for a plant capacity of up to 5 million tpy production and will include tow 130 000 m3 storage tanks, and port facilities with a jetty for standard size LNG carries. The proposed site is approximatley 350 acres and is situated within Calcasieu Parish on the west bank of the Calcasieu River.
Initial study work is already underway and Live Oak LNG will begin the permitting process within the next few weeks. The anticipated startup of the plant is in late 2019.
Live Oak LNG has awarded Bechtel a contract for the preengineering design and Chart Industries has been selected for the process design work. The company estimates that there will be an average of 550 people working directly on the project, with up to 1000 jobs during the construction peak. Once operational, the plant will employ approximately 100 people.
Asia PacificPrometheus Group and SMEC are excited to announce their global partnership which combines Prometheus Group's leading edge enterprise asset management software with SMEC's best in class asset management consulting group. The partnership initially will focus on the oil and gas industry and other asset intensive verticals.
EgyptCB&I has announced that it has been awarded a contract by Carbon Holdings for the license and engineering design of a polypropylene unit to be built in Ain Sokhna. The unit will be ablined to the Tahrir petrochemical complex and use CB&I's Novolen technology to produce 350 000 tpy of polypropylene.
MexicoSempra Energy has anounced that its IEnova and Sempra LNG units have signed a Memorandum of Understanding (MoU) with a subsidiary of Pemex for the cooperation and coordination in developing a natural gas liquefaction project at the site of the Energia Costa Azul receipt terminal in Esenada, Mexico. The MoU defines the basis for the parties to exporte Pemex's participation in the potential Energia Costa Azul project, including joining efforts on its development and structuring agreements that would allow opportunites for Pemex to become a customer, natural gas supplier and investor.
EuropeKlaipedos Nafta has signed a MoU with Bomin Linde LNG to jointly develop the LNG fuel market, including the necessary infrastructure, in the Baltic Sea.
For seven decades we've helped feedstock processors enhance profits with responsiveand responsiblerecovery and refining of PGMs from spent hydrocracking catalysts. Tell us what we can do for you at sabinmetal.com
For seven decades we've helped feedstock processors enhance profits with responsiveand responsiblerecovery and refining of PGMs from spent hydrocracking catalysts. Tell us what we can do for you at sabinmetal.com
Profitable hydrocracking/hydrocarbon processing starts and ends with Sabin Metal worldwide
C
M
Y
CM
MY
CY
CMY
K
ProfitableHydrocracking Ad DD.pdf 1 1/19/15 2:06 PM
12March 2015HYDROCARBON ENGINEERING
w rld newsAPI-PA | TAX HIKE WOULD DAMAGE ECONOMY
Stephanie Catarino Wissman, Executive Director of Associated Petroleum Industries of Pennsylvania (API-PA) has said that the Governor's proposal for a new severence tax on natural gas development in Pennsylvania will harm job growth and weaken the state's economy.
Wissman commented, "the Governor's proposed tax hike could treaten the future of our state's best job creators. The current local impact tax, which is collected from every shale drilling site in the state, has distributed more than US$630 million to
communites since 2012, including more than US$224 million in just 2014. That's on top of over US$2.1 billion in state and local taxes generated by the energy industry. Driving development away from Pennsylvania will ultimately cost jobs and lead to less revenue for education, transportation, healthcare, and other state programs. The Governor needs to look for better budget solutions that will keep the Commonwealth competitive, protect long term economic growht, and preserve the engine of Pennsylvania job creation."
API | GROWING ENERGY PRIORITIES
The American Petroleum Insitute (API) has announced the establishment of a Colorado Petroleum Council that will focus on energy priorities in the state, including hydraulic fracturing and energy infrastructure, as the state seeks to create jobs, generate more revenue to the government, and produce more domestic energy. In making this announcement, API has also hired Tracee Bentley, a former Colorado State Official, to lead the new office as Executive Director.
API President and CEO, Jack Gerard said, "Colorado is at the forefront of America's energy renaissance. The right energy policies are essential to maintain strong enconomic growth, which energy development is generating across the state. Bipartisan cooperation among state government officials and businesses and cosumer groups to address critical energy development issues will ensure Colorado remains a leader in creating energy jobs."
BMI | PETROCHEMICALS IN SAUDI ARABIA
Business Monitor International (BMI) has said that the decline in the price of naptha is posint a major challenge to the competitiveness of Saudi based petrochemicals production, which is overwhelmingly based on ethane. As naphtha comprises just 11% of feedstock with the majority from ethane, Saudi Arabia stands to suffer from the fall in naphtha price that has come as a result of crude oil prices falling. BMI has said that at the same
time, product prices are falling on export markets, leading to a severe squeeze on margins. At stake is the long term growth in Saudi petrochemicals capacity.
BMI has also said taht Saudi Arabia's economic performance, with strong growth, shoudl lay the basis for growth in downstream conversion sectors and forecast real GDP growth for this year to be 3.6%, a slight moderation from the 2014 levels of 4.3%
17 - 19 MarchStocExpo 2015Ahoy Rotterdam, The NetherlandsTel: +44 (0)20 8843 8804Email: [email protected]
18 - 19 MarchARTC 18th Annual MeetingBangkok, ThailandTel: + 852 3411 4702
Email: [email protected]
22 - 24 MarchAFPM Annual MeetingMarriott RivercenterSan Antonio, TexasTel: +1 202 457 0480Email: [email protected]
22 - 26 MarchSOGATBeach Rotana HotelAbu Dhabi, United Arab EmiratesTel: 971 (02) 674 4040Email: [email protected]
12 - 15 AprilAnnual GPA ConventionMarriott RivercenterSan Antonio, TexasTel: +1 918 493 3872
20 - 22 AprilSulphur World SymposiumMajestic Hotel and SpaBarcelona, SpainTel: +1 202 293 9305Email: [email protected]
20 - 22 AprilGlobal Refining & Petrochemical SummitThe Hague, The NetherlandsTel: +44 (0)20 7202 7769Email: [email protected]
| DIARYDATES
news digest
WHEN CONDITIONS HEAT UP DONT LET CORROSION SHUT YOU DOWN Whether its higher temperatures, rising pressures or more acidic media, conditions in oil refineries have never been more extreme. Tube and pipe corrosion are a constant threat, causing as many as half of all major shutdowns. This is why hundreds of the worlds most demanding petrochemicals refiners are turning to the next generation of corrosion resistant alloys. Like one German oil refinery, which used Sandvik SAF 2707 HD hyper-duplex heat exchanger tubes to reduce the number of shutdowns from 8 to 1 over a period of four years. The result was massive savings on material replacement. So as your tubes performance is pushed to new heights, find out how we can help keep corrosion from shutting you down.
SMT.SANDVIK.COM
14March 2015 HYDROCARBON ENGINEERING
US refining:
new
Nancy Yamaguchi, Contributing Editor, discusses the outlook for the US refining industry.
T he US refining industry has enjoyed a golden time in recent years, operating in synergy with the boom in US oil production, which has been made possible by advances in shale oil development. The majority of the new crude output has been squeezed into local refineries, because US policy severely restricts the export of domestic crude. The sudden influx of domestic crudes has caused their
Nancy Yamaguchi, Contributing Editor,
discusses the outlook for the US refining industry.
Again
14March2015 HYDROCARBON ENGINEERING
US refining:
new
price to fall in relation to international crudes. In addition, Canada has increased its production of synthetic crudes and diluted bitumens from its oilsands resources. Canadian output is largely landlocked, and the US is its natural market. These factors have caused a strong rise in US refinery utilisation. Initially, this benefitted refineries directly in the path of the new crude supplies. More
recently, however, additional transport options have allowed crude supplies to flow to the coasts as well, evening out the countrys refinery utilisation. In addition, export options have expanded, including allowances for export of lightly processed condensate, trade with Canada, and potential exports to or crude swaps with Mexico.
15 March2015HYDROCARBON ENGINEERING
San Francisco skyline and Bay Bridge.
16March 2015 HYDROCARBON ENGINEERING
The inexpensive feedstock has been a boon to US refineries. But is the boon over? One of the key questions today is how the market will respond to the drop in global
oil prices, since oil prices affect so many facets of the business. At the time of writing, in January 2015, spot prices for West Texas Intermediate (WTI) crude have fallen below US$50/bbl. This is the lowest price since 2009, which was regarded as the worst year of the recession that caused such widespread suffering in the US and in many other countries around the world. There are now so many questions. Will prices remain low, and for how long? Will low prices shut in some of the US production from prospective shale plays? Will it shut in production in other parts of the world? With a more consistent low price regime worldwide, will other refineries increase throughput? Will there be a demand response? Will US refining lose its competitive edge in export markets? And ultimately, will the low prices succeed in shutting in non-OPEC production, derailing investments in alternative energy, and setting up the global market for another oil price shock? In many ways, a sharp downward correction in oil prices can be just as detrimental as an upward price spike. This article will discuss developments in US refining, how the industry has coped with recent changes, and which key changes may be on the horizon.
US oil product demand
DemandanddemandpatternAlthough the US refining industry is active in international trade, the industrys prime directive has always been the satisfaction of domestic demand. For the most part, this has kept the industry quite busy. The US is by far the largest oil market in the world, and it has had the most exacting and wide ranging product quality specifications, complicated further by regional and seasonal segmentation. The demand barrel is a high value one, overwhelmingly dominated by gasoline and middle distillates. Historically, consumers even purchased a disproportionate share of premium grade motor gasoline, adding to refiner profitability. This practice has grown less common, and many retail outlets now question the need to provide premium grade gasoline at all. So many changes have occurred that the industry has been in continual motion. The immediate future direction of the industry will hinge largely upon how the market responds to lower prices. To some extent, the lower prices will stimulate demand. But US refiners have become huge players in international export markets, and the likely level of demand growth is tiny in relation to the volume that the US now exports. The future profitability of US refining may rely much more on export markets than it has in the past.
One of the most profound changes in the US market is the change from growth in oil product demand to an era of shrinkage. Figure 1 displays the trend in US oil demand by product from 2000 through the January - October period of 2014. Unless otherwise noted, the data used here are the latest available from the US Energy Information Administration (EIA), and the 2014 data cited is an average of the January - October period. At the beginning of the decade, demand was expected to grow slowly but steadily. Demand for oil products plus LPG/NGLS reached 20.8 million bpd in 2005, but it hit a plateau. In 2008, a serious price shock hit the international market, and crude
0
5000
10000
15000
20000
25000
36707 37072 37437 37802 38168 38533 38898 39263 39629 39994 40359 40724 41090 41455 2014*
'000
bpd
Figure 1. US product supplied, 2000-2014*
Other
Fuel Oil
Diesel
Kero/Jet
Gasoline
Naphtha/PCF
LPG/NGL
0
5000
10000
15000
20000
25000
36707 37072 37437 37802 38168 38533 38898 39263 39629 39994 40359 40724 41090 41455 2014*
'000
bpd
Figure 1. US product supplied, 2000-2014*
Other
Fuel Oil
Diesel
Kero/Jet
Gasoline
Naphtha/PCF
LPG/NGL
Figure 1. US product supplied 2000 - 2014*.
Figure 2. Year on year change in US oil demand.
Figure 3. US product demand: average annual growth rates 2000 - 2014*.
Figure 4. AEO 2014 forecast of gasoline and distillate demand to 2040, and 2011 - 2014 (January - October) data.
-52
112 273
697
71
-115 -7
-1182
-727
409
-298 -392
397
82
-1500
-1000
-500
0
500
1000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 2. Year-on-year change in US Oil Demand
-52
112 273
697
71
-115 -7
-1182
-727
409
-298 -392
397
82
-1500
-1000
-500
0
500
1000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 2. Year-on-year change in US Oil Demand
-0.3%
-4.7%
0.4%
-1.4%
0.5%
-8.9%
-0.9% -0.3%
-0.1
-0.08
-0.06
-0.04
-0.02
0
0.02
LPG/NGL Naphtha/PCF
5Gasoline 5Kero/Jet Diesel 5Fuel Oil Other Total
Figure 3. US product demand: average annual growth rates 2000-2014*
-0.3%
-4.7%
0.4%
-1.4%
0.5%
-8.9%
-0.9% -0.3%
-0.1
-0.08
-0.06
-0.04
-0.02
0
0.02
LPG/NGL Naphtha/PCF
5Gasoline 5Kero/Jet Diesel 5Fuel Oil Other Total
Figure 3. US product demand: average annual growth rates 2000-2014*
8.75
6.84
3.90
4.62
8.91
4.01
3
4
5
6
7
8
9
10
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
mmbpd
Figure 4. AEO 2014 forecast of gasoline and dis?llate demand to 2040, and 2011-2014 (January-October) data
Gasoline AEO Dis8llate AEO Gasoline actual* Diesel actual*
8.75
6.84
3.90
4.62
8.91
4.01
3
4
5
6
7
8
9
10
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
mmbpd
Figure 4. AEO 2014 forecast of gasoline and dis?llate demand to 2040, and 2011-2014 (January-October) data
Gasoline AEO Dis8llate AEO Gasoline actual* Diesel actual*
UPDATE: BP ENERGY OUTLOOK 2035
Despite the recent weakening in global energy markets, ongoing economic expansion in Asia will drive continued growth in global energy demand over the next 20 years.For further information go to www.energyglobal.com/downstream
FRENCH OIL, GAS AND PETROCHEMICALS
In July last year, the French cabinet approved a long delayed energy bill that would be used to encourage energy efficiency. The bill is expected to become law early this year and the legislation poses some upside risk to BMI's gas consumption outlook. Natural gas could indeed become an attractive option as a backup to intermittent renewables. For further information go to www.energyglobal.com/downstream
MEDIUM TERM OIL OUTLOOK: MERRILL LYNCH PART 1
The share of energy consumption as a percentage of global GDP has dropped to just 3.7%, the lowest level since 2002. Global spare oil production capacity remails relatively low by historical standards. The current price shock is different to the last three because it is mostly driven by a massive surge in North American oil production. For further information go to www.energyglobal.com/downstream
USW STRIKE UPDATE
As strikes at US refineries entered their 13th day on Friday last week, Tesoro Corp announced that it was confident that its refineries in California and Washington could operate with its non-union workers for a 'very long period of time.'For further information go to www.energyglobal.com/downstream
Latest News
CADWorx 2015Plant Professional
2014 Integraph Corporation. All rights reserved. Intergraph is part of Hexagon. Intergraph and the Intergraph logo are registered trademarks of IntergraphCorporation or its subsidiaries in the United States and in other countries. AutoCAD is a registered trademarkof Autodesk, Inc.
Intergraph CADWorx Plant Professional
makes the creation of intelligent plant designs quick and easy. It has helped rmsproduce the high-quality deliverables their customers have come to rely on for over fteen years.
UP TO 30%FASTERMODELING& SMARTERDESIGN
www.intergraph.com/go/cadworx
AutoCAD -Based Intelligent 3D Piping Design Specication-driven Design On-the-y Collision Checking Structural Steel Equipment Ducting/Cable Trays ISOGEN Isometrics P&ID Creation and Links Links to Stress Analysis Design Review
Capabilities
Untitled-6 1 20/08/2014 14:31
18March 2015 HYDROCARBON ENGINEERING
spot prices skyrocketed above US$100/bbl. Recall that only a few years earlier, prices had been in the range of US$25 - 30/bbl. The US and several other major countries fell into serious recession. US demand fell by 1.9 million bpd between 2007 and 2009, and although demand has crept back up during the period from 2010 to today, it has not recovered to its 2007 level.
Figure 2 presents a closer look at the changes in oil demand by calculating the incremental year on year changes in demand. Between 2007 and 2008, demand dropped by 1.182 million bpd. Between 2008 and 2009, demand dropped by another 727 000 bpd. Demand rebounded by 409 000 bpd in 2010. It then fell again by 298 000 bpd in 2011 and 392 000 bpd in 2012. In 2013, demand rose by 397 000 bpd. Data for the first ten months of 2014 show a small increase of 82 000 bpd. However, early release
numbers for the full year of 2014 suggest that there will be a greater increase, and it is noteworthy that the large drop in prices did not occur until the early part of 2015. This suggests that US demand will grow more strongly in 2015 than has been forecast, barring geopolitical events that could force prices back up. Most forecasts of US oil demand foresee a long term downward slope, and this most likely will be the case. In the near term, however, low prices and an improvement in economic circumstances is expected to cause a slight rebound in demand.
For most US refiners, the most welcome rebound in demand would be in gasoline and diesel. Gasoline currently accounts for 53.6% of US finished product demand, and diesel accounts for 24.1%. Together, these two key fuels represent 77.7% of finished product demand. In 1985, the demand barrel included 48.1% gasoline, 20.2% diesel, and 8.5% fuel oil. US consumption of fuel oil has nearly vanished, since it has been phased out of all major end uses. Preliminary data for 2014 indicate that fuel oils share has fallen to 1.5% of the barrel. As Figure 3 shows, gasoline and diesel are the only two key fuels that maintained positive rates of growth between 2000 and 2014. The growth rates were small, 0.36%/y and 0.53%/y respectively, but in contrast, demand for fuel oil continued to decline at -8.86%/y, demand for naphtha and petrochemical feedstocks fell at -4.69%/y, and demand for kerosene and aviation fuels fell by -1.44%/y. In total, US demand fell at an average rate of -0.34%/y from 2000 - 2014 (January - October).
LongtermforecastofdemandIn the long term, the EIAs Annual Energy Outlook (AEO) forecasts that demand for liquid fuels and other petroleum will decline gently at an average rate of -0.052%/y between 2011 - 2040. The mix, however, will shift in favour of distillate fuel oil at the expense of gasoline.
Figure 4 presents the AEO 2014 forecast of gasoline and diesel demand, 2011 - 2040. In 2011, gasoline demand was 8.75 million bpd and distillate fuel oil demand was 3.9 million bpd. By 2040, the AEO forecasts that gasoline demand will fall to 6.84 million bpd (a drop of 1.91 million bpd) whereas distillate fuel oil demand is forecast to rise to 4.62 million bpd (an increase of 0.72 million bpd.) Overlaid on the chart, however, are data for 2012, 2013, and the January - October period of 2014. In both instances, the past three years brought a greater resurgence in demand than expected, most noticeably in the case of gasoline. Significantly, the recovery in demand pre dates the current sharp drop in oil prices. While it would not be sensible to merely extrapolate future demand upward from the recent deviation in the trend lines, it is logical to expect that the next official forecast will recalculate the long term outlook based on a higher starting point, as well as perhaps a lower price forecast. This assumes that prices remain low during the coming year.
In an overall economic sense, a downward price movement is a mixed bag. Lower oil prices can stimulate demand and, in the case of a net importing country, reduce imports. Yet persistent low prices could shut in higher cost shale oil production and stymie investment in alternative and renewable energy resources. Although many US
7 9 13 20 23 35 43 46 46 44
223
312
361
499
637
748 771 785
805 825
0
100
200
300
400
500
600
700
800
900
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 7. Ethanol use by US reners and blenders
Rener input of ETOH
Blender input of ETOH
7 9 13 20 23 35 43 46 46 44
223
312
361
499
637
748 771 785
805 825
0
100
200
300
400
500
600
700
800
900
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 7. Ethanol use by US reners and blenders
Rener input of ETOH
Blender input of ETOH
Figure 7. Ethanol use by US refiners and blenders.
Figure 6. US refiner and blender yield of gasoline and diesel.
Figure 5. US refinery capacity and number of operable refineries.
6,231
18,621
17,925 336 324
142
0
50
100
150
200
250
300
350
400
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
# of refineries
CDU capacity
Figure 5. US renery capacity and number of operable reneries
CDU capacity
# of operable reneries
6,231
18,621
17,925 336 324
142
0
50
100
150
200
250
300
350
400
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
# of refineries
CDU capacity
Figure 5. US renery capacity and number of operable reneries
CDU capacity
# of operable reneries
46% 46% 47% 47% 46% 47% 47% 46% 47%
49% 49% 49% 48% 48% 49%
21% 21% 21% 21% 21% 22% 22% 23%
24% 23% 23% 24% 25% 25% 25%
0
0.1
0.2
0.3
0.4
0.5
0.6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 6. US rener and blender yield of gasoline and diesel
% Gasoline % Gasoil
46% 46% 47% 47% 46% 47% 47% 46% 47%
49% 49% 49% 48% 48% 49%
21% 21% 21% 21% 21% 22% 22% 23%
24% 23% 23% 24% 25% 25% 25%
0
0.1
0.2
0.3
0.4
0.5
0.6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 6. US rener and blender yield of gasoline and diesel
% Gasoline % Gasoil
Linde Process Plants, Inc.6100 South Yale Avenue, Suite 1200 Tulsa, Oklahoma 74136, USAPhone 918-477-1200, [email protected], www.lppusa.com
Refiners ... are you burning money?Without a CRYO-PLUS unit on your fuel gas stream, you are.
How Linde can benefit your refinery:
Single source provider CRYO-PLUSTM technology for liquid recovery Integrated PSA for hydrogen recovery Experienced in brown field construction Our modular designs minimize field work
Linde Process Plants, Inc. has the experience and flexible process to maximize recovery of liquids from fuel gas. Our integrated solutions are supported with our knowledge in design, engineering, and construction.
Our patented technology provides the solution you need torecoverlostrevenue.Safeandefficientdesignsensurereliability and environmental compliance.
Visit us at the AFPA Annual Meeting March 2224!
20March 2015 HYDROCARBON ENGINEERING
refineries are independent companies and/or have been spun off in one way or another from large, integrated oil
companies, many retain interests stretching from upstream to downstream, and many have interests in alternative and renewable energy sources as well. In the near term, petroleum product demand (for all products except fuel oil) is expected to rise in 2015 over its 2014 level. Moreover, the shale plays now producing will remain economical, and output from them will continue to rise. Although there have been a number of projects that initially were estimated to require a price environment of US$70 - 80/bbl to be economically feasible, these projects are not the norm. There is a wide variety in breakeven costs among the tight oil developments in the US. Most producers believe that US output will continue to grow for the next few years even at US$50/bbl prices. Similarly, advances in unconventional production from Canadian oilsands reserves have brought down production costs, and Canadian output is expected to continue to grow. If global crude prices continue to sag, production from other non-OPEC sources might be the first to be cut. In such a case, crude acquisition costs to US refiners would remain relatively advantageous, just not as advantageous as they have been in recent years.
US refinery capacity and product output
RiseinoutputandutilisationIn spite of the recent decline in US refined product demand, US refiners and blenders have achieved gains in output during the 2000 - 2014 period. Refiner and blender net output rose from 17.2 million bpd in 2000 to 19.7 million bpd during the January - October period of 2014, amounting to an expansion averaging 0.9%/y. Yet as noted, US product demand fell at a rate averaging -0.34%/y over the same period. The end result has been a more aggressive move into export markets, made possible in part by inexpensive crude feedstocks. The recent drop in global crude prices is now leveling that field, and it will be up to US refiners to deal with a more competitive environment.
Of course, US refiners are accustomed to a competitive environment, after several waves of overcapacity, mergers, closures, and regulatory changes. Figure 5 shows the long term trend (1949 - 2014) in the number of operable refineries in the US and total operable capacity. In 1949, there were 336 refineries in the US, and total capacity was 6.2 million bpd. The average refinery size was 18 500 bpd. Operable capacity peaked in 1981 at 18.6 million bpd, with 324 operable refineries. Utilisation rates, however, were only 68.6%. Capacity was cut to 15.5 million bpd within the next five years. The number of refineries fell to 216, as the smaller, less efficient plants were shut down. Nameplate capacity settled at a plateau, and by the mid 1990s, it began to grow once again. The number of refineries continued to fall, however, and only the largest, most sophisticated of the lot survived. The US Department of Energy lists 142 operable refineries remaining, with an average size of 126 200 bpd.
As would be expected, the average US refinery is now sophisticated and experienced. As Figure 6 illustrates, the refiner and blender yield of gasoline rose from 46.1% in
13000
13500
14000
14500
15000
15500
16000
16500
17000
17500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 8. Rener net inputs to rening
Unnished oils
Oxy/Renewables
NGL/LRG
Crude
13000
13500
14000
14500
15000
15500
16000
16500
17000
17500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 8. Rener net inputs to rening
Unnished oils
Oxy/Renewables
NGL/LRG
Crude
Figure 8. Refiner net inputs to refining.
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 9. Blender net inputs
Gasoline Blending Components Renewable Diesel ETOH LPG/LRG
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 9. Blender net inputs
Gasoline Blending Components Renewable Diesel ETOH LPG/LRG
Figure 9. Blender net inputs.
0
100
200
300
400
500
600
700
800
900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 10. US gasoline imports have been replaced by GBC imports
Gasoline Imports
GBC Imports
0
100
200
300
400
500
600
700
800
900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 10. US gasoline imports have been replaced by GBC imports
Gasoline Imports
GBC Imports
Figure 10. US gasoline imports have been replaced by GBC imports.
2,221
7,694
6,097
1,941
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
kbpd
Figure 11. US reners blend a diminishing share of nished gasoline
Blender Net Produc:on of Finished Gasoline
Rener Net Produc:on of Finished Gasoline
2,221
7,694
6,097
1,941
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
kbpd
Figure 11. US reners blend a diminishing share of nished gasoline
Blender Net Produc:on of Finished Gasoline
Rener Net Produc:on of Finished Gasoline
Figure 11. US refiners blend a diminishing share of finished gasoline.
[email protected] www.kbcat.com blog.kbcat.comAMER: +1 281 293 8200 APAC: +65 6735 5488 EMEA: +44 1932 242424
KBC Advanced Technologies
KBC has just released new versions of its engineering software suite, which empower you with the industrys leading tools for Maximising Asset Performance. From strategic planning and investment studies through unit optimisation and performance monitoring throughout your value chain, KBC can help you make decisions with condence based on the delity and granularity of our technologies. KBCs superior platform enables management of your complex, multi-dimensional challenges and adds identiable value to your bottom line.
MAXIMISE YOUR ASSETS POTENTIAL
Advanced Technologies
www.kbcat.com/technology
SEE WHATS NEW
C
M
Y
CM
MY
CY
CMY
K
KBC Adv - Hydrocarbon Eng - March2015.pdf 1 2/19/2015 9:25:15 AM
22March 2015 HYDROCARBON ENGINEERING
2000 to 48.8% in 2014. The gasoil yield has risen from 20.8% in 2000 to 24.7% in 2014. The fuel oil yield, already low at 4.0% in 2000, has fallen to a mere 2.2% currently.
ThechangingroleofrefinersingasolineproductionThe use of ethanol as a transport fuel is now quite common, and it is widely known that ethanol blends are used in the US. However, the impact on US refiners is more far reaching than many observers realise. First, the US gasoline market is the worlds largest. Second, the US refining industry is the worlds largest also, and it evolved to maximise gasoline production. Third, the US is the worlds largest ethanol producer. Fourth, public policy calls for the use of a great deal of additional ethanol and other renewable fuels in the future. Thus, everything is being done
at such a grand scale that the impacts on US refining are huge.
The widespread adoption of 10% ethanol blends has radically changed the way finished gasoline is produced because of ethanols affinity for water. Because it is hydrophilic, the ethanol in ethanol/gasoline mixtures may pick up water in pipelines and tanks, and the water may later separate from the fuel, degrading fuel quality. Many fuel transport, handling, and storage systems are not well equipped to handle ethanol blends, so the common practice has become to blend ethanol at the last possible moment (often called splash blending). In fact, some dispensers allow the consumer to specify and blend custom mixes of ethanol and gasoline right at the pump, a practice that was popularised in Brazil but now is spreading to areas in the US where ethanol supplies and flexible fuel vehicles are abundant.
The majority of US ethanol, however, is used in 10% blends at standard dispensers, finalised by blenders instead of refiners. Regulatory compliance is tracked via a complicated system of renewable identification numbers (RINs). Figure 7 shows the trend in ethanol used by blenders and refiners from 2005 through the first 10 months of 2014. In 2005, refinery input of ethanol was 7000 bpd. Blenders used 223 000 bpd. Refinery input of ethanol has grown modestly, reaching 44 000 - 46 000 bpd in 2012 - 2014. In contrast, blender use of ethanol has grown immensely, reaching 825 000 bpd during the January - October period of 2014.
RefinerandblenderinputsFigure 8 and Figure 9 compare the net inputs to refining with the net inputs used by blenders. For refiners, the key input is crude oil (91 - 94%), with approximately 3% natural gas liquids, 2 - 5% unfinished oils, and 1 - 2% oxygenates, renewable fuels and other liquids. In 2005, these inputs totaled 16.4 million bpd. The recession and the slump in demand reduced inputs to 15.7 million bpd in 2009, but refinery inputs recovered and grew to 16.8 million bpd during the first 10 months of 2014. Crude oil inputs grew by 1.42 million bpd, displacing some unfinished oils, the use of which fell from 722 000 bpd in 2009 to 363 000 bpd in 2014.
Figure 9 shows blender net inputs. In 2005, blenders used 223 000 bpd of ethanol and 1.978 million bpd of gasoline blending components, a logical proportion, given that most of the gasoline produced by blenders is 10% ethanol, and some is E15 and E85. Blender activity has grown swiftly. During the January - October period of 2014, blenders used 825 000 bpd of ethanol and 6.800 million bpd of gasoline blending components (GBCs). Blenders also used 34 000 bpd of butanes and pentanes plus, and 37 000 bpd of renewable diesel.
The majority of the gasoline blending components are produced by refineries, typically in formulations that suit the particular market requirements and need only 10% of ethanol added pre sale to create on spec gasoline. While US refiners produce the majority of the GBC used, a major volume is imported as well. Figure 10 compares US imports of GBCs with imports of gasoline, 2000 - 2014. Finished gasoline imports peaked at 603 000 bpd in 2005. GBC
0
100
200
300
400
500
600
700
800
900
1000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 12. US gasoline at the 10% ethanol blend wall
Rener and Blender net input of ETOH
10% of gasoline demand
0
100
200
300
400
500
600
700
800
900
1000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 12. US gasoline at the 10% ethanol blend wall
Rener and Blender net input of ETOH
10% of gasoline demand
Figure 12. US gasoline at the 10% ethanol blend wall.
65
70
75
80
85
90
95
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
% refinery utilization
Figure 13. US Renery u1liza1on rates: strength in the center
P1 Ref U2l P2 Ref U2l P3 Ref U2l P4 Ref U2l P5 Ref U2l
65
70
75
80
85
90
95
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
% refinery utilization
Figure 13. US Renery u1liza1on rates: strength in the center
P1 Ref U2l P2 Ref U2l P3 Ref U2l P4 Ref U2l P5 Ref U2l
Figure 13. US refinery utilisation rates: strength in the centre.
0
500
1000
1500
2000
2500
3000
3500
4000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 15. Growth in US rened product exports
Other
Fuel Oil
Diesel
Kero/Jet
Gasoline/GBC
Naphtha/PC Feed
LPG
0
500
1000
1500
2000
2500
3000
3500
4000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 15. Growth in US rened product exports
Other
Fuel Oil
Diesel
Kero/Jet
Gasoline/GBC
Naphtha/PC Feed
LPG
Figure 14. Growth in barge, rail and truck deliveries of US crude to refineries.
3400 BissonnetSuite 130Houston, Texas 77005USA
Ph: [1] (713) 665-7046Fx: [1] (713) [email protected]
PROCESSCONSULTINGSERVICES,INC.
In troubled times fierce globalcompetition for premium crudesmeans that refinery units musthave the flexibility to handleheavy, viscous, dirty crudes thatincreasingly threaten to dominatemarkets. And flexibility mustextend to products as well ascrudes, for refinery productdemand has become more andmore subject to violent economicand political swings. Thus refin-ers must have the greatest flexi-bility in determining yields ofnaphtha, jet fuel, diesel and vacu-um gas oil products.
Rather than a single point processmodel, the crude/vacuum unitdesign must provide continuousflexibility to operate reliably overlong periods of time. Simplymeeting the process guarantee 90days after start-up is very differ-ent than having a unit still operat-ing well after 5 years. Sadly fewrefiners actually achieve thisnomatter all the slick presentationsby engineers in business suits!
Why DoManyCrude/VacuumUnits PerformPoorly?In many cases its because theoriginal design was based moreon virtual than actual reality.There is no question: computersimulations have a key roleto play but its equally truethat process design needs to bebased on what works in the fieldand not on the ideals of theprocess simulator. Nor should thedesigner simply base the equip-ment selection on vendor-statedperformance. The design engi-neer needs to have actual refineryprocess engineering experience,not just expertise in office-based
modeling. Refinery hands-onexperience teaches that fouling,corrosion, asphaltene precipita-tion, crude variability, and crudethermal instability, and manyother non-ideals are the reality.Theoretical outputs of process orequipment models are not. In thisera of slick colorful PowerPointpresentations by well-spokenengineers in Saville Row suits,its no wonder that units dontwork. Shouldnt engineers wear-ing Nomex coveralls who haveworked with operators and takenfield measurements be accordedgreater credibility?
Today more than ever before thisis important. Gone are the dayswhen a refiner could rely onuninterrupted supplies of light,sweet, easy-to-process crudes.
If you want to explore these issuesin technical detail ask forTechnical Papers 267 and 268.
A4 QUESTION PTQ AD :10 01 PC PTQ 0107 ADF 4/8/09 8:32 AM Page 1
24March 2015 HYDROCARBON ENGINEERING
imports were 510 000 bpd in that year. But imports of finished gasoline were sharply curtailed in the years following, and they have averaged only 52 000 bpd recently. GBC imports have largely supplanted gasoline imports, reaching a peak of 789 000 bpd in 2009. GBC imports have declined to 526 000 bpd since then, the reasons being weaker demand for gasoline and higher refinery utilisation, which has boosted the output of domestic GBCs for transfer to blenders.
The result is that US refiners today are responsible for a diminished share of US finished motor gasoline. As Figure 11 illustrates, in 2005, refineries produced 6.097 million bpd of finished gasoline, while blenders produced 2.221 million bpd. During the first ten months of 2014, refinery output of finished gasoline fell to 1.941 million bpd, while blenders produced 7.694 million bpd. In just one decade, US refineries went from finalising 73% of the countrys gasoline to just 20%.
The10%blendwallThe adoption of E10 across the US is essentially complete, as Figure 12 demonstrates. The top line calculates 10% of the countrys gasoline demand, while the bottom line presents refiner and blender net input of ethanol between 2005 and late 2014. The convergence of the lines marks the reaching of the 10% blend wall. When the renewable fuels standards (RFS) were initially adopted, the blendwall was deemed a distant obstacle because the contraction of the gasoline market was not foreseen. With the demand outlook for gasoline now in negative territory, there is a push to find more ways to raise consumption of ethanol and other renewable fuels.
The ethanol industry favours raising the blend limit to 15% ethanol, and E15 is indeed being sold in some areas. However, many vehicles and much of the fuel handling infrastructure are not ready for this switch. If E15 is pushed, it would cause US refining to undergo another round of adjustments, once again reducing output of petroleum based gasoline and GBCs. For many refineries, this would pose a serious threat to profitability. Yet many proponents of E15 believe that it is the only way to channel more ethanol into the transport sector, since market penetration rates for E85 and flexible fuel vehicles has lagged behind. Although ethanol prices have been favorable close to ethanol production centres in the Midwest states, the majority of the US driving population lives on the coasts, where E85 prices have not been competitive with E10 prices.
Refinery utilisation and trade behaviour
ShaleboomboostsrefineryutilisationGlobal crude prices were at a long, sustained high before their recent collapse. In the US, however, crude prices had already broken with international prices. In the year 2011, spot prices for Europes Brent crude were more than US$16/bbl above prices for US WTI crude. This was a major turnabout, since in 2004, Brent crude had been approximately US$3/bbl cheaper than WTI. The rapid growth in tight oil production from shale plays shook US crude production out of its long term decline and ushered in a period of renewed growth. Crude production has risen from 5.0 million bpd in 2008 to an estimated 9.1 million bpd in January, 2015. Most of the shale plays are in the north and central corridor of the country, reaching down to the US Gulf Coast. The existing pipeline network allows these crudes to flow south, but not easily to the east or west. The restrictions placed on exports of US domestic crude created localised surpluses of crude, causing US refinery utilisation rates to rise, particularly in the centre of the country.
Figure 13 shows the trend in refinery utilisation rates among the five US PADDs (Petroleum Administration Defense Districts). The US East Coast is PADD 1, where the majority of the US population resides. Its refining industry is relatively small and unsophisticated, however, and it has been the site of several refinery sales and closures. PADD 1 refinery utilisation rates have been the lowest in the country, falling below 80% in 2008 and even below 70% in 2011. The US West Coast is PADD 5. PADD 5 also experienced a slump in refinery utilisation, with rates falling to 80% in 2009. As domestic crudes grew more plentiful and cheap, refinery utilisation first rose in PADD 2 (the US Great Lakes and Midwest), PADD 3 (the US Gulf Coast), and PADD 4 (the Rocky Mountains). Refineries in these areas enjoyed pipeline access to less expensive domestic crudes. Pipelines are the favoured mode of crude oil transport, handling approximately 80% of the domestic crudes delivered to refineries. Tankers are the second largest mode of delivery, handling in the range of 10 - 15% of domestic crude deliveries.
0
500
1000
1500
2000
2500
3000
3500
4000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 15. Growth in US rened product exports
Other
Fuel Oil
Diesel
Kero/Jet
Gasoline/GBC
Naphtha/PC Feed
LPG
0
500
1000
1500
2000
2500
3000
3500
4000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 15. Growth in US rened product exports
Other
Fuel Oil
Diesel
Kero/Jet
Gasoline/GBC
Naphtha/PC Feed
LPG
Figure 15. Growth in US refined product exports.
Figure 16. US refined product exports by destination.
221
313 353
415
502 574
783
917
1,063
1,160
1,329
0
200
400
600
800
1000
1200
1400
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 16. US rened product exports by desAnaAon
N. Am
S. Am.
AP
Eur/Oth
221
313 353
415
502 574
783
917
1,063
1,160
1,329
0
200
400
600
800
1000
1200
1400
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
'000
bpd
Figure 16. US rened product exports by desAnaAon
N. Am
S. Am.
AP
Eur/Oth
For more information visit:www.hydrocarbonengineering.com
Global PublicationGlobal PublicationTanks & Terminals
Its on its way...
T&T.indd 1 18/02/2015 14:40
26March 2015 HYDROCARBON ENGINEERING
Getting the new shale crudes to additional refineries outside the existing pipeline network required the use of other transport modes. As Figure 14 shows, there has been a recent surge in the use of barges, trucks, and tank trucks (rail) to deliver domestic crudes. In 2010, these three modes accounted for only 6% of domestic crude deliveries to refineries. By 2013, the percentage had grown to 15%. Although these modes of transport are significantly more expensive than pipeline transport, they have been the key to getting additional domestic crude to refineries in PADD 1 and PADD 5. It is no coincidence that the increased use of these crude transport modes has corresponded with an improvement in refinery utilisation in PADDs 1 and 5.
TheUSbecomesanexportrefiningcentreThe growth in US refinery throughput has not been matched by a growth in demand. Excess output has hit export markets. The huge growth in US petroleum product exports by type is shown in Figure 15. In the year 2000, exports were under 1 million bpd. They more than tripled to 3.3 million bpd in 2014 (January - October.) One third of this is diesel, one of the fuels in greatest demand in international markets. Diesel exports have grown at rates averaging over 14%/y from 2000 through 2014. Exports have increased for every class of product, and for crude oil and natural gas liquids as well. Although it is common to hear the expression US crude export ban, it
is not really a ban, but a set of restrictions. US crude exports grew to 320 000 bpd during the first 10 months of 2014, 303 000 bpd of which went to Canada. There are discussions now underway to allow for a crude trade with Mexico to exchange up to 100 000 bpd of US light sweet crude for Mexican heavy sour crude. This plan would benefit both traders, alleviating the oversupply of light sweet crudes in the US and helping boost gasoline production in Mexico. Mexicos refinery investment and modernisation plans have been continually delayed, and product imports have grown. US refined product exports to Mexico have averaged over 500 000 bpd for the past four years.
Figure 16 traces the growth in US product exports by destination. With such rapid growth in exports, US products are now reaching markets around the globe, even to unexpected and far flung places such as Oman, Poland and Macau. But the main export outlet is the Western Hemisphere. Exports to Mexico and Canada are now averaging 1 million bpd, and exports to Central and South America are averaging 1.3 million bpd. Latin America used to be a significant exporter of refined product to the US, but its refinery capacity has stagnated despite many ambitious construction and modernisation plans. Figure 17 compares Latin American (including Mexico) refinery capacity with oil demand from 1965 through 2013, according to British Petroleum (BP). Crude capacity peaked at approximately 8.5 million bpd in 1980, but it fell to 7.1 million bpd in 1986 as many refineries closed during the time of overcapacity. Capacity gradually crept back above 8 million bpd by 2008, but BP noted capacity of only 7.6 million bpd in 2013. Demand, in contrast, has grown steadily, surpassing nominal crude capacity by 2010. Latin America therefore remains an attractive export market for US refiners.
The outlookThe US refining industry has faced a number of major challenges in past decades, including:
n Periods of overcapacity and poor or negative margins. n Changes in crude feedstock types, sources, and prices.
n International refinery expansion programmes and expansion of export refining.
n Successive waves of fuel specification changes, both home and abroad.
n Mergers, acquisitions, and a retreat from vertical integration.
n The shift to 10% ethanol blends and the transfer of gasoline finalisation to blenders.
n The influx of light tight oils from shale plays in the center of the country.
Now, more change is on the horizon. Some of the critical questions facing the industry are: n How low will global crude prices go, and for how long?
n Will low crude prices internationally erode the feedstock cost advantage recently enjoyed by many US refineries?
n What will the impact be on demand?
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1965
19
66
1967
19
68
1969
19
70
1971
19
72
1973
19
74
1975
19
76
1977
19
78
1979
19
80
1981
19
82
1983
19
84
1985
19
86
1987
19
88
1989
19
90
1991
19
92
1993
19
94
1995
19
96
1997
19
98
1999
20
00
2001
20
02
2003
20
04
2005
20
06
2007
20
08
2009
20
10
2011
20
12
2013
'000
bpd
Figure 17. Renery construc3on has languished in La3n America, while demand has con3nued to rise
Demand, Mexico+Lat.Am
CDU Capacity, Mexico+Lat.Am
Source: BP
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1965
19
66
1967
19
68
1969
19
70
1971
19
72
1973
19
74
1975
19
76
1977
19
78
1979
19
80
1981
19
82
1983
19
84
1985
19
86
1987
19
88
1989
19
90
1991
19
92
1993
19
94
1995
19
96
1997
19
98
1999
20
00
2001
20
02
2003
20
04
2005
20
06
2007
20
08
2009
20
10
2011
20
12
2013
'000
bpd
Figure 17. Renery construc3on has languished in La3n America, while demand has con3nued to rise
Demand, Mexico+Lat.Am
CDU Capacity, Mexico+Lat.Am
Source: BP
Figure 17. Refinery construction has languished in Latin America, while demand has continued to rise.
12000
13000
14000
15000
16000
17000
18000
19000
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14*
'000
bpd
Figure 18. Rela.onship between operable capacity, opera.ng capacity, and product supplied
Operable rening capacity
Finished Product Supplied
OperaCng renery capacity
12000
13000
14000
15000
16000
17000
18000
19000
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14*
'000
bpd
Figure 18. Rela.onship between operable capacity, opera.ng capacity, and product supplied
Operable rening capacity
Finished Product Supplied
OperaCng renery capacity
Figure 18. Relationship between operable capacity, operating capacity and product supplied.
Aim for More Diesel, Better DieselExxonMobils MIDWTM technology is a commercially proven process using an advanced proprietary catalyst for the production of ultra-low sulfur and low cloud point diesel.
Benefits include: Low-pressure, fixed bed process improves product yield and quality
Increased sulfur removal and reduced naphtha yields
Proprietary catalyst isomerizes waxy n-paraffins in gas oil, tolerant to H2S, ammonia, and organic S and N
Stand-alone or integrate with others
ExxonMobils MIDW Technology
Improves Product Yield and Quality
www.exxonmobil.com/tsl
FP.MIDW_4hydroEngin.indd 1 2/18/15 9:38 AM
n Will low prices shut in domestic production and derail progress in alternative and renewable energy sources, and if so, will this pave the way for another oil price shock?
n Conversely, if advances in alternative energy continue to be made, and/or if carbon taxes are adopted, will the US shift more quickly away from fossil energy?
n Will the US move toward 15% ethanol blends, cutting further into demand for oil based gasoline?
n Will the US relax its restrictions on exports of crude oil, removing what critics call a form of protectionism?
n Can the US remain a competitive export refining center in the Western Hemisphere and further afield?
ConclusionUS refiners have weathered many a storm, and they are not to be underestimated. Capacity and the number of participants hav
