Durban Refinery overview

7 March 2007

ARA

Agenda

Brief Refinery History and Processing

Scheme

Clean fuels programme

Bio fuels programme

Shutdown cooperation

Safety cooperation

Environmental challenges

Refinery History & Processing Scheme

Original Refinery - 1955

Engen Refinery today

Refinery History1951 - Construction begins

1954 - First start up of a small but Complex (for the time) refinery

1954 - 1969 Refinery expanded and new units added 4 times

1972 - Lube base oil manufacturing plant added

1973 - Sapref started. Crude imports moved away from Durban harbour

1974 – 1976: Two more expansions

1977 - Aromatic Solvents (BTX)

1981 -1993: Five Major investments to make higher quality products

1998 - Petronas buys 100% of Engen, delists Engen

2000 - WAIH buys 20% of Engen

2001 – 2005: Four Investment steps in Environmental projects and Clean fuels

Simplified flow diagram

Engen Refinery(2006)

Only the main plant units are shown, and many of the

interconnections have been omitted for clarity

Units in Red: Modified in Clean fuels phase 1

Units in yellow: Value compromised by Clean fuels phase 1

specifications that deviate from “Euro 3”

PROCESS

CONTROL

CENTRE

CR

UD

E O

IL D

IST

ILL

AT

ION

TO

WE

R

•

• - Phase 1 upgrade of new unit

- Phase 2 upgrade of new unit

OVERHEADS

(will become petrol)

SIDESTREAM No. 1

(will become paraffin/

jet fuel)

SIDESTREAM No. 2

(will become diesel)

BOTTOMS

(will become

lubricating oil

fuel/furnace oil

bitumen)

REFORMER

• NCPX

KERO HYDRO-

TREATER (HKT)

SCPX

CATALYTIC

HYDRO-

DESULPHURISER

(CHD)

NCPX

VACUUM

TOWER

COMBO

VISBREAKER

No. 2

(viscosity breaker)

COMBO

GAS PLANT

• NCPX

ALKYLATION

(OCTANE IMPROVER)

SCPX

ISOMERISATION

(OCTANE IMPROVER)

SCPX

PETROL PREPARATION

AND BLENDING

• OM&S

SULPHUR RECOVERY

• SCPX

BTX SOLVENT

PRODUCTION

SCPX

(increases octane rating of petrol)

(removes sulphur)

(removes sulphur)

LUBRICANT BASE OIL

PREPARATION (SAFOR)

FLUID CATALYTIC

CRACKER (FCCU)

• COMBO

ASPHALT UNIT

SCPX

EFFLUENT

TREATMENT

PLANT

• OM&S

Used process water

from all over the refinery

LPG

PENTANE

HEXANE

AVIATION GASOLINE

PETROL

AROMATIC SOLVENT

ALIPHATIC SOLVENT

SULPHUR

PARAFFIN

JET FUEL

DIESEL

LUBRICANT

BASE STOCK

HEAVY FUEL OIL

BITUMEN

ENVIRONMENTALLY

CLEAN/SAFE

EFFLUENT WATER

Crude Oil

Storage tanks

back to C

HD

back to g

as

pla

nt

to p

etr

ol

pre

para

tion

and b

lendin

g

Clean Fuels Programme

Phase 1 requirements

Elimination of lead in gasoline

Reduction of sulphur in diesel from 0,3 to 0,05%

Reduction of sulphur in gasoline from 0,15 to 0,05%

Effective 1 January 2006

Phase 1 elements

Dehexaniser

Cat Naphtha Splitter

Modifications to Diesel

de-sulphurisation unit (CHD)

Total cost: $40 million

Requirements were met but we had issues..

Phase 1 IssuesThe timeline was too rushed to deliver value to our

shareholders

CHD project was declared too late for optimal design

(energy and catalyst cycle length)

Hasty Engineering process caused environmental

impacts

Conclusion: We needed more time between

finalisation of specifications and start-up

Phase 1 Issues

Varying Planning and Construction Management skills within

Engineering and Construction companies

Loss of Contractor staff to other projects in Middle East / Asia

Lead contractor staff spread to thinly over refineries

implementing CF projects in same time-frame

Lack of development for good young resources

70% of construction workers were “first timers” despite our

training centre program

Conclusion: Stage implementation of such specification

changes

Phase 1 Issues

Change from original product specification assumptions

Imports of high octane blend stock

Large volume low octane petrol exports

Extent is that harbour berths are over-subscribed

Pentane and Hexane exported at prices below crude

Conclusion: Projects can not be built where exact

product specification roadmaps are not firm

Cleaner Fuels Phase 2

The objective of the Cleaner Fuel programme is to

produce fuel that enables motor vehicles to

substantially reduce exhaust and other fuel

emissions

The need to make CF1 fuel changes including the

removal of lead were clearly apparent

CF2 is more complex and changes should be driven

on a scientific rational approach

We must ensure that the changes have a net

positive impact on the environment taking all local

factors into account

CF2 scope

The proposal to introduce changes based on the Euro IV specifications, subject to the rational scientific approach and if justified the following units may have to be built at the Refinery:

Hydrocracker Unit (MHC)

Hydrogen Plant

Benzene reduction Unit

Sulphur Recovery Unit

Off site tankage, piping and utilities to support the above units

Together these projects will represent the most challenging programme ever undertaken by the Refinery with costs of $ 400 million

Phase 2: Engineering Issues• Globally, Engineering and Construction resources are limited due to world

economic growth. Several of our good construction resources have already

left the country

Major equipment like reactors and compressors can not be specified early in

projects of this nature. High pressure compressors and thick walled vessels

now require ~3 years lead time

EIA process for high pressure units is likely to be complicated

• Strong Engineering milestone review process needed as Engineering

resources available to us are relatively inexperienced

Locally, Engineering/Construction resources will compete with Infrastructure

improvement projects and other refinery Clean Fuels phase 2 projects

Conclusion A 5 year time-frame has been accepted for CF projects after

final specifications are declared

Phase 2: Economic Concerns

Will we have Euro 4 specifications,

USA specifications or a hybrid

specification?

Will Biofuels (Ethanol) introduction

into petrol lead to more Pentane and

Hexane exports?

How firmly can we understand final

cost, given the worldwide

construction boom?

Biofuels Programme

Bio-fuels status

A draft strategy document was issued for comment in December 2006

The programme aimes at using renewable raw materials to produce petrol and diesel components to supplement fossil fuel resources

Target of 4.5% of petrol and diesel volumes

Strategy suggests a maximum E10 in petrol and B5 in diesel

The programme is anticipated to be fast tracked and will reflect early in the already busy CF2 project plan

Depending on the specifications decided on the implications for the Refinery may be significant involving widespread project input

Bio-fuels Challenges

The introduction of ethanol into the gasoline pool, especially at low %s has impact on Refinery gas balance in the absence of waivers on gasoline volatility specs

Typically every litre of ethanol introduced into the petrol pool causes the displacement of 1 litre of light end hydrocarbon

Impacts of the introduction of Methyl esters into the diesel pool are being investigated, density and cold flow properties may impact on jet avails

Integration and implementation in the same window as clean fuels 2

Setting parameters that will ensure sufficient consistent quality and quantity of bio product for blending

Realistic fuel-price structure that will ensure viability for all concerned

Coping with additional demands on the country’s already stretched construction and engineering skills resources during development phases

Shutdown cooperation

Shutdown Network Forum

Vision

To create value by enabling effective large shutdown execution through the sharing of:

•Real time information

•Best practices

•Resource development

Mission

To create an environment where member companies obtain information to drive excellence in maintenance and construction to mutual benefit by:

•Providing integrated shutdown planning

•Managing resource quality and availability

•Influencing and communicating pertinent legislation

•Facilitating forums for sharing experiences and best practices

•Creating environments for skills development projects

OG & CM Artisan Skills Training

Project

• Widening of Scope– Early 2000s, skills shortage evident: quality and quantity

– Decision to look at training collaboration to meet construction and shutdown needs.

• Quantifying the shortage– National Advisory Council for Innovation

(NACI 2003)• 6000 skilled people short by 2010

• Focus on:

1. Electricians

2. Instrument mechanicians

3. Welders

4. Boilermakers

5. Fitters

6. Riggers

OG & CM Artisan Skills Training

Project• OG&CM established in May 2004

– Phase 1: R25 million discretionary grant from the CHIETA for 1 000 learnerships at NQF Level 2

– All six trades catered for.

• 18 training centres across the country

– Industry related

– Private

– FET Colleges

• Database of skills and generic safety induction

Safety cooperation

Advisory Risk Management Comm (ARMC)

Refinery GM level committee

Significant incidents are shared

Refinery visits / audits

Workshops, recent topics

Major Hazardous Installations

Sewer safety

Management of change

Permit to work

S A Petrochemical Fire Chiefs Committee

Advance Petrochemical fire training

Petrochemical Emergency Response Preparedness

Sharing of Fire/Incident Reports

E.g. Vacuum tower bottom line failure ignited the product.

Sharing of best practices, examples

Fire Pre-planning standards

Breathing Air Quality – use of air compressor and/or air cylinders, to supply workers working in tanks

Approach for Off-Site Emergencies

Evacuation Plans for Buildings

Floating Roof – Fire Protectio

Fire protection systems on floating roof tanks

Environmental challenges

General Environmental Issues

Engen refinery: its location makes it the most visible

Industry in the area

One of about 140 industries in South Durban

Responsible for about 10 - 20% of the emissions in

South Durban (from MPP cost allocation database)

Local Environmental NGO will not engage

constructively (e.g. objections to projects that reduce

emissions)

Tighter legislation and regulatory monitoring

Refinery History

History of the Refinery

ENGEN

Settlers Primary School

SAPREF

MONDI

Flares

Noise limit

Residential

(SANS 10103)

Industrial (SANS

10103)

Engen

permit

Daytime (06:00 to 18:00) 55 70 60

Evenings, Weekends

(18:00 to 24:00)

55 70 55

Night-time (00:00 t0

06:00)

45 60 50

Noise limits are a mixture of industrial and residential limits

Tighter Legislation

Permit limits on Sulphur Dioxide:

19 t/day source emission

35 allowed exceedances of ambient ground level 10

min limit per year.

Meeting the Challenges

VOC – VRU, ETP covers, fenceline monitoring (passive sampling)

SO2 – 2 x sulphur plants, ambient monitoring, DeSOx additive in FCCU

Flare – system is BAT compliant

Noise – steam leak repair programme

PM10 – FCC fourth stage separator, isokinetic sampling

Community engagement – complaints management, Community Liaison Forum, environmental awareness

ISO 14001 implementation

Questions? And Answers!