Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
Baker & O’Brien, Inc. All rights reserved.
14th Annual Bunker and Residual Fuel Conference
Compliance with IMO Regulations - New Strategies for Refiners in the U.S.
and Internationally
Aaron Imrie
June 20, 2017 Houston, Texas
2
Legal Notice
Baker & O’Brien, Inc., (Baker & O’Brien) prepared this report for the S&P Global Platts 14th Annual Bunker & Residual Fuel Conference. The opinions and findings in this report are based upon Baker & O’Brien’s experience, expertise, skill, research, analysis, and related work to date. This report relies upon public and proprietary data available to Baker & O’Brien at the time this report was prepared. All forecasts and projections contained in this presentation represent Baker & O’Brien’s best judgment, utilizing its skill, and expertise. However, such forecasts and projections are inherently uncertain due to the potential impact of factors or future events that are unforeseeable at this time or beyond Baker & O’Brien’s control. Baker & O’Brien prepared this report for the sole benefit of this S&P Global Platts 14th Annual Bunker & Residual Fuel Conference. Any reproduction, distribution, or disclosure of this information is strictly prohibited without Baker & O’Brien’s prior written authorization. Baker & O’Brien expressly disclaims all liability for the use, disclosure, reproduction, or distribution of this information by or to any third party.
3
• IMO Regulation and Compliance Options
• Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
• Comparative Advantage of Refiners in the U.S. Versus Other Regions
• Summary
Agenda
4
• IMO 2020 SOx regulation for bunker fuel offers competing compliance options.
• Demand side responses:
– Emissions abatement, i.e., exhaust gas scrubbers
– Reduce demand (slower steaming, etc.)
– Waivers (Non compliance!)
• Supply side responses:
– Increase MGO, MDO, ECA fuel type volumes
– Manufacture LSFO (0.5 wt.% max. sulfur fuel oil)
– LNG and other low sulfur fuel alternatives
Compliance Options IMO Regulation and Compliance Options
5
• Which compliance option will dominate over the long run?
• What might a refiner be thinking now? Perhaps:
Questions Abound… IMO Regulation and Compliance Options
6
• Which compliance option will dominate over the long run?
• What might a refiner be thinking now? Perhaps:
“This isn’t our first low sulfur rodeo, and it probably won’t be the last. But, this one doesn’t look
like the others.”
• Let’s look at this visually for more insight on that perspective.
Questions Abound… IMO Regulation and Compliance Options
7
Complex Market Dynamics
Gasoline (ultra low sulfur)
Jet/Kerosene
Diesel (ultra low sulfur)
High Sulfur Fuel Oil
Crude Refining
Natural Gas Steam
Methane Reforming
H2
SUPPLY SIDE
Sulfur
H2
IMO Regulation and Compliance Options
Sulfur has been removed on the supply side in diesel and gasoline markets.
8
Complex Market Dynamics
Gasoline (ultra low sulfur)
Jet/Kerosene
Diesel (ultra low sulfur)
High Sulfur Fuel Oil
Crude Refining
Marine Use
Natural Gas Steam
Methane Reforming
H2
HIGH SOx
?
SUPPLY SIDE DEMAND SIDE
Sulfur
Scrubbers
Low SOx
H2
IMO Regulation and Compliance Options
IMO 2020 compliance allows an option for sulfur to be removed on the demand side.
9
Complex Market Dynamics
Gasoline (ultra low sulfur)
Jet/Kerosene
Diesel (ultra low sulfur)
High Sulfur Fuel Oil
Low Sulfur Fuel Oil
Crude Refining
Marine Use
Natural Gas Steam
Methane Reforming
H2
HIGH SOx
?
SUPPLY SIDE DEMAND SIDE
Sulfur
Scrubbers
Low SOx
?
H2
IMO Regulation and Compliance Options
IMO 2020 compliance allows an option for sulfur to be removed on the supply side as well.
10
Complex Market Dynamics
Gasoline (ultra low sulfur)
Jet/Kerosene
Diesel (ultra low sulfur)
High Sulfur Fuel Oil
Low Sulfur Fuel Oil
?
Crude Refining
Marine Use
Natural Gas
Liquefaction
LNG
Steam Methane
Reforming
H2
HIGH SOx
?
SUPPLY SIDE DEMAND SIDE
Sulfur
Scrubbers
Low SOx
CAPEX, OPEX, Infrastructure Considerations
?
H2
IMO Regulation and Compliance Options
Natural gas competes in multiple ways as a solution.
11
Complex Market Dynamics
Gasoline (ultra low sulfur)
Jet/Kerosene
Diesel (ultra low sulfur)
High Sulfur Fuel Oil
Low Sulfur Fuel Oil
?
Crude Refining
Marine Use
Natural Gas
Liquefaction
LNG
Steam Methane
Reforming
H2
Inland Power/Heat
Scrubbers
HIGH SOx
?
SUPPLY SIDE DEMAND SIDE
Sulfur
Scrubbers
Low SOx
~
CAPEX, OPEX, Infrastructure Considerations
?
Coal, others…
Substitution?
~
Substitution?
H2
IMO Regulation and Compliance Options
12
• How will your industry adjust?
• For Refiners:
– If bunker fuel oil is NOT currently part of a your product slate, will LSFO (0.5% S) prices and demand be attractive enough to adjust the slate?
– If HSFO is currently part of the product slate, how low will HSFO prices go?
Questions to Consider Depending on Perspective
Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
13
Any Indication From the Financial Markets?
$(18.00)
$(16.00)
$(14.00)
$(12.00)
$(10.00)
$(8.00)
$(6.00)
$(4.00)
$(2.00)
$-
$/B
3.5% Fuel Oil Barges FOB Rotterdam Crack Spread Futures
∆=~$6/B (increasing discount)
Source: CME Group (Platts) “3.5% Fuel Oil Barges FOB Rdam (Platts) Crack Spread Futures Quotes Globex” http://www.cmegroup.com/trading/energy/#refinedProducts
January 2020
Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
http://www.cmegroup.com/trading/energy/#refinedProductshttp://www.cmegroup.com/trading/energy/#refinedProducts
14
• CAPEX related (proactive)
– Increase resid upgrading capacity (Cokers, Hydrocrackers)
– Increase distillate hydrodesulfurization capacity
– Increase sour gas treatment and sulfur recovery capacity
– Various combinations and/or newer technologies…
– What about the future of jet fuel (last sulfur “sink”)?
• OPEX related (reactive)
– Crude diet adjustments
– Adjust refinery flow rates (shift heavy, low-sulfur barrels)
– Increase (any) available unit capacity utilization
Types of Strategies Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
15
Basic FCC Cracking Refinery – Simplified Model
Crude
Sulfur
Fuel Gas
LPG
Gasoline
Jet/Kero
Diesel/AGO
Atm
osp
heri
c T
ow
er
H2
HDT
H2S
H2
H2S
FCC
LVGO
Light Ends Naphtha
Vacuum Resid
1
1
450°F
650°F
Vacu
um
To
wer
Gas Plant -Treating Sulfur Recovery
Reforming Alkylation & Isomerization
Naphtha Hydrotreating
1
HVGO
1050°F+
1050°F
950°F
LCO
MCB/Slurry
Source: PRISMTM Assay Viewer
650°F+
Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
16
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Brent37.5 API0.40 % S F
uel
Oil S
ulf
ur
(wt.
%)
Yie
ld (
vo
l. %
)
Fuel Oil Yield and Quality
VR MCB LCO FO Sulfur (RHS→)
Basic FCC Cracking Refinery – Simplified Model BASE CASE - BRENT CRUDE
Crude
Sulfur
Fuel Gas
LPG
Gasoline
Jet/Kero
Diesel/AGO
Atm
osp
heri
c T
ow
er
H2
HDT
H2S
H2
H2S
FCC
LVGO
Light Ends Naphtha
Vacuum Resid
1
1
450°F
650°F
Vacu
um
To
wer
Gas Plant -Treating Sulfur Recovery
Reforming Alkylation & Isomerization
Naphtha Hydrotreating
1
HVGO
1050°F+
1050°F
950°F
LCO
MCB/Slurry
Source: PRISMTM Assay Viewer
650°F+
0.00
0.50
1.00
1.50
2.00
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Brent37.5 API0.40 % S
Die
se
l S
ulf
ur
(wt.
%)
BE
FO
RE
HD
T
Yie
ld (
vo
l. %
)
Middle Distillates Yield and Quality
Diesel/AGO Jet/Kero Diesel Sulfur (RHS→)
Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
17
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Bonny Light35.1 API0.15 % S
Brent37.5 API0.40 % S
Arab Light32.5 API1.93 % S F
ue
l O
il S
ulf
ur
(wt.
%)
Yie
ld (
vo
l. %
)
Fuel Oil Yield and Quality
VR MCB LCO FO Sulfur (RHS→)
Basic FCC Cracking Refinery – Simplified Model COMPARE CRUDES
Crude
Sulfur
Fuel Gas
LPG
Gasoline
Jet/Kero
Diesel/AGO
Atm
osp
heri
c T
ow
er
H2
HDT
H2S
H2
H2S
FCC
LVGO
Light Ends Naphtha
Vacuum Resid
1
1
450°F
650°F
Vacu
um
To
wer
Gas Plant -Treating Sulfur Recovery
Reforming Alkylation & Isomerization
Naphtha Hydrotreating
1
HVGO
1050°F+
1050°F
950°F
LCO
MCB/Slurry
Source: PRISMTM Assay Viewer
650°F+
0.00
0.50
1.00
1.50
2.00
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Bonny Light35.1 API0.15 % S
Brent37.5 API0.40 % S
Arab Light32.5 API1.93 % S
Die
sel
Su
lfu
r (w
t. %
) B
EF
OR
E H
DT
Yie
ld (
vo
l. %
)
Middle Distillates Yield and Quality
Diesel/AGO Jet/Kero Diesel Sulfur (RHS→)
Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
18
Basic FCC Cracking Refinery – Simplified Model CRUDE DIET CHANGE
Crude
Sulfur
Fuel Gas
LPG
Gasoline
Jet/Kero
Diesel/AGO
Atm
osp
heri
c T
ow
er
H2
HDT
H2S
H2
H2S
FCC
LVGO
Light Ends Naphtha
Vacuum Resid
1
1
450°F
650°F
Vacu
um
To
wer
Gas Plant -Treating Sulfur Recovery
Reforming Alkylation & Isomerization
Naphtha Hydrotreating
1
HVGO
1050°F+
1050°F
950°F
LCO
MCB/Slurry
Source: PRISMTM Assay Viewer
650°F+
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
BL : Brent50 : 50
Fu
el
Oil S
ulf
ur
(wt.
%)
Yie
ld (
vo
l. %
)
Fuel Oil Yield and Quality
VR MCB LCO LVGO FO Sulfur (RHS→)
Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
19
Basic FCC Cracking Refinery – Simplified Model CRUDE DIET CHANGE II
Crude
Sulfur
Fuel Gas
LPG
Gasoline
Jet/Kero
Diesel/AGO
Atm
osp
heri
c T
ow
er
H2
HDT
H2S
H2
H2S
FCC
LVGO
Light Ends Naphtha
Vacuum Resid
1
1
450°F
650°F
Vacu
um
To
wer
Gas Plant -Treating Sulfur Recovery
Reforming Alkylation & Isomerization
Naphtha Hydrotreating
1
HVGO
1050°F+
1050°F
950°F
LCO
MCB/Slurry
Source: PRISMTM Assay Viewer
650°F+
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
BL : Brent50 : 50
BL : Brent75 : 25
Fu
el
Oil S
ulf
ur
(wt.
%)
Yie
ld (
vo
l. %
)
Fuel Oil Yield and Quality
VR MCB LCO LVGO FO Sulfur (RHS→)
Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
20
Basic FCC Cracking Refinery – Simplified Model CRUDE DIET CHANGE WITH VGO DOWNGRADE
Crude
Sulfur
Fuel Gas
LPG
Gasoline
Jet/Kero
Diesel/AGO
Atm
osp
heri
c T
ow
er
H2
HDT
H2S
H2
H2S
FCC
LVGO
Light Ends Naphtha
Vacuum Resid
1
1
450°F
650°F
Vacu
um
To
wer
Gas Plant -Treating Sulfur Recovery
Reforming Alkylation & Isomerization
Naphtha Hydrotreating
1
HVGO
1050°F+
1050°F
950°F
LCO
MCB/Slurry
Source: PRISMTM Assay Viewer
650°F+
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
BL : Brent50 : 50
BL : Brent75 : 25
BL : Brent75 : 25
FCC BYPASS
Fu
el
Oil S
ulf
ur
(wt.
%)
Yie
ld (
vo
l. %
)
Fuel Oil Yield and Quality
VR MCB LCO LVGO FO Sulfur (RHS→)
LVGO (0.3%) S
Strategies for Refiners Heading Toward 2020 and the 0.5% Sulfur Cap
21
Comparative Advantage of Refiners in the U.S. Versus Other Regions
Source: EIA
22
• Highly complex refinery configurations.
• Under utilization might allow some flexibility in adjusting yield slate; some “room to fill”.
• Relatively lower energy costs supported by inexpensive, abundant natural gas.
• Access to competitively priced “over-the-fence” hydrogen.
• Relatively minimal (forced) exposure to HSFO markets.
Advantage Boost for U.S. Refiners? Comparative Advantage of Refiners in the U.S. Versus Other Regions
23
• U.S. natural gas forecast for 2017 is 73.3 Bcf/d.
• 2018 is forecast at 3.3 Bcf/d (+4.5%) above 2017.
• Henry Hub price expected to remain low.
Inexpensive and Abundant Natural Gas
0
1
2
3
4
5
6
7
8
9
Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018
Henry Hub natural gas price dollars per million Btu
Historical spot price
STEO forecast price
NYMEX futures price
95% NYMEX futures upper confidence interval
95% NYMEX futures lower confidence interval
Source: EIA (Short-Term Energy Outlook, June 2017); EIA (Today In Energy) “United States Remains the World’s Top Producer of Petroleum and Natural Gas Hydrocarbons”, June 7, 2017
Comparative Advantage of Refiners in the U.S. Versus Other Regions
24
• Multiple hydrogen pipeline networks available; e.g.,
• Gulf Coast Connection Project (2012)
– Houston to New Orleans
– 600 miles of bidirectional pipeline
– 22 hydrogen plants
– Over 1 Billion Scf/D of hydrogen capacity
Access to “On-Demand” Hydrogen
Source: http://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdf
Comparative Advantage of Refiners in the U.S. Versus Other Regions
http://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdfhttp://www.airproducts.com/microsite/h2-pipeline/pdf/air-products-US-gulf-coast-hydrogen-network-dataSheet.pdf
25
US Refining Yield Trends: Less Heavy, More Light Oil Products
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0.0
5.0
10.0
15.0
20.0
25.0
PADD 11993
PADD 12016
PADD 31993
PADD 32016
PADD 51993
PADD 52016
Dis
till
ate
+ G
aso
lin
e Y
ield
s
Bo
tto
m-o
f-th
e-B
arr
el Y
ield
s
Yields (Volume % of Crude Oil)
Asphalt
Coke
Resid Fuel Oil
Distillate + Gasoline (RHS→)
0.74 %
Sulfur 1.42 %
Sulfur
1.43 %
Sulfur
Source: PRISMTM, EIA
2016 Average Resid Fuel Oil wt.% Sulfur
Comparative Advantage of Refiners in the U.S. Versus Other Regions
26
Underutilized Resid Upgrading Capacity
Crude
Sulfur
Fuel Gas
LPG
Gasoline
Jet/Kero
Diesel/AGO
Atm
osp
heri
c T
ow
er
H2
HDT
H2S
H2
H2S
LVGO
Light Ends Naphtha
Vac Resid
1
450°F
650°F
1050°F+
Vacu
um
To
wer
Gas Plant -Treating Sulfur Recovery
Reforming Alkylation & Isomerization
Naphtha Hydrotreating
1
HVGO
1050°F+
1050°F
950°F
Source: EIA
H2S
H2
HCU
FCC
Coker
1
Coker and Hydrocrackers have (some) “room to fill”?
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016
Uti
liza
tio
n R
ate
(%
)
Hydrocracking Utilization Rates
PADD 1 PADD 3 PADD 5
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016
Uti
liza
tio
n R
ate
(%
)
Coking Utilization Rates
PADD 1 PADD 3 PADD 5
Comparative Advantage of Refiners in the U.S. Versus Other Regions
27
-
500,000
1,000,000
1,500,000
2,000,000
PADD 1 PADD 3 PADD 5
B/D
Hydrocracking Capacity (2016)
Used Available
• PADD 3 offers most availability.
• Total 2016 U.S. coastal PADD available upgrading capacity was approximately 850,000 B/D (high end estimate).
Available Upgrading Capacity
-
500,000
1,000,000
1,500,000
2,000,000
PADD 1 PADD 3 PADD 5
B/D
Coking Capacity (2016)
Used Available
Comparative Advantage of Refiners in the U.S. Versus Other Regions
Source: EIA
28
It Matters What You “Fill It” With
Source: AFPM Paper AM-15-75 “Heavy Oil Import for Delayed Coking Feed” (Table 2 – Delayed Coker Yields for Different Feed Blends) Sloley et. al., March 22-24, 2015. Reproduced with authorization from CH2M HILL.
0%
20%
40%
60%
80%
100%
ATB VTB VTB + FCC Slurry75 : 25
VTB + Visbreaker Pitch85 : 15
SDA Pitch(65% Yield)
SDA Pitch(35% Yield)
Weig
ht
% o
f C
oker
Feed
Delayed Coker Yields for Different Feed Blends
Coke Gas Oils Naphthas Light Ends
Comparative Advantage of Refiners in the U.S. Versus Other Regions
29
• Lots of uncertainty! Which creates:
– Barriers to investment.
– Stand-offs between shippers & refiners.
• Reducing fuel oil sulfur can be challenging and options limited without making investments.
• U.S. refiners are generally poised to take advantage.
– Low energy costs (abundant, low-cost natural gas).
– Access to hydrogen.
– Asset underutilization?
• Although there are reports of significant under-utilization of upgrading assets, it is not enough to “solve the global problem”.
Summary
30
Baker & O’Brien – Independent Energy Consultants
www.bakerobrien.com
Dallas
12001 N. Central Expressway Suite 1200
Dallas, TX 75243 Phone: 1-214-368-7626
Fax: 1-214-368-0190
Houston
1333 West Loop South Suite 1350
Houston, TX 77027 Phone: 1-832-358-1453
Fax: 1-832-358-1498
London
146 Fleet Street Suite 2
London EC4A 2BU Phone: 44-20-7373-0925