Octane and Refining - Energy Information Administration · PDF fileOctane and Refining Prepared for the 2017 EIA Energy Conference Washington D.C June 26-27, 2017. ... In refining,

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Octane and RefiningPrepared for the2017 EIA Energy ConferenceWashington D.CJune 26-27, 2017

Confidential. © 2017 IHS MarkitTM. All Rights Reserved.Source: © 2016 IHS Markit. All Rights Reserved.

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2017 EIA Energy Conference

Confidential. © 2017 IHS MarkitTM. All Rights Reserved.

What’s happening with octane? Octane links CAFE, RFS, and gasoline quality

• Octane improvement could be important enabler of more efficient engines

• Octane improvement could provide incentive for higher ethanol blends

• Gasoline quality improvements put pressure on refinery-sourced octane

• Tier III sulfur reduction

• Possible future aromatics limits

Automakers interested in harmonizing global gasoline quality

• North America octane below Europe, but similar to Japan

• Would global strategy converge on Euro grade 95 RON? Or higher?

If octane increases, how would refiners respond?

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What are gasoline and refined products?

• Gasoline is a key refinery product – others include LPG, jet fuel, diesel, fuel oil, asphalt and lube oils

• Gasoline and other products, like crude oil, are complex mixtures of many hydrocarbons.

• Gasoline must conform with physical, performance, and environmental specifications for operation of automobiles

• Physical – density, sulfur, …

• Performance – octane, stability, …

• Environmental – emissions, toxics, …

• Products are blends of multiple components from different refinery processes

• To meet the required specifications

• Goals are minimum giveaway at the least cost..

4



How are gasoline components produced?

Mainly, by processing crude oil in refineries.But some come from the petrochemical and biofuels industries.

5



Refineries are typically quite complex Important Processes Affecting Octane

SULFUR

DIESEL

KERO/JET

GASOLINE

SRU

LPG

HIGH PRESSURE HYDROCRACKER

DISTILLATEHYDROTREATER

MEROX

NHT/REFORMER

GAS PLANT

ADU

VDU

CRUDE

COKER

NHT/ISOMERIZATION

COKE

VGO HDS FCCU

ALKYLATION &POLYMERIZATION

FCC NAPHTHA HDT

The Reformer is the primary source of

incremental octane

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Refineries usually have a large number of gasoline blending components available

• Butane

• Natural Gasoline

• Light Straight Run Naphtha

• Heavy Naphtha

• Isomerate

• Lt Hydrocrackate

• Light Cat Gasoline

• Heavy Cat Gasoline

• Light Reformate

• Heavy Reformate

• Alkylate

• Polymer Gasoline

• Toluene

• MTBE/TAME (but not now sold in US)

• Ethanol

Gasoline has to meet specifications for many properties: • Octane, vapor pressure, distillation, sulfur, benzene, oxygenates,

contaminants, cleanliness, …

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Octane and vapor pressure are the two key specs: the diversity of properties shows the refiner’s challenge

Butane

Light Naphtha/C5+

Isomerate

Hydrocrackate

Light Cat Gasoline

Heavy Cat Gasoline

Light Reformate

Heavy ReformateAlkylatePoly Gasoline

MTBEEthanol

60

70

80

90

100

110

120

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

Blending RVP

Typical Blending Component PropertiesB

lend

ing

Oct

ane N

umbe

r -RM

/2

Finished Gasoline Region


8


60

70

80

90

100

110

120

130

MON RM/2 RON

Typical Blending Octane ValuesB

lend

ing

Oct

ane

Num

ber

Every component has different RON, MON, and AKI (RM/2)

95 to 100

Range

Very few refinery components exceed 95 RON – limiting the capability of refiners to improve pool octane to that level


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In refining, marginal costs typically drive market prices• Catalytic Reforming units are the primary controllable octane

source in the refinery

• Refiners can optimize unit throughput and severity (octane of product)

• Higher octane results in higher costs

• Reformers convert naphtha feedstock into high-octane, high-aromatics reformate with significant byproducts of hydrogen, fuel gas, and LPG

• The largest cost is the loss from converting naphtha (related to oil prices) to gas and hydrogen (related to natural gas prices)

• A wide spread between oil and gas raises octane costs and values

• Operation of other octane-producing units are less controllable• FCC, hydrocracker operations tied to overall refinery balance

• Alkylation operation determined by feedstock from FCC


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Yield effects are the most important driver of incremental octane costs

-50

0

50

100

150

200

250

300

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2000 2002 2004 2006 2008 2010 2012 2014 2016

Pric

e Sp

read

in C

ents

per

Gal

lon

Equ

ival

ent

Cos

t in

Cen

ts p

er O

ctan

e-Nu

mbe

r G

allo

n Yield Effects

Variable Cost

Gasoline versus NatGas Spread

Octane Cost versus Gasoline-Natural Gas Price Spread


11


Premium gasoline prices and octane values follow the cost to produce premium gasoline

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2004 2006 2008 2010 2012 2014 2016

Cen

ts p

er O

ctan

e-N

umbe

r G

allo

n

Incremental Refining Cost Spot USGC Octane Value - Conventional

Octane Cost verus Octane Price


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Ethanol is a high-octane component, but blending logistics are complex

Refinery produces BOB,is shipped to terminals

Ethanol blended with BOB to produce finished gasoline – inline or splash blending

Terminals storeinventory of Ethanol

Finished gasolinetransported to Gas Station

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High-volume ethanol blends are a potential route to higher pool octane, but impacts are non-linear• Ethanol boosts blend RVP by roughly

1 PSI at 2-3% (by volume) – the driver for the 1 psi RVP waiver

• In lower-concentration (up to 10%) ethanol blends, blending octane is in the 112-118 range

• Ethanol’s octane improvement declines as concentration increases

• E85 measured octane is typically in the 100-105 range

• Ethanol RON impact much higher than AKI

• Despite non-linearities and blending issues, high-ethanol blends could be one way to raise pool octane


14

60

70

80

90

100

110

120

130

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Volume % Ethanol

Ethanol Blending Octane ValuesBle

nding

Octan

e Num

ber (R

M/2)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0% 5% 10% 15% 20%

Volume % Ethanol

Impact of Ethanol Blending on RVP

RVP I

ncrea

se (P

SI)


High-volume ethanol blends face a number of potential roadblocks

• Ethanol is an effective octane improver

• Current RBOB RON is ~ 89

• 95 RON achievable with E15-E20

• 100 RON with higher volume blends and higher octane BOB

• But many barriers exist

• E10 blend wall – potential product liability issues

• RFS 15 billion gallon corn ethanol limit – no change despite significant improvements in carbon footprint

• RVP waiver not fully available in excess of 10% blends

• Investments in gasoline retail infrastructure needed

0

2

4

6

8

10

12

Volume % Ethanol

RM/2 RON

Impact of Ethanol Blending on Octane

Oct

ane

Incr

ease

Source: Szybist, Foster, Moore, Confer, Youngquist and WagnerSAE publication 2010-01-0619, published 04/12/2010


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Pressure to increase octane will remain…

• Automakers – higher octane opens avenues to higher efficiency

• Biofuels industry – higher octane could create incentives for higher-ethanol blends

• Refiners – unless ethanol solves the problem, refiners would bear the additional operating and capital costs. But is the alternative a world of battery-powered vehicles?


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Reinventing the Wheel (RTW) – IHS Markit StudyDisruptive forces are in play that could radically alter long-established trends in the auto industry and have profound repercussions for oil, chemicals, and electric power

Key global factors impacting the automotive industry ecosystem

© 2017 IHS MarkitSource: IHS Markit

Regulation pressure

Energy rivalry

Technology development

Societal change

Economicuncertainty

Ride hailing

Autonomous

Congestion

Environment andclimate issues

Connectivity


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Octane and Refining - Energy Information Administration · PDF fileOctane and Refining Prepared for the 2017 EIA Energy Conference Washington D.C June 26-27, 2017. ... In refining,