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Refiners perspective on the changes ahead
Rob Cox21st March, 2017
What is IPIECA?
• Global oil and gas association for environmental and social issues• Formed in 1974 following the launch of UNEP• The only global association involving both the upstream and downstream oil
and gas industry• Membership covers over half of the world’s oil production
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http://www.ipieca.org
IPIECA members
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Addressing a wide range of topics
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Timeline
MARPOL = IMO’s International Convention for the Prevention of Pollution from ShipsMEPC = IMO’s Marine Environmental Protection Committee
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• Bunker Fuel Sulphur regulation changes
• Evolutionary changes:─ 4.50% S to 3.50% S─ 1.50% S to 1.00% S Tightening fuel specification - adjustments within refinery processes
• Paradigm shifts─ 1.00% S to 0.10% S: from LSFO to MGO─ 3.50% S to 0.50% S: from HSFO to desulphurized distillate and/or resid streams Major change in fuel type, implemented globally over a large volume in a short
transition time - major shift in refinery operations needed to produce marine fuels• Refining changes to produce new marine fuels• Refining changes to process fuels no longer needed on the market
Dealing with changes
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2015 ECA• 1% HSFO 0.10% MGO
2015 ECA Fuel S Change
MARPOL = IMO’s International Convention for the Prevention of Pollution from ShipsMEPC = IMO’s Marine Environmental Protection Committee
Data sources:BP Statistical Review of World Energy, June 2015Marine and Energy Consulting Ltd, Outlook for Marine Bunker & Fuel Oil to 2035, May 2014EnSys/Navigistics, Supplemental Marine Fuel Availability Study, 15 July 2016
IMO Review
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2015 ECA• 1% HSFO 0.10% MGO
2020 3.50% HSFO 0.50% Fuel
The Challenge
MARPOL = IMO’s International Convention for the Prevention of Pollution from ShipsMEPC = IMO’s Marine Environmental Protection Committee
Data sources:BP Statistical Review of World Energy, June 2015Marine and Energy Consulting Ltd, Outlook for Marine Bunker & Fuel Oil to 2035, May 2014EnSys/Navigistics, Supplemental Marine Fuel Availability Study, 15 July 2016
IMO Review
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Product Trends
Data source: BP Statistical Review of World Energy, June 2015
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2015 ECA• 1% HSFO 0.10% MGO
2020 (or 2025)• 3.50% HSFO 0.50% Fuel
The Challenge
MARPOL = IMO’s International Convention for the Prevention of Pollution from ShipsMEPC = IMO’s Marine Environmental Protection Committee
Data sources:BP Statistical Review of World Energy, June 2015Marine and Energy Consulting Ltd, Outlook for Marine Bunker & Fuel Oil to 2035, May 2014EnSys/Navigist6cs, Supplemental Marine Fuel Availability Study, 15 July 2016
IMO Review
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• Effective switch volume depends on scrubber penetration by 2020• Factors affecting scrubber installations:
• Economics – pay back period based on spread HSFO – 0.50% S fuel• Expectation on how spread may evolve• Dry dock schedule of ship• Scrubber suppliers and shipyard capacities
• S-curve to model penetration
Scrubber Penetration
Data sources: CE Delft, Assessment of Fuel Oil Availability – Final Report, July 2016EnSys/Navigist6cs, Supplemental Marine Fuel Availability Study, 15 July 2016 Note: 1 Mton/yr = ~18.4 kbd 11
• Fuel availability modelling studies pointed at fuel quality aspects that will need attention─ Meeting commercial fuel specifications – but these may evolve─ Flash Point─ Stability─ Compatibility
• What to expect in the real world?• 0.50% S demand will likely be met by a mix of components (distillates, low
sulphur residuals) and new fuel oil formulations as the market responds over time and new streams are introduced
• Too early for details – new formulations will depend on initiatives by individual suppliers
• ISO 8217 will consider 0.50% S developments in their next revision cycle• LNG will play a role as well in meeting marine fuel demand
Future Marine Fuel Mix
8 March 2017 12
05
101520253035
'00 '05 '10 '15 '20 '25 '30 '35
Lighter Product Mix Requires Higher Conversion Complexity
Virgin light ends
Atmos.Pipe-still
Naphtha Hydrofining Reformer
Distillate Hydrofining
LPG
Naphtha
Gasoline
Jet Fuel/Kerosene
Diesel/Distillate
Fuel Oil
CrudeOil
Vacuum Pipe-still
Alkylation
CokerGasoline
Jet Fuel/Diesel
Cracked Light Ends
Gas Oil
Gas Oil
Light Ends
AsphaltFuel Oil
Coke
Low Conversion Refinery Additional Medium and High Conversion Processing
Additional High Conversion Processing
Coker
Medium and High Conversion Unit RunsMBD
FCCU
HDC
Total
VGO Hydrocracker
(HDC)
Fluid Catalytic Cracking (FCC)
Source: ExxonMobil
EnSys/Navigistics study modelling work indicates far reaching changes needed within the global refining industry to meet 2020 marine fuel requirements, e.g:• Increased coker unit throughputs to upgrade residual streams
• Carbon removal process more crude oil required (+ 0.2-1.2 mb/d)
• Vacuum unit throughputs increase producing more vacuum gasoil (VGO)
Shifting Fluid Catalytic Cracking feedstock from VGO to resid• Can lead to increased refinery SO2 emissions• Regulatory constraints – need for added abatement facilities
Refining Changes Needed -1
Source: EnSys/Navigistics, Supplemental Marine Fuel Availability Study, 15 July 2016
Refinery challenges and opportunities will varyDecisions made by individual refiners
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• Increased severity on desulphurization/hydrocracking units• Substantial increases in H2, Sulphur recovery plant load• Decreases catalyst life – may not be sustainable
• 20% of export crude trade changes• Trade of non-crude supply, intermediates and finished products
increases, with 30% changing trade routes• 2 – 4.5% increase in global refining CO2 emissions predicted by
integrated refinery model associated with increased Sulphur removal and increased crude runs/coke output
Refining Changes Needed - 2
Source: EnSys/Navigistics, Supplemental Marine Fuel Availability Study, 15 July 2016
Refinery challenges and opportunities will varyDecisions made by individual refiners
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• Production of 0.50% S fuel requires a substantial Sulphur reduction in refinery products in a short period
• Raises required Sulphur recovery from 63 kton/day to 72 kton/day (~+15%)• Demand for hydrogen will increase accordingly
Hydrogen and Sulphur Removal – EnSys Assessment
Sulphur reduction to meet ULS
standards ppm
Timescale in years
Stages?
Gasoline / petrol
100 – 1000 10 - 20 yes
Diesel 1000 – 10000 10 – 20 yes
Annex VI 20000 - 30000 months no
Data sources: EnSys/Navigistics, Supplemental Marine Fuel Availability Study, 15 July 2016EnSys/Navigistics: Presentation at MEPC 70, 24 October 2016Marine and Energy Consulting Ltd, Outlook for Marine Bunker & Fuel Oil to 2035, May 20148 March 2017 14
• IMO decision on 2020 implementation of the 0.50% S rule removes an important uncertainty
• Two main compliance options
• Some uncertainties remain:• Evolution of global marine fuel demand• Penetration of scrubbers ahead of 2020• IMO implementation measures• Evolution of local “compliant fuels” market
Conclusion -1
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• Refining is an integrated business with numerous interdependencies – changes impact what products can be produced – all fractions must be used
• Refining industry preparation for the 2020 implementation
• Industry has track record of responding to regulatory changes• Investments are based on global market conditions and
regulatory outlook• Decisions made by individual refiners• Difficult to predict how well supply and demand will balance• Other market actors and supply chains involved – e.g. road
transport fuels
Conclusion - 2
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