CAPTURING THE MAXIMUM VALUE IN THE POST-IMO 2020 WORLD. Jock Hughson, Licensing Technology Manager, Shell Global Solutions

Transcription

1 CAPTURING THE MAXIMUM VALUE IN THE POST-IMO 2020 WORLD Jock Hughson, Licensing Technology Manager, Shell Global Solutions

2 DEFINITIONS AND CAUTIONARY NOTE The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation Shell, Shell group and Royal Dutch Shell are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words we, us and our are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. Subsidiaries, Shell subsidiaries and Shell companies as used in this presentation refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as joint ventures and joint operations respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as associates. The term Shell interest is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest. This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. 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In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F, File No , available on the SEC website You can also obtain this form from the SEC by calling SEC

3 AGENDA The implications of IMO MARPOL 73/78 Annex VI Potential response options Planning your response Selected response options Case study: How Shell Pernis refinery has increased crude flexibility and simultaneously minimised highsulphur fuel oil (HSFO) production The takeaways 2

4 THE IMPLICATIONS OF IMO MARPOL 73/78 ANNEX VI The International Maritime Organization (IMO) will tighten the global cap on the maximum sulphur content of marine fuel oil (MFO) from 3.5 to 0.5%. There are three options for the shipping industry: 1. SCRUBBERS 2. LNG 3. LOW-SULPHUR FUEL Issues include: Space constraints High capital expenditure (capex) Safe sludge handling Issues include: Space constraints High capex Only for new vessels 3mbd of HSFO bunkers will need to switch to 0.5%-sulphur MFO Blending low sulphur gas oil and vacuum gas oil (VGO) is an expensive solution. Many refiners are not prepared for 2020 and have limited low-cost/timely solutions 3

5 RESPONDING TO IMO 2020 WILL BE HIGHLY COMPLEX AND EXPENSIVE FOR MOST REFINERS Key factors that will influence individual refiners investment decisions: Existing process units How discounted they believe HSFO will be, and for how long The amount of capex they can afford. Shell has made Masterplans for all of it s refineries How will you respond? Do nothing Implement operational changes Evaluate possible options Low capex/quick implementation solutions Medium capex solutions High capex solutions 4

6 POLL Question How will you refinery respond to the upcoming changes to the Marine Fuel Oil specification; Invest in conversion to eliminate High Sulphur fuel oil Invest in facilities to reduce High Sulphur fuel oil Feedstock changes to reduce HS Fuel Oil production Other Not affected by the changes in regulations 5

7 Capex YOUR OPTIMUM RESPONSE DEPENDS ON REQUIRED RESIDUE CONVERSION AND AFFORDABILITY Residue slurry HCU SDA + ebullated bed HCU Delayed coker Gasification HIGH CAPEX, LOW ROI SDA + HCU revamp SDA + residue gasification revamp Crude flexibility SRU revamp Deep-flash VDU Add vacuum flasher downstream VBU LOW CAPEX, HIGH ROI MEDIUM CAPEX, MEDIUM HIGH ROI Residue conversion, % 6

8 DEVELOPING YOUR IMO 2020 RESPONSE: THE HYDROCARBON MASTER PLAN STUDY Customer led Long-term vision (customer led) Supply and demand Environmental and product quality requirements Business needs Business constraints (eg refinery configuration, capex) Price scenarios (eg HSFO discounts) Long list of identified options and ideas Initial selection Long list of options Option Screening Joint development Short list of options Option Development Recommended IMO 2020 response option Study premises Profitability analysis Risk assessment Integrated economics Implementation road map 7

9 WHY SHOULD REFINERS CONSIDER CRUDE FLEXIBILITY? A flexible crude diet could lift current refining margin by up to $1/bbl. Often requires only moderate capex. Critical to determine impact of Investments in residue conversion on crude flexibility. Fully assessing the risks is key: Higher risk of reliability issues and unplanned shutdowns (high TAN, high Nitrogen) But these can be mitigated. Shell is looking for opportunities to use opportunity crudes, and mitigating the risks, in all its refineries. 8

10 LOW CAPEX RESPONSE OPTION: CRUDE FLEXIBILITY Are you operating at the limits of your crude acceptance matrix? If not, you may be failing to capture maximum value. Some high total acid number (TAN) crudes are low in sulphur. This refiner could add more high TAN crudes and still be within its acceptable quality window. High TAN crudes are typically lower cost, so bring major cost savings while reducing HSFO. Crude changes require a new look at the catalyst and operations of the conversion and hydroprocessing units. 9

11 LOW CAPEX RESPONSE OPTION: SHELL DEEP-FLASH VACUUM DISTILLATION UNIT (VDU) Key benefits: Low capex Longer onstream unit cycle (four years +) Higher margin, less downtime, reduced fuel oil production Improved plant availability CDU AR HVU VR: Fuel oil Bitumen VGO HCU Naphtha UCO CCR Gasoline Kerosene/diesel Lift more and better quality VGO Shell deep-flash technology unlocks your downstream assets, while reducing HSFO. CDU AR HVU VR: Fuel oil Bitumen VGO CFH FCC Naphtha CCR Slurry oil Gasoline Gasoline LCO 10

12 LOW CAPEX RESPONSE OPTION: LEVERAGE LATEST-GENERATION CATALYSTS AND REACTOR INTERNALS Integrating Criterion catalysts and Shell reactor internals to handle heavier and more difficult feeds: Deasphalted oil (DAO), heavy VGO, ebullated bed VGO, visbreaker (VB) VGO in hydrotreating and hydrocracking units Increase throughput to handle the heavier feedstocks generated Comprehensive catalyst portfolio to help produce <0.5 wt% sulphur fuel oil: Higher HDS, metals and CCR reduction catalyst activity and stability Higher conversion capability to distillates 11

13 LOW CAPEX RESPONSE OPTION DOWNSTREAM VISBREAKER UNIT (VBU) Key benefits: Low capex Reduce fuel oil production VB gas oil can be upgraded in a hydrotreater or hydrocracker VBU can process VGO if lower capex solution required CDU AR HVU VGO VBU VB GO VF Naphtha HCU UCO CCR Gasoline/BTX Kerosene/diesel Reduce HSFO by almost 30% Fuel oil Bitumen 12

14 MEDIUM CAPEX RESPONSE OPTION: SOLVENT DEASPHALTER (SDA) + HCU REVAMP Comparatively moderate capex Can help to CDU AR HVU VGO Naphtha CCR Gasoline Reduce fuel oil yields Increase middle distillates Improve crude flexibility SDA DAO HCU Kerosene/diesel Improve net cash margin position No regret investment: a full residue conversion scheme can be added later (phased investment). Asphaltenes: Bitumen Power Gasification UCO For potential LSFO blending? Reduce HSFO by almost 50% 13

15 MEDIUM CAPEX RESPONSE OPTION: INTEGRATING SDA AND VB/THERMAL CONVERSION TECHNOLOGIES Moderate capex Different schemes available depending on existing refinery configuration. Can help to Reduce fuel oil yields Increase middle distillates Improve net cash margin position Reduce HSFO by almost 70% CDU AR HVU VGO SDA DAO Asphalt VBU Cracked gasoil Cracked VGO TGU Residue Gasifier, pelletiser or power 14

16 MEDIUM CAPEX RESPONSE OPTION: COKER DEBOTTLENECKING WITH SDA Medium capex Can help to Reduce fuel oil yields CDU AR HVU VGO Naphtha CCR Gasoline/ BTX Increase middle distillates Improve crude flexibility Improve net cash margin position Proven operation of hydrocracking DAO and heavy coker gas oil (HCGO) SDA DAO Coker HCGO Coke HCU UCO Kerosene/ diesel Reduce HSFO by 100% Generates Petcoke 15

17 PROOF POINT: SHELL PERNIS INVESTS IN SDA ROSE TO INCREASE CRUDE FLEXIBILITY AND MINIMISE FUEL OIL PRODUCTION Shell s Pernis refinery in the Netherlands is Installing an SDA ROSE unit Revamping its residue desulphurisation unit to a DAO hydrocracker. Compared with other technology options, the ROI could be extremely high (over 15%) AR HVU VR HVGO VR HDT VGO FUEL OIL Gasifier HCU FCC Naphtha Distillates Naphtha Distillates Gasoline Distillates Hydrogen Tight integration with other units will be vital. 16

18 PROOF POINT: SHELL PERNIS INVESTS IN SDA ROSE TO INCREASE CRUDE FLEXIBILITY AND MINIMISE FUEL OIL PRODUCTION Shell s Pernis refinery in the Netherlands is Installing an SDA ROSE unit Revamping its residue desulphurisation unit to a DAO hydrocracker. Compared with other technology options, the ROI could be extremely high (over 15%) AR HVU VR HVGO VR HDT VGO FUEL OIL Gasifier HCU FCC Naphtha Distillates Naphtha Distillates Gasoline Distillates Hydrogen Tight integration with other units will be vital. Value delivered 33% reduction in fuel oil production Increased middle distillate yield Improved crude flexibility AR VR HVU HVGO SDA ROSE DAO HCU Gasifier HCU FCC Naphtha Distillates Naphtha Distillates Gasoline Distillates Hydrogen 17

19 RESIDUE CONVERSION OPTIONS WILL REQUIRE AN IMPROVED SULPHUR HANDLING SYSTEM Shell s SCOT ULTRA technology features two improved technologies and offers a performance step change. Criterion s C-834 high-activity, low temperature catalyst Optimised process design SCOT ULTRA Shell/Huntsman s high-selectivity JEFFTREAT ULTRA family of solvents Drivers Stringent sulphur dioxide (SO 2 ) emission regulations, including World Bank standards (150 mg/nm 3 ) Minimising capex and operating costs Differentiators New generation of catalyst (Criterion) New generation of solvent (Shell) Low-temperature tail gas treating Largest footprint in the market (+60%) 18

20 THE TAKEAWAYS 1 2 There is no one-size-fits-all solution to upgrade the BoB. Develop a master plan to identify the optimal responses. The highest residue conversion technologies may not be the most profitable investment. Integrated solutions may provide better returns 3 Shell Global Solutions, as an operator and catalyst provider, has accumulated vast experience on how refiners can integrate their technology blocks to achieve cost effective solutions to HSFO management. 19

21 Questions and answers

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