ECA changes and its impact on distillate demand

Transcription

1 ECA changes and its impact on distillate demand Platts 4th Annual Middle Distillates Conference 30th January 2014 Hugh Tucker Technical Director

2 UK Petroleum Industry Association Trade Association for the UK oil refining industry & its marketing activities Some principles: Sound science Level playing field Practicable Flexibility Cost effective and Affordable Avoid gold plating of legislation Associate scheme for Process & Terminal Safety and Road & Rail Transportation. Ten Members BP Shell Phillips 66 ExxonMobil Murco Petroineos Essar Total Valero Marketing/Retail No refining Refining and Branded wholesale marketing Refining and Marketing Refining and limited marketing UKPIA members source more than 85% of the UK petroleum product market

3 EU refined product demand profile Distillate demand (Diesel/ Gasoil & Kerosene) increasing Continued but slower decline in gasoline demand Source: Purvin & Gertz, UK refining study

4 EU Refined product supply demand balance EU demand 304 EU demand 102 The EU currently net imports some 41mte of Diesel & Gasoil which is projected to grow to 54mte by 2030 Source: Purvin & Gertz, UK refining study

5 Evolution of Marine fuel sulphur to 2020 (2025) UK and Baltic Emission Control Areas IMO Marpol (annex VI), key dates: 1 st July 2010: ECA s 1.00% max S 1 st Jan 2012: Global Marine 3.50% max S 1 st Jan 2015: ECA s 0.10% max S 1 st Jan 2020: All Marine 0.50% max S Subject to review in 2018 which could defer to 2025

6 EU Marine Fuel consumption EU gasoil deficit post 2020 Up to 83mte If Marine included?? 41mte Current deficit ECA fuel ~10mte, HS fuel ~42mte Source : Europia / PFC energy / P&G In 2015: ECA fuel becomes 0.10% max sulphur In 2020: If HS fuel is required as Gasoil, or blends of Gasoil post 2020, this will add more to the overall EU Gasoil deficit, but overall demand will fall.

7 The refiners challenge Crude oil: typically much heavier than product demand LPG Naphtha/gasoline Kero/jet Gasoil/Diesel Heavy fuel oil 20 0 Brent Iran light Nigerian Russian Kuwait Demand Use available crudes: Adapt to quality variations Adapt to different crudes on a day-to-day basis Produce desired products: All products must be on-spec All must be produced at the same time Nothing can be thrown away! And minimise energy, GHG, environmental impacts and costs Source CONCAWE

8 Typical refinery processes Crude residue Catalytic cracking (FCC) versus Hydrocracking?

9 The impact on refining? Unit throughput (Mt) 60 0 These unit throughput trends assume that gasoline exports and distillate imports remain constant Cat Cracking (FCC) Hydrocracking, Residue HDS and other conversion Hydrogen Base case 2010 SECA bunker 1.0%S SECA bunker 0.1%S 1.0%S 2020 General bunker 0.5%S Throughput of gasoline-producing FCC units drops dramatically, due to declining gasoline demand. Significant capacity additions required of diesel-producing units (Hydrocracking), Residue hydro-desulphurisation, Residue conversion (Coking) and Hydrogen production units - Driven by IMO bunker sulphur reduction and growing demand share of distillates - Requires massive investment in new unit capacity & increases GHG! Note: Draft graphs and figures from CONCAWE work in progress

10 EU refineries however are facing increasing environmental legislation $/bbl Net Cash Margin after sustaining capital The figure does not include FQD7a, FQD other items and the Energy Efficiency Directive. Article 7a could, for example, add up to a further $2/bbl of cost at UK locations. Circa 11.4 billion is estimated for UK refineries only to comply with UK and EU legislation to Source: Purvin and Gertz UK refining report

11 The way forward a question of balance For Refining: In the UK our DECC s UK Refining Strategy must have real outcomes Call for meaningful Refining Fitness Checks by the EU Commission to inform European Policy and before potentially damaging new regulation enacted e.g. Fuels Quality Directive (FQD) Article 7a and Industrial Emissions Directive (IED) The UK and Europe needs a strong base of refineries investing for the long term to maintain supply resilience. For Marpol: The IMO 2018 review should, based on technology available at the time, compare: i. The cost (including the impact to supply resilience) to the oil industry of providing fuel at 0.50 mass % sulphur, and ii. The additional CO2 released associated with manufacturing these fuels, with iii. The cost of providing sulphur abatement equipment on board ships and/or sulphur trading schemes This should show that the cost to the oil industry is substantially higher than providing on board abatement measures and that higher sulphur fuels may continue to be used while at the same time meeting the emission levels set out in MARPOL Annex VI.

12 UKPIA Process & Terminal Safety and Road & Rail Transportation Associate Scheme Our Associate Scheme - Process Safety Associate, Transport Associate and Full Associate is now open to all companies with an interest in process safety and transportation within the oil, gas and other high hazard industries. By joining UKPIA you are part of an influential, authoritative and established association providing you with access to leading industry committees and to an experienced secretariat. To find out more about becoming a UKPIA Associate Visit the UKPIA website: Send an to: info@ukpia.com Call:

13 Thank You!