European Refining Outlook to 2030: Technical & Economic Challenges

Transcription

1 European Refining Outlook to 2030: Technical & Economic Challenges European Forum for Science and Industry Roundtable: Scientific Support to EU Refining Capacity 1 October 2012 Michael Lane Secretary General, CONCAWE

2 Topics I will cover Refining Outlook: CONCAWE technical activities JRC related technical activities The refinery s challenge Demand outlook & distillate growth Required investment could it happen? Summary of conclusions Important note: All future projection estimates and assumptions are based on modelling work, published information & consultant studies. 2 2

3 A European Research Association CONservation of Clean Air and The Oil Companies European association for health, safety and environment in refining and distribution (founded in 1963) Water in Europe Active research in areas of importance to the European Refining Industry Auto Emissions & Fuel Quality Air Quality Water/Soil Quality & Waste Oil Pipelines Safety Refinery Technology Support Health Science Petroleum Products Risk Assessment Implementation of REACH & GHS 3

4 JEC Consortium The JEC research collaboration was initiated in 2000 by: JRC: Joint Research Centre of the European Commission EUCAR: European Council for Automotive R&D CONCAWE: Research Association of the European Oil Refining Industry Collaborative Projects : Projects Completed Well-to-Wheels (WTW) Study Versions 1, 2b, and 2c WTW Study Version 3c: enhancing pathways and vehicles Impact of ethanol on vehicle evaporative emissions (SAE ) Impact of ethanol in petrol on fuel consumption and emissions JEC Biofuels Study for a 2020 time horizon (2011) 2012: Projects in progress : Version 4 of the JEC WTW Study : Update of the 2011 JEC Biofuels Study 4

5 JEC research output is high quality The JEC Consortium s work does provide a high quality, reliable source of life-cycle assessment, energy use and greenhouse gas information for fossil and bio-fuels used in the EU. To our knowledge, there is no comparable data source Letter to JEC (July 2012) : Philip Owen. Head of Unit, DG Climate Action 5

6 2013 a Year of Air Quality in Europe : science is key Upstream Operations Refining Operations Petroleum Fuels Fuel Consumption H 2 S, VOC PM, NO X, SO X VOC Worker / Consumer Exposure to Fuel Evaporative / Combustion Emissions PM, NO x SO x VOC Atmospheric Processes VOC NO X SO X Smaller Particles CO Air Pollution 6 O 3, Aldehydes, Secondary Aerosol O 3, Nitrate PM Sulfate PM, Acid Aerosol Larger Particles

7 Refining BREF /IED: our technical input Draft2 (D2) of refining BREF released on 9 March: CONCAWE provided ~ 50% of all comments received by Seville We prepared detailed commenting, collected new data and provided operational interpretation Detailed data for 400+ stacks; 33 FCUs & 56 S recovery units Results so far: Several key Member States endorsed and referred to CONCAWE submissions and cost effectiveness Bubble concept is in the BREF and supported by companies and MS still effort required to put bubble values in BAT conclusions If D2 BATAEL ranges became final, the investment cost for EU refining could be B CONCAWE has published a report on the cost effectiveness of emissions abatement options in European refineries (# 6/11) CONCAWE proposals for the BATAEL ranges are generally consistent with the current TSAP [Thematic Strategy] in terms of /ton of pollutant abated 7

8 The Refinery s 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, CO 2, environmental impacts, and costs 8

9 Refineries convert crude to fit-for-purpose products Yield (% on crude oil) LPG Naphtha Gasoline Kero/Jet Gasoil/Diesel Heavy fuel oil High gasoline High diesel Demand Simple refinery Complex refinery Achieving this requires complex process technology and hydrogen Reforming to obtain the desired molecules and distribution Residue conversion to crack larger molecules into smaller ones Hydrotreating to obtain the desired product quality (e.g. S removal) More refinery complexity means that more energy and more hydrogen are needed - and typically more CO 2 emissions! 9

10 Biofuels and alternative fuels displace refined products Guide to terms used: Toe = tonnes of oil equivalent RED = Renewable Energy Directive E5, E10, E85 = gasoline containing 5%v, 10%v and 85%v ethanol B7, B10 = diesel containing 7%v and 10%v biodiesel HVO = hydrogenated vegetable oil BTL = biomass to liquids DME = dimethyl ether Total demand for road fuels in EU (Mtoe/a) Bio & Alternative road fuels, Mtoe/a Refined road fuels, Mtoe/a Bio & Alternative road fuels, %energy (RH axis) % 10% 8% 6% 4% 2% Bio & Alternative road fuels (%energy) Source: CONCAWE % Renewables reach 10% energy RED target in Ethanol: E5 protection grade and E10 for new vehicles >2005. E85 flex-fuel vehicles grow to 21% of total road fuel ethanol consumption in FAME: B7 protection grade and B10 for new vehicles > Other alternative fuels such as HVO, BTL, DME and electricity contribute 1.3% energy in 2020, growing to 2.9% in Renewable road fuels in 2030 replace 32 Mt of fossil fuels or 13% (mass) of the road fuels market. 10

11 Steady growth in share of refined middle distillates Distillates demand in EU (% m/m of total refined products demand) 70% 60% 50% 46.1% 48.9% 52.1% 56.7% 58.9% 59.9% 60.3% Distillate marine bunker 40% Heating oil 30% Diesel (non-road, rail and inland water) Jet/Kero 20% Diesel (road) 10% 0% Source: Wood Mackenzie, CONCAWE Middle distillate refined products are heavier than gasoline but lighter than heavy fuel oil: Jet fuel, heating kerosene, road diesel, non-road diesel, heating oil, distillate marine fuel. Total fossil middle distillates demand does not grow in absolute tonnage. Share of distillates in total refined product market continues to increase, reaching 60% in Contrasting market tonnage trends: Growing demand for jet fuel and distillate marine bunker. Declining demand for heating oil and road and non-road diesel. 11

12 Announced investments only address part of total needs 50% 40% EU27+2 Refinery Projects Capacity change by process unit versus year-end 2008 Capacity additions Capacity reductions Net change Capacity change (%) 30% 20% 10% 0% -10% CDU VDU REF DHC RHC FCC COK VIS HDS H2U Significant announced investments to increase capacity in refinery units aimed at: boosting distillate production (28% more Distillate Hydrocracker capacity) reducing residue production (37% more Residue Hydrocracker and Coker capacity) supplying hydrogen for cracking and sulphur removal reactions (49% more hydrogen production capacity) Total investment in announced expansion projects is estimated at 30 G$ 2011 Significant capacity reductions in units that boost gasoline production (FCC) and distil crude (CDU). CDU and FCC capacity reductions could more than double if the refineries temporarily closed in are not restarted 12

13 Substantial investment requirements Announced projects G$ IMO general bunker 0.5% Ferry bunker 0.1%, switch to distillate Demand SECA bunker 0.1%, switch to distillate Non-road Diesel 10 ppm S Inland Marine Gasoil 10 ppm Demand SECA bunker 1.0% FQD PAH 8% Demand G$ (2011) Estimated total investment of 51 G$ from 2008 to 2020 would be required to fully meet product demand and quality changes (including low sulphur bunker fuel), i.e. 21 G$ more than the estimated 30 G$ for announced investment projects. 51 G$ equates to about 1 $ 2011 /bbl of crude processed over the period Compared to typical historic EU refining margins of 1-5 $ 2011 /bbl. Declining demand post-2020 will lead to under-utilisation of new-build capacity. This could have a negative influence on investment decisions prior to

14 CO 2 emissions from EU refining Demand Demand IMO general bunker 0.5%, Ferry bunker 0.1% Demand SECA bunker 0.1%, switch to distillate Non-road Diesel 10 ppm S Inland Marine Gasoil 10 ppm Demand SECA bunker 1.0% Demand-related Quality-related FQD PAH 8% These figures assume constant refinery energy efficiency frozen at the 2008 level Demand 2010 Base case CO 2 emissions (Mt/a) Refining CO 2 emissions fell by about 7 Mt from 2008 to 2010 due to the drop in demand and refinery throughput. The major events contributing to increasing CO 2 emissions are the marine bunker sulphur reductions in 2015 and Combined impact is 15 Mt of additional CO 2 emissions from EU refining. Declining demand between 2020 and 2030 will lead to a decrease in refining CO 2 emissions of about 9 Mt, assuming no further product quality changes. 14

15 Energy Consumption: with & without efficiency improvements European Refineries Total Energy Consumption per t Net Input (w/o EII Improvement, Indexed) Total Energy Consumption per t Net Input (Indexed) If EII had not improved then energy intensity would be 11% higher Annual energy saved by improved EII is 64 ktoe per refinery on average, or about 6 Mtoe for total EU refinery population Equivalent to the total annual energy consumption of five large EU refineries Source: Solomon Associates 15

16 Summary: expected developments Biofuels and alternative fuels displace refined products Call on refinery production in steep decline Steady growth in share of refined middle distillates Operating rates decline in line with demand trends Major changes in refinery unit processing requirements Energy efficiency improvements do not completely offset higher energy requirements for quality changes Announced investments only address part of total needs Substantial investment requirements: IED / BREF compliance may be an additional high cost CO 2 emissions from EU refining : ~ flat Ship fuel sulphur reduction leads to a major CO 2 increase 16

17 For More Information Our technical reports are available at no cost to all interested parties CONCAWE Website: Europe s first electric car: Lohner-Porsche

18 Additional Information 18

19 REACH: a big effort with limited benefits The IUCLID stack of papers is a mock-up. The others are real, printed previously for other reasons. We did not really print the IUCLID file (and don t recommend anyone to print it ) One dossier (Gasoline) REACH for petroleum products: ~ 200 M cost to refining with more to come Limited health or environmental benefits (for our products) A massive bureaucracy which reduces resources available to address safety & environmental concerns 19

20 Fuel Quality Changes Have Contributed to Air Quality Emissions (as a % of 1995 level) Road Transport CO NOx PM-Diesel VOC Benzene SO 2 Source: European Commission 20

21 Declining product demand (including biofuels) Total demand including biofuels in EU (Mt/a) Mt 583 LPG Gasoline 500 Petrochemicals Middle distillates 400 Residual marine fuel Residual inland fuel 300 Others Source: Wood Mackenzie, CONCAWE Basis: JEC Fleet & Fuels model for road diesel and gasoline (2011); Wood Mackenzie for all other products (2011) New European fleet-average CO 2 emissions targets for passenger cars: 143 g CO 2 /km in 2010 (actual) 95 g CO 2 /km by g CO 2 /km by 2030 (assumed) Products demand expected to fall by 137 Mt (19%) between 2005 and Total diesel+gasoline road demand shrinks by 52 Mt (18%) between 2005 and

22 Increasing distillate/gasoline imbalance Total demand including biofuels in EU (% m/m) LPG Gasoline Petrochemicals Middle distillates Residual marine fuel Residual inland fuel Others MD/Gasoline ratio (RH axis) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Wood Mackenzie, CONCAWE 10% 19% % 61% Middle distillate / Gasoline demand ratio Steady decline in total demand but a steady growth in: Percentage of middle distillates, reaching 61% in 2030 Ratio of middle distillates to gasoline, reaching 6.3 in 2030 Increasingly difficult for gasoline-oriented EU refineries to meet this changing demand ratio. 22

23 Operating rates expected to decline with demand trends 90% Crude Distillation Unit Capacity or Throughput (Mt/a) 85.8% 80.7% 81.5% CDU throughput Mt/a CDU capacity Mt/a CDU utilisation % 74.5% 85% 80% 75% CDU Capacity Utilisation Rate (%) % Average EU refinery utilisation rate falls from 86% in 2008 to 82% in 2015, in spite of the announced closure of 5% (36 Mt) of refining capacity between 2008 and Mt of Crude Distillation Unit (CDU) expansion projects bring net CDU capacity reduction to 2% (17 Mt). Without further closures the CDU utilisation rate could fall below 75% by

24 Major changes expected in refinery unit processing Guide to terms used: FCC = Fluid Catalytic Cracking unit DHC = Distillate Hydrocracking unit COK = Coking unit RES HDS = Residue Hydrodesulphurisation unit H2 = Hydrogen production unit Note: These are the unit throughput changes required to meet product demand and quality changes without increasing the import/export imbalance of gasoline, diesel, jet and heavy fuel oil Steady decline in throughput of gasoline-producing units (FCC) Reflects shrinking gasoline demand. Contrasting steep increases in required throughput of: Units producing diesel and jet fuel (DHC) Units that crack or desulphurise residual fuel oil (COK and RES HDS) Units that produce hydrogen for the cracking and sulphur removal reactions (H2). 24