MSAR is manufactured utilising

By Dr. Simon Craige and Ian Hole MSAR : a new low-cost bunker fuel MSAR (Multiphase Superfine Atomised Residue) is a second generation oil-in-water emulsified fuel developed by Quadrise Fuels International plc (QFI) in conjunction with the specialist chemicals company AkzoNobel. MSAR is manufactured utilising refinery residues, the lowest value portion of the barrel. By blending these residues with typically 20 to 30% water as an alternative to the conventional back-blending of high value distillates to produce fuel oil there is considerable scope for cost saving. The inclusion of a small amount of highly stabilising chemicals as part of the MSAR formulation (see Figure 1) results in a robust liquid fuel, with superior combustion and emission performance and similar handling properties to fuel oil. From a refiner s perspective, MSAR offers a solution to the dilemma surrounding conventional heavy fuel oil (HFO) production: HFO is sold at a discount to crude, consuming valuable diluents and reducing refinery profitability. The value add of MSAR over HFO production is that no diluents are Figure 1: MSAR overview needed to produce a transportable product, releasing these valuable distillates for sale and increasing the overall refining margin. This also makes available the raw residue at a low cost, enabling MSAR to be manufactured and sold at a lower price per unit of energy (saving the customer typically 10-20% against HFO). The recent successful demonstration of MSAR where over 20,000 tonnes was manufactured at a large refinery in Lithuania, stored, transported 300km by rail and fired in a conventional power plant has now established the fuel as a competitive and commercially proven alternative to HFO. Work with major diesel engine manufacturers, as well as over 150,000 hours of commercial operation with first generation oil-in-water emulsion fuels has also demonstrated the potential for the use of MSAR in large diesel engines for landbased power generation. MSAR can equally be considered as a viable and significantly lower cost alternative for use in ship auxiliary and propulsion engines. As such it is an attractive prospect for the bunker market, which currently faces high price sensitivity with little or no inter-fuel competition and potentially a huge increase in costs arising from new legislative measures concerning reduction of sulphur, oxides of nitrogen and particulates emissions. Development of emulsion fuels Oil-in-water emulsion systems are characterised by being water continuous, and containing a suspension of oil phase droplets within the water phase (as opposed to water-in-oil emulsions that contain discrete water droplets within the bulk oil phase). Both types of emulsion technologies have been applied to improve the use of oil-based liquid fuels, but as shown in Figure 2, the additional benefits of the oil-in-water system (as represented by MSAR ) are considerable. Whereas water-in-oil technologies are based on the introduction of water and additives to the existing fuel oil adjacent to firing (which will result in an overall increase in costs, even taking into consideration the modest scope for improved efficiencies on modern combustion systems), MSAR is a specific fuel manufactured using cheaper sources of hydrocarbon, the use of which in such emulsified form gives rise to further improved efficiencies and environmental performance at significantly lower cost. In addition, because the oil (fuel) phase in MSAR normally come from completely non-catalytic origins, and is encapsulated as droplets within the continuous water phase, conventional problems in handling and fouling associated with contaminants in fuel oils (such as precipitated 42 bulletin 2009 volume 104 #6 Innovations

Figure 2: Differences in emulsion fuel types asphaltenes or catalyst fines) will not be apparent to the operator, reducing the need for fuel pre-treatment and filtering. The large scale commercialisation of oil-inwater emulsion fuels was originally pioneered by BP and Petroleos de Venezuela S.A. (PDV- SA), who developed Orimulsion (a previous commercially available oil-in-water emulsion fuel) as a means of monetising Orinoco bitumen. Commencing in 1990, a 6.5 million tonne per year market was established, with fuel manufactured in Venezuela being exported worldwide. Orimulsion was intended as a power market fuel and was therefore specifically precluded by PDVSA from entering the bunker market. By 2003 Orimulsion contracts with major electricity generating companies in North and Central America, Europe and Asia resulted in demand exceeding supply by over 300%. At the time when Orimulsion ceased production in 2006 (a politically driven decision), more than 60 million tonnes had been delivered, transported in conventional tankers from 5,000DWT up to VLCCs, using conventional storage and distribution facilities. This experience clearly demonstrates the stability and integrity of such emulsion fuels within a normal infrastructure of handling and transportation. Based on this know-how further improvements have been made by QFI with the development of MSAR, whilst also extending the choice of feedstock materials that can be utilised for emulsion fuel into a wide range of more readily available refinery residues. Diesel engine experience with emulsion fuels As noted previously, Orimulsion was specifically precluded from being supplied to the bunker market. Hence the principle application of emulsion fuel in diesel engines to date has been for power generation, predominantly using Wärtsilä engines. As a result of successful testing programmes, a 150MWe Wärtsilä Orimulsion -fuelled power plant complete with Flue Gas Desulphurisation (FGD) equipment was installed in Guatemala in 2004. Since commencement of the MSAR business this emulsion fuel development programme (see Figure 3) has been extended into a number of MSAR emulsion fuels produced from a variety of hydrocarbon types. The performance of MSAR in Wärtsilä tests has been similar or superior to Orimulsion (e.g. providing lower NOx, compared to operation with HFO), and the improved fuel stability of MSAR has removed the need to invert the emulsion to an oil continuous fuel prior to firing, significantly reducing the need for potential engine retrofit. Given the positive experience of emulsion fuels to date, and the on-going programmes to further improve the operational performance of engine based systems (reducing the emulsion fuel water content, while maintaining the same handling and stability characteristics), the introduction of this fuel into the bunker market is now seen as a natural step in the further commercialisation of MSAR as an alternative fuel for residual fuel oil applications. The bunker fuel market The global market for residual fuel oil is close to 10 million barrels per day or 500 million tonnes per year. Within this total, the global demand for bunker fuel currently equates to about one third, a proportion which is expected to increase in the future. In addition to the share represented by residual fuel oils, the shipping industry also consumes about 70 million tonnes of distillate bunker fuels annually. Whilst the bunker market is globally represented in every significant port in the world, there is a considerable concentration in a few major centres. In volume terms Innovations bulletin 2009 volume 104 #6 43

Figure 3 Emulsion fuel development on diesel engines over 60 million tonnes per year of the bunker trade is shared between the three major centres Rotterdam/Antwerp, Singapore and Fujairah with an estimated half of the global bunker trade being supplied from the 10 largest centres. The bunker market is centred on the core grade of 380 cst fuel oil (measured at 50oC). There are also lighter residue based grades, especially 180 cst, as well as the distillate grades, marine gas oil (MGO) and marine diesel oil (MDO). In recent years heavier 500 cst and 700 cst grades have been developed winning favour with some larger volume consumers, despite being available at only a very few locations. ly linked to the price of high sulphur fuel oil. Small differences in specification allow only a limited degree of variation between the bulk price of bunker fuels and generic fuel oil. For example, the current relative discount to be expected between 380 cst and 700cSt grade bunker fuels would be less than 5%. The cost of 380 cst fuel currently exceeds Bunker fuel prices The price of 380 cst bunker fuel is close- bulletin 2009 volume 104 #6 Owners have worked hard to reduce operating costs (such as optimising onboard Figure 4: Trends in the historic pricing of bunker fuels Despite these variations on bunker grades, there still remains no viable alternative to conventional oil-based fuels. From a viscosity point of view there is scope to use MSAR as a substitute for any or all of the residue grades, from the heaviest down to the lighter 180 cst fuel. In principle the established specifications of these grades can be met by MSAR, with the obvious exception of water content (and possibly density as the maximum economic advantage of MSAR will come from using heavy uncut residues which can give densities of up to 1.04 when mixed with water). 44 USD 420/tonne in all major locations as demonstrated in Figure 4 which shows recent prices of 380 cst material, before delivery charges, for Rotterdam and Singapore. At these prices bunkers represent the largest cost element in operation of most classes of vessel. I n n o va t i o n s

Figure 5: MARPOL Annex VI - NOx Limits, g/kwh (where n is rpm) Tier Date n<130 130<n>2000 n>2000 I 2000 17.0 45n^-0.2 9.8 II 2011 14.4 44n^-0.23 7.7 III 2016* 3.4 9n^-0.2 1.96 * In NOx Emission Control Areas (Tier II standards apply outside SECAs) labour, tolerating the disruption and inconvenience of the heavier 500 cst/700 cst grades and additional measures such as slow steaming), but such cost savings have been dwarfed by the overall recent trends in fuel economics. With MSAR providing the prospective to compete at a level of discount up to 10-20% against residue/diluent based bunker fuels, it makes for a potentially attractive alternative fuel. Impact of SECAs and other emission issues The bunker market has long been a primary sulphur sink for the world s refining industry with international regulations allowing the use of 4.5% sulphur fuel, resulting in the order of 10 million tonnes of sulphur dioxide being emitted by world shipping every year. Recent regulations have established a number of Sulphur Emission Control Areas (SECAs) in waters close to land, notably in the Baltic, North Sea and English Channel where the fuel sulphur limit is 1.5%. The International Maritime Organization (IMO) has set out even tighter limits which, by 2020 or shortly after, would require all ocean going shipping to meet a 0.5% sulphur limit globally with shipping in SECAs limited to 0.1% sulphur. This represents a massive challenge to the refining industry as there are inadequate low sulphur crudes available to produce the required volumes of fuel oil to these new specifications. Consequently the world s fleet will have to change, at enormous cost, to all distillate fuelling arising from the refining industry processing its residues to hydrocracked and desulphurised products. An alternative is the adoption of shipboard desulphurisation. Such systems are not currently without their critics in terms of cost and performance, albeit the technology has been readily applied to the power and refining sectors at varying scales. However, there is an opportunity that given the potential savings from using MSAR, its use in conjunction with the installation of onboard sulphur removal could be an optimal solution to addressing the cost of reducing sulphur emissions from shipping in the future. MARPOL Annex VI provides for future limits on NOx emissions. These are graded by engine speed. Commercially it is the lower speed engines that offer the most potential and these will be set the most lenient limit as shown in Figure 5. It is likely that MSAR would make a significant contribution to meeting these limits (reductions of between 20-30% have been seen when firing on engine based systems), however the extent would need to be established via testing with engine manufacturers. It is noteworthy that the footnotes to MARPOL VI anticipate the introduction of water into the combustion process as one of the technologies likely to be required to achieve Tier III standards. Operational issues Before the potential savings represented by MSAR can be realised, it is recognised that there are a number of other factors that will affect the overall cost equation. There are possibly a number of operational consequences that would arise from changing to MSAR which need to be evaluated, and these will have different impacts on different shipping categories/vessel types. Bunker capacity and Cargo cut out - Assuming a worst case nominal water content of 30%, MSAR has an energy density (MJ/kg) of about 68% of bunker fuel oil and hence more needs to be carried. Vessel Range - The lower energy density of MSAR will also reduce the maximum range of a vessel given any storage limitation in the extra fuel required as indicated above. Port Time Typically the likes of containerships run to tight schedules with short port visits. With 10,000 tonne bunker deliveries the large container ships already stretch the delivery infrastructure to the limit of what is possible with barge deliveries. With the need for additional volumes represented by using MSAR as a bunker fuel this aspect could be further impacted. With the development of lower water content MSAR formulations for marine market applications, the extent and potential impact of all the operational issues referred to above will be reduced. Opportunities for MSAR in the bunker market In summary, the use of bunker fuels exists within what will be, for the foreseeable future, a significant price sensitive market without the opportunity for inter-fuel competition. However, the introduction of MSAR emulsion fuel, even if considered in combination with on-board FGD scrubbing, may represent an opportunity to provide a viable and significantly cost competitive alternative to ship owners/operators (as summarised in Figure 6). On the realistic basis that strategically relevant refinery residues could be obtained at significant discounts to heavy fuel oil, it should be possible to produce emulsion fuels that are commercially very attractive. The resulting availability of such a competitive fuel alternative at 3 or 4 ports around the world could give access to a number of dedicated route vessels, providing opportunity for a significant share of the freight market. The containership market, with its com- Innovations bulletin 2009 volume 104 #6 45

Figure 6: MSAR as a competitive solution bination of high fuel consumption, fixed routings and low concern regarding the issue of cargo cut out, could appear to offer the best opportunity for MSAR market entry given the current perception of operational constraints. In addition, it may be the case that the anticipated tightening of sulphur regulations offers an opportunity to link conversion to MSAR with shipboard desulphurisation technology, delivering an overall cost competitive advantage with full environmental compliance. ll Editor s Note: Dr. Simon Craige, VP Technology, joined Masefield mid 2005, following a 3 year term acting as Managing Director of DOG A/S, a major Danish oil re-refining company. Simon holds a BSc in Applied Chemistry and a PhD in Bitumen Technology He has expert specialised knowledge of emulsion science combined with commercial application experience and a substantial understanding of power generation technology and related engineering. Earlier in his career, Simon was part of the BP Research Centre team involved in the development of the specialised technology supporting the Orimulsion venture with PDVSA in the late 1980 s. He then transferred to the Bitor joint venture where he held various positions working extensively in Europe in the co-ordination of major commercial developments associated with the conversion of thermal power stations to oil emulsion fuels. Ian Hole, VP Economics and Logistics, has worked in the energy industry for over 25 years including more than 10 years in the field of emulsified fuels. Following roles with BP in Corporate Planning and BP Gas, Ian worked as a product trader before joining BP Interna- tional s New Product Development Unit where he worked on the establishment of marketing company, BP Bitor, (a joint venture with Petroleos De Venezuela SA, PDVSA) to market Orimulsion. He then worked for the joint venture and subsequently transferred to PDVSA and became a Director of Bitor Europe with responsibility for commercial development. After leaving PDVSA in 2000 he joined former BP colleagues as a director of Quadrise Ltd and has remained with the project following the company s being absorbed in QFI. Ian has an MA in economics from Cambridge University. Quadrise Fuels International plc (QFI) is a public company listed on the AIM market in London. Its business is the manufacture of oil-in-water emulsion fuels from the low cost elements of the oil barrel to make a low cost alternative to heavy fuel oil for use power plants and large industrial diesel engines. 46 bulletin 2009 volume 104 #6 Innovations