Low sulphur marine fuel options: Technical, environmental & economic aspects Maritime Stakeholder Event Michael Lane Secretary General, CONCAWE 1 st June 2011
CONservation of Clean Air and Water in Europe The Oil Companies European association for health, safety and environment in refining and distribution (founded in 1963) 2
CONCAWE Membership 4 Open to companies owning refining capacity in the EU 4 Currently 41 Member Companies: ALMA API APC BP CEPSA Chevron ConocoPhillips ENI ERG ExxonMobil Hansen & Rosenthal Hellenic Petroleum INA Ineos IPLOM Koch KPI Lotos Lukoil LyondellBasell Murco MOL Motor Hellas Neste Oil Nynas OMV Petrogal Petroplus PKN Orlen Preem Repsol RHG Rompetrol Sara SARAS Shell SRD ST-1 AB Statoil Tamoil Total 4 Represents nearly 100% of European refining capacity 4 Not for profit association, funded by Member Companies 3
EU-27+2 Transport Fuel Demand 250 200 Source: IEA/ Wood Mackenzie 2010 3.0 2.5 Demand Mt/a 150 100 50 2.0 1.5 1.0 0.5 Ratio diesel / gasoline 0 2000 2005 2010 2015 2020 Gasoline Jet/Kero Road Diesel 0.0 Road fuel demand continuing steady shift from gasoline to diesel Jet/kero demand expected to increase Ratio of on-road diesel to gasoline continuing to grow 4
The Refinery s Challenge Crude oil: typically much heavier than product demand 100 80 60 40 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 5
Refineries turn crude into multiple fit-for-purpose products 100.0 80.0 Yield (% on crude oil) 60.0 40.0 LPG Naphtha Gasoline Kero/Jet Gasoil/Diesel Heavy fuel oil 20.0 0.0 2005 High gasoline High diesel Demand Simple refinery Complex refinery 4 Achieving this requires complex process technology and hydrogen 4 Reforming to obtain the desired molecules and distribution 4 Residue conversion to crack larger molecules into smaller ones 4 Hydrotreating to obtain the desired product quality (e.g. S removal) 4 More refinery complexity means that more energy and more hydrogen are needed - and typically more CO 2 emissions 6
IMO proposed path to low sulphur marine fuels 7
EU refineries CO 2 emissions pathway to 2020 Heating Oil 50 ppm S Ultra low AGO PAH Marine fuels to 0.5% S distillate IMO: 0.5% S all marine fuels Demand 2015-2020 IMO: 0.1% S SECA FQD: Inland waterways GO 10 ppm S Demand 2010-2015 IMO: 1.0% S SECA FQD: AGO PAH 8%, Non-road diesel 10 ppm S FQD: Auto Oil-2 SLFD: Heating oil 0.1% S IMO: 1.5% S SECA & Ferries Demand 2005-2010 FQD: Auto Oil 1-2005 SLFD: Inland HFO 1% S Demand 2000-2005 SLFD: Heating oil 0.2% S FQD: Auto Oil 1-2000 Base case 2000 Demand changes Agreed quality changes Additional potential quality changes 100 120 140 160 180 200 220 Source: CONCAWE report 8/08 Mt CO 2 /a These figures assume constant energy efficiency frozen at the 2005 level 8
Effect of IMO bunkers on EU refining CO 2 emissions 160 Refinery CO2 (Mt) 150 145 140 130 129 135 133 137 125 120 110 100 2005 2010 2015 2020 2025 2030 Source: CONCAWE, based on PRIMES reference scenario of April 2010 Therefore some data not consistent with the previous chart Core case IMO case 4Refinery CO 2 emissions are linked to refining activity, reflecting market demand for fossil fuels and the processing intensity required to meet specifications. 4Full implementation of IMO bunker specifications in 2020 results in an increase in EU refining emissions of about 12 Mt compared to a core case without IMO. 4Declining market demand results in reducing emissions to 2030 but the incremental IMO bunker emissions remain unchanged. 9
Effect of IMO bunkers on EU refining investments Major unit investments 2030 rel. to 2005 Source: CONCAWE, based on PRIMES reference scenario of April 2010 Note: CONCAWE s investment projections are based on publicly available information and other non-confidential sources US$ Billion 35 30 25 20 15 10 5 0 Core case IMO case Distillate HDS HCU Coker LR HDS VR HDS POX Hydrogen 4The six major units shown here make up 85% of the total investment in 2030. 4Hydrocracker Units (HCU) form the biggest single unit investment type, amounting to 9 G$, in response to increasing demand for automotive diesel fuel. 4In the IMO case, the model assumes additional investment is mainly in residue desulphurisation units. These units need additional hydrogen production capacity for POX Hydrogen units, contributing 4 G$ to the total 16 G$ cost of switching to IMO bunkers. 10
2020 / 2025 0.5% Sulphur Cap 4 Mainly distillate fuel or distillate / residual fuel mix 4 Major conversion capacity addition: cokers, hydrocrackers, hydrodesulfurisation 4 Unprecedented volume transition on a global scale 4 Unknowns: development of emission abatement technology, demand evolution other fuels, ETS, 4 Supply & investment decisions by individual refiners Source: Purvin & Gertz, June 2009 11 11
Conclusions 2010 and 2012 changes to S content of marine fuels: crude slate optimisation and blending / segregation Longer term (2015-2025): unprecedented step changes & major investments needed refiners unlikely to be able to supply market in the same way Not currently possible to predict how the market will react Much depends on factors such as: the rate of ECA growth the application of abatement technology, etc. Switching marine fuels to distillate will increase the total supply chain CO 2 emissions GHG / warming impact of marine fuel S reduction is significant 12 12
For More Information Our technical reports are available at no cost to all interested parties CONCAWE Website: www.concawe.org 13