Mark Whittle, Quadrise International Limited, UK, examines a new disruptive technology that can significantly improve refining margins and distillate yield. T he large scale commercialisation of oil-in-water emulsion fuels was initiated by BP and Petroleos de Venezuela S.A. (PDV SA), who developed Orimulsion as a means to monetise Orinoco bitumen. Starting in 1990, a 6.5 million tpy market was established. The fuel was manufactured in Venezuela and ex ported worldwide, under contracts, to major electricity generating companies in North and Central America, Europe and Asia. Orimulsion was specifically prohibited from enter ing the bunker market by PDVSA. When production was terminated in 2006 (a politically driven de c ision), more than 60 million t had been delivered, in convention al tankers (up to VLCC), and using conventional storage and distribu t ion facilities. Based on this experience, further improvements have been made by QFI with the develop m ent of Multiphase Superfine Atomised Residue (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. MSAR technology provides an alternative option for the bottom of the barrel that can significantly improve a refinery s margin by increasing the distillate yield at the lowest capital cost, whilst creating an advantaged emulsified fuel oil for power generation, marine bunkers and refinery uses. MSAR is a second generation oil-in-water emulsified fuel developed by Quadrise International Limited (QIL) in conjunction with leading surface chemistry specialist, AkzoNobel, and bitumen emulsion plant supplier ENH. QIL is a leader in emulsion fuels, derived from the team that was
instrumental in the commercialisation of Orimulsion fuel for BP and PDVSA. MSAR fuel is manufactured utilising the most viscous refinery residues, i.e. the lowest value fraction of the barrel. By blending these residues with water and proprietary chemicals to produce a comparable fuel oil, as opposed to with high value distillates as per conventional blending, there is considerable scope for cost savings, as is demonstrated in Table 1. Oil-in-water emulsions are characterised by being water continuous and comprising a suspension of oil phase droplets within the water phase, as opposed to water-in-oil emulsions that contain discrete water droplets within a bulk oil phase. The advantage of an oil-in-water emulsion is that the droplet packing and water phase determine the final fuel viscosity, rather than the underlying residual oil viscosity. MSAR is a disruptive innovation that combines conventional blending equipment with proprietary technology, providing the know how to increase the refinery s production of distillates, whilst producing a lower cost fuel oil that benefits the refinery and the end user. The inclusion of small quantities of stabilising AkzoNobel chemicals, as part of the MSAR formulation, results in a highly stable fuel oil with superior combustion and emission performance, and similar Table 1. Case study: residue cut with LCO to make 380 cst HFO Percentage of resid in MSAR 70% Resid consumed by MSAR production 245 000 tpy MSAR MMU daily production 1000 tpd (single unit) MSAR annual production 350 000 tpy Stream values and properties US$/t Viscosity NCV (GJ/t) (cst at 50 C) Heavy fuel oil, 3.5wt% S 150 380 40.5 Cutter stock (LCO) 300 6.5 42.0 Refinery residue 35 890 001 39.0 Refinery fuel oil blend US$/t tpy Wt% Cutter stock (LCO) 300 187 544 43.4 Refinery residue 35 245 000 56.6 Refinery fuel oil blend 150 432 544 100 MSAR blend economics US$/t Ratio (wt%) US$/t MSAR Refinery residue 35 70 25 OPEX (water 29%, chems 1%, etc.) - 30 35 Variable cost of MSAR production (US$60/t) MSAR net calorific value (NCV, GJ/t) 27.3 NCV adjustment factor, HFO:MSAR= 1.48 MSAR equivalent value versus HFO (normalised for NCV) = US$101/t Variable margin created by MSAR versus HFO today = US$41/t US$14.5 million/y Assumptions: Dec 2015 market/assessment prices. Refinery residue netback as per HFO blending pool for 380 cst viscosity specifications. Opex for marine application. MSAR has a lower NCV due to the water. handling properties to conventional fuel oil. As a result, MSAR can be produced at the refinery and sold as an alternative fuel oil to major fuel oil customers on a B2B basis. Clients and project partners involved in MSAR development to date include A.P.Moller-Mærsk, Wärtsilä, MAN Diesel & Turbo, YTL PowerSeraya, CEPSA, PKN Orlen and a number of progressive oil majors. Drivers for refinery upgrading, benefits of MSAR When a refinery produces fuel oil, higher value distillate cutter stocks (or fluxants), are downgraded to the fuel oil pool to control viscosity and other specifications, depending upon the grade (RMG, RMK, etc). In simple terms, the heavier the crude or the more complex the refining process, the higher the cutter stock requirement per tonne of residue (Figure 2). The recent International Maritime Organization (IMO) regulations set out limits of 0.1% sulfur for emission control areas (ECA) and 3.5% sulfur globally. Future plans are under review for 2020-2025 that would require all ocean-going shipping to meet a global 0.5% sulfur limit. Conventional fuel oil blending economics, in conjunction with regulatory changes from the IMO, have resulted in a drive to reduce the quantity of fuel oil manufactured in integrated fuel refineries and, at the same time, a push to improve qualities to meet the market s demands for premium quality distillate transport fuels. For many refiners, downstream investment decisions are not easy ones, especially given today s low crude prices and margins. The capital investment for conventional residue upgrading typically amounts to billions of dollars and an implementation time of four to six years creates additional risk, given the future is now less certain than it ever was. While the IMO conducts the necessary studies into supply availability of 0.5 wt%s fuels for 2020-2025, many refineries are left in limbo. MSAR offers a solution for complex refineries producing heavy residues, and less complex refineries, where conventional upgrading is likely to be uneconomic due to scale or a lack of available finance. Calculating the value of implementing MSAR production requires an understanding of the refinery s fuel oil blending
economics. The netback value of the residue can be defined by using this simple formula: Residue value = fuel oil value - cutter stock value Simply put, provided that the cost of producing MSAR, including chemicals and an adjustment for energy content, is less than the upgrade value of the cutter stock released from the fuel oil pool, then there is a genuine case to investigate the potential of MSAR blending. This is generally the case for semi-complex refineries. It is worth noting that, even with the significant decline in crude prices, the spread between HFO and gasoil has remained supportive of MSAR production. Advantages of MSAR blending at the refinery The MSAR manufacturing process is relatively simple and is based around an online blending system that can be retrofitted into refineries. The existing blending infrastructure can remain, allowing existing unit and blending operations to continue if desired. The main process equipment, including the MMU, can be delivered in shipping containers, or supplied as skid/stick mounted modular constructions. The scope and approach is tailored to the refinery, especially with respect to available tanks and export facilities. Modular construction allows for simplified integration, thereby reducing expenditure, risk and implementation times, with the latter being typically less than 12 months. This modular approach also allows for further expansion at a later date. Capex is typically US$3-7 million for a standard 1000 tpd (6000 bpd) MSAR blending system with Opex in the range of US$20-35/t of MSAR. Capex is largely a function of available tankage and the MSAR grade produced, whilst Opex is largely a function of the stability required for the intended application. The power application has lower Capex and Opex than marine, where stability requirements are very high. The license fee is a percentage share of the value added to the refinery and end consumer. The middle distillate yield shift, achieved by releasing cutter stocks from the fuel oil pool, can be further enhanced through incremental yield benefits associated with changes in crude slate, and/or increased unit severity, because the MSAR process can be applied to very heavy residue streams (viscosity > 5000 cst at 100 C) relaxing current operating constraints. MSAR fuels also have improved combustion and compatibility characteristics providing operational and environmental benefits. From a compatibility perspective, because the hydrocarbon component is encapsulated as droplets within the continuous water phase, conventional operational problems such as precipitation of asphaltenes during storage or blending of cracked HFOs will not occur as no chemical reaction takes place between the hydrocarbons, reducing the effects of incompatibility during blending and the need for fuel pretreatment and filtering. Environmentally, the tiny hydrocarbon droplet size (5-10 μm) results in lower black soot particulates and reduced boiler fouling as complete burnout is achieved, reducing the ash and particulate emissions to the level of inorganic material in the fuel. Furthermore, the water content reduces the combustion temperatures, resulting in significant NO X reductions, 1. Oil residues are taken from refinery rundowns and the temperature adjusted to achieve the required input viscosity (typically 300-500 cst). 2. Water, derived from utility or waste water sources is blended with proprietary chemicals prior to the residue stream. 3. Special chemicals are added to stabilise the emulsion for long term storage and transport, and to promote complete combustion. 4. The mixture is processed in a proprietary colloid mill to produce a stable oil-in-water emulsion fuel (approximately 70% oil) with a viscosity of 200-400 cst (50 C). Figure 1. MSAR manufacturing unit (MMU) and process. Figure 2. Cutter stock requirements for HFO 380 cst production. The economics of MSAR are driven principally by the spread in refinery heavy fuel oil (HFO) and gasoil (MGO) values and not the absolute crude oil or product prices. During the last four years, the approximate US$200 400/t range has supported the MSAR case, this is still true today with crude oil at less than US$50/bbl and spreads at approximately US$200/t. Figure 3. MSAR economics are driven by the HFO/gasoil spread.
e.g., reductions of 20-50% have been achieved when firing on engine-based systems. Given the low Capex and Opex costs compared to the significant distillate yield shift and associated increase in refinery margins and combustion performance, MSAR projects can have high IRRs and fast paybacks in the range of 6-18 months. A simple case study is presented in Table 1. Case study Evaluating the economics of a hypothetical semi-complex refinery, producing HFO from a blend of thermally cracked visbroken residue and LCO cutter stock and installing a single MMU producing 1000 tpd of MSAR illustrates that the margin created from MSAR production can conservatively equate to approximately US$41/t of MSAR on an equivalent basis If the refinery produces 350 000 tpy of MSAR (which equates to 245 000 tpy of residue) this would equate to an additional margin in excess of US$14 million/y. Taking a Capex of US$7 million, i.e. the top end of the range stated above, and allowing additional costs for the licence fee and marketing, the fuel would allow payback in 12-18 months. Applications MSAR can be transported, stored and combusted in the same manner and systems as HFO and at ambient temperatures. As a direct, lower cost substitute for conventional HFO it has three primary markets: power generation, marine bunkers and refinery uses. Utilities MSAR is an alternative to HFO or natural gas for major utility and industrial consumers. There is significant experience in the use of oil-in-water emulsion fuels for power applications, as evidenced by in excess of 60 million t or Orimulsion that has been consumed worldwide. QIL continues to build on this experience with a successful demonstration at the Orlen Lietuva refinery in Lithuania, where over 20 000 t of MSAR was manufactured from visbreaker residue, stored, transported 300 km by rail and fired in a conventional power plant, establishing the fuel as a competitive and commercially proven alternative to HFO. Currently, QIL is working with a Saudi oil major to develop a production to combustion demonstration project to highlight the suitability of MSAR for power generation, which will incorporate an extended trial on a 400 MWe thermal power unit. Engineering design and site preparation work has commenced and activities are ongoing. Marine bunker applications QIL has agreements with A.P.Moller-Mærsk, the world s largest container shipping company, for marine MSAR, a replacement bunker fuel oil. There is an ongoing joint development programme covering all aspects of the use of MSAR as a bunker fuel, i.e. combustion, quality, transport, storage and bunkering. Between 2013 and 2014, a marine MMU was installed at the PKN Orlen Mažeikiai refinery in Lithuania, and approximately 1000 t of marine MSAR was manufactured to conduct proof of concept trials. The test engines were large, slow speed, two-stroke engines and the trials were declared successful by both engine manufacturers (Wärtsilä and MAN) and MSAR was deemed a viable fuel for use in their engines. Following on from this, the next step is to run a seaborne Letter of No Objection (LONO) trial starting in 2016, which is a 4000 hour continuous running trial that will provide the approval for rolling out MSAR to more vessels, fleets and therefore refineries. QIL signed agreements in September 2015 with Maersk and CEPSA for the LONO production and supply and is now in the EPC phase to install a 6000 bpd MMU at CEPSA s 240 000 bpd Refinery Gibraltar-San Roque for this LONO trial, and potentially future commercial supplies. Refinery and industrial uses MSAR can be used as an alternative to HFO in areas such as refinery operations, industrial boilers and cement manufacturing. One current development involves working with YTL PowerSeraya, Singapore, which previously consumed 1.8 million tpy of Orimulsion, and is now investigating MSAR options. A second is working with a mid-sized refinery in Africa, which is evaluating MSAR for refinery fuel with potential scope to expand production to cover domestic power plant and/or marine applications. Conclusion MSAR blending technology is a disruptive game changer for refiners as it converts high viscosity, low value, bottom of the barrel residues into advantaged emulsion fuel oils without the need for high value distillate cutter stocks. The blending technology is supported by some of the best world-scale industry participants covering technology, engineering, production and end use. MSAR production releases high value distillates from the fuel oil pool, thereby significantly boosting the refinery margin, whilst producing advantaged emulsion fuels that can be transported, stored and combusted in the same manner and systems as HFO, and which are suitable for power generation, marine bunkers and use in refineries. In addition, the technically superior pre-atomised fuel has enhanced combustion features, such as complete carbon burnout and reduced NO X levels, and operational benefits, such as improved fuel oil stability and the avoidance of asphaltene precipitation. Successful commercial demonstrations show that the technology is a proven, low risk, low cost alternative option and can be installed simply and quickly whilst achieving high IRRs and fast paybacks. Further advances in the production and use of MSAR are planned and underway for the next 12-24 months, with partners including major refineries and end users for power, marine and refinery use applications.