Feature article

The refining piece of the carbon emissions puzzle

16/08/2008

Petroleum Review

Refiners are facing more challenges today than ever before as a result of growing demands from multiple stakeholders.

Global demand for oil is rising and consumers continue to want performance and fuel economy while being increasingly concerned about their role in contributing to greenhouse gas emissions. Governments are concerned about emissions, but are also interested in energy security and supporting local agriculture, all of which are contributing to a drive for increasing market penetration of biofuels. Shareholders, although attracted to investing in the industry, are concerned about cost inflation and the sustainability of returns over the medium-to-long term.

To meet increased energy requirements and tough new environmental standards, refineries must combine their available expertise with continued investment in technology. This need for effective solutions to today’s challenges and thirst for new technologies has led to innovation being a key business driver and an important success factor. Underpinning this shift is the drive to create more efficient and reliable processes. Refineries have come to realise that in order to meet society’s needs through successful projects that will increase the volume of oil products and meet more stringent specifications and requirements, they need to be innovative in all their activities – from master planning to project execution and maintenance. 

The refining industry has enjoyed exceptionally favourable margins for the past few years, with robust demand growth (mainly driven by the developing nations) underpinning near-capacity operating rates at refineries, and high oil prices. However, the shift towards unconventional crudes and heavy feedstocks, coupled with vigorous market demand for cleaner products produced using reduced-emission manufacturing processes, is changing the refining landscape.

Although refiners are able to choose the crude they process, there is little flexibility in the total crude supply available to the EU under reasonably economic and secure terms. This may make it difficult to achieve an overall emissions reduction target at a European level by differentiating in favour of crudes that generate less carbon dioxide (CO2).

Refining processes need to be addressed if the new direct emission standards are to be met. The consumption of energy in the refining process typically represents around four to seven percent of the crude itself, depending on the complexity of the refinery. Refineries have made great strides in improving their energy efficiency.  Solomon Associates research shows about a 13 percent reduction since 1990, which is significant given that application of sulphur reduction technologies and having to deal with more difficult crudes has increased in this period – both cases that require increased energy usage.  It is a trend that will continue but not at such a rate as improvements are likely to be between five to 10 percent in the next 10 years.  According to the Shell Sustainability Report 2007, Shell’s refineries have reduced their CO2 emissions almost 2% from 2002 to 2007.

The refining industry cannot act alone to address the CO2 challenge. At Shell, we are striving for public-private partnerships and a strong policy framework.

Jeroen van der Veer, Shell Chief Executive, has said, “Meeting the world’s growing energy needs in an environmentally responsible manner is a tremendous challenge. Technology is essential to answering that challenge.”

Shell is pursuing research and development into leading-edge technologies to further improve energy efficiency, generate energy cleanly and mitigate CO2 emissions.
The Carbon Energy Management Consultancy (CEM), from Shell Global Solutions, brings together technology and expertise from across Shell’s operations, gained from reducing its own CO2 footprint, and also works with other companies facing the same challenges by saving energy, reducing costs and lowering CO2.  Shell’s greenhouse gas (GHG) emissions fell to 92 million tonnes of CO2 equivalent in 2007, which is a 25 percent reduction since 1990.

The CEM programme examines current emission positions of clients and benchmarks them against optimal industry operating practices. Strategic options are proposed to improve the client’s emission position, such as energy efficiency programmes, carbon optimisation, CO2 sales and carbon-allowance trading.

Using Shell’s extensive technical and operating experience from its plants, the CEM programme is designed to be modular and builds upon Energise—the company’s energy efficiency programme, Energise, has helped large industrial sites save energy and cut emissions with minimum capital expenditure. This programme has delivered reductions in energy usage by between two percent and nine percent with minimal capital investment.

Strategies for energy efficiency could include best available technology assessments, hydrocarbon management reviews, asset reliability improvements and catalyst optimisation. The company’s own energy efficiency improvements are already delivering CO2 savings of about 1 million tonnes per year.

A company’s options for carbon optimisation can be explored through carbon abatement curves. These help to inform strategy through analysing different technologies that are available for mitigating greenhouse gas emissions and their costs. Switching to less carbon intensive fuels, introducing renewable fuels sources, make-or-buy decisions for power supply, CO2 mineralisation and storage can all be considered.

CEM also looks at the options for carbon allowance trading and offsetting, within the European Union Emission Trading Scheme (EUETS) and using the Kyoto instruments, such as the Clean Development Mechanism and Joint Implementation.

The CEM programme considers options against the parameters of feasibility and impact. Once a preferred implementation approach is identified, CEM can support its delivery and provide ongoing support to ensure that energy or carbon savings are sustained. Changes in management practices, operator training, monitoring tools and leadership focus play a role in preventing value erosion once consultants leave a client’s site.

Positive results from the CEM programme have already been seen. By focusing on better operational performance, the Fredericia refinery in Denmark achieved sustainable energy savings of nine percent. The refinery was Shell’s second most energy efficient refinery; yet, the CEM programme still managed to generate more savings. For example, the Fredericia refinery’s crude distiller changed the way skimming oil in the hydrodesulphurisation unit was managed. The refinery achieved more energy savings.

The energy-efficiency stream of the programme has also helped Malaysia LNG decrease the amount of feed gas used as fuel to run the LNG plant and reduce venting of hydrocarbons through flaring or incineration. The saved fuel is available as additional feed gas for conversion into LNG product.

One of Shell’s UK refineries identified energy savings worth five to six percent of the site’s energy bill through Energise, demonstrating the success of Shell Global Solutions’ Carbon and Energy Management Consultancy. Additionally, Shell Global Solutions Carbon and Energy Management Consultancy won the Petroleum Economist Cleaner Energy Initiative Award 2007.

Shell’s Energy Management System, a key tool to help ensure that value is sustained, is a combination of structured management processes and monitoring tools linked to real-time plant data systems. If implemented correctly, it can help develop a self-sustaining energy culture that enables continuous energy improvement. In exploring the potential for one Russian refinery, estimates suggested that operational excellence based on the energy management monitoring system could generate annual savings approaching US$250,000 on its most efficient crude unit, based on the preliminary assessment.

Shell is also developing cost-effective technologies to capture carbon emissions from power plants and refineries and sequestering them underground. Several storage possibilities exist that are being explored through a range of projects. For example, in Queensland, Australia, Shell and others are exploring sites that could potentially be used to store CO2 captured from a power plant. Shell is the preferred provider of gasification technology and is providing drilling and CO2 storage expertise. If the project goes ahead, it is thought that up to 420,000 tonnes of CO2 the majority of the demonstration plant’s CO2 emissions could be annually captured and stored. Commercial versions would have carbon emissions nearly 40 percent lower than those from a comparably sized conventional natural gas-fired power plant.

Another innovative approach to carbon management is also bringing results. For example, Shell’s Pernis refinery in The Netherlands has reduced emissions by using a pipeline to redirect CO2 from the plant to horticultural growers in the south of The Netherlands. The additional benefit is that pure CO2 accelerates crop growth (up to a 25 percent increase in production) and the growers now no longer need to run greenhouse heating systems during the summer just to maintain CO2 flow.

Shell Global Solutions has also facilitated the sale of CO2 for other industrial applications including the paper industry in which it is converted to precipitated calcium carbonate and used as a paper whitener. In addition, Shell actively supports carbon trading and it completed the first-ever trade of CO2 emission allowances in 2003. This was within the EUETS, on behalf of Nuon Energy Trade and Wholesale, to effectively open the European emissions trading market.

Already, technology development is enabling the reduction and management of CO2 to meet the mandates, which are being laid before the oil and gas sectors. As legislation changes, developments in fuels and new fuels are all vying for a place on the agenda, refineries are uniquely positioned to meet the energy challenge head-on. The refiners that are likely to succeed are the ones who maintain a global perspective on supply and demand so that they are geared to meet different market needs, ensure that the supply chain is optimised and can manage change effectively.