The lower oil prices of 2015 provided a much-needed improvement in margins for many refiners around the world, but many of us remember other sharp swings in oil prices and recognize that they do not last forever. The industry’s underlying challenges continue, and it remains to be seen how long the low-price environment will persist.
Consequently, most refiners should continue looking for opportunities to maintain their competitiveness. I come at this from a very distinct angle, as I represent a technology licensing business (Shell Global Solutions) and also an organization that itself owns and operates refineries and petrochemical plants (the Shell Group).
Consequently, I have a unique insight into the opportunities that are available for refiners, and how best to integrate the solutions offered by technology providers. So what challenges do I see? Changes in feedstock availability and the emergence of substantial new capacity from efficient, export-oriented refineries have clearly changed the competitive landscape for many businesses, as will the looming changes for the marine bunker fuels market.
However, I firmly believe that where there are challenges, there are also opportunities. In this article, I describe some potential response options and new, emerging technologies.
Benchmarking shows that the most successful refiners tend to score highly in reliability, utilization, yield and energy efficiency. Our experiences at Shell prove that many low-cost improvements can be unlocked through maintenance and reliability studies and energy management projects. But, when opportunities have been identified, it can require an experienced team to implement them effectively.
In addition, hydroprocessing units that are constrained by pressure drop, fouling or rapid catalyst deactivation must be addressed. State-of-the art reactor internals and tailor-made catalysts can often provide the solution, and we at Shell Global Solutions and Criterion Catalysts & Technologies can be part of that journey. Similarly, changing the crude diet, adding cracked feed or revamping the vacuum distillation unit to recover more heavy vacuum gas oil, could expand hydrocracker capacity economically.
Strategic investment opportunities.
After optimizing existing assets, we also consider larger, more strategic investments, such as short-to-medium-term revamps or implementing new units. Another option is to improve integration with a petrochemical neighbor. For example, Shell adjusted the hydrocracker operation at its Pernis refinery in the Netherlands to optimize hydrowax quality for the ethylene cracker at the nearby Moerdijk petrochemicals facility—an annual benefit of $5 MM.
The dramatic growth in light tight oil production in the US has created opportunities for refiners in other markets to co-process the non-typical crudes, such as Canadian or Venezuelan synthetic crudes, that have been displaced. To start processing these, it is important that refiners understand the particular contaminants that they will be dealing with—but, if they can handle them, they could unlock a competitive advantage.
Meeting the bunker fuels challenge.
We are all acutely aware of the impending shift from 3.5% to 0.5% maximum sulfur specifications for marine bunker fuels. Two interesting technology options are emerging. The first involves reconfiguring existing, proven technologies. An example would be lining up a solvent deasphalting (SDA) unit in a new integration scheme with an existing refinery residue process, such as a residue desulfurization unit or a residue hydrocracker.
This catalytically debottlenecks the existing residue hydroprocessing units and enables operators to process highersulfur, heavier crudes at higher conversion for increased middle distillates production. The key is the SDA unit, which achieves a very high level of deasphalted oil extraction (upward of 80 wt%) and rejects the worst contaminants from the hydroprocessing unit feed to result in a technically and economically robust scheme.
The second emerging option involves the maturation of slurry-phase residue hydrocracking, which offers robustness for a wide range of residue qualities and the highest achievable conversion. It requires the highest investment cost, although I expect this to come down in time.
The outlook is good.
The key takeaway that I leave you with is that yes, times are tough, but we should not be despondent. In recent years, many refiners have had great success in unlocking margin improvements, and technology providers have demonstrated exceptional creativity in developing the innovative new technologies that the industry needs—and more are in the pipeline.