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Key steps for refiners ahead of IMO 2020

Jock Hughson, Biliana Oettler Shell Global Solutions

T
he reality is that many refiners remain differential is likely to close partially over time as
unprepared for IMO MARPOL 73/78 Annex scrubber technology improves and conversion
VI (IMO 2020). These regulations, which facilities are built. So, there will still be a market
will substantially tighten the global cap on the for HSFO and refiners do not necessarily need to
maximum sulphur content of marine fuel oil, eliminate their HSFO exposure entirely, but they
could have a major impact on an ill-equipped would be well advised to reduce it to sustain their
refiner’s profitability. Fortunately, it is not too late; competitiveness.
they could implement several low-cost solutions in
the next two years to safeguard their competitive How should you respond?
position. Figure 1 shows some of the technology solutions
Because of IMO 2020, which will cut the allow- to be considered, but there is no one-size-fits-all
able sulphur content of marine bunker fuels answer. Your optimum solution depends on vari-
from 3.5 to 0.5%, from 2020 refiners can expect ous factors, including your existing configuration,
demand for high-sulphur fuel oil (HSFO) to strategy, available capital and location.
fall, demand for low-sulphur fuel oil (LSFO) to For example, the highest residue conversion
increase and a corresponding price differential technologies, which include ebullated-bed residue
between the two to open up. hydrocracking and slurry-phase residue hydroc-
This is because ships will only be able to con- racking, will not provide the optimum solution for
tinue using HSFO if they are fitted with on-board many refiners, in part because they are extremely
scrubbers, but these are costly and it will only capital intensive.
be possible to convert a modest percentage Similarly, the answer may be different for those
of the world’s fleet before the new global cap who have a need to improve their crude flexibility
comes into force. Liquefied natural gas con- in order to improve margins, or those who have
versions are inappropriate for most ships, so secure, reliable HSFO outlets, or those who have
the majority will turn to LSFO from 2020. key constraints in key units such as the vacuum
Fortunately, the LSFO–HSFO price distillation unit or hydrocracker.

Residue slurry HCU

SDA + ebullated bed HCU Gasification


Delayed coker/flexicoker High capex,
Coker debottlenecking with SDA
medium to low ROI

SDA + HCU revamp


SDA + residue gasification revamp

SRU revamp Add vacuum flasher downstream VBU Medium capex,


medium to high ROI

Deep-flash VDU
Capex

Crude flexibility Low capex, high ROI

Residue conversion, %

Figure 1 Some of the technology solutions that can help refiners to respond to IMO 2020

www.digitalrefining.com/article/1001450 November 2017 1


Shell’s response to IMO 2020 however, although refiners who have not already
At Shell Global Solutions, we have been looking committed to this type of long-term high-capex
at our own facilities and those of our customers investment are likely to delay making an invest-
to help identify the best responses. The business ment decision until at least 2019 when the supply,
case for some of the integrated solutions, which demand and economic implications of IMO 2020
often involve revamping an existing process unit, should become clearer.
has tended to be far stronger than for installing So what changes could you implement before
new high residue conversion technology. 2020? Among the low-capex, quick-win solutions
For example, a solvent deasphalting (SDA) unit that have scored highly in our analyses is Shell’s
can be added for comparatively moderate capital deep-flash technology, which can help to lift more
expenditure (capex). Simultaneously revamping and better quality vacuum gas oil (VGO) from the
the hydrocracker can help to reduce HSFO pro- vacuum distillation unit and reduce HSFO pro-
duction by almost 50%, increase middle distillates duction. Another popular solution is installing
yield and improve crude flexibility. latest-generation reactor internals and catalysts,
The combination of SDA and deasphalted oil which can enable the hydrotreating and hydroc-
hydrocracking, or SDA and thermal conver- racking of heavier and more difficult feeds such as
sion, which is another moderate-capex response deasphalted oil, heavy VGO and visbreaker VGO,
option, has another important advantage: it and increase conversion capability.
Another quick-win opportunity is to change
Did you know: Shell’s fouling the crude diet to include a proportion of opportu-
nity crude. For a typical 200,000 bbl/d refinery,
abatement technologies can the inclusion of 10% of an opportunity crude with
a relative discount of $1/bbl could increase the
help increase cycle length by gross refinery margin by some $7 million a year.
Moreover, this will typically require no capex.
up to 300%? The importance of first developing a robust
investment plan tailored to your specific circum-
retains high levels of crude flexibility. This is stances cannot be overemphasised. You can only
becoming an increasingly important profitabil- identify the optimum solution by taking into
ity driver for refiners. There are large opportuni- account your specific constraints and by using
ties for refiners to increase margins by including tools such as scenario planning to help you take
lower-priced, opportunity or niche crudes in their a view of the future market in which you will be
diet, so you should always evaluate the effect that operating.
your investments will have here.
Another crucial consideration is the refin- Residue upgrading beyond IMO 2020
ery’s back end. When increasing the level of res- IMO 2020 is a short-term trigger, but the busi-
idue conversion, by either revamping process ness case for residue upgrading projects is likely
units or installing new ones, the treating and to remain strong beyond 2020. Margin improve-
utility systems and logistics infrastructure can ment will probably still be strategically important
often be key constraints. Additional capacity and so reducing the yield of low-margin fuel oil
is likely to be required for sour water strippers in favour of a higher-margin product slate will be
and wastewater treatment plants, and particularly key for the longer term.
the sulphur recovery unit. Fortunately, the state
of the art has recently advanced here with the The takeaways
development of Shell’s next-generation tail gas IMO 2020 will have a disruptive effect
treating process, SCOT Ultra, which offers a per- on refiners in several ways. It will cause a
formance step change for minimal investment. price gap to open up between LSFO and HSFO
Of course, the gestation period of all such pro- that only the best prepared and equipped refin-
jects is likely to extend beyond 2020, so it may be ers will benefit from, and this gap will close par-
too late to initiate such a response now to reap the tially over time. To fully reap the benefits of this
benefits of the expected LSFO–HSFO price differ- price gap, a refiner would need to have already
ential. They may remain options for the long term invested in a medium- to high-capex solution that

2 November 2017 www.digitalrefining.com/article/1001450


suits their particular circumstance. Those who important margin improvement opportunities as
have not chosen to make a significant investment they increase the volume of value-added products.
by now are likely to continue evaluating the vari-
ous options and will not initiate a full response in SCOT is trademark owned by the Shell group of companies.
time for 2020.
This short article originally appeared in the 2017 ERTC
Nevertheless, refiners would be well advised
Newspaper, produced by PTQ/DigitalRefining.
to focus on what they can achieve ahead of
2020. From installing deep-flash technology and Contact: Biliana.Oettler@shell.com
revamping with latest-generation catalysts and
reactor internals through to including low-cost
opportunity crudes in the refinery diet, there are LINKS
many steps for strengthening competitiveness
ahead of the disruption that is inevitable in 2020. More articles from: Shell Global Solutions International
Furthermore, they should remember that More articles from the following categories:
IMO 2020 is only the start. Post-2020, residue Sulphur Removal and Recovery
upgrading investments will continue to provide

www.digitalrefining.com/article/1001450 November 2017 1