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European Refining Outlook to 2030: Technical & Economic Challenges
European Forum for Science and Industry Roundtable:
Scientific Support to EU Refining Capacity
1 October 2012
Michael LaneSecretary General, CONCAWE
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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2
Topics I will cover….
• 2030 Refining Outlook:• CONCAWE technical activities• JRC related technical activities• The refinery’s challenge• Demand outlook & distillate growth• Required investment – could it happen?• Summary of conclusions
2
Important note: All future projection estimates and assumptions are based on modelling work, published information & consultant studies.
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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A European Research Association
Auto Emissions & Fuel QualityAir QualityWater/Soil Quality & WasteOil PipelinesSafety
CONCONservation of
CClean
AAir and
WWater in
EEurope
The Oil Companies’ European association for health, safety and environment inrefining and distribution(founded in 1963)
Refinery Technology SupportHealth SciencePetroleum ProductsRisk AssessmentImplementation of REACH & GHS
Active research in areas of importance to the European Refining Industry
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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The JEC research collaboration was initiated in 2000 by:JRC: Joint Research Centre of the European CommissionEUCAR: European Council for Automotive R&DCONCAWE: Research Association of the European Oil Refining Industry
JEC Consortium
Collaborative Projects2000-2010: Projects Completed
Well-to-Wheels (WTW) Study Versions 1, 2b, and 2cWTW Study Version 3c: enhancing pathways and vehiclesImpact of ethanol on vehicle evaporative emissions (SAE 2007-01-1928)Impact of ethanol in petrol on fuel consumption and emissionsJEC Biofuels Study for a 2020 time horizon (2011)
2012: Projects in progress2012-13: Version 4 of the JEC WTW Study2012-13: Update of the 2011 JEC Biofuels Study
http://ies.jrc.ec.europa.eu/about-jec
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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JEC research output is high quality
“The JEC Consortium’s work does provide a high quality, reliable source of life-cycle assessment, energy use and greenhouse gas information for fossil and bio-fuels used in the EU. To our knowledge, there is no comparable data source”
Letter to JEC (July 2012) : Philip Owen. Head of Unit, DG Climate Action
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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2013 a Year of “Air Quality in Europe”: science is key
H2S, VOCPM, NOX,SOX VOC
Worker / ConsumerExposure to Fuel Evaporative / Combustion Emissions
PM, NOx SOx VOC
UpstreamOperations
RefiningOperations
PetroleumFuels
Fuel Consumption
VOC NOXSOXSmaller ParticlesCO
O3, Aldehydes, Secondary AerosolO3, Nitrate PMSulfate PM, Acid AerosolLarger Particles
Air Pollution
Atmospheric Processes
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Refining BREF /IED: our technical input
Draft2 (D2) of refining BREF released on 9 March:CONCAWE provided ~ 50% of all comments received by Seville
We prepared detailed commenting, collected new data and providedoperational interpretation Detailed data for 400+ stacks; 33 FCUs & 56 S recovery units
Results so far:Several key Member States endorsed and referred to CONCAWE submissions and cost effectiveness Bubble concept is in the BREF and supported by companies and MS– still effort required to put bubble values in BAT conclusions
If D2 BATAEL ranges became final, the investment cost for EU refining could be 10 – 30 B€
CONCAWE has published a report on the cost effectiveness of emissions abatement options in European refineries (# 6/11)
CONCAWE proposals for the BATAEL ranges are generally consistent with the current TSAP [Thematic Strategy] in terms of €/ton of pollutant abated
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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The Refinery’s Challenge
Use available crudes:Adapt to quality variationsAdapt to different crudeson a day-to-day basis
Produce desired products:All products must be “on-spec”All must be produced at the same timeNothing can be thrown away!
And…minimise energy, CO2, environmental impacts, and costs
0
20
40
60
80
100
Brent Iran light Nigerian Russian Kuwait Demand
LPGNaphtha/gasolineKero/jetGasoil/DieselHeavy fuel oil
Crude oil: typically much “heavier” than product demand
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Refineries convert crude to fit-for-purpose products
Achieving this requires complex process technology and hydrogen“Reforming” to obtain the desired molecules and distributionResidue conversion to “crack” larger molecules into smaller onesHydrotreating to obtain the desired product quality (e.g. S removal)
More refinery complexity means that more energy and more hydrogen are needed - and typically more CO2 emissions!
0.0
20.0
40.0
60.0
80.0
100.0
2005 High gasoline High diesel
Demand Simple refinery Complex refinery
Yiel
d (%
on
crud
e oi
l)
LPGNaphthaGasolineKero/JetGasoil/DieselHeavy fuel oil
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Biofuels and alternative fuels displace refined products
Renewables reach 10% energy RED target in 2020.Ethanol: E5 protection grade and E10 for new vehicles >2005. E85 flex-fuel vehicles grow to 21% of total road fuel ethanol consumption in 2030. FAME: B7 protection grade and B10 for new vehicles > 2017.Other alternative fuels such as HVO, BTL, DME and electricity contribute 1.3% energy in 2020, growing to 2.9% in 2030.Renewable road fuels in 2030 replace 32 Mt of fossil fuels or 13% (mass) of the road fuels market.
0%
2%
4%
6%
8%
10%
12%
200
220
240
260
280
300
320
2005 2010 2015 2020 2025 2030
Bio
& A
ltern
ativ
e ro
ad fu
els
(%en
ergy
)
Bio & Alternativeroad fuels, Mtoe/a
Refined road fuels,Mtoe/a
Bio & Alternativeroad fuels, %energy(RH axis)
Source: CONCAWE
Total demandfor road fuels
in EU27 + 2(Mtoe/a)
Guide to terms used:Toe = tonnes of oil
equivalentRED = Renewable
Energy DirectiveE5, E10, E85 = gasoline
containing 5%v, 10%v and 85%v ethanol
B7, B10 = diesel containing 7%v and 10%v biodiesel
HVO = hydrogenated vegetable oil
BTL = biomass to liquidsDME = dimethyl ether
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Steady growth in share of refined middle distillates
“Middle distillate” refined products are heavier than gasoline but lighter than heavy fuel oil:Jet fuel, heating kerosene, road diesel, non-road diesel, heating oil, distillate marine fuel.
Total fossil middle distillates demand does not grow in absolute tonnage.
Share of distillates in total refined product market continues to increase, reaching 60% in 2030.
Contrasting market tonnage trends:Growing demand for jet fuel and distillate marine bunker.Declining demand for heating oil and road and non-road diesel.
46.1%48.9%
52.1%56.7%
58.9% 59.9% 60.3%
0%
10%
20%
30%
40%
50%
60%
70%
2000 2005 2010 2015 2020 2025 2030
Distillate marinebunker
Heating oil
Diesel (non-road, railand inland water)
Jet/Kero
Diesel (road)
Source: Wood Mackenzie, CONCAWE
Distillates demandin EU27 + 2
(% m/m of total refined products
demand)
Source: Wood Mackenzie, CONCAWE
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Announced investments only address part of total needs
Significant announced investments to increase capacity in refinery units aimed at:boosting distillate production (28% more Distillate Hydrocracker capacity)reducing residue production (37% more Residue Hydrocracker and Coker capacity)supplying hydrogen for cracking and sulphur removal reactions (49% more hydrogen production capacity)
Total investment in announced expansion projects is estimated at 30 G$2011
Significant capacity reductions in units that boost gasoline production (FCC) and distil crude (CDU).
CDU and FCC capacity reductions could more than double if the refineries temporarily closed in 2011-2012 are not restarted
-10%
0%
10%
20%
30%
40%
50%
CDU VDU REF DHC RHC FCC COK VIS HDS H2U
Capa
city
cha
nge
(%)
EU27+2 Refinery Projects 2009-2015Capacity change by process unit versus year-end 2008
Capacity additionsCapacity reductionsNet change
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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0 10 20 30 40 50 60
Demand 2008-2010
FQD PAH 8%
SECA bunker 1.0%
Demand 2010-2015
Inland Marine Gasoil 10 ppm
Non-road Diesel 10 ppm S
SECA bunker 0.1%, switch to distillate
Demand 2015-2020
Ferry bunker 0.1% , switch to distillate
IMO general bunker 0.5%
Announced projects 2009-2015
G$ (2011)
Substantial investment requirements 2008-2020
Estimated total investment of 51 G$ from 2008 to 2020 would be required to fully meet product demand and quality changes (including low sulphur bunker fuel), i.e. 21 G$ more than the estimated 30 G$ for announced investment projects.
51 G$ equates to about 1 $2011/bbl of crude processed over the 2008-2020 periodCompared to typical historic EU refining margins of 1-5 $2011/bbl.
Declining demand post-2020 will lead to under-utilisation of new-build capacity.This could have a negative influence on investment decisions prior to 2020.
+ 21G$
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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14
CO2 emissions from EU refining 2008-2030
Refining CO2 emissions fell by about 7 Mt from 2008 to 2010 due to the drop in demand and refinery throughput.
The major events contributing to increasing CO2 emissions are the marine bunker sulphur reductions in 2015 and 2020.
Combined impact is 15 Mt of additional CO2 emissions from EU refining.
Declining demand between 2020 and 2030 will lead to a decrease in refining CO2emissions of about 9 Mt, assuming no further product quality changes.
140 145 150 155 160 165
Base case - 2008
Demand 2010
FQD PAH 8%
SECA bunker 1.0%
Demand 2010-2015
Inland Marine Gasoil 10 ppm
Non-road Diesel 10 ppm S
SECA bunker 0.1%, switch to distillate
Demand 2015-2020
IMO general bunker 0.5%, Ferry bunker 0.1%
Demand 2020-2025
Demand 2025-2030
CO2 emissions (Mt/a)
Demand-relatedQuality-related
These figures assume constant refinery energy efficiency frozen at the 2008 level
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Energy Consumption: with & without efficiency improvements
Total Energy Consumption per t Net Input (Indexed)
Total Energy Consumption per t Net Input (w/o EII Improvement, Indexed)
If EII had not improved then energy intensity would be 11% higherAnnual energy saved by improved EII is 64 ktoe per refinery on average, or about 6 Mtoe for total EU refinery populationEquivalent to the total annual energy consumption of five large EU refineries
European Refineries
120
109
Source: Solomon Associates
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Summary: expected developments
Biofuels and alternative fuels displace refined products
Call on refinery production in steep decline
Steady growth in share of refined middle distillates
Operating rates decline in line with demand trends
Major changes in refinery unit processing requirementsEnergy efficiency improvements do not completely offset higher energy requirements for quality changes
Announced investments only address part of total needs
Substantial investment requirements: 2008-2020IED / BREF compliance may be an additional high cost
CO2 emissions from EU refining 2008-2030: ~ flatShip fuel sulphur reduction leads to a major CO2 increase
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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For More Information
Our technical reports are available at no cost to all interested parties
CONCAWE Website:www.concawe.org
Europe’s first electric car: Lohner-Porsche 1900
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Additional Information
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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REACH: a big effort with limited benefits
The IUCLID stack of papers is a mock-up. The others are real, printed previously for other reasons.We did not really print the IUCLID file (and don’t recommend anyone to print it…)
• REACH for petroleum products: ~ 200 M€ cost to refining with more to come• Limited health or environmental benefits (for our products)• A massive bureaucracy which reduces resources available to address safety & environmental concerns
One dossier (Gasoline)
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Fuel Quality Changes Have Contributed to Air Quality
Source: European Commission
CONOx
PM-DieselVOC
BenzeneSO2
1995 20051990 2000 20100
20
40
60
80
100
120
140
Emis
sion
s (a
s a
% o
f 199
5 le
vel)
Road Transport
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Declining product demand (including biofuels)
Basis: JEC Fleet & Fuels model for road diesel and gasoline (2011); Wood Mackenzie for all other products (2011) New European fleet-average CO2 emissions targets for passenger cars:
143 g CO2 /km in 2010 (actual)95 g CO2 /km by 202075 g CO2 /km by 2030 (assumed)
Products demand expected to fall by 137 Mt (19%) between 2005 and 2030.Total diesel+gasoline road demand shrinks by 52 Mt (18%) between 2005 and 2030.
720
583
0
100
200
300
400
500
600
700
800
2000 2005 2010 2015 2020 2025 2030
LPG
Gasoline
Petrochemicals
Middle distillates
Residual marine fuel
Residual inland fuel
Others
Source: Wood Mackenzie, CONCAWE
Total demandincluding biofuels
in EU27 + 2(Mt/a)
Source: Wood Mackenzie, CONCAWE
Total demandincluding biofuels
in EU27 + 2(Mt/a)
-137 Mt
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Increasing distillate/gasoline imbalance
Steady decline in total demand but a steady growth in:
Percentage of middle distillates, reaching 61% in 2030
Ratio of middle distillates to gasoline, reaching 6.3 in 2030
Increasingly difficult for gasoline-oriented EU refineries to meet this changing demand ratio.
46% 61%
19%10%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2005 2010 2015 2020 2025 2030
Mid
dle
dist
illat
e / G
asol
ine
dem
and
ratio
LPG
Gasoline
Petrochemicals
Middle distillates
Residual marinefuelResidual inlandfuelOthers
MD/Gasoline ratio(RH axis)
Source: Wood Mackenzie, CONCAWE
Total demandincluding biofuels
in EU27 + 2(% m/m)
Source: Wood Mackenzie, CONCAWE
2.4
6.3
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Operating rates expected to decline with demand trends
Average EU refinery utilisation rate falls from 86% in 2008 to 82% in 2015, in spite of the announced closure of 5% (36 Mt) of refining capacity between 2008 and 2015.
19 Mt of Crude Distillation Unit (CDU) expansion projects bring net CDU capacity reduction to 2% (17 Mt).
Without further closures the CDU utilisation rate could fall below 75% by 2030.
CDU capacity Mt/a
CDU throughput Mt/a
85.8%
80.7% 81.5%CDU utilisation
%
74.5%
70%
75%
80%
85%
90%
2008 2010 2015 2020 2025 2030
CDU
Cap
acity
Util
isatio
n Ra
te (%
)
Crud
e Di
still
atio
n U
nit C
apac
ity o
r Th
roug
hput
(Mt/
a)
European Refining Outlook 2030Michael Lane, Secretary General, CONCAWE
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Major changes expected in refinery unit processing
Steady decline in throughput of gasoline-producing units (FCC)Reflects shrinking gasoline demand.
Contrasting steep increases in required throughput of:Units producing diesel and jet fuel (DHC)Units that crack or desulphurise residual fuel oil (COK and RES HDS)Units that produce hydrogen for the cracking and sulphur removal reactions (H2).
Guide to terms used:FCC = Fluid Catalytic
Cracking unitDHC = Distillate
Hydrocracking unitCOK = Coking unitRES HDS = Residue
Hydrodesulphurisation unitH2 = Hydrogen
production unit
Note: These are the unit throughput changes required to meet product demand and quality changes without increasing the import/export imbalance of gasoline, diesel, jet and heavy fuel oil
