Technical
Newsletter
#34 - November 2016
PETROLEUM REFINING AND INSURANCE
PART I
Crude Oil Refining - a constantly evolving industry
Introduction
Refining can be considered by many as a mature and stable industry but it has changed drastically since the 19th century,
adapting to its ever-changing and challenging environment. Insurers have had to follow this transformation and adapt
their way of underwriting these risks.
Part I of this Technical Newsletter takes us on the journey the refining industry has had to travel.
In the beginning was the crude oil…
Many types of crude oils are produced around the world.
The main components, primarily hydrocarbons, can be
differentiated by their properties, the most important of which
is the boiling temperature as it allows for the primary separation
by distillation (see figure 2).
The price of a particular crude oil depends on its characteristics,
two of the most important of which are density and sulfur
content. Density ranges from light to heavy, while sulfur
content goes from sweet (low sulfur) to sour (up to 6% sulfur).
The density and concentration of contaminants such as sulfur
are good indicators of how easy to process the crude is and of
its price. The most well-known references for crude oil prices are
Brent (North Sea) and West Texas Intermediate (WTI) however
over 150 crudes are traded.
Did you know?
Barrel comes from the French Baril. Before it became
standard in 1860 during the Pennsylvnia oil rush
the 42 Gallon (159 liters) barrels were first used for
petroleum in Pechelbronn, Alsace where the first
oil sands were mined and refined from 1745.
(1)
”GET UP EARLY, WORK LATE - AND
STRIKE OIL.” JOHN D. ROCKEFELLER’S
RECIPE FOR SUCCESS.
Sulfur and TAN(1) are good indicators of potential corrosion
problems and are therefore of interest to insurers.
Today oil is still the primary source of energy with 32% vs 30%
for coal and 24% for gas according to the BP statistical review
2015 (see figure 1).
Figure 1: World Energy Consumption
Million tonnes oil equivalent per year
Of interest to refiners and insurers is that petroleum has been
known and used in various ways (adhesives, flaming projectiles,
boat coating, lighting...), since ancient times. The first users of
petroleum were located in the Middle East (Egypt, Babylon,
Mesopotamia, Persia...) and China.
Coal
Coal
Renewables
Renewables
Hydroelectricity
Hydroelectricity
Nuclear
Nuclearenergy
energy
Natural
Naturalgas
gas
Oil
Oil
14000
14000
12000
12000
10000
10000
8000
8000
6000
6000
4000
4000
2000
2000
0
1989 91
89
1993 95
93
1997
97
99
2001
01
03
2005
05
07 2009
09
11 2013
13
0
Source: BP Statistical Review 2015
Total Acid Number which is a measurement of acidity
1
Refining 1.01
A petroleum refinery is an industrial process plant where
crude oil is processed into more useful products such as (by
order of volumes produced):
› Transportation fuels (gasoline, kerosene, diesel)
› Heating fuels (fuel oil)
”TURNAROUNDS AND OTHER
MAINTENANCE ACTIVITIES ARE
IMPORTANT FOR THE INTEGRITY OF THE
PLANT AND THEREFORE OF PARTICULAR
INTEREST TO INSURERS.”
› Petrochemical industry feedstocks (naphtha, propylene)
Due to the evolution of technology and automation, the
number of employees has decreased from several thousands, for
example the Whiting Refinery in the US employed 3000 people
in the early 1900’s, to a few hundred in developed countries
depending on the level of contracting. In some cases, the number
of employees could be higher, as it can be used by governments
as a means of employment. The skills of the employees have
significantly changed and the level of knowledge has increased
considerably.
› Liquefied Petroleum Gas (butane, propane)
› Lubricants
› Bitumen
› Coke
› Sulfur
Gas
20°C
Figure 2: Distillation of crude oil,
first step of refining
Diesel
Finally, the complexity of refinery operations is such that they can
be fully optimised to produce the highest possible margins, only
through the use of Linear Programming (LP) models to respond
to changes in market environment and to the introduction of
new (usually more stringent) product specifications and new
crude slates.
Fuel Oil
Refineries are composed of three main areas:
150° C
200° C
300° C
Crude Oil
370° C
Gasoline
Kerosene
400° C
FURNACE
Lubricating Oil,
Paraffin Wax,
Asphalt
Source: SCOR
Basically crude oil undergoes physical and chemical processes.
Figure 3 shows a typical refinery process flow diagram with usual
process units and final products. By nature, hydrocarbons
are flammable products and they are processed at high
temperatures and pressures in the presence of hydrogen,
which exacerbates their flammability and explosivity.
Hence, the safe operation of refineries requires a broad
range of highly trained and specialised personnel
(instrumentation, electrical, mechanical, process, safety...).
›P
ROCESS UNITS: where crude oil is actually transformed into
final products.
› UTILITIES: produce all the utilities required by the process
units such as power, steam, hydrogen, nitrogen, air, water…
›S
TORAGE (feedstocks and products): required to store the
crude oil and final products before they are expedited.
Refinery capacity is defined by the crude throughput and is
generally expressed in barrels per day (bpd). Refineries operate
continuously, 24 hours a day, 365 days a year, except when they
are shut down for the general maintenance of the units known
as turnaround. These take place every 4 to 5 years, usually lasting
5 to 6 weeks, during which time maintenance activities that
cannot be performed during normal operations are carried out.
2
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
Figure 3: Refinery process flow diagram
Crude Oil
Pipeline
Tanker
Gas
Gas
Liquid
Atmospheric
Distillation
Function:
Gas
Plant
Naphtha
Sour Gas
Vacuum
Distillation
Distillation
Gas
Kerosene
Atmospheric Residue
Sour Gas
H2 rich gas
Visbroken Gasoline
Visbroken Gasoil
Visbroken Residue
Coker Gasoline
Heavy Coker Gasoil
Light Coker Gasoil
Coke
Distillates
Sour Gas
H2
HDS
HDS
Amine
Washing
Naphtha
Splitter
Claus Unit/
Tail Gas
Light Naphtha
H2
HDT
Heavy Naphtha
Sour Gas
Light FCC Gasoil
Catalytic
Cracking FCC
Treatment
Visbroken Gasoline
MEROX
Visbreaking
Light Naphtha
Kerosene
Gasoil
Propylene
Butenes
FCC Gasoline
Heavy FCC Gasoil
Catalytic
Reforming
Function:
Removes the
contaminants such as
sulfur and nitrogen
from the feeds
Prepares streams for
additional processing
Examples:
-Distillate and
gasoline
hydrotreatments
(HDS, HDT)
Upgrading
Function:
Rearranges the
molecules to
improve the
properties of the
feed
Examples:
-Catalytic reforming
-Alkylation
-Isomerisation
Heavy Naphtha
Hydrocraking
Separates the
different products
based on boiling
points
Examples:
-Atmospheric
distillation
-Vacuum distillation
Sour Gas
Sour Gas
Distillates
Delayed
Coker
H2
Fuel Gas
Butane / Propane
Vacuum Residue
HDS
Steam
Reforming
Isomerisation
Butane / Propane
Lube Oil
Plant
Conversion
Sulfur
Fuel Gas
Commercial Butane / Propane
Naphtha
Benzene
Propylene
Isomerate
Diesel
Reformate
Heating
Oil
Light Naphtha
Own Heavy Fuel
Refinery /Bunker
Fuel
Alkylate
Coke
Alkylation
MTBE / ETBE
Waxes
Parrafins
Lube Oils
Additives
FCC Gasoline
Bitumen
Coke
Blending /
Tank Farm
Blending /
Tank Farm
Additives
Kerosene
Blending /
Tank Farm
Gasoil
Gasoil
Heavy FCC Gasoil
Visbroken Residue
Coke
Lube Oils / Parafins / Waxes
Vacuum Residue
Asphalt
Lube Oil
Blending
Butane
Isobutene
MTBE-ETBE
HDT
Blending
Methanol / Ethanol
Sour Gas
H2
Function:
Breaks down the
heavy crude
fractions into lighter
products, such as
middle distillate.
Examples:
-Fluid Catalytic
Cracking (FCC)
-Hydrocracker
-Coker
Blending
Function:
Mixes the various
hydrocarbon
components
manufactured in the
refinery to meet the
final product
specifications
Examples:
-Blending areas with
pumps and
intermediate storage
tanks.
Blending /
Tank Farm
Additives
Kerosene
Gasoline
Petrochemicals
Liquefied Fuel Sulfur
Petroleum Gas
Gases
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
Source: SCOR
3
The complexity of refining processes has been increasing
dramatically
The refinery process has been
improved over more than 100 years
with the addition of new, more
complex units.
The
Nelson
Complexity
Index
(NCI), which allows to measure the
conversion capacity in comparison to
the primary distillation capacity of any
refinery, is used to compare refineries.
It is an indicator of the investment
intensity or cost index of the refinery
but also the potential value added of a
refinery (see table 1).
The trend of increasing conversion
capability will pull up the complexity
index as the world’s demand for lighter
products increases.
Table 1: From simple to complex refineries
CONFIGURATION
NELSON
COMPLEXITY
INDEX
DESCRIPTION
Topping
<2
This type of refinery simply separates crude oil into
light gas, refinery fuel, naphtha and distillates (final
products) by atmospheric distillation. There are no
chemical reactions involved.
Hydroskimming
2-6
Upgrades naphtha into gasoline with catalytic
reforming and removes sulfur with hydrotreating units.
Conversion
6-12
Converts heavy crude oil fractions (fuel oil, asphalt low
value product) into lighter products (such as gasoline
and diesel).
Deep Conversion
>12
Converts the heaviest and least valuable crude oil
fractions (residual oil) into lighter more valuable
products.
The complexity index has increased
over the years (see figure 4).
A short history of the petroleum and refining industry
The modern history of petroleum started when James
Oakes discovered how to produce kerosene from coal in
1847 in England.
In 1870, the US were the largest oil exporter and J. D Rockefeller
founded the Standard Oil Company which by 1879 controlled
90% of US refining capacity.
In 1857, Michael Dietz invented a flat-wick kerosene lamp that
replaced whale oil and created a new market for crude oil.
The demand for petroleum was relatively stable until the early
20th century. The invention of electricity progressively replaced
kerosene lamps. The invention of the automobile and its mass
production shifted the demand to gasoline and diesel.
The advancement of crude oil production began when Colonel
Edwin L. Drake developed a new technology to extract oil from
the ground near Titusville, Pennsylvania, using drilling, with a
steam engine, through a pipe. The first drop of oil came out
from the ground when the well depth reached 69ft, on Monday
29th August 1858, later producing 30 barrels per day. This
marked the beginning of the Pennsylvania oil rush.
The conjunction of those events triggered the oil and then the
refining industry boom. In 1860-1861, seven refineries were
built in Pennsylvania and Arkansas. By the end of the 1860s,
58 refineries were in operation in Pittsburgh, primarily to recover
kerosene.
4
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
Did you know?
Colonel Drake was to end
up as an impoverished man.
Pennsylvania voted an annuity
of $1,500 to the “crazy
man” whose determination
founded the oil industry.
Figure 4: Worlwide refining since the middle of 19th century
Global Refining Capacity (mbpd)
Number of vehicles (millions)
100
1000
1973
90
80
800
oil crisis
GLOBAL REFINING
CAPACITY
70
900
700
600
60
1870
Rockefeller founds the
Standard Oil company
50
40
30
1880
Thomas Edison
invents the
incandescent bulb
20
10
500
400
300
1908
Ford T mass car
production
GLOBAL NUMBER OF
VEHICLES
200
100
0
0
1850
1860
1856
World’s first
refinery
in Ploiesti,
Romania
1870
Vacuum
distillation
1880
1890
1900
1910
1920
1930
1932
1913
Thermal Coking
cracking
1858
Colonel E. Drake
developed a new
technology to extract oil
from the ground by
drilling
1889
Invention of gasoline
motor by Daimler
1940
1950
1942
FCC
1960
1970
1980
1975
Resid
hydrocracking
1954
HDS
1952
Cat reforming
1990
2000
2010
2020
Biofuels
Alternative
Fuels
1961
Hydrocracking
Refinery
complexity
1937
Cat cracking
14
DEEP CONVERSION
12
CONVERSION
10
8
HYDROSKIMMING
6
4
TOPPING
2
0
1850
1860
1870
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
2020
Source: SCOR
The geography of refining now and its eastward shift
Most countries have at least one refinery. Refineries are
often located on the coast. There are around 700 operating
refineries(2) in the world, ranging from 10 to 1240 kbpd, with
a worldwide capacity of 96.5 mbpd (according to the BP
statistical review 2015). Asia has the largest refining capacity
of 33.1 mbpd. The US follows with 17.8 mbpd. In counting
refineries, idle refineries have not been taken into account
nor have refineries that have been converted into terminals.
There have been a few of these in the past years especially in
Europe (Reichstett ex-Petroplus in France, Wilhelmshaven exConoco in Germany, Cremona Tamoil in Italy). The 10 largest
refineries in the world are indicated in table 2 on the next page.
(2)
Due to market conditions, new (or expansions of) refineries
in Europe and the US are very unlikely. They are more likely in
Asia and in emerging countries where there is more economic
growth (see figure 5 on the next page).
”REFINERIES IN THE US AND EUROPE ARE
AGEING AND NEED INVESTMENT:
A POTENTIAL CONCERN FOR INSURERS.”
Upgraders, especially in Canada, have been excluded from the refinery count although processes are similar to refineries.
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
5
Table 2: Largest refineries in the world
COMPANY
LOCATION
Reliance
Industries
PDVSA
SK
Energy
GS Caltex
S-Oil
Motiva
Enterprises
ExxonMobil
ExxonMobil
Saudi
Aramco
Royal Dutch
Shell
Jamnagar,
India
Paraguana,
Venezuela
Ulsan,
South
Korea
Yeosu,
South
Korea
Ulsan,
South
Korea
Port
Arthur,
Texas, USA
Singapore
Baytown,
TX,
USA
Ras Tanura
Saudi
Arabia
Pernis,
The
Netherlands
1,240
940
850
775
669
600
592
560
550
416
CAPACITY
(KBPD)
Source: SCOR
Europe has lost 20 refineries between 2007 and 2014 and the
refining capacity has reduced by 20%.
New and recent refineries are large and complex, mostly located
in Asia and Middle-East.
Figure 5: Global map of refineries (in 2016)
Refining capacity (BPD)
EUROPE
> 300 000
100 000 < crude < 300 000
50 000 < crude < 100 000
< 50 000
Refineries: 98
NCI: 11
Refining Capacity: 14.6m bpd
6
4
US GULF COAST
Refineries: 55
NCI: 12
Refining Capacity: 9.2m bpd
Refining
Complexity (NCI)
NCI> 10
8 < NCI < 10
6 < NCI < 8
RUSSIA & CENTRAL ASIA
NCI< 6
Refineries: 98
NCI: 6
Refining Capacity: 7.7m bpd
Refining capacity
(BPD)
> 1 000 000
500 000 < crude < 1 000 000
200 000 < crude < 500 000
< 200 000
NORTH AMERICA
SOUTH & CENTRAL AMERICA
AFRICA
MIDDLE EAST
ASIA-PACIFIC
Refineries: 157
NCI: 11
Refining Capacity: 21.2m bpd
Refineries: 64
NCI: 6
Refining Capacity: 6.3m bpd
Refineries: 47
NCI: 6
Refining Capacity: 6.3m bpd
Refineries: 57
NCI: 5
Refining Capacity: 9.8m bpd
Refineries: 246
NCI: 8
Refining Capacity: 33.1m bpd
Source: SCOR
6
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
Refining has been evolving in recent decades due
to external constraints
Refining has had to adapt to 3 main external constraints on refineries themselves and on finished products.
Refineries have been increasing their conversion rates to adapt to heavier
crudes
0%
20%
Sahara
(Algeria)
Brent
(North Sea)
Arabian Light
Safaniyah
(Saudi Arabia) (Saudi Arabia)
(World)
Boscan
Heavy Oil
(Venezuela)
80%
35.0
1,45
34.0
1,33
33.0
1,21
32.0
1,09
31.0
0,97
0,85
1984
1987
1990
1993
1996
1999
2002
Source: IEA
Light
Consequently, refiners have had to invent new technologies to
increase conversion, to be able to produce the same volumes of
refined products.
Middle
distillates
Product demand has been changing, thus requiring
refineries to adapt.
Gas
40%
60%
Figure 7: Sulfur up, °API(3) down
30.0
1981
Figure 6: Crude yields vary considerably
Market
demand
New sources of oil have also become available: shale oil and oil
sands.
Sulfur Content, wt%
”HEAVY CRUDES HAVE PROPERTIES
DIFFERENT FROM “CONVENTIONAL”
CRUDES (CONTAMINANTS, DENSITY…)
THAT BRING NEW CHALLENGES
INCLUDING CORROSION, TO REFINERS
AND THEIR INSURERS.”
With the development of oil fields worldwide, the crude slate
has been changing over the past decades, becoming heavier and
containing more contaminants, such as sulfur, as per figure 7.
°API(3) Gravity-Degrees
In many manufacturing industries such as car, electronics,
chemicals... raw materials have tight specifications to
produce very specific and identical products, whereas
refineries adapt to different crudes and optimise
operating conditions to achieve varying product yields, as
per figure 6.
Generally speaking, the product slate (gasoline, diesel...)
obtained by simple distillation of any crude oil does not meet the
market demand in terms of volume, nor in terms of properties.
Heavy
products
100%
Density
0,806
0,837
0,855
0,893
0,995
°API(3)
44
37,5
34
27
10,7
Sulfur content
Wt %
0,2
0,3
1,7
2,8
5,3
In order to meet the specifications required by the end users,
refinery schemes have added new “upgrading units”, such as
in the 60s-70s, reforming units to produce premium gasoline.
Source: SCOR
(3)
°API gravity is an inverse measure of density.
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7
The demand for finished products has evolved towards more
diesel engines in Europe (see figure 8). This has been leading to
a structural imbalance between gasoline and diesel.
Million tonnes per year
Figure 8: Road fuel demand in Europe
In order to be able to process a wider range of crudes and to
adapt to the changing demand, refineries have to be more
flexible, and need the construction of new conversion units such
as FCCs, hydrocrackers and cokers.
250
2.5
The hydrogen challenge
200
2
150
1.5
100
1
The changes in the refinery configuration have led to new
technical challenges for refiners. One of the most important is
the increase in hydrogen consumption. Indeed, in the simple
refinery scheme, hydrogen is in surplus and is produced in the
reforming units. But with new conversion units, particularly
hydrocrackers and hydrotreatments, requiring hydrogen in
large quantities, new hydrogen production capacities have been
required and new units have had to be built.
50
0
0.5
2000
2002
GASOLINE
2004
2006
2008
DIESEL
2010
2012
2014
0
Source: Fuels Europe
Environmental legislations have been increasingly constraining on refineries
and their products
Refineries generate a lot of emissions in the environment,
which have been increasingly controlled by a lot of new
regulations, adding new constraints on the production tool
(see figure 9).
In addition, finished products have had to become “green(er)”
adding another constraint on refineries.
Different legislations in the US (California Air Resources Board,
Environmental Protection Agency) and in Europe (European
Commission) were passed imposing new product specifications
to protect the environment (from acid rains, for example), to
improve the air quality, and public health. These continuous
regulation changes and emission control have led to significant
changes in the refinery configuration, as illustrated in table 3.
Figure 9: New regulations that affect refineries.
PLANT EMISSIONS
Flaring
H2S
CO
VOC (Benzene, Butadiene)
Particles
Metals
CO2 (Green House effect)
SO2
NOX
CLEAN AIR ACTS
Neighbourhood
nuisances
Noise, Odours
Smoke, Flare
PRODUCTS
CO2
NOX
HC
SO2
Particles
MOTOR FUEL
SO2
Particles
NOX
CLIMATE LEGISLATION
FUEL PRODUCTS LEGISLATION
FUELS
Waste
WATER OR GROUND
SOIL AND WATER LEGISLATION
Source: SCOR
8
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
Table 3: Refinery responses to regulation changes
YEAR
TITLE
REGULATION’S AIM
SPECIFICATIONS
REFINERY RESPONSES
1970s
Lead Phase
Out
To remove lead additives from
gasoline due to their toxicity
Lead, used as an octane booster,
is prohibited in gasoline
New reforming / isomerisation
units to boost octane
1990s
Addition of
oxygenates
To reduce air pollutants such as
CO, NOx, PM (particulates), VOCs
(volatile organic compounds)
US: min 2 wt% oxygen content in gasoline
EU: max 3.7 wt% oxygen
content in gasoline
Incorporation of alcohols (methanol,
ethanol) or ethers (MTBE, ETBE).
New MTBE or ETBE units
2000s
Benzene
reduction
To reduce the benzene content in
gasoline as benzene is carcinogenic
US: benzene content max 0,62 vol%
EU: benzene content max 1 vol%
New Benzene splitters or
Benzene hydrogenation units
2000s
Sulfur
reduction
To reduce SO2 emissions
Sulfur in gasoline (max)
US: 2006: 30 ppm from 2017: 10 ppm
EU: 2009: 10 ppm (EURO V)
New hydrotreatment units to
remove sulfur from gasoline and
diesel, with specific levels
2010s
Marine Fuel
Legislation
To reduce the emissions of
ships in some EU areas
EU: max sulfur content 0.10% in bunker
fuel oil for ships in the Baltic,
the North Sea and the English Channel
Reduction of fuel oil production by
addition of new conversion units
The impact of those regulations on car emissions have been
substantial. Similar legislation trends can be observed worldwide.
It started in the developed countries (Europe, Japan and the
USA) and now most of emerging countries in Asia, Africa and
South America have started to adopt legislations on emission
standards. These specifications are likely to be even tighter in the
future. Refineries will have to continue to invest to meet these
new requirements.
Greenhouse Gas (GHG) emission reduction
In the last 20 years, the effects of greenhouse gases (such as
CO2) on global warming have been demonstrated.
The United Nations has addressed it with the UNFCCC (United
Nations Framework Convention on Climate Change) which
is the parent treaty of the Kyoto Protocol signed in 1997.
It established a commitment for the 196 State Parties to reduce
their greenhouse gas (GHG) emissions.
The Conference of Parties (COP), which is composed of all state
parties, meets annually at world conferences and checks the
successful implementation of the objectives of the Convention.
Three of them are further developed in this newsletter:
Refineries have to increase their energy efficiency to
reduce GHG emissions
Refineries need to burn large quantities of fuel to generate heat
and power. To meet their requirements, refineries have many large
furnaces. They are important contributors to the GHG emissions.
So tighter regulations (on sulfur), and the need for conversion
units have actually increased CO2 emissions of refineries (red curve
of figure 10).
The main objective of COP21 (the 21st session) held in Paris
in December 2015 was to achieve an agreement on climate
in order to maintain global warming below 2°C. To reach this
target, GHG emissions will need to be reduced by 40-70% by
2050.
In order to meet their targets in terms of reduction of GHG
emissions, refineries have had to reduce the energy required (see
figure 10) to operate the units and several options are available:
Several options are available to achieve this through the use of
biofuels, lower GHG fuels (natural gas, LPG), energy efficiency,
carbon capture and storage (CCS)...
›O
ptimisation of operating conditions through new advanced
process controls in order to reduce the energy consumption
›H
eat recovery improvement by installing more efficient heat
exchangers
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
9
Several legislations have imposed the incorporation of biodiesel
and ethanol in fuels. As a result the addition of biofuels has
been increasing over the past 10 years (see figure 12).
› Use of more efficient technologies:
• Catalysts operating at lower temperatures,
hence reducing the energy consumption
• Distillation columns with high efficiency trays
Figure 12: Global biofuel production 1995-2015
• High efficiency burners for fired heaters
Billion liters
• Cogeneration plants
140
›H
ydrogen management (Hydrogen recovery in purges, new
dedicated hydrogen production units)
120
100
80
›O
ptimisation of utilities (steam production and recovery,
flaring reduction).
60
40
20
0
Total Energy Consumption per tonne
and Ell relative to 1992
Figure 10: EU refineries’ energy intensity index
1995
115
Total Energy
Consumption
per tonne
110
105
Energy intensity
index (Ell)
100
Note: the lower
the Ell®, the higher
the energy efficiency
of a refinery
95
90
85
1992
1996
2000
2004
2008
2000
2005
2010
EU biodiesel
Brazil ethanol
EU, China, Canada ethanol
USA ethanol
2015
Source: IEA
As of today, most of the biofuels used are obtained from
edible materials (i.e. vegetable oils and sugars) and are called
“conventional biofuels”.
However, this situation is not sustainable on a long term basis, as
it enters in competition with the use of land for food.
2012
Renewable fuels production has to increase, to reduce
GHG emissions
To address this point, the European Parliament adopted an EU
Council text that limits the amount of food crop-generated
biofuels by 2020, with a cap set at no more than 7% of
transport’s energy consumption.
Different studies have demonstrated that the use of renewable
fuels is an efficient way of reducing the carbon footprint (refer
to figure 11).
This binding legislation encourages the development of biofuels
produced from non-edible materials (see page 11 for more
details), wich are called “advanced biofuels”.
Source: Solomon associates
Figure 11: Greenhouse Gas Emissions of transportation fuels by type of energy
19%
Reduction
› In 2015 in most countries, the gasoline
used in cars contained up to 15% bioethanol. In Brazil, this goes up to 25%
and most cars are equipped with flex
fuel engines able to run on 100% bioethanol made mainly from sugar cane.
28%
Reduction
52%
Reduction
78%
Reduction
Gasoline
Corn Ethanol
Petroleum Current
Average
Natural
Gas
Biomass
86%
Reduction
Sugarcane Cellulosic
Biomass
Biomass
Source: Alternative fuel data centre, US department of Energy
10
Did you know?
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
› In the US, the Renewable Fuel Standard
(RFS) requires that transportation fuel
contains a minimum volume of renewable
fuels to limit the GHG emissions. The
volume of blended renewable fuels has to
be multiplied by 4 from 2008 to 2022; in
other words an annual growth rate of 10%.
What are biofuels?
Biofuels (bioethanol in gasoline and biodiesel in diesel) technologies fall into three main categories depending on the raw materials
they use.
› The 1st generation of biofuels uses edible materials obtained
from wheat, corn, sugar cane, palm oil also used for feeding
humans. These are called conventional biofuel technologies.
They are well proven and are producing biofuels on a
commercial scale, such as in Brazil, the USA…
› The 3rd generation of biofuels uses materials not obtained from
soils, such as algae. These technologies are very promising, as
the feedstock is available in very large quantities, but they are
under R&D stage and will not be available for several years.
› T he 2nd generation of biofuels uses non edible materials,
obtained from dedicated rapid growth crops (jatropha, wood,
straw, dry agricultural residues) to produce bioethanol or
animal fat and vegetable oils to produce biodiesel. These
technologies are under development (R&D or pilot stage), with
few exceptions at an early commercial stage.
BIO
Production of alternative fuels will have to increase to reduce GHGs.
Along with renewable fuels, the reduction of GHGs can
be achieved by developing alternative fuels that are less
carbon intensive.
Alternative liquid fuels can be produced from various sources:
Gas or Biomass. In most cases, the first step is to produce syngas
(hydrogen + carbon monoxide) by various processes, which is
then converted into liquid (mainly diesel) through the so-called
Fisher Tropsch (FT) process (refer to figure 13).
Figure 13: X-to-liquid technologies - GTL, BTL.
”LIQUID FUELS OBTAINED FROM
BIOMASS OR GAS CAN SIGNIFICANTLY
REDUCE CO2 EMISSIONS COMPARED TO
CONVENTIONAL LIQUID FUELS.”
These technologies have not been utilised on a wide-scale, as
only five gas-to-liquid (GTL) plants are currently in commercial
operation. GTL plants are located in countries where natural gas
is abundant such as Qatar and Nigeria.
X-TO-LIQUID TECHNOLOGIES - GTL, BTL
Pearl GTL, located in Qatar, is the world’s largest GTL plant. It has
a capacity of 140 kbpd and was started up in 2011.
GAS-TO-LIQUID (GTL)
Syngas
Generation
Syngas
FT
+ Upgrading
The diesel produced from biomass-to-liquid (BTL) generates
86% less CO2 emission per km, according to a study carried out
by Concawe in 2006.
GTL Diesel
NATURAL GAS
BIOMASS-TO-LIQUID (BTL)
Syngas
Generation
Syngas
FT
+ Upgrading
No commercial-scale biomass-to-liquid (BTL) complex has been
installed yet.
BTL Diesel
BIOMASS
Source: Axens
SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016
11
In the top 4 for process innovation
According to data presented by the European Commission in
its annual competitive report, the refining industry was the
leading industrial sector in process innovation and among
the top 4 for product innovation. Research and Development
(R&D) is a key part of refining industry, it has allowed it to deal
with the challenges posed by new environmental legislations,
new product specifications and to improve refining margins...
One example is developed here below: catalysts.
Catalysts
Catalyst manufacturers have adressed refining contraints by
developing new formulas however this often requires intensive
R&D work, several years before a new catalyst is commercialised.
Catalysts are at the heart of the processes and key to the
refineries’ performance. As the catalyst is consumable, changing
the catalyst type is an “easy way” for refiners to increase the
performance of their operations.
There are 3 main R&D areas to improve refining performance:
› activity (to process more difficult crudes, i.e. higher density and
higher contaminant content),
› selectivity (to produce the right products while minimising the
unwanted ones),
›
stability (to increase the catalyst life and minimize the
number of days of unit shut-downs, with subsequent loss of
production).
Did you know?
Catalysts are made of a support, usually an
inert material (alumina) with a specific shape
on which the active component (platinum,
palladium, cobalt, nickel…) is dispersed. The
metal / support combination is specific to
each catalyst and is part of the “know-how”
of the catalyst manufacturer.
Conclusion
By nature, the refining industry is very complex and has
constantly been evolving and adapting since the 19th century.
As a result, underwriters of petroleum refining have also
had to innovate as they need to consider new technologies,
changing crude oil quality and its consequences on issues such
as the ageing of refineries and corrosion. These points will be
further developed in Part II of this publication.
Forecasters predict an increase in global refining capacity in the
coming years, which means a potential growth of insurable assets.
However energy predictions are very difficult with lots of factors
and uncertainties, political, societal, technical, economic…
Michel KRENZER
Onshore Energy Manager, EMEA Team
Global Onshore Energy Practice Leader
+ 44 203 207 8633
[email protected]
PLEASE FEEL FREE TO VISIT US AT SCOR.COM
SCOR Global P&C
5, avenue Kléber - 75795 Paris Cedex 16
France
[email protected]
Environmental constraints are currently aimed at moving
towards a low carbon world and developing renewable energies
as illustrated by the 2015 Paris agreement. This will put refineries
under further pressure to improve emissions and will impose
higher production levels of renewable fuels and alternatives to
traditional fuels.
We are confident that refiners will manage to further adapt to
tomorrow’s challenges and invent new technologies. Refining in
the future will be cleaner and more productive.
Jean-Christophe CANDELON
Onshore Energy Underwriter
+44 203 207 8698
[email protected]
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Editor: SCOR Global P&C Strategy & Development
ISSN: 1967-2136
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