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Developments in EU refining: Part 2

Hydrocarbon Engineering,

Part 1 can be read here.

How much more investment is required in the longer term?

The announced EU refining projects in the 2009 – 2015 period do not address the additional equipment needed to reduce the sulfur content of non-ECA marine fuels to 0.5% in the scenario of a worldwide cap in 2020 which is an unprecedented step change. Under the assumption that the IMO decides to impose this reduction by 2020, and that the entire non-ECA demand for residual marine fuel at EU ports in 2020 (approximately 30 t) would be supplied by EU refineries and not by additional imported diesel, the Concawe refining model has estimated that €15 billion of additional investment would be required. The investment would chiefly be in coking units (which convert residual fuel to coke and lighter distillate products), residue desulfurisation units (which reduce sulfur content) and hydrogen units (which produce hydrogen feedstock for the desulfurisation units). The scale of the required changes in unit capacities is indicated in Figure 3 which shows the percentage changes in unit throughputs relative to a 2008 baseline. Solid lines show to what extent announced investments can achieve the required increases in unit throughputs.

Figure 3. Percentage changes in unit throughputs relative to a 2008 baseline.

It will be exceptionally difficult for EU refiners to decide whether to make these major investments, which would be entirely dedicated to producing a marine fuel representing only approximately 5% (30 tpy) of the output of EU refineries. The future demand for this low sulfur product will also be shaped by ships equipped with exhaust gas scrubbers allowing them to switch back to high sulfur marine fuel, or by ships adapted to burn LNG fuel.

These factors point to weak long term demand prospects for low sulphur marine fuel, which could lead to progressive under utilisation of any new investments in process unit capacity dedicated to its production. Such uncertainties could make it difficult to economically justify additional refining investments.

What is the expected impact on refining CO2 emissions?

CO2 is emitted in refineries by fuel burned to supply heat for the refining processes and by chemical reactions taking place in hydrogen production units, which reject the carbon in the feedstock as CO2. In spite of declining throughput, CO2 emissions from EU refining are expected to be driven higher from 2010 to 2020, mainly by the marine fuel sulfur reductions in 2015 and 2020 and, to a lesser extent, by the need to produce an increasing share of distillates to satisfy demand. Figure 4 shows the expected 13% increase1 in CO2 emissions from 2010 to 2020 and the subsequent decrease from 2020 to 2030, driven by steeply falling refining throughput. Hydrogen production accounts for 22% of refining CO2 emissions from 2020 onward, up from 14% in 2010.

Figure 4. The expected 13% increase in CO2 emissions from 2010 to 2020.

Concluding remarks on the outlook for EU refining

EU refining faces many challenges in meeting product demand and quality requirements in the period from 2010 to 2030. The Concawe study gives some insight into the combined impact of these challenges under the important assumption that refiners will invest to meet the challenges without becoming more dependent on product imports and exports. In reality, refiners will make decisions affecting investment and import/export balances based on their own individual circumstances.

One of the study’s key outcomes is that the € 21 billion of announced investment projects over the 2009 – 2015 period should adequately equip EU refining with the appropriate conversion unit capacity to satisfy future demand and quality requirements, with the important exception of the IMO marine fuel sulphur reduction to 0.5% which would require additional investments estimated at € 15 billion, and would incur additional refining CO2 emissions. Without this further investment beyond 2015, the available conversion and desulfurisation capacity would permit the production of only 10% of the estimated demand for 0.5%S marine fuel in 2020. In this case, Europe would have to resort to imported diesel to satisfy the remainder of the demand, significantly increasing EU dependence on imports.


1. The estimated 13% increase in CO2 emissions assumes that the energy efficiency of refining process units remains unchanged from 2008. There could, in reality, be some margin for improvement in energy efficiency, which would mitigate the expected increase in energy related CO2 emissions but would not improve the chemical CO2 emissions from hydrogen production units.

Written by Concawe

Edited by Claira Lloyd

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