Imposing a carbon cost through a cap and trade system or a straight carbon tax has a substantial impact on all energy intensive industries. There is a legitimate concern from the refining industry that profitability may be under threat in a carbon capped environment.
US refiners are potentially facing quite different carbon implications than those in the EU due to the inclusion of their carbon based products in the carbon emissions accounting. However, management of carbon emissions can still offer potential competitive advantages as it is possible to reduce the direct emissions component of a refinery’s carbon footprint of a refinery to some extent and often quite considerably.
Assuming that no free emission permits would be distributed to refineries and a relatively high carbon price of US$ 50 (€ 36)/t of CO2, the total annual carbon cost for the European refining sector would be over US$ 7 billion (€ 5 billion). This equates to US$ 1.5/bbl of crude processed, which is a substantial fraction of the historical average net crude margin.
Carbon and energy efficiency
To a large extent, carbon management comes down to energy management. At an energy cost of US$ 7/million Btu (€ 20/GCal) and a CO2 cost of US$ 30/t (€ 21/t), for example, the carbon cost is approximately 25% of the energy cost for natural gas fuel. At the current European carbon price of € 10 - 15/t (approximately US$ 18/t), carbon cost represents only 15% of the energy cost at the same fuel cost. If the energy cost decreases, the relative importance of the CO2 cost increases and vice versa.
The impact of a fuel switch from oil to natural gas, as is more common in Europe, depends on a number of factors such as energy efficiency and the amount of steam and power import.
Hydrogen production, in particular, should be an area of focus for European refineries until 2012 since hydrogen plant emissions reporting is a major flaw in the system. Indeed, refiners are requested to report all steam reformer CO2 emissions for hydrogen producing facilities that are a part of the refinery. However, hydrogen plants that are not part of a refinery only have to report the fuel emissions and not the chemical carbon emissions.
Greenhouse management strategy
Implementing a carbon management strategy requires more than putting a multiplier on the data generated by the energy management system. It is also much more complex than simply switching the refinery fuel from fuel oil to natural gas, if that option exists.
Gap analysis and improvement roadmap
The first step in the optimisation process is to determine gaps versus best practice operation, design, measurement and reporting. Gaps are identified using technologies such as hydrogen and energy pinch, BT benchmarking, operational assessments, and fuel network simulation. Process simulation of fractionators, furnaces, exchanger networks and the steam/power generation systems are used to identify poor performance.
After the identification of potential areas of improvement, the actions and investment required to reduce the performance gaps can be outlined and quantified, after which an investment roadmap is developed.
Continuous tracking and improvement
To sustain best in class performance after implementation of the GHG reduction roadmap, as well as to track implementation progress, an effective performance tracking system needs to be in place. This system monitors the carbon footprint, detects gaps, and ensures that appropriate action is taken to keep gaps minimised at all levels of the organisation.
Fuel switching and an energy management system will reduce the refinery carbon footprint. However, it falls short of a real carbon management strategy, which requires a more detailed analysis of the carbon metric. A good energy management system is a minimum prerequisite to effective carbon management. While this will capture most of the potential opportunities, additional considerations will be required for more comprehensive measurement and reporting of the carbon content of the different refinery streams, import/export of steam, power, and hydrogen, together with a good understanding of market mechanisms for pricing carbon and the use of emission offsets.
To achieve best in class performance in carbon management, a systematic approach and the use of properly integrated tools and methodologies are required, as well as a tracking and improvement programme and a focus on the human element.
The third and final article of this series will discuss where and how much the refinery carbon footprint can be reduced.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/15012010/greenhouse_gas_legislation_and_the_refining_industry_part_2/