The environmental challenge

The last year has not been a good one for the refinery sector in North America. In the US, utilisation rates on 17.6 million bpd of operable capacity dropped from 89% in mid 2008 to 81% by late 2009. Transport fuel consumption fell by over 3%. Margins have declined dramatically. Operating costs have risen as feedstock got heavier and more sulfurous refiners who are trying to dispose of facilities are finding few takers.

But the economic situation facing the sector is relatively minor compared to the labyrinth of environmental regulations that have multiplied over the years, and the sectors’ efforts to meet them.

Over the last two decades, refineries have made impressive inroads into controlling emissions. Even though refinery output has increased by 10% over the last decade, total CO₂ emissions are down by 12%, total energy consumption is down by 8.5%, and energy efficiency has improved by 9%. VOC emissions are down by 64%, benzene emissions have dropped by 84%, SO_x emissions are down by 42%, sulfur levels in gasoline have been reduced by over 90%, and sulfur levels in diesel fuel have fallen by 85% (since 2005).

GAS ATTACK

Now the issue of greenhouse gas (GHG) emissions has taken prominence. Over the last century and a half, GHGs in the atmosphere have increased from 280 to 382 ppm, mostly due to the 28 billion tpy of CO₂ emitted by mankind.

A number of initiatives are underway to slow and reverse the atmospheric increase in GHGs. In order to reverse GHG buildup, the majority of nations around the world signed the Kyoto protocol, agreeing to an emissions reduction to 6% below 1990 levels by 2012.

The US did not sign the Kyoto protocol, but federal lawmakers are pursing comprehensive legislation.

THE FUTURE

Although cap and trade legislation may allow some leeway in regards to purchasing offsetting credits, eventually, refineries will have to reduce GHG output with a large scale process such as carbon capture and sequestration (CCS).

Unfortunately, refineries are not easy (or cheap) to convert to CCS. As little as 13% of flue gas is CO₂ (the rest being inert nitrogen, water vapour and trace gases). As pure CO₂ is easier to transport and sequester, much investment must go into purifying it. Capital investment can approach US$ 1 billion per refinery; various estimates place the cost of capturing CO₂ from flue gases at approximately US$ 75/t. The costs of transporting 1 t of CO₂ a distance of 250 km can range from US$ 1 - 8. Storage in an underground reservoir can add from 50 cents to US$ 8/t. Clearly, the costs of corralling hundreds of millions of tonnes of CO₂ are substantial, and create a significant barrier to most CCS schemes.

The refinery sector faces a rough road ahead. Margins are not expected to recover in 2010. Even though the worst of the global downturn is over, demand in North America (or Europe) is not expected to return to prerecession levels for several years. Growing demand in Asia, on the other hand, will likely be met by new refineries closer to market in the Middle East, India and China. Experts reckon that the OECD has 10 - 15% too much refining capacity; in addition to Shell’s Montreal refinery being shut down, Sunoco has permanently idled its 150 000 bpd Eagle Point plant in New Jersey, and Valero has shuttered its 190 000 bpd refinery in Delaware City. Dealing with GHGs will also be costly and fraught with uncertainty and risk; the demands of GHG reduction come at a time when spending on refineries in North America has dropped from US$ 15 billion in 2008 to US$ 5.5 billion in 2009. But the sector has faced many obstacles before and it has always persevered.

Author: Gordon Cope, Contributing Editor, June 2010 Hydrocarbon Engineering

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