Crude oil refining reconfiguration
World is moving over troubled waters. Under this situation everybody needs to adapt to this challenge. That is a real fact in the current energy business scenario impacted by climate change. World regions are reacting according to their own needs, strenghts and capacities. The oil refining industry is not an exception and it is getting clear that a reconfiguration is taking place throughout the world. A recent post from Hydrocarbon Processing (HP) magazine (https://www.hydrocarbonprocessing.com/) titled “Coronavirus accelerates oil refining shift to Asia” describes comprehensibly this issue. Following I willl describe some key ideas about what is happening within the industry, as indicated in HP post, and then I will detail how a US refiner is adapting its refinery in UK to energy transition.
“Fuel consumption has been falling across most of North America, Western Europe and Japan since 2007 as a result of efficiency improvements in the transport business. Severe drop of fuel consumption during the pandemic is accelerating the long-term shift of refining capacity from North America and Europe to Asia, and from older, smaller refineries to modern, higher-capacity mega-refineries. The result is a wave of closures.
ASIA FUEL GROWTH
In contrast to Western Europe, North America and Japan, fuel consumption has grown rapidly across the rest of Asia over the last decade. Markets in West Asia (centered on the Gulf), South Asia (centered on India) and East Asia (China) have been responsible for more than two-thirds of worldwide oil consumption growth since 2009. Asia has seen sustained growth in its refining capacity to match the growth in consumption. Asia and the Middle East account for 43% of worldwide refining capacity, almost exactly matching their 44% share in global oil consumption.Asia’s refineries are more competitive because they are nearer growing markets; process large volumes with better economies of scale; and are equipped with more modern and sophisticated equipment.
INCREASING SCALE
In the 1960s and 1970s, new refineries were built at a minimum efficient scale of 100,000-250,000 bpd of crude capacity, but refineries commissioned in the 2000s and 2010s are generally 300,000-400,000 bpd or more. New mega-refineries are often built with integrated petrochemicals units, enabling them to produce a higher share of higher value-added chemicals as well as lower-value fuels.As a result, the new mega-refineries can squeeze a higher share of valuable products from the same crude at lower cost, outcompeting rivals in North America and Europe.Facing a shrinking fuel market at home, North American and European refiners have found it increasingly difficult to compensate by growing fuel exports profitably.And as the average size and complexity of new oil refineries has increased, the oldest, smallest and least complex refineries have become uneconomic.The result is a wave of refinery closures, with jetties, tank farms and pipelines repurposed to become import terminals. Most closures have been in North America and Europe.“
HUMBER REFINERY
A recent post (November 2020) issued by Oil & Gas Journal magazine (https://www.ogj.com/) titled “Phillips 66’s Humber refinery advances renewables projects” details two initiatives the company is executing to show their committment to lower carbon footprint. The first initiative corresponds to a Conversion Unit project of Used Cooking Oil into Renewable Diesel and the second one is a development project to produce Green Hydrogen with the target to install a 100 MW electrolizer powered by Offshore wind generation. In our next post we will describe the two initiatives.