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Addressing the Marpol VI sulfur specification

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Addressing the Marpol VI sulfur specification

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Addressing the Marpol VI sulfur specification

  1. 1. KBC ADVANCED TECHNOLOGIES Proprietary Information SUPERIOR RESULTS. SUSTAINED. Addressing the Marpol VI Sulfur Specification 14 February 2018
  2. 2. 2 1.00% 0.10% 4.50% 3.50% 0.50% Decision taken… 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 2010 2015 2020 2025 ECAs Marine Sulfur Fuel Content ECA = Emissions Control Area 14 February 2018 KBC Advanced Technologies Proprietary Information
  3. 3. 3 Price Trends 14 February 2018 KBC Advanced Technologies Proprietary Information
  4. 4. 4 Transition to post-IMO world will not be seamless 14 February 2018 KBC Advanced Technologies Proprietary Information
  5. 5. 5 Emissions ControlledAreas Shipowners Club 14 February 2018 KBC Advanced Technologies Proprietary Information
  6. 6. 6 Shipping Dilemma – The demand ̴ 300 mln t/y marine fuel 85% International >200mln t/y heavy high Sulphur IMO, 2014 EGCS CO2 Reduction 2023 ? International Domestic Fishing Non- Compliance / Fines LNG 14 February 2018 KBC Advanced Technologies Proprietary Information
  7. 7. 7 Shipping Industry Response – Wait and See • Scrubber installations on “fixed” routes with reliable fuel sources • Less than 1000 scrubbers where total craft in the plus 80,000 numbers Shipping is NOT moving to Scrubbers in a wholesale manner • CapEx and OpEx Challenges for Transocean shipping • Open loop Scubbers will not be allowed forcing sludge collection and increased operating cost (more people and records) Cost risk has stifled decisions • Scrubbers do not touch CO2 • Particulate emissions identified as causing more lightening strikes in open waters in shipping lanes Regulatory pressure on GHG • Average age of fleet is ~25 years • New ships and or new engines must comply with a new NOx emissions and other criteria Over capacity in Shipping Scrapping carriers risk too 14 February 2018 KBC Advanced Technologies Proprietary Information
  8. 8. 8 Shipping Industry Relying Upon Refining The shipping industry will not wholesale install scrubbers Compliant fuel will be used Compliance and fines are already being levied in the current market, and this will continue as there is no abatement to the rule. Between 0.75 to 1 MMBPD of HS FO will remain in demand out of a 3.5 to 4.0 MMBPD consumption today Projections are that at most, 10% of ships will have scrubbers by 2025 or 2030 14 February 2018 “Keep in mind that if today a five-year old Supramax is worth some $14 million, to spend at least $3 million-$5 million on a scrubber is quite a big investment,” said Ralph Leszczynski, research director at Banchero Costa. ICS - Reduce CO2 emissions per tonne-km, by at least 50% by 2050, compared to 2008 and reduce international shipping’s total annual CO2 emissions by an agreed percentage by 2050, compared to 2008 KBC Advanced Technologies Proprietary Information
  9. 9. 9 World Refining Capacity - 2016 to 2025 Thousands barrels per day Data Sources: KBC 20,480 7,983 15,053 8,591 3,385 8,584 31,987 90 380 214 87 160 3,000 4,500 Current Capacity Accumulated Additional Capacity through 2021 Region could see up to 10 MM added Capacity 14 February 2018 KBC Advanced Technologies Proprietary Information
  10. 10. 10 Flow shifts Data Sources: KBC Regions with good margins and excess refining capacity will export – USA / ME / Asia 14 February 2018 KBC Advanced Technologies Proprietary Information
  11. 11. 11 Turner and Mason Margin and Demand Focused Refinery Utilization and Margins 14 February 2018 KBC Advanced Technologies Proprietary Information
  12. 12. 12 HS FO Decline • Shippers reducing fuel use  Slow steaming  Digitalization – operations, routes, fuel quality  Disruptive system changes - Hull cleaning, sails, different fuel combinations • On land use declining  More HS FO moving to bunker market  LNG use accelerating 0% 2% 4% 6% 8% 10% 12% 14% 5 6 7 8 9 10 11 2005 2010 2015 2020 2025 2030 Share %mil bpd Global Fuel Oil Demand Outlook Global Fuel Oil Demand Share of Total Oil Product Demand (RHS) The rate of demand decline averaged 250k bpd between 2006 and 2016 Which trend is most likely? 14 February 2018 KBC Advanced Technologies Proprietary Information
  13. 13. 13 Marine HS Fuel Demand Africa  4% Asia   45% CIS  3% Europe   23% Latin America   10% ME  8% North America   7% Total:  4.2MMBD Pre 2020 IMO HSFO Millions mt/year Millions mt/d mmbpd IMO 2012 225 0.62 4.16 IEA 2016 162 0.44 3.00 OPEC 2015 189 0.52 3.50 Post 2020 HSFO Ensys 50 0.14 0.92 CE Delft 0 0.00 0.00 IEA 2020 27 0.07 0.50 Delta Shifts Ensys 175 0.48 3.24 CE Delft 0 0.00 0.00 IEA 2020 149 0.41 2.75 3 to 3.5 MM BPD of HS FO at Risk 14 February 2018 Recent study showed optimistically, there will be 150-200 MMT/year of excess HS FO in 2020. Storage as a means to “weather” the storm will only exacerbate the problem and only work if scrubbers are installed. KBC Advanced Technologies Proprietary Information
  14. 14. 14 Downgrading Blend Stocks - Risky • Choice of optimum blendstock is extremely complex  Quality properties to consider  New fuel specifications still unknown  All come at a cost • What’s missing between the two blend pools to the right? • How much diesel does it take to blend down 2.5 wt% sulfur? • What will be the outlet for FCC Bottoms? Vac Res & FCC Btm Kerosene Viscosity/ Flash LCO Viscosity/ Stability Others Density Sulphur VGO / Treated Gasoil ULSD Sweet LCO Sweet Resid Pour Point Compatibility Viscosity Pre 2020 Post 2020 14 February 2018 KBC Advanced Technologies Proprietary Information
  15. 15. 15 Crude Spreads Forward 14 February 2018 KBC Advanced Technologies Proprietary Information
  16. 16. 16 ResponseArray Do Nothing – Accept the Risk Switch to Sweet Crude / Compliant Fuel Invest in Bottom of the barrel conversion Ships installing Scrubbers 14 February 2018 KBC ADVANCED TECHNOLOGIES Proprietary Information Cracked Spreads Widen after 2020
  17. 17. 17 Is HS FO Spec a Positive or Negative to Refiners? • Will there be a global or regional glut of HS FO? • What opportunities may be present to exploit?  Crude diet price shifts?  Distressed prices for “over spec” streams?  Increased value of intermediate Diesel / Gasoil? • What logistics may be required to maximize the opportunity? 14 February 2018 KBC Advanced Technologies Proprietary Information
  18. 18. 18 • Quality Assurance  Lower Sulphur directionally is higher paraffinic content less aromatics  Aromatics improve stability  Flocculation of “incompatible” oils can be temperature dependent - Gel formation at filter or in tank  Lubrication needs  Stratification on land / barge / in ship? • What components and sources will make up the “compliant” fuel? • Port to port quality assurance and consistency? BlendingforFuelOil 14 February 2018 KBC Advanced Technologies Proprietary Information
  19. 19. 19 Strategy: Understand your project • For Each option  Capex / Opex  Yields model FINANCIAL MODEL • Capex / Opex  Licensor data? • Yields model  Unit extrapolation / Spreadsheet  LP / (Kinetic) Process simulation 14 February 2018 KBC Advanced Technologies Proprietary Information
  20. 20. 20 Strategy: Understand your project tool capability • LP  Good tool for day-to-day planning  Optimisation is limited  Availability  Unit responses to be configured - Licensor - Unit process simulator - Plant Data (difficult but done) - (Pilot) Plant • Refinery wide Process simulator  Flexibility, detail, constraints  Fundamentals are built-in - Accuracy  Transparency  Independent and can represent “near” licensor yields  Limited optimization capability  Extrapolation not unlimited 14 February 2018 KBC Advanced Technologies Proprietary Information
  21. 21. 21 Strategy: Petro-SIM is the industry leader 14 February 2018 21 CDU REF-SIM Reformer Coker DC-SIM FCC-SIM FCCU Blender DHTR-SIM Diesel Hydrotreater KBC Advanced Technologies Proprietary Information
  22. 22. 22 Strategy: Accuracy early is cheap insurance • Accuracy: get a complete and correct view of:  Non linearities: yields, cold flow, stability  Unit capacities, fuel Hydrogen-, Sulfur balances  Units capacities? • Examples  CCR pressure change  HCGO to hydrocracker, coker naphtha to treater/blender…  Volume/mass pricing - C/H balance  Molecular Management • Time is critical 14 February 2018 KBC Advanced Technologies Proprietary Information
  23. 23. 23 Conclusions – The long term solution is in Refining Refiners • What is an optimised configuration for the future • What feedstock or blending is required? • What streams in and out maximize the opportunity? • Are the tools used robust enough to define the cost effective solution? The Future is Now • The oil industry is resilient, with the capability to meet the challenges of the future • Is the plan defined today actually right to meet the events coming? • Plan now to be ready to execute in Q4 2019 • Test the concepts as cheap insurance what is planned will actually work 14 February 2018 KBC Advanced Technologies Proprietary Information The same economics that incentivize shippers to install scrubbers (cheap HS FO) is the same incentive that signals refiners to invest to capture back margin lost in cheap HS FO sales.

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