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ECA changes and its impact on distillate demand
Platts 4th Annual Middle Distillates Conference– 30th January 2014
Hugh Tucker – Technical Director
UK Petroleum Industry Association
Trade Association for the UK oil refining industry & its marketing activities Some principles: • Sound science • Level playing field • Practicable • Flexibility • Cost effective and Affordable • Avoid gold plating of legislation
Associate scheme for Process & Terminal Safety and Road & Rail Transportation.
Ten Members • BP • Shell • Phillips 66 • ExxonMobil • Murco • Petroineos • Essar • Total • Valero
Marketing/Retail – No refining Refining and Branded wholesale marketing Refining and Marketing Refining and limited marketing
UKPIA members source more than 85% of the UK petroleum product market
EU refined product demand profile
Distillate demand (Diesel/ Gasoil & Kerosene) increasing Continued but slower decline in gasoline demand
Source: Purvin & Gertz, UK refining study
EU Refined product supply demand balance
EU demand
304
EU demand
102
The EU currently net imports some 41mte of Diesel & Gasoil which is projected to grow to 54mte by 2030
Source: Purvin & Gertz, UK refining study
UK and Baltic Emission Control Areas
Evolution of Marine fuel sulphur to 2020 (2025)
IMO Marpol (annex VI), key dates:
1st July 2010: ECA’s 1.00% max S
1st Jan 2012: Global Marine 3.50% max S
1st Jan 2015: ECA’s 0.10% max S
1st Jan 2020: All Marine 0.50% max S
Subject to review in 2018 which could defer to 2025
EU Marine Fuel consumption
Source : Europia / PFC energy / P&G
In 2020: If HS fuel is required as Gasoil, or blends of Gasoil post 2020, this will add more to the overall EU Gasoil deficit, but overall demand will fall.
EU gasoil deficit post
2020
41mte Current deficit
Up to 83mte If Marine included??
ECA fuel ~10mte, HS fuel ~42mte
In 2015: ECA fuel becomes 0.10% max sulphur
The refiners challenge
Use available crudes: • Adapt to quality variations • Adapt to different crudes
on a day-to-day basis
Produce desired products: • All products must be “on-spec” • All must be produced at the
same time • Nothing can be thrown away!
And minimise energy, GHG, environmental impacts and costs
0
20
40
60
80
100
Brent Iran light Nigerian Russian Kuwait Demand
LPGNaphtha/gasolineKero/jetGasoil/DieselHeavy fuel oil
Crude oil: typically much “heavier” than product demand
Source CONCAWE
Typical refinery processes
Catalytic cracking (FCC) versus Hydrocracking?
Crude residue
The impact on refining?
• Throughput of gasoline-producing FCC units drops dramatically, due to declining gasoline demand.
• Significant capacity additions required of diesel-producing units (Hydrocracking), Residue hydro-desulphurisation, Residue conversion (Coking) and Hydrogen production units
- Driven by IMO bunker sulphur reduction and growing demand share of distillates - Requires massive investment in new unit capacity & increases GHG!
Cat Cracking (FCC)
Hydrogen
Hydrocracking, Residue HDS and other conversion
-60
0
60
2008Base case
2010SECA
bunker1.0%S
2010SECA
bunker1.0%S
2020Generalbunker0.5%S
2025 2030
Uni
t thr
ough
put (
Mt)
These unit throughput trends assume that gasoline exports and distillate
imports remain constant
Note: Draft graphs and figures from CONCAWE work in progress
2015 SECA
bunker 0.1%S
Net Cash Margin after sustaining
capital
$/bbl
EU refineries however are facing increasing environmental legislation
• The figure does not include FQD7a, FQD other items and the Energy Efficiency Directive.
• Article 7a could, for example, add up to a further $2/bbl of cost at UK locations.
• Circa £11.4 billion is estimated for UK refineries only to comply with UK and EU legislation to 2030.
Source: Purvin and Gertz UK refining report
For Refining: • In the UK our DECC’s UK Refining Strategy must have real outcomes • Call for meaningful ‘Refining Fitness Checks’ by the EU Commission to inform
European Policy – and before potentially damaging new regulation enacted – e.g. Fuels Quality Directive (FQD) Article 7a and Industrial Emissions Directive (IED)
• The UK and Europe needs a strong base of refineries investing for the long term to maintain supply resilience.
The way forward – a question of balance
For Marpol: • The IMO 2018 review should, based on technology available at the time, compare: i. The cost (including the impact to supply resilience) to the oil industry of providing fuel at 0.50 mass % sulphur, and ii. The additional CO2 released associated with manufacturing these fuels, with iii. The cost of providing sulphur abatement equipment on board ships and/or sulphur trading schemes • This should show that the cost to the oil industry is substantially higher than providing
on board abatement measures and that higher sulphur fuels may continue to be used while at the same time meeting the emission levels set out in MARPOL Annex VI.
Our Associate Scheme - Process Safety Associate, Transport Associate and Full Associate – is now open to all companies with an interest in process safety and transportation within the oil, gas and other high hazard
industries. By joining UKPIA you are part of an influential, authoritative and established association providing you with access to leading industry committees and to an experienced secretariat.
UKPIA Process & Terminal Safety and Road & Rail Transportation – Associate Scheme
To find out more about becoming a UKPIA Associate Visit the UKPIA website: www.ukpia.com
Send an e-mail to: [email protected] Call: 020 7269 7600
Thank You!
www.ukpia.com 0207 269 7600