Chemical Engineering May 2020 - 15

'Double whammy'
The supply and demand picture for
crude oil products creates a difficult
period for refineries. " Most of the
time, economic theory states that
when prices for a resource go down,
we will use more of it. But now, with
demand for refined products also
dropped because there's less driving
and less aviation, we have the
unusual situation of low oil prices
coinciding with low demand for refined
products, " comments Arij von
Berkel, research director at Lux Research
Inc. (New York, N.Y.; www.
luxresearchinc.com).
The demand destruction due
to the virus, combined with the
drop in crude prices was a " double
whammy " for refiners, says Sawyer.
" In the current situation, you could
produce refined products at a low
price, but no one is buying, " von
Berkel
says. " Many refineries
are
reducing production, or looking to
store products in the hopes of selling
it later. Refineries may also try to
change the product mix, possibly
making less aviation fuel and more
shipping fuel right now, for example, "
von Berkel says.
Pandemic response
The response from the refining industry
to the pandemic is ongoing,
and thus far, it has been multi-dimensional,
with operations- and production-related
responses accompanied
by employee public health measures
and humanitarian efforts.
FGE's Sawyer predicts that refinery
run cuts related to the COVID-19
shutdowns are going to be at least
15 million bbl/d globally, year over
year in April and May. " Some refineries
are going to shut as a result of
that, temporarily, " he says. Examples
of
refinery shutdowns have been
observed in the U.S., Canada, Italy,
South Africa and elsewhere. Unfortunately,
some of the refineries that
have been forced to close because
of COVID-19 may struggle to restream,
he says.
" We may see shutdowns of fluid
catalytic cracker (FCC) units if gasoline
demand stays low, " Sawyer
says. " We have seen some examples
of that as well. " Some refineries
that are in turnaround may not restart
Million barrels per day
110
Forecast
105
100
95
90
85
//
Q1 Q2 Q3 Q4
2015
Q1 Q2 Q3 Q4
2016
Q1 Q2 Q3 Q4
2017
Q1 Q2 Q3 Q4
2018
Q1 Q2 Q3 Q4
2019
Q1 Q2 Q3 Q4
2020
FIGURE 1. Data on global fuels from EIA shows a steep consumption dip in Q2 2020
for a few months.
In the U.S., ExxonMobil Corp. (Irving,
Tex.; www.exxonmobil.com) is
among many companies with refining
operations that have cut production.
ExxonMobil cut production at its
502,500-bbl/d Baton Rouge, La. refinery,
as low demand has increased
inventories and filled storage tanks,
the company says. ExxonMobil has
also cut contract workers at the site
by 1,800 people in April. At least
three refineries in California have cut
production, as well.
Marathon Petroleum Corp. (Findlay,
Ohio; www.marathonpetroleum.
com) idled its Gallup Refinery and
related assets in Jamestown, N.M.
beginning on April 15. Marathon
spokesperson Jamal Kheiry says the
company does not expect any supply
disruptions in the region because
it can meet customer commitments
with other assets in its network.
" Our intent is to maintain regular
employee staffing levels during this
temporary idling period, with employees
assigned to tasks that are
necessary to support our idle status
and eventual return to normal operations.
At this time, the duration of the
idling period is unknown; however, it
is our intent to return to normal operations
as soon as demand levels justify
doing so, " Kheiry says. The company
would not comment on specific
crude acquisitions and refinery runs.
Marathon also provides an example
of how large refining companies
are handling their personnel during
the public health crisis. To reduce
the probability of spreading COVID19
from otherwise healthy people
to those most at risk, Marathon has
reduced facility staffing to only essential
personnel and implemented
CHEMICAL ENGINEERING WWW.CHEMENGONLINE.COM MAY 2020
Q1 Q2 Q3 Q4
2021
remote working programs wherever
feasible, the company says, adding
" This is in addition to a variety
of other mitigation efforts, including
social-distancing, travel restrictions,
self-quarantine guidelines, enhanced
cleaning protocols, and more. "
On the humanitarian side, many refining
companies are finding ways to
give back to their local communities.
For example, Valero Energy Corp.
(San Antonio, Tex.; www.valero.com)
Foundation committed $1.8 million in
late March to support organizations
on the front lines of the COVID-19
treatment and public health response.
In addition, Valero is also providing
gas cards to selected charitable organizations
to provide access to essential
fuels and products for their
operations. Meanwhile, Marathon donated
575,000 N95 respirator masks
to healthcare facilities in 20 states
where the company has operations,
and through the Marathon Petroleum
Foundation, donated $1 million to
American Red Cross Disaster Relief.
Preview of the future?
The current demand falloff due to
the COVID-19 response is occurring
within a larger context of broader
demand shifts, and some industry
experts are drawing connections
between the current situation and
what the future might look like 15-20
years from now. Most predictions put
the peak global demand for gasoline
around 2035, after which demand
will decline as a consequence of the
automotive fleet changing to electric
power or hydrogen, and more efficient
internal combustion engines.
" Everyone expects a drop in demand
after 2035, which will also be
accompanied by a drop in price, so
15
World production
World consumption
EIA
http://www.luxresearchinc.com http://www.exxonmobil.com http://www.valero.com http://www.marathonpetroleum http://WWW.CHEMENGONLINE.COM
Chemical Engineering May 2020

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