Hydrocarbon Processing - May 2022 - 12

Business Trends
RUS
WEUR
USC
10 12 14 16 18 20
10 12 14 16 18 20
LTA
10 12 14 16 18 20
10 12 14 16 18 20
10 12 14 16 18 20
10 12 14 16 18 20
ME + SAFR
APS
10 12 14 16 18 20
CSEUR
10 12 14 16 18 20
APN
author's company estimates that 15%-
20% of global refinery capacity is at risk
by 2030, with an additional 20% of capacity
at risk by 2040.
Sustainability. Net-zero emissions
goals will continue to transform the refining
industry. The author's company's
proprietary metricb
accounts for most of
FIG. 4. Regional operational availability, 2010-2020.
Dated Brent price
2016-44 US$/bbl
2018-71 US$/bbl
2020-42 US$/bbl
2018
Refinery closure
peer group
2016
2020
1
2
Quartile
FIG. 5. Worldwide CTF with refinery closure peer group.
perienced lower unplanned downtimes.
Was this because running at lower utilization
put less stress on the equipment?
This variability indicates the need for
additional data. The 2022 Fuels Study
will collect operational and turnaround
data for both 2021 and 2022, shedding
light on which turnaround strategy was
the best option (i.e., should refiners have
deferred their turnarounds or not).
Potential refinery closures. The author's
company's cost of transportation
fuels (CTF) metric gauges a refinery's
survivability. CTF is the breakeven price
for a refiner to produce a barrel of transportation
fuel. This breakeven price includes
net raw material cost and operating
expense. A refinery's location may
have an impact on CTF for access and
logistics to deliver cheaper raw materials.
Regions with higher energy prices also
drive refiners to lower their non-energy
costs to remain competitive. Refineries
with a higher CTF are at risk of going out
12 MAY 2022 | HydrocarbonProcessing.com
of business. FIG. 5 shows the worldwide
CTF distribution, including a refinery
closure peer group showing the average
CTF position for refineries in the study
that announced either closure or conversion
to renewables production.
Refineries operating on the left side
of the curve (a lower CTF) can go on
the offensive, using their lower breakeven
cost plus advantaged freight rates
to transport products. Refineries with
a higher CTF in those markets must
go on the defensive to remain profitable.
Refineries operating in the range
of the closure peer group are at risk for
closure, conversion or divestment to another
buyer. Demand destruction may
be the accelerator for additional refinery
capacity going offline. The author's
company's proprietary database modela
evaluates regional product demand and
trade flows to calculate at-risk capacity
to return regional utilization to 80% as
product demand decreases. Under a 2°C
temperature increase scenario case, the
3
4
a refinery's Scope 1 and Scope 2 greenhouse
gas (GHG) emissions. The metric
has a direct link to refinery energy efficiency.
As refiners ramp up run rates, increased
utilization from better reliability
will improve energy efficiency. When
formulating a sustainability strategy, refiners
should agree on a percentage reduction
for GHG emissions in carbon
dioxide equivalent (CO2e), which can
translate to a concrete energy efficiency
goal. If strategic investments are required
to meet this goal, an acceptable rate of
return can be generated using process
constraint removal and non-energy operating
expense reduction credits.
Takeaway. The pandemic has had significant
impacts on utilization, profitability
and cash flow for the refining industry,
and has forced refiners to rethink
how to staff and maintain their facilities
in a demand destruction environment.
The resulting demand destruction and
sustainability initiatives point to additional
rationalization of refining capacity
in the next several years. Participation
in the 2020 Fuels Study allows participants
to shape their future strategies to
deal with lower (and already declining)
transportation fuels demand, which the
pandemic has likely hastened.
NOTES
a
Solomon's World Oil Refining Logistics and Demand
(WORLDâ
) Model
b Solomon's Carbon Emissions Index (CEI™)
MIKE ACHACOSO is Vice President
for Solomon's global Refining and
Logistics Business Unit. He has
more than 32 yr of downstream
industry experience. During his
career, Mr. Achacoso has worked
in both domestic and international
locations. His expertise ranges from refinery
operations to strategic planning, economics and
commercial. Mr. Achacoso has held numerous
leadership positions. Prior to Solomon, he worked
for ExxonMobil, TotalEnergies, Syncrude Canada
Ltd., Sinclair Oil and HollyFrontier. Mr. Achacoso
earned a BS degree in chemical engineering from
Louisiana State University and an MBA from the
University of Wyoming.
CTF, US$/bbl
http://www.HydrocarbonProcessing.com
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