Jul-2011

Improving profitability in the era of lower utilisation

Over the last several years, the US refining industry has evolved from the golden era of high margins and maximum utilisation to tighter margins and refinery rationalisation. Refiners have had to quickly adapt to this new reality or risk becoming unprofitable.

Eric Streit and Robert Ohmes, KBC

Article Summary

With refineries running at lower throughputs than have been seen in many years, refiners are presented with new challenges to retain a profitable operation. This paper focuses on ways that refiners can improve profitability while operating in a low margin and low utilisation environment.

Current and future market conditions
For the last five years, crude unit throughputs in US refineries have been declining, with crude unit utilisation dropping below 85% in 2009. Although crude unit utilisation recovered slightly in 2010 (85.3%), utilisation continues to be well below the average of the last 20 years. In addition, most forecasts call for continued low utilisation rates.

Some of the decrease in utilisation is due to the addition of capacity during a period of flat or slightly declining refined product demand. However, over the last five years, low margins have forced refineries to cut crude charge. After five years of relatively steady refinery gross inputs, in 2008 they dropped nearly 4% and dropped another 1% in 2009. Although gross inputs rebounded slightly in 2010, they are still lower than they have been in nearly a decade.

In sharp contrast to recent history, increased throughput does not necessarily mean increased profit. Refiners are forced to make decisions that would have seemed unlikely 10 years ago. Shutting down units, extending turnarounds and reducing unit capacities are all strategies that are being done today to try to compensate for lower refinery utilisations.

Another aspect of the market that refiners must deal with is that the margins on all refinery products are eroding. During 2006 and 2007, the price of ultra-low-sulphur diesel (ULSD) was much higher than gasoline, which gave refiners a clear definition of direction: maximise distillate. Over recent months, ULSD and unleaded regular gasoline (ULR) have sold for similar prices. The driver to maximise ULSD over gasoline is no longer present.

Historically, typical operating plans maximised refinery and individual unit throughputs. Even conversion was frequently sacrificed to maximise feed rate. With large margins on most products, the planning challenge was to make sure as many units as possible were fully utilised. The main operational challenge was to maintain reliability while finding ways to relieve throughput constraints.

In the present and near future, margins do not support maximum throughputs. Economic drivers have shifted from feed rate to conversion. Creating volume in a refinery is always desirable but at lower unit feed rates, increased liquid volume yield is more important than ever. Therefore, refiners must look for and implement alternate operating strategies to maximise profitability, including unique operational changes that may have been suboptimal under previous economic conditions.

Maximising refinery profit at lower than historical throughputs
With the shift away from maximum unit utilisation, many operational opportunities may now be available that have not been in the recent past. Constraints that previously restricted unit throughputs have been relieved. Energy inputs that were optimised for high rates now need to be re-evaluated. Buying or selling intermediates may have been uneconomical in the past, but with open capacity on some units it may now be profitable.

The following sections will outline typical and novel example strategies that refiners can examine for profit improvement opportunities. Later in this paper, an industry- proven work process will be outlined that enables refiners to identify, capture and sustain opportunities.

Fractionation
At higher unit throughputs, fractionators throughout the refinery are typically operated up to one or more physical constraints. These constraints may include flooding, overhead condensing, furnace outlet temperature or heat removal limits, among others. At reduced unit throughputs, many of these former constraints may no longer be an issue. There are a number of ways that a tower’s operation
could be changed as a result of the removal of these physical constraints.

As tower flooding, reboiler duty and condensing system constraints are removed at lower unit throughput, increasing reflux and decreasing pumparound rates to provide more internal reflux in the fractionators may be profitable. These changes improve the separation in the tower and allow more valuable products to be drawn to higher rates or to better qualities.

The draw rate of individual products from a fractionator may have been constrained at high flow rates due to rundown hydraulics. As the feed rate to the tower is reduced, the unit may not need to run a given product to its maximum rundown rate. Instead, cutting back some product draws that were always maximised in the past may make sense.

Each tower should be examined on an individual basis to determine if changing tower operational targets makes sense at lower flow rates. Each tower’s operation can then be reviewed on a multi-system and plant-wide basis to capture profit improvement opportunities.

Increasing hydrogen recycle
On many hydrotreaters, the gas-to-oil ratio is set to a level to minimise catalyst deactivation while maximising throughput. Frequently, this translated into maximising unit throughput up to a minimum gas-to-oil ratio (or minimum hydrogen partial pressure). With lower unit throughput, it makes sense to revisit this strategy. Increasing gas-to-oil ratio on a hydrotreater or hydrocracker will provide benefits in terms of increased unit cycle length and increased hydrogen consumption along with improved properties in hydrotreated diesel (cetane) or FCC feed (H2 content).

However, increased gas-to-oil ratio comes at a cost. The gas that is being recycled has to be compressed and heated back up to reactor temperature, so raising gas-to-oil requires more energy input for the same unit throughput. Each unit should be evaluated to optimise the cost versus benefits of increasing the gas-to-oil ratio.