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Apr-2019

The power option

With the market for high sulphur fuel oil under pressure, refiners with delayed cokers can instead opt for higher value power and steam generation.

ROBERT GIGLIO
Sumitomo Heavy Industries Ltd-Foster Wheeler
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Article Summary
The vacuum residuum produced by vacuum distillation comprises long carbon chains that are cracked by a delayed coker, increasing refinery yields of short chain molecular weight hydrocarbon gases, naphtha, and light oils products by 30%, while producing a residual solid product known as petroleum coke. Refineries configured with a delayed coking system can generally produce from 20-30% by weight of entering residual oil as solid petroleum coke. There is a global market for petcoke used for steam and power generation.

Refineries also blend the products of vacuum distillation with lighter petroleum liquids (kerosene, diesel, gasoil) to produce a high sulphur fuel oil (HSFO), with sulphur content typically 1-4% by weight, for the maritime and power generation industries in developing countries and the Middle East. This blending step decreases the value yield from the crude feed since it uses higher value liquids to produce a lower value product.

The International Maritime Organization (IMO), responsible for prevention of marine pollution by ships, is in the process of reducing allowable fuel sulphur content and increasing engine efficiency standards for ships (MARPOL 73/76, Annex VI Amendments). In 2020, the allowable fuel sulphur content limit will drop from 3.5% to 0.5%. The new regulations are expected to reduce demand for HSFO maritime fuels.

The shipping industry consumes about 75% of the world’s production of HSFO today so refiners must soon respond to an imminent global drop in demand for HSFO as ships move to gasoil, diesel, or LNG. Perceptive refiners will find opportunity in a disruption in the HSFO market. By eliminating the blending step required to produce HSFO, refiners’ higher margin from the crude can be greatly increased. Refiners with delayed coking capability will have an added market opportunity.

According to IHS Markit, in 2015, delayed coking technology was used in 41% of the world’s refineries, with Asia, Latin American, and the US having the greatest percentage of coking capacity. There are many refiners with existing delayed coking capability that have already moved away from the volatile HSFO market by producing petroleum coke instead of HSFO. PetroPower couples delayed coking technology with cir­culating fluidised bed combustion (CFB) technology to convert the petroleum coke into power and steam, completely eliminating refinery residues. PetroPower eliminates the value-losing vacuum residue blend step common in many refineries that currently produce HSFO for maritime use (see Figure 1).

The petcoke produced by delayed cokers is an attractive source of energy due to its very high heating value (over 8500 kcal/kg) that stems from its high carbon (75-80% by weight) and low ash content (under 1%). However, extracting its energy is no simple task because of its low volatile matter (under 15%), high sulphur (over 5%) and high metal content (2000-3000 ppm total for vanadium, nickel, sodium and iron).

CFB power plants are ideally suited to burn the petcoke byproduct to produce power and steam. There are many PetroPower configuration options. For example, the CFB power plant can be close coupled with the refinery where the refinery uses all of the steam and power, or it can take an open market approach where the refinery and power plant are located apart from one another and the petcoke is transported by barge or rail. Because petcoke is traded globally, the CFB power plant can be located closer to large power consumers to reduce power transmission losses.

In some locations, excess power and steam can be exported to adjacent industrial facilities and local power grids. The open market concept could be expanded with multiple refineries selling petcoke to multiple power plants, perhaps establishing regional petcoke pricing hubs, as is common with coal-fired power plants. First adopters will have significant market power when establishing regional petcoke pricing hubs. The technology offers both refiners and independent power producers a low risk investment opportunity with an attractive economic return.

Powerful pro forma
The economic attractiveness of PetroPower is site specific but a case study will serve to illustrate the value proposition. Consider a large refinery that processes a medium to heavy sour crude (see Figure 2). The simple refinery produces 400000 b/d from the atmospheric and vacuum towers, but loses 20000 b/d to blend its vacuum residue to produce HSFO. Assuming the average market value for its suite of light products and gases (gasoline, diesel, gasoil, kerosene, LPG) is $80/bbl and the HSFO’s value is $40/bbl, then the simple refinery’s total product sales would be $27.2 million/day.

The refiner now decides to add PetroPower and shifts production away from HSFO to producing petcoke fuel. Now, instead of losing 20000 b/d of light product to the HSFO blend step, the delayed cokers yield an additional 67000 b/d. This would boost the output of refined products by 87 000 b/d, producing an additional $7 million/day of revenue, offset by the loss of $4.8 million/day for the HSFO produced by the refinery.

Further, the plant will produce 910 MWe of electricity that may be sold to the local electricity market or perhaps used to reduce the power purchased by a nearby refinery. If the price paid for power by the local electricity market is a conservative $60/MWh, the PetroPower plant would generate $1.3 million/day in power sales for the refinery, a net increase of $3.5 million/day in revenue.

A reasonable estimate of the construction cost of the delayed coking process and CFB power plant is $2.9 billion. Therefore, the investment in PetroPower produces a simple payback of 3.1 years, $11 billion net present value, and an internal rate of return (IRR) of 32% (see Table 1). The economics would be further improved if refinery electricity purchases were offset by power generation (net metering) rather than sold directly to the local utility grid. For this example, a $60/bbl crude price is assumed and, for every $10/bbl increase above this, the IRR would increase by about 4%.

There is one further intangible factor to consider. The PetroPower plant has traded its current HSFO market volatility risk for the low risk and predictable power market while also diversifying its product portfolio. 

The economics of the PetroPower plant surpass other generation alternatives. For example, if a simple refinery installed a conventional power plant to burn the HSFO to produce power and steam based on $40/bbl HSFO and $1500/kWe plant first cost then the levelised cost of electricity (LCOE) over 30 years, including fixed and variable O&M, 80%/20% debt-equity investment, and 90% capacity factor, would be approximately $77/MWh. The LCOE for a $1000/kWe natural gas-fired combined cycle plant using $7/million Btu natural gas under the same assumptions is approximately $60/MWh. The PetroPower option at 1800 $/kWe, under the same operating assumptions and $50/tonne for petcoke, would produce the lowest LCOE of $43/MWh.

Specially designed arch-fired pulverised fuel boilers have been used to burn low volatile solid fuels like petcoke and anthracite coals for many years. A thermograph of an arch-fired pulverised coal furnace is viewed on the left of Figure 3. The burners are pointed downward to form a high temperature refractory lined combustion zone below the boiler so that the slow burning petcoke reaches a temperature and burning time high enough to crack and burn out the high level of fixed carbon in the petcoke. However, these types of boilers achieve only mediocre combustion efficiency and struggle with ash disposal issues due to high levels of unburned carbon remaining in the boiler ash.
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