Refinery of the future: bankable, flexible and sustainable
Efficient use of molecular precision across an integrated refining and petrochemical operation uncovers the best roadmap for refiners to meet their changing objectives.
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As firms work to realise their vision of how they want to engage the market across the energy transition, implementing those plans requires an investment strategy that is simultaneously bankable, flexible, and sustainable. In a business where investment opportunities are aligned with three-to-five-year maintenance turnaround schedules, opportunities span from smaller, highly tactical investments to longer-term strategies.
While smaller investments can be funded out of cash flow, bolder projects often require access to external financing. These projects face increased challenges to secure the cash needed to bridge the energy transition. Simply responding to changes in the marketplace risks being too late and an inability to invest fast enough to maintain a going concern. The fundamental challenge is to invest in profitable investments aligned with society’s increasing focus on environmental, social and governance (ESG) goals. Rising to these challenges is how Honeywell UOP helps its customers realise their refinery of the future.
Healing a fractured business model
Please, get rid of transfer pricing. Whether a firm operates a basic oil refinery or the most highly integrated refinery and petrochemicals complex, entitlements are pervasive in the form of transfer pricing between internal lines of business. These can be west-side vs east-side, conversion units vs others, and refinery vs aromatics vs olefins, to name a few. As the industry looks to drive efficiencies via connected and digital, we learn more about the inefficiencies associated with such entitlements. Connected and digital themselves do not fix inefficient business models. As China has been the world leader in integrated R&P complexes, it drives step-change higher efficiency in the ‘Chairman’s Model’, in which each internal business is driven towards the same goal: the best overall profitability of the firm, not just their domain.
Any digital or connected approach will simply mirror the inefficiencies of a fractured business model. Several major firms are realising this fundamental inefficiency and have started their journey to improvement – leadership structures are being modified, incentives are being realigned, and benefits are being realised. The first step in creating a future-forward refinery is to ensure the organisational structure reflects an integrated business model approach. When we consider decarbonisation and driving efficiencies, it is imperative to consider the whole operation.
Efficient integration with molecular precision
As we look at ways to increase a plant’s efficiency, we start at the macro level, but very quickly dig deeper into what is happening at the most micro level. It is no longer good enough to talk about boiling ranges of feedstocks or even individual carbon numbers. Strategies for molecule management have matured to one of true molecular precision. Latest technology advancements manage operating efficiency at the level of individual isomers as we drive to minimise the work intensity for each component.
As engineers and chemists, we can take almost any molecule and convert it into almost any other molecule. But certain molecules want to be certain things. For example, by exerting energy (work) and capital, we can convert propane all the way to BTX. But what should we convert it into? The answer is: the thing that creates the highest value with the least amount of work and capital. To do that, we need to integrate efficiently across the entire enterprise. Less efficient operations are systematically losing their right to participate in future markets.
How to measure efficiency?
At Honeywell UOP, we focus on six fundamental efficiency metrics (see Figure 1). The five on the outside ring (carbon, hydrogen, utilities, emissions, and water – treated as a scarce resource) are in tension with each other and with capital at the centre. Whether a firm or an investor is focused on financial or ESG measures, doing this well, aligned with each firm’s goals, is critical in securing access to the cash required to realise their vision.
With carbon, we want to put the right molecules in the right place. This can be the right process unit or separating the right product pool. With hydrogen, we want to optimise the sources and uses – put it on to do good things, take it off to do good things, and do that as few times as possible. With utilities, we want to do more with less and minimise utility usage. When we are successful with utilities, emissions also come down. But emissions can also be favourably reduced when we employ the proper molecular management and drive towards smaller equipment to carry out the objectives.
Water is critical. We want to treat water as a scarce resource because it is. There is a growing competition for water between civil, social, societal, agricultural, and other industrial uses. We need to minimise new water consumption and strive for zero water discharge.
Finally, it must be noted that the approach to securing capital has shifted dramatically over the past few years. Large banks have shifted their lending profiles towards green projects (see Figure 2). Financial portfolio management is extending beyond traditional measures, such as net present value (NPV), internal rate of return (IRR), and debt service coverage ratio (DSCR), and increasingly focusing on sustainability measures, such as CO2 per tonne of product and CO2 per dollar invested. Boards of directors are also driving this proliferation. As this communication cascades down organisations, project managers at the individual site level are increasingly asking us to help them achieve the financial measures, but also the ESG measures.
Scope 1, 2 and 3 emissions
Scope 1 emissions, commonly known as direct emissions, are produced as part of day-to-day business. These include emissions exiting process units and heater stacks, emissions from on-site generation of utilities, fugitive emissions from flanges and valves, and company vehicle emissions.
Scope 2 emissions frequently are referred to as indirect emissions. These are associated with the generation of energy needed to run a facility that is produced by and purchased from someone else.
Scope 3 emissions arise primarily from the ultimate combustion of fuels that a refinery produces and sells. Scope 3 also includes emissions associated with disposing of waste streams and emissions generated when others fabricate, manufacture, and deliver such things as catalyst, specialty equipment, vessels, exchangers, and pumps on the facility’s behalf. Scope 3 encompasses everything upstream and downstream of the facility, making this the largest component of its carbon footprint.
There are several ways an existing enterprise can reduce emissions. These range from low-cost tactical ‘just go do’ activities to the most strategic shifts, such as pivoting from fuel to petrochemicals production.
No- or low-cost solutions include reducing slops reprocessing, reducing or eliminating flaring, and avoiding over-refluxing columns. These can often be solved through visualisation tools to quantify processes and understand how to get the most out of their assets every day, across every shift.
At a slightly higher cost, operators can consider using higher activity catalysts. These reduce reactor temperatures, leading to a reduction in the amount of fuel used and a subsequent reduction in the CO2 footprint. Operators can optimise pump efficiencies by properly sizing impellers and control valves or improving the compressor anti-surge control system hardware, software, and programming.
Moderate- to high-cost options might include adding to the heat exchanger network, optimising hydrogen and electrification networks, monitoring and mitigating fugitive emissions, and replacing exchangers with higher efficiency systems.
When we engage with the customer to start this journey, we start with a Concept Development Workshop – effectively a voice-of-the-customer exercise where we align our listening skill set to understand where the firm wants to transition or improve across time. It helps us identify the right ideas to assess. Then, working with the current value of carbon in the global region, we create a carbon abatement curve for the customer, in which carbon reduction opportunities and their CO2 impact are paired with the cost per tonne of CO2 reduced. This provides a roadmap through which a firm can plan its journey.
Cost of hydrogen production drives regional technology selections
The cost to produce hydrogen varies from region to region around the globe and has a profound impact on the types of technologies employed and market participation. For example, the cost of hydrogen in China out of a steam methane reformer (SMR) is approximately $2,000/t compared to $750/t in the Middle East. As a result, China drives crude oil to aromatics projects; when they search for olefins projects, they end up importing propane (effectively as a hydrogen source) to feed their propane dehydrogenation units.
Lower energy prices result in a cost advantage for producing light olefins in the US, the Middle East, and places that have a similar cost structure, while places that have a high hydrogen cost structure (China, SEA, India) are looking more towards aromatics production and/or imported feedstocks.
How does this impact the ways in which we try to improve carbon efficiencies and operations costs? It means there is a huge argument for capturing the hydrogen that refiners have already made.
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