Evaluating purchased feedstocks for hydrocrackers and hydrotreaters

Over the years in my career, I came to respect traders who could locate, negotiate, and purchase cheap feedstocks. The good traders seemed like sharks – always prowling and always hungry. They could make a lot of money for a refinery.

Jeff Johns

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Article Summary

The most successful traders always had good technical and operations staff to support them. The technical staff always translated the impacts of a purchased stock into dollars to make good decisions. The operations staff would find clever ways to offload, store, and then feed the stocks to hydrocrackers and hydrotreaters. An effective team of traders, engineers, and operators could always take advantage of good opportunities, but could also identify the opportunities that did not make sense. In this article, I’ll discuss some of the methods used to evaluate purchased feedstocks while maintaining  the integrity of the units.

Jack be nimble, Jack be quick!
In my background, the question of whether to purchase a feedstock for a hydroprocessing unit comes up with little notice and sometimes with substantial pressure to just say yes! There is no better answer to be nimble and quick than preparation and planning. I have seen great value in key members of the refinery working together proactively to identify and agree on the range of feed parameters that can be acceptable in all situations, what range of feed parameters will never be acceptable, and the process to assess the risks/trade-offs to handle any feed that doesn’t fall into either of the two previous categories. 

Another critical consideration is the type of purchase being considered. Is this a 'one-off' opportunity purchase or a long-term contract? The team should insist on taking the time for a rigorous and thorough assessment (including a feed variability assessment) when a significant amount of 'grey zone' feed is being considered for a long term 'take or pay' agreement. A less rigorous assessment can be appropriate for a 'one-time' modest parcel of feed that can be segregated in tankage and run off slowly if necessary.

Examples of feedstock agreements/standards are shown below for diesel and gasoil purchases. The list of parameters on each list is intended to be an example and may not include all necessary parameters. The limits in a purchased feedstock standard should be established through a team that includes representation from planning, operations, and process engineering. Setting limits requires experience and calculations.

Most refiners have LP models that simulate processing costs and calculate potential profits for purchased feedstocks. These models can identify if there is enough hydrogen and processing capability for a purchased stock and  generally provide a good first pass on what a purchased stock may be worth. However, in my experience most of these models do not calculate catalyst life impacts very well nor do they consider that some challenging feeds can be diluted to minimise the difficulty in processing a stock. LP models cannot calculate the impact of contaminated stocks on reactor pressure drop. Therefore, there is still a need to discuss a potentially challenging opportunity feed purchase and get detailed estimates of the processing costs and impact on the unit and the refinery.

It’s all about the economics (most of the time)
There are a few exceptions, but most decisions on purchased feedstocks should obviously focus on economics. Would you run a stock that made $1MM for the refinery if it cost $0.25MM to process it? Of course, you would! While each refinery will have its own risk tolerance and economic criteria, a typical rule of thumb used is to have a 3:1 payout when running purchased stocks.

Would you run a stock that made $1MM that cost $1MM to process? This stock purchase would be highly discouraged because there are risks associated with purchased stocks:
• Feed properties are different than advertised
• Feed contains contaminants that were not identified in the analysis
• Feed is contaminated during shipping
• Feed is much more difficult to process than expected

A stock can be much more difficult to process than expected when the feed has been previously hydroprocessed, such as in a synthetic crude. Previous processing typically removes all the easy sulphur and nitrogen, leaving only the harder to remove molecules behind. The feed looks easy but can be exceedingly difficult to process.

There are rare feeds that nobody should purchase. As an example, a few years ago, some Russian crude was offered on the market at an extreme discount. The discount came because the crude had been contaminated with chlorides. If I recall correctly, the chlorides in the crude had been measured in the range of 50-100 ppm or more.

Every oil trader in the world salivated at the discount and pushed their technical people to consider this crude. Most companies quickly and prudently declined this purchase. I heard stories that a few refineries in Europe ran this crude and a couple of these refineries ended up shutting down due to corrosion and leaks that occurred. This is an extreme example, but one that shows sometimes it’s just not worth any amount of money to run a terribly contaminated feed.

Processing costs
Assuming you can easily transfer the stock to your refinery and to the unit, then there is a need to estimate the impact on unit for catalyst fouling, hydrogen consumption, reactor pressure drop, exchanger fouling, etc. Many refiners have kinetic models that can estimate catalyst fouling and hydrogen consumption. Experience and comparison with current feedstocks should be used to estimate the impacts on items such as reactor pressure drop and exchanger fouling.

Catalyst fouling
Catalyst fouling is caused by coke or metals neutralising active sites on a catalyst – mostly by covering the active sites and making them inactive for reactions to take place. For hydroprocessing reactions to take place, the hydrogen and the oil molecule need to touch or otherwise interact with the active sites for the reactions to occur.
Total fouling consists of coke fouling plus metals fouling.

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