European refiners lag on IMO 2020
The continent’s crude processors are playing catch-up following the introduction of IMO 2020 regulations on sulphur content in marine fuel
European refiners are, in many cases, reacting retroactively to the introduction of stricter sulphur limits on marine transport fuels. the changes are being made. A study by US firm AspenTech—a software provider for process industries—earlier this year found that European refiners were the least prepared globally for the advent of IMO 2020.
Under new International Maritime Organisation (IMO) 2020 regulations introduced at the start of the year, the limit for sulphur content in marine fuel has been reduced to 0.5pc. While bunker fuel typically accounts for a small proportion of refiners’ output, this nonetheless requires them to make changes. And these changes must now be made while facing the even bigger challenge posed by the collapse in jet and road transport fuel demand caused by the Covid-19 pandemic.
Taking a hit
Several European refiners were already struggling with longer-term profitability for a variety of reasons—well before matters were exacerbated by Covid-19. Against this backdrop, any change in the economics for bunker fuel is an additional burden.
“If you look at the economics of a refinery, the refining margin or profitability margin is not that high,” says Ron Beck, AspenTech’s industry director of oil and gas. “And if you take away or make it more difficult to get something that you are counting on as a revenue source, then you throw off the economics.”
AspenTech finds that just 23pc of European refineries pre-IMO 2020 had focused on operational improvements targeting higher availability to make low sulphur fuels. This compares with a 37pc figure globally.
“The European refineries did not make a lot of capital investments. They may not have had a choice, because maybe the economics were not there for the companies to make responsible capital investments,” says Beck. “But, at the same time, there are lots of very economical ways to apply technology to be able to thrive under these situations.”
There are a number of approaches that those refiners that have previously neglected operational improvements could take, according to Beck. And, crucially, most chime with a broader long-term goal of sustainability, which is a particularly strong narrative in the European downstream, as the continent’s operators and investors are further down the path of the energy transition relative to other geographies.
“By focusing on software technologies that can help you operate your refinery more precisely to different objectives, you can meet multiple needs—maximising your opportunity under the IMO 2020 rule as well as optimising your refinery to take you towards your company's sustainability goals, which in some cases are pretty ambitious,” says Beck.
23pc - European refineries focused on increasing low sulphur fuels pre-IMO 2020
One option is for refiners to change the mix of fuels they buy in order to respond to the changing market. A refiner’s linear programme (LP) model can help with this in several different ways, depending on the model.
“The best practice refining companies do not just build a model of their own facility–they build a model of the whole market,” says Beck. “So, let us say you are in northern Europe, you can and should look at what is happening with all the other refiners across the European market. Then you can get an idea of what your choices are, what you think your competitors are doing and how profitably they are doing it. And that can help you make better decisions.”
This can be particularly helpful, in Beck’s view, for those refiners that own multiple plants and are seeking to optimise their entire network.
Using blend optimisation tools is another component of how refiners can adapt. “The decision is exactly how you run the blending operation to have a big impact on your economics. That is another way in which software technology could really help people through IMO 2020,” says Beck.
Using a sulphur recovery unit is an option for refiners that receive high-sulphur crude grades, for example from Nigeria. However, Beck sees a drawback in this approach in that sulphur recovery units can affect sustainability, as they are energy-intensive, as well as being complex to operate.
“The European refineries did not make a lot of capital investments" Beck, AspenTech
But he cites an example—albeit not from Europe—of India’s Bharat Petroleum Corporation (BPCL) building a digital twin model in order to obtain the best results from its sulphur recovery system, including sulphur emissions reductions and energy savings.
Dynamic optimisation is used by Spain’s Cepsa at its Rabida refinery. “What this does is takes your monthly plan, takes data coming out of the refinery itself, and constantly adjusts how you are operating. It is a much larger-scale version of what you can do with sulphur recovery,” says Beck.
A simpler, non-automated version of the model still requires an operator to change settings based on what it suggests. A more complex next step is to make it a closed loop model that adjusts by itself and does not require people to do anything other than monitor it.
Cepsa has managed to boost its margins thanks to its use of this model, according to Beck, and has also succeeded in reducing flaring by 300pc.
Refiners can also take a broader approach of general transformation. “One example is [Romania’s] Rompetrol, which has accelerated its whole digitalisation activity to gain competitive advantage,” says Beck. The firm reported recently that it had already gained $5mn worth of incremental benefit overall from this strategy, and projects that, within four years, it will achieve $30mn.