PTQ Q4 2022 Issue

cost minimisation is the easy, safe bet. However, saving in the wrong place can be very costly in the long run. With the need for increased flexibility in feedstocks being used and operating conditions applied, the number of variable risk factors to be considered in unit operations can easily become too large to model reliably. One common feature of highly profitable refineries is that they perform laboratory tests to evaluate different operating scenarios on catalysts before running these scenarios in their units. Such tests can either be performed in the refineries’ own testing facilities or outsourced to third parties. hte GmbH offers highly parallelised test units for refiner - ies to accelerate their own testing capabilities, and hte also performs such tests for refineries that would outsource catalysts testing work. Performing a test before loading a new catalyst, before deciding whether to buy a fresh, new catalyst or use a reju- venated one, or before attempting to co-process a renew- able feedstock are just a few examples where experimental evidence can increase margins by tens of millions every year. A George Hoekstra, President, Hoekstra Trading LLC, George.hoekstra@hoekstratrading.com: According to American Fuel and Petrochemical Manufacturers, the US has lost 1.1 million barrels/day of refining capacity since early 2020, and other refineries are ‘on the bubble’. Valero’s CEO Joe Gorder, when asked in their April 2022 earnings conference call about the possible purchase of the Lyondell Houston refinery, sounded bearish, saying Valero’s experience in buying such assets indicates “it’s going to cost $3 billion to get it up to a Valero standard, and I look at it maybe that wasn’t exactly the best thing.” When I followed up and asked Valero’s Investors’ Relations whether the $3 billion was needed for safety, environmen - tal, reliability, or profitability improvement, they said it was for reliability and profitability. My research says refiners have been investing for safety, environmental, reliability, and diversification into other busi - nesses, but they have stopped investing in technology for the manufacture of conventional fuels for the US market. The sudden halt in conventional fuels refining investment was an abrupt change in investment strategy. According to EPA, 85 US refineries installed new FCC feed pretreaters or gasoline desulphurisers in 2000-2005 to meet the US Tier 2 clean gasoline sulfur standard, which was phased in from 2004-2006. That came immediately after a similar round of investments to meet the ultra-low sulphur clean diesel (ULSD) specification. Those investments in the first decade of this century did much more than merely comply with clean fuel specifications. In retrospect, they unquestionable paid off handsomely in higher profitability. But then investment in US fuels refining suddenly stopped. During the six-year phase-in for investment for Tier 3 gaso - line, 2014-2019, US refiners made almost none of the antic - ipated $3 billion+ capital investment that was understood by all to be needed. As a result, many US refineries today are producing less on-spec gasoline marketable in the US. In my opinion, to keep US refineries operating, profit - able, and healthy, we need an immediate reversal of this

sudden, unprecedented halt in investment in conventional fuels refining technology. Much is being made of the US losing 1 million barrels/day of crude refining capacity. But what about the record levels of US fuels exports to Mexico, Central and South America? According to a July 2022 detailed study, the US is exporting nearly 1 million barrels/ day of both gasoline and diesel to Mexico, Central and South America. Conventional wisdom says these fuel barrels are being exported because of global economics and because we cannot move them where they are needed in the US. But I wonder whether the gasoline barrels we are exporting even meet US clean fuels specifications? Regardless, unless we want our fuel supply to go the way of California’s electric grid, it is time for refiners to start investing again in fuels refining technology, starting with gasoline desulphurisation. A Kevin Clarke, Chief Strategy Officer, Imubit, k evin. clarke@imubit.com: Many refining facilities are actively considering/developing projects for the integration of renewable diesel into the flow scheme, driven by opportunities surrounding management and trading of RINs, as well as state and national govern - ment incentives, but also by growing demand for lower carbon content fuels. There is also emerging interest in using the refining complex as a green hydrogen production location or as a carbon capture and sequestration/reuse hub integrated with neighbouring energy-intensive industries. These ideas make sense because refiners have a licence to operate complex continuous process plant, often at high temperatures and pressures. They have infrastructure inbound power supply and distribution, water treatment facilities, inbound and outbound logistics and last but defi - nitely not least, a highly trained, safety-conscious work - force that will continue to be required in the future as the energy industry transitions towards low and zero-carbon operations. A Andy Howell, Executive Vice President Technology, KBC (A Yokogawa Company), Andy.Howell@kbc.global: Refineries have been under increasing pressure to increase profit margins while reducing carbon emissions. Global policies and regulations are being implemented to meet the Paris Agreement ‘zero-carbon road map’ that attempts to limit global surface temperature increases to 1.5°C by 2050. Furthermore, the rapid expansion of renewable and sustain - able energy sources such as wind, solar, and bio-energy are negatively shifting consumers’ perceptions of energy and chemical products, causing a transformation among tradi- tional energy sources. Due to the changing socio-technical landscape, mod- ern refineries have been able to diffuse niche innovations to fuel decarbonisation efforts and achieve Scope 1 and Scope 2 reductions. These innovative technologies include the development of carbon capture and storage, alternative energy supply, alternative feedstock, improved industrial processes, and waste heat usage. Following are several endogenous factors that can contribute to the success of these innovations:

PTQ Q4 2022