PTQ Q4 2024 Issue

Vol 29 No 5 Q4 (Oct, Nov, Dec) 2024 ptq PETROLEUM TECHNOLOGY QUARTERLY

Understanding the peculiarities of the refining business

T h e EIA estimates that around 416 crude oil refinery projects will be finalised worldwide between 2021 and 2025. More than two-thirds are expansions of existing refineries, with 93 a imed at developing new oil refinery infrastructure (see PTQ Revamps 2024 ). Many target increasing blue H 2 capacity from catalytic reformers while minimising the facility’s total carbon footprint. Others involve linking refinery assets with petrochemical facilities, such as steam crackers, in the produc - tion of olefins, starting with feedstocks that include naphtha, ethane, and propane. Forecasts that the EV market will eventually overtake demand for fossil fuels have not come to fruition yet, partly due to lack of expected government incentives. For example, Mercedes has joined a growing list of struggling EV manufacturers, having revised its EV margins downward while preparing to invest more in its line-up of combustion engine cars. Many refineries are still operating at high margins and production rates due to the strong demand for conventional fossil fuels in developing regions. For example, Joao Lopes, an analyst at S&P Global Commodity Insights, recently noted strong refined product demand in Latin America in 2024, which seems to indicate that refinery expansion, such as with PEMEX, may go forward. However, this is not without the Mexican government giving the world’s most indebted oil company billions of dol- lars in tax reprieves (announced earlier in 2024). This will help with the completion of important projects, such as the Olmeca refinery on Mexico’s southern Gulf Coast, which has encountered multiple scheduling setbacks. In other instances, like the planned closure of the 100-year-old Grangemouth refinery in Scotland, UK, older refineries can no longer compete with lower-priced products from new mega refineries, such as the 625k BPD Dangote refining com - plex in Nigeria. However, some older refineries in North America and elsewhere remain efficient due to better access to expertise and resources. These refineries have been thrown a lifeline with opportunities to reconfigure existing FCC units and hydroprocessing reactors for co-processing renewable and hydrocarbon-based feedstocks towards the production of SAF, renewable die- sel, and more. Moreover, refineries in mature economies generally have access to cheaper resources like water and hydrogen compared to other regions. For example, hydrogen costs may be five times higher in China than North America. Refiners worldwide share similar worries when it comes to tariffs. Import tariffs on proprietary technology and machinery (such as compressors, reactors, and fraction- ation towers) increase capital costs. For example, tariffs and trade policies directly impact oil-rich Venezuela’s ability to import refining equipment and export refined products. In addition to tariffs, non-tariff barriers such as quotas, licensing require- ments, and standards can also impact profitability in certain refineries. Furthermore, some governments impose export tariffs on final products from refinery facilities to keep prices lower inside the country or to increase government revenues. New refinery projects coming online in developing countries face unique chal - lenges. For example, the Dangote refinery is struggling with pipeline vandalism and illegal reselling of refined products. This also destroys arable land for agriculture and potentially deters additional investment. Africa already contends with limited access to capital markets. As we approach 2025, it is notable that Saudi Arabia is importing record volumes of fuel oil for incremental power generation, driven by scorching heat waves and widespread water shortages in the Middle East. Against this backdrop, it is clear that climate considerations play a role in long-term planning algorithms.

Editor Rene Gonzalez editor@petroleumtechnology.com tel: +1 713 449 5817

Managing Editor Rachel Storry rachel.storry@emap.com Editorial Assistant Lisa Harrison lisa.harrison@emap.com

Graphics Peter Harper

Business Development Director Paul Mason sales@petroleumtechnology.com tel: +44 7841 699431

Managing Director Richard Watts richard.watts@emap.com

Circulation Fran Havard circulation@petroleumtechnology. com

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PTQ (Petroleum Technology Quarterly) (ISSN No: 1632-363X, USPS No: 014-781) is published quarterly plus annual Catalysis edition by EMAP and is distributed in the US by SP/Asendia, 17B South Middlesex Avenue, Monroe NJ 08831. Periodicals postage paid at New Brunswick, NJ. Postmaster: send address changes to PTQ (Petroleum Technology Quarterly), 17B South Middlesex Avenue, Monroe NJ 08831. Back numbers available from the Publisherat $30 per copy inc postage.

Rene Gonzalez

PTQ Q4 2024