PTQ Q2 2022 Issue

Energy management and sustainability of the downstream industry Energymanagement must feature in any strategy in the downstream industry for both environmental impact and economic competitiveness

MARCIOWAGNER DA SILVA Petrobras

T he increasing necessity to reduce the environmental impact of fossil fuels has led to a global decarbonisation trend in the energy mix, creating a new challenge for the crude oil production and processing value chain. The downstream industry produces fuels or energy carriers for end uses such as transport. Refining processes use a significant amount of energy, typically from the combustion of less valuable hydrocarbons, result- ing in carbon dioxide (CO 2 ) emissions. Considering this fact, minimising the energy intensity of crude oil refining processes is fundamental to improv- ing the sustainability of the down- stream business. E nergy management is vital for energy companies, especially oil com- panies, to achieve sustainable and competitive operations. Nowadays, company strategies must consider the three legs of the sustainability tri- pod: people, planet, and profit, in this order. In this sense, refiners must con - sider two factors in their energy man- agement strategies: environmental and economic factors. Economic driving force While crude oil is a tradeable com- modity, it is of no practical value until refined or converted into oil products: fuels, petrochemical, lubri- cants, and bitumens. The profitabil - ity of a crude oil refinery is directly proportional to its capacity to add value by maximising the production of higher value derivatives. This is illustrated in Equation 1 , which pre- sents a simplified concept of the liq - uid refining margin:

The first term in Equation 1 cor- responds to the revenue obtained through the sale of the oil products, represented by the sum of the prod- uct of the derivative market value and the volume or weight commer- cialised. As aforementioned, the profitability or refining margin is directly proportional to the refin - ery’s capacity to add value to the processed crude slate. Hence, the maximisation of higher added value derivatives leads to the maximisa- tion of the first term in Equation 1 . In Equation 1 , the term Pc corre- sponds to the acquisition cost of crude oil. Refiners have no direct control over the crude oil market or the acquisition cost of crude oil, which is determined by geopolitical conditions in the international mar- ket and the demand for oil products. Lower cost, heavy crude oils can reduce the cost of the crude oil feed- stock supply, but the processing of heavier crude slates requires more complex refining configurations with higher conversion capacity, raising the operational costs. The fixed and variable costs (Fc + Vc) represent the operational costs for refineries. Figure 1 shows a sim- plified scheme for profitability in the

downstream industry, highlighting refiners’ cost composition. Considering that energy consump- tion represents more than 60% of the total costs of a typical crude oil refinery, the capacity to optimise and reduce energy wastage is a key factor in the competitiveness of the downstream industry. Some rela- tively simple actions are available to optimise energy consumption in refining assets to achieve this goal. In a typical crude oil refinery, it is possible to identify two basic ways to improve profitability through energy optimisation: 1 Consumption reduction This involves running at lower through- put or lower conversion. As such, it has a direct impact on the yield of products and the quality of the derivative or the auxiliary pro- cesses. This option is used in times of low product demand (such as during the recent pandemic), but is less desirable when prod- uct demand is high, so it is not a straightforward option. 2 Cost reduction of the energy used This involves optimising energy con- sumption and minimising wasted energy through energy efficiency and reliability improvements. These actions normally represent a reduc- tion in the total energy consumption of the refinery. Among the optimisation opportu- nities, it is required to answer some questions, such as when is it an advantage to use thermal or electric energy, what is the best operating scenario to change electrical equip - ment to turbines, and what is the Available options for energy optimisation

Protability

Revenues

Costs

Added value of the derivatives

Volume

Fixed + variable

Figure 1 Simplified composition of profitability for crude oil refineries

Liquid refining margin = ∑ i

n (Di x Vi) – Pc –

(Fc+Vc)

(1)

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