PTQ Q1 2023 Issue

Vol 28 No 1 Q1 (Jan, Feb, Mar) 2023 ptq PETROLEUM TECHNOLOGY QUARTERLY

The dichotomy of refining

H igher refining margins are typically accompanied by debt-funded projects, which doesn’t seem to reflect the current business cycle, such as in mature markets, where the onus is on taking a conservative investment approach. This is driven by the transformation to non-fossil fuels, conflict in Ukraine, and other destabilising events changing market dynamics. Moreover, uncertainty over stable cash flows is exacerbated by high interest rates, supply disruptions, and regulations. Fitch Ratings ( expects crack spreads for certain refiners to fall in 2023 from record high margins, such as along the US Gulf Coast. These declining crack spreads are influenced by expectations for weaker global economic growth and other related concerns, such as worries about a global food crisis, already seen in Africa, caused by severe shortages in fertiliser due to high natural gas prices. This uncertainty makes it difficult to attract capital, contributing to declining net refining capacity and product shortages, such as diesel. Nevertheless, major refinery projects in Asia and the Middle East explain why global refining capac - ity could continue increasing to 2035, including nine large active projects in the Middle East. Besides capacity and product diversity from fuels to polymers, these projects support sustainable objectives, as recently discussed at the Refining India 2022 conference in New Delhi and the ERTC 2022 in Berlin. Lowering emissions and energy costs and increasing profitability calls for a ‘re- balance’ of production capacity using the latest advances to existing technology involving crude distillation units, delayed coking units (DCUs), hydrocrackers, and FCCs. To meet these objectives, fired heater optimisation and separation efficiency continue to benefit from global technology suppliers partnering with niche repos - itories of expertise focused on specific areas (such as mass transfer efficiency, ceramic coatings applications, and neural network systems). How does this ben- efit traditional refinery units? Overall, reduced demand for fossil-based transportation fuels has resulted in DCUs operating at lower than design capacity. In parallel, the trend towards electric vehicles (EVs) has accelerated demand for synthetic graphite used in EV battery manufacturing, predicating the redesign of fuel-grade cokers to produce needle coke instead. Opportunities to co-process recycle waste plastics through a DCU further improve utilisation. Optimal performance of hydrocracking units is critical in pursuing refinery profit - ability, which benefits from the latest developments in zeolite-based catalyst to mitigate the chemistry of HPNA formation in two-stage hydrocracking units. As with other refinery conversion units, opportunities to process plastic waste-derived pyrolysis oil through the hydrocracker are emerging from the pilot plant stage. Besides high margins, petrochemical feedstocks, diesel, and sustainable aviation fuel (SAF) are crucial refinery products for the world’s economy, requiring technol - ogy capable of upgrading low-value streams like HCGO, HVGO, and DAO to distil- late range products, as large-scale commercial production of renewable diesel and SAF is still a long way off. Regardless of the project, an emerging consideration for refineries is to treat utilities such as water and hydrogen as scarce resources, as will be discussed in the Q2 2023 issue of PTQ . The dichotomy of refinery challenges and opportunities continues to play out. Even though investors in some major markets have put dividends and share buy - backs ahead of capacity gains over the past few years, other refiners are com - mitted to investing in the enormous opportunities in the petrochemical sector, as long-term global petrochemical consumption could increase by a factor of 9, against a backdrop of the sustainable refinery landscape.

Editor Rene Gonzalez tel: +1 713 449 5817 Managing Editor Rachel Storry Graphics Peter Harper US Operations Mark Peters tel: +1 832 656 5341 Business Development Director Paul Mason tel: +44 7841 699431 Managing Director Richard Watts 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 Q1 2023

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