PTQ Q4 2023 Issue

new splitter, as shown by the separation between the two curves. With such a convincing case for action based on hard data from that unit, a $25 million revamp was approved and funded within one month, the new splitter was installed and is saving $27 million/year in octane with a present value of $205 million. Several licensors offer new processes to improve octane/ sulphur performance for Tier 3. For example, Topsoe has a process called HyOctane Technology. The pilot plant data in Figure 5 shows that the HyOctane process (gold seg- ment) gives lower octane loss at low product sulphur lev- els compared to the conventional operation of a fixed bed selective gasoline desulphuriser. The HyOctane process has been available since 2017, but only one unit has been licensed so far. Topsoe also has a gain sharing program for existing gas- oline desulphurisers, which allows refineries to do a step test of a proprietary process modification that reduces octane loss when making very low sulphur product. The gain sharing program guarantees octane savings of $10 million/year. With Tier 3, gasoline desulphurisers are operating at higher severity, and cycle life has become a concern. A higher start-of-run activity can bring a longer cycle life. However, it has proven hard to increase catalyst activity without hurting octane selectivity, though suppliers have worked long and hard to meet that challenge. In 2022, Evonik introduced a new line of gasoline desul- phurisation catalysts called OctaMax, using a novel concept that brings much higher initial activity with equal selectiv- ity. In independent pilot plant tests alongside competitors’ catalysts, it proved 45°F higher activity with equal selectiv- ity. 6 Besides bringing a longer cycle life, OctaMax provides a way to reduce gasoline pool sulphur and increase the generation of sulphur credits with a present value of around $60 million/refinery at today’s credit price. Credit opportunities Our client group has meticulously tracked Tier 3 credit supply, inventory, demand, and price since 2015. Since 2017, the group has been publicly predicting higher-than- expected credit demand and price because of the high level

of measured octane destruction. Informed clients are reap- ing benefits from a good credit strategy. For example, in 2021, a refinery was able to realise an immediate $17 million benefit in gasoline margin by pur - chasing one year’s worth of credits at a cost of $1.9 million, which enabled increasing its sulphur specification by 10 ppm to reduce octane destruction for one year. That was an immediate $15.1 million net benefit, not counting the benefit of deferring an unplanned shutdown. If they had purchased several years of credits instead of just one, that benefit would multiply annually, $15.1 million/year. Our analysis of credit supply shows that the supply of usable credits is down by a factor of 10 from the level pre- vailing before 2020. This huge contraction in effective sup- ply is not well-recognised in the market, which strengthens the bullish case for sulphur credits. Lab opportunities The bespoke success stories were all enabled by the appli- cation of modern lab analytical methods, metaphorically referred to as ‘blood tests’. Like a real blood test, they reveal a wealth of valuable information about what is happen- ing inside your unit. With the system we have set up, it is almost effortless to get these analyses on samples from your unit and, from that alone, define your performance curve. That is the key step that sets the stage for capturing Tier 3 opportunities. One refiner took this to another level. Their FCC product streams were analysed over a period of months while they were first running on low-sulphur crude and then transi - tioning to high-sulphur crude. With that data, a spreadsheet was developed that calculates the detailed composition of any FCC naphtha feed or cut point they envision produc - ing.⁷ They have not estimated a value for this, so Hoekstra Trading assigned a very conservative value of $15 million, which will come easily from better optimisation of just the FCC naphtha cut point. Capital investment opportunities An FCC refinery with no high-pressure FCC feed hydro - treater should consider investing in one to enable higher margin capture from cracking of high-sulphur gasoils,

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8 years (2013-2020) 1 year (2021) 1 year (2022)

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Topsoe HyOctane process Conventional

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Figure 6 The US gasoline margin (x-axis) and margin volatility (breadth of curves) increased in 2021 and 2022 compared to the previous eight-year period, which increases the value of production flexibility

Figure 5 Topsoe’s HyOctane process reduces octane loss at low product sulphur levels vs conventional operation

PTQ Q4 2023