KNPC

Think K Event 27 Oct. 2015

Global Refining Challenges

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Background

• Global refining industry has been driven by a steady rise in the consumption of transportation fuels.

• Demand is also driven by the need for cleaner fuels to comply with strict environmental standards.

• From around 2000 until the current recession, the global refining industry enjoyed healthy profit margins. In addition, the global demand for petroleum products such as gasoline and diesel fuel grew very quickly in contrast to the supply

• Many refiners initiated aggressive plans to expand & upgrade refineries.

• Refining is capital intensive – so heavy investments were made to support the growing demand.

Today’s conditions offer both opportunities & challenges

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Major Challenges – The Energy Sector

Challenges:• Volatile Energy markets• Shale revolution/Arctic exploration• Tougher Refining crack margins • Tougher operational & logistical challenges • Increased regulatory pressure • Skills and labour supply deficit

Opportunities • Growing markets • Closer collaboration across the supply chain• Opportunities in new markets with newer assets and technologies

By 2050:World population expected to reach 9 billion peopleEnergy demand growing by 40%Chemicals demand growing by 50%Vehicle population growing to 2 billion

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Key Refining Challenges

Resource conservation

Climate change

Renewables

Proximity

Pollution Refining Challenges

Envi

ronm

ent /

soc

ieta

l im

pact

Energy Sector

Competitors

Margins Efficiency Innovation Complexity

Supply & demand

Fuel quality

Renewables

Capacity

Pricing

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The Drive For Innovation

• Changing codes, standers & regulations:

Shift to lower marine bunker fuel S specs 3.5 to 0.5%; or strict KEPA mandates for lower Sulphur liquid fuel

• Lifecycle Cost Reduction: Lower total cost of ownership (OpEx + CapEx) needed to help stabilize margins economy of scale:

units are being built with few smaller and more efficient equipment • Molecule Management : advances in process technology and new pathways for every molecule

to be used most effectively:

targeting max propylene production, C5 management• Waste minimization : effectively converting waste streams to valuable products:

eg CO2 capture & reuse• Superior Catalysts : new catalysts for better yields less hydrogen less energy more efficient

processes:

Relative volume activity of todays catalysts are ~700% higher over the last 2 decades • Technology Appetite & Speed : Projects needs to be on-line faster to accelerate cash

Flows to maintain position or get ahead of the competition• Digital Revolution : to update and standardize process automation and other systems:

allowing increased asset utilization, Reduced maintenance costs;Increased operating efficiency Improved safety. 

In response to energy price volatility, industry needs innovation in technology and business models for:

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Innovative Ways for Tackle Refining Challenges

Better operational efficiency • Sweating the assets through operational improvements • Process opportunity crudes (higher S, N, Metals, Asphaltene) • Maximise Value Added Products & Bottom of the Barrel (BOB) Upgrade• Improved operation and maintenance practices

Technological upgrading• Energy efficient technologies/design/catalyst systems/chemicals• Loss minimization • Production of most stringent specs fuels in a cost effective manner• Optimise H2 consumption• Upgrading low value streams/products / new products

Economies of Scale• High level of integration to reduce capex and opex : the bigger the

better (eg typical capacities of FCC grew from 40 to 140 KBPD, HPU from 50 to 180 MMSCD)

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Next move?

• Improving refinery optimization• Reducing energy consumption • Reducing cost , improving effectiveness and efficiency • Balancing maintenance cost with reliability• Employ technological developments to meet the above needs and:

– Raise capacity– Process opportunity/heavy crudes– Meet stringent specifications– New improved inspection and Maintenance techniques – New metallurgy– Intelligent plant

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Refining into the future

Some changes already occurring that have bold implications for tomorrow's facilities:

• Use of unmanned aircraft — small drones loaded with high definition video and still cameras – for inspection of flare stacks.

• Coke drum inspection. Today, a laser camera that sends out several beams does the job much more accurately in a couple of hours.

• To inspect pipelines, magneto-strictive technology creates magnetic fields and sends a pulse down the whole length of pipe. Every bit of pipe is checked, and the technology promises to save time and money.

• To measure gasoline octane, Near-infrared sensors can now measure octane on site. They detect ― down to the molecule ― the chemical composition of solids, liquids and gases.

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Operate Smarter & More Efficiently

Diagnose & alert problems prior to failure or safety incident (IOW & SMS)

Opportunity to act on information to prevent failure or safety incident

Identify root cause of problem prior to going into the field

Quickly see KPI dashboards to detect abnormal operation

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Smart Refinery & E-Management

• Smart sensors

• Work plans & equipment documentation will be viewed on wearable technology such as Google Glass

• Micro processing Power

• Computational and simulation models that aid in decision making (diagnostics & predictions)

• Advance tools for refinery operators

• Creative thinking through cross value chain collaboration

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Refinery Conversion The 3 original upgrading routes remain unchanged:

– Hydrogen addition – Carbon rejection – Gasification

• Technological advancements are realized in the following:– Process equipment & mettulurgy – Instrumentation & automation– Catalysts– Energy efficiency

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What is the Right Asset Portfolio?

• Selection of the proper bottom of the barrel processes is crucial for the refining industry

• Refinery configurations are driven by regional market demands & legislation.

• Diminishing boundaries between refining & petrochemical industries

• Little room for small players

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Conclusion

• Capital investment and sustainable development will be industry drivers in the coming years

• Growth strategy should focus on:• Diversification to high revenue streams• Effective cost controls, operational excellence & customer satisfaction• Safety & human capital investment • Benchmarks on supply chain focus, operational excellence & regulatory

compliance

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Thank You

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Back Up Slides

Sweating the Assets Example MAB Refinery

Unit Original Design capacity KBPD

Revised Design Capacity KBPD

% Increase

Crude U11 156.25 190 22

ARDS U12 66 84 27

VRU U13 127 156.8 23

HCRU14 38 42.5 12

Coker U20 60 80 33

HTU U15/1/6/17

35/35/7.5 40/40/10 14/14/33

Future Refining Technologies

• Processing of variety of crudes/heavy crude diet • Improved product quality (eg reducing content of sulphur and aromatic

hydrocarbons in gasolines and diesel fuels)• Increasing conversion - higher product yields (~99%) • New product development• increasing the efficiency reliability and environmental friendliness of the

production process.• Increased refinery complexity • Improving on-stream performance eg by addressing pressure from

fouling, rapid catalyst deactivation• Improvements in technologies, reactor internals• Innovation in catalysts (now at 700% higher activity over 2 decades)

Technological advancement in refining process & catalyst systems to achieve the following :

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