Marpol Annex VI - African Refiners Association · • Residue hydrotreating (short / long residues)...
Transcript of Marpol Annex VI - African Refiners Association · • Residue hydrotreating (short / long residues)...
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Marpol Annex VI
13 March 2017
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About SAPIA
The South African Petroleum Industry Association (SAPIA) represents the
collective interests of the South African petroleum industry. The Association
plays a strategic role in addressing a range of common issues relating to the
refining, distribution and marketing of petroleum products, as well as
promoting the industry’s environmental and socio-economic progress. SAPIA
fulfils this role by contributing to the development of regulation in certain areas
of South African policy; proactively engaging with key stakeholders; sharing
research information; providing expert advice; and communicating the
industry’s views to government, members of the public and the media.
November 2016
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The annex is about GHGs (efficiency)
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2000 2005 2010 2015 2020 2025
Su
lph
ur
Co
nte
nt
% (
w/w
)
Sulphur cap of fuel oil used on board ships – MARPOL Annex VI Reg 14
Sulphur limit requirement in
emission control areas
All shipping subject to IMO
Regulations
Limit enforced by 2020
worldwide
• Annex VI first adopted in 1997 and focused on the prevention of air pollution from ships
and to limit SOx, NOx, ODS and VOCs - subsequently expanded to include energy
efficiency measures for shipping
• S14 (1) regulates the maximum sulphur content for fuel oil used on board ships
• At Marine Environmental Committee Protection Committee (MEPC 70) a sulphur cap of
0.5% from 1 January 2020 was mandated
• Decision based after studies to assess the fuel oil availability in terms of S14 (8)
• Terms of reference drawn up and contract awarded to CE Delft / Stratas consortium
• Supplementary study following the same terms conducted by Ensys / Navigistics
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Options for compliance
Scrubbers
Ultra low
sulphur fuel oil
Alternative
fuels
Decommission
• Annex VI provides for the use of scrubbers
• ROI ? – vessel size / price delta / installation capacity
• Not all ex - ECA ships ready by 2020 (penetration ~20%)
• Requires plot space (cargo, stability, power impacts)
• Availability would be an issue by 2020 (Ensys study)
• New market potential for ULSFO at significant margins
• Supply may increase with investments if margin sustained
• LNG holds potential but significant investment for
conversion of the existing fleet and provision of port
infrastructure required in areas where LNG available• Other alternatives (biofuels) not considered viable
• Decommission for older vessels - hasten phase out
• Increase in number of eco ships with improved efficiencies
• Likely upward push to freight rates
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Fuel Oil / Bunker quality
• Fuel Oil quality is a direct consequence of the processing route chosen to
upgrade residue
• Crude oil also obviously has a major impact - South Africa’s crude oil diet has
been ‘sour’ – high sulphur originating from the Middle East
– Middle East crudes formed original basis of design
– Changed over the years to include ‘sweeter’ West African grades for lower sulphur
transportation fuels production
• Result - South African heavy fuel oil tends to be high sulphur
– Sulphur content has reduced over the years due to the processing of West African
crudes – but insufficient to met the sulphur cap
• Distillate bunker fuels - sulphur quality varies
– Dependent on each facility and local plant / port logistics
– But not seen as a major stumbling block to Annex VI implementation (replacement with
current diesel quality – road fuels supply impacts ?)
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Sulphur handling
• South African imported crude diet is now ~50% ME / ~50% WAF
• Sulphur is distributed unevenly throughout crude oil with the highest levels in the
heavier components making up the bulk of heavy fuel oil
– Requires targeted refining to remove sulphur - else it remains in the product
• Heavy oil treatment has generally followed two paths worldwide
– Coking – conversion to solid coke for use in alternate markets
– Visbreaking – reduction of fuel oil viscosity
– Dependent on local and regional markets for coke and fuel oil
• Further sulphur reduction of heavy oils by hydrodesulphurisation techniques are
typically used
– Treatment with hydrogen at pressure and temperature over a catalyst
– Expensive and uneconomic in the current environment ($1 billion)
– Uncertainty as to whether SA oil refinery’s are able to meet the sulphur cap for HFO –
potential for closures ?
– Likely major switch to distillates – potential for regional shortfalls ?
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Heavy oil treatment
• Residue hydrotreating (short / long residues) prompts further configuration questions –
fuel oil only ? RFCC ? distillate production ? hydrogen availability ? sulphur plant ?…
• Solvent deasphalting also available but often used in conjunction with base oil plants –
processing options for DAO ? pitch quality / production ?
• Likely SA refiners will not respond by reconfiguration of facilities but will wait and see
• Severe thermal cracking of residue into
solid coke and liquid fractions
• Liquid fractions require upgrading
• Coke aimed to two primary markets
• Fuel – cement / boilers
• Anode – metallurgical (Al, Fe etc)
• Coke calcining dependent on markets
• Most of the deleterious products (sulphur
etc) end up in the solid coke
• ‘Primary’ route chosen by US Gulf Coast
refineries to upgrade residual crude oil -
domestic demand for coke
• Mild thermal cracking of residue to reduce
FO viscosity and produce lighter fractions
• Liquid fractions require upgrading
• Reduces the amount of high quality fuel
(diesel) to be blended into fuel oil to meet
specifications
• Deleterious products remain in the fuel oil
• ‘Primary’ route chosen by European
refiners to meet demand for bunker fuels
in Europe
• All SA refiners followed this processing
scheme in original designs and retained
VisbreakingCoking
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Options for production
• Shift to increased WAF processing to balance fuel oil sulphur requirements ?
– Availability of types of WAF could be insufficient to meet demand
– Capability of refineries to process increased WAF not proven (acid ?)
– WAF not great for other products – distillates, bitumen and base oils
– Unlikely that sulphur cap will still be met for HFO
• Design and install units for fuel oil to meet sulphur requirements – unlikely
• Potential for blending back quantities of distillate into HFO to meet sulphur cap
– Large volumes could result in flash, viscosity, stability issues
• Export high sulphur fuel oil to international markets while maintain throughput
– Likely export into a long market at low prices
– Export infrastructure required for large scale exports of fuel oil
– Heavy fuel oil bunkering market significantly reduced unless imported
• Cut back refinery throughput to balance fuel oil production / sulphur / qualities?
– Throughput reduction would need to be met by increased imports for all fuels – port
logistics ?
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Refinery ops globally (Ensys)
• Crude runs would increase
– Higher rates due to increased intensity and associated higher F&L
– CO2e emissions will rise
• Lower sulphur FCC feedstock could be an attractive marine fuel blendstock
– FCC could then use high sulphur streams but will require addition of scrubbers to
control emissions
– However major investment requiring several years for planning and construction
• Higher hydrocracker utilisation – availability crucial
• Expected increase in catalytic reformer rates / severity – to address hydrogen
deficit but will impact gasoline and LPG pools
• Likely to be insufficient sulphur plant and hydrogen production capacity
– Incremental sulphur recovery estimated at ~15%
• Changes to regional crude runs and shifts in crude flows expected
• Initial compliance option open to shippers is a switch to marine distillates
– Potential for disruption to other distillate markets
– Safety / performance issues ?
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Focus shifting to implementation
• At MEPC 70 resolved that further consideration on what additional measures may
be developed to promote consistent implementation of the 0.50% global sulphur
limit to be considered at MEPC 71 in May 2017
• Joint submission by ICS, BIMCO, INTERTANKO et al to PPR (PPR 4/20/3)
suggest these should be grouped into four areas;
– Initial transitional issues arising from shift from 3.50% S to 0.50% S ‘overnight’
– Machinery impact with fuel oils of 0.50% S max and especially potential safety concerns
that may arise from the use of new fuel sources and blends;
– Verification - mechanisms necessary to ensure a level commercial landscape
– Any regulatory amendments or guidelines necessary to address these issues and
promote consistent implementation of the 0.50% m/m sulphur limit.
• Submission by IPIECA to PPR notes that not all ships for which scrubbers are
economic will be equipped by 2020
– Will cause transitional issues Initial transitional issues arising from shift from 3.50% S to
0.50% S ‘overnight’
– Machinery impact with fuel oils of 0.50% S max and especially potential safety concerns
that may arise from the use of new fuel sources and blends;
Sources: PPR 4/20/3; PPR 4/20/7
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South African activities
• South Africa is one of 10 pilot countries1 to implement the provisions of Annex VI
under the Global Maritime Energy Efficiency Partnership
• GloMEEP aimed at supporting the uptake of energy efficient measures for
shipping and supports the pilot countries through
– Advising on legal, policy and institutional reform
– Awareness raising and capacity building
– Establishment of public private partnerships to encourage technology transfer
• Local steering committee formed to implement aspects of Annex VI with
objectives, among others
– Domestication of Annex VI into local law
– Development of capacity for effective flag and port state control
– Reduction of atmospheric emissions from shipping
– Collection and sharing of data
– Improving energy efficiency of vessels
– Increased investment in R&D
• To date two steering committees have been held
1. Other countries: Argentina, China, Georgia, India, Jamaica, Malaysia, Morocco, Panama, Phillipines
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Conclusions
• The 0.5% S cap is set to be enforced from 2020
• Concerns by bunkering and ship owning industry
– Availability of compliant fuel
– Anticipated increased costs to shipping – distillate costs and / or scrubbing
– Safety / blending stability
– Installation / availability of scrubbers
• Likely to cause disruption to distillate and marine fuel oil markets
– Potential for major surplus of high sulphur fuel oil that will be required to be cleared into
other markets
• Will likely affect refining operations – changes to throughput and increased
severities with consequent shift in product pools
– Further potential for shift to sweeter crudes increasing sweet / sour differential
– Short term compliance operation is the increased supply of marine distillates
– Locally expect a wait and see approach
• The focus is now on transitioning to the 0.5% S cap
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What takes precedence ?
• Major focus in Africa to improve air
quality and reduce the incidence of
non-communicable chronic
diseases
• UNEP objective is to have
significant penetration of 50 ppm S
diesel by 2020 and 10 ppm S by
2025 across Africa
• Will require significant investment in
African refining infrastructure to
achieve this ambition – short of
closing refineries
• Priorities now lie where –
addressing the road transporting
issue or marine ?
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End
Thank you
Dankie
Ngiyathokoza
Ke a leboha
Ke a leboga
Ke a leboga
Siyabonga
Inkomu
Ndo livhuwa
Enkosi
Ngiyabonga