Special Report Refinery of the Future

V. V. GALKIN and V. MAKHIANOV, Gazprom Neft,

Moscow, Russia; and M. I. LEVINBUK, Topchiev Institute
of Petrochemical Synthesis, Russian State University
of Oil and Gas, Moscow, Russia

Case history: Modernization of Russia’s

refining industry—Part 1
Russian laws governing transportation fuels and crude oil and modernization. Such an endeavor by an industry poses
have undergone many changes. These regulatory changes will many questions, such as:
involve the revamping of Russia’s refining industry. At present, • Will installing processing capacity to handle heavy-oil
this nation has 22 large refineries—each with a throughput residues provide needed profit with new export duties,
capacity of 5 million tpy (MMtpy), according to the Russian especially for medium-sized refineries?
Ministry of Energy’s register.1–3 However, the domestic refin- • What is the minimum capacity for a refinery to be
ing industry includes eight mid-sized refineries with capaci- profitable and provide return on investment (ROI)
ties ranging from 1 MMtpy to 5 MMtpy and over 200 small within a reasonable time?
refineries with significantly much lower processing capacity • What is the minimum level of investments necessary
(under 1 MMtpy). to upgrade the refineries?
Under the new laws, domestic refineries must modernize The authors present efficiency assessments for refinery
or shut down. Not all of Russia’s refineries will be upgraded. modifications for three refining schemes: gasoline, diesel and
The following technical review outlines the economic strat-
egies that will be applied to select the refineries that can be
Dry gas H2S Sulfur
modernized cost-effectively. Important questions to be re- SRU
solved include: What are the possible impacts to Russia’s GFU LPG (sale)
refining and petrochemical industries? What new process Natural gas H2
HPU
technologies will be most effective to optimize the output of IBP-70 Isomerizate (blending)
gasoline, middle distillates, or petrochemical feedstocks, and Isomerization
to upgrade heavy oil residues? IBP-180
Naphtha HT
Reformate (blending)
Reforming
BACKGROUND 70-180
180-240 Kerosine (sale)
Atmospheric and vacuum distillation

Changes in Russian law will introduce technical regulations Kerosine HT

on the quality of oil products, excise duties for various trans- Gasoline-stripping
portation fuels and refined products, and refinery utilization 240-350 SDF (sale)
or efficiency without heavy residue processing.4–6 The most Crude oil DF HT
effective modifications are processing schemes that maximize Light CCG (blending)
Gasoline, DF

middle distillates output. Heavy CCG (blending)

LCGO

Many mini-refineries will be closed due to economic rea- CCG HT

sons. Medium-sized refineries with capacities less than 5
FCC Naphtha
MMtpy and without complex and efficient refining processes VGO BBF (blending/sale)
offer low profitability. However, incorporating flexibility to VGO HT FCC
handle heavy-oil residue can increase their economic efficien-
HCGO

cy and provide payback for the medium-sized refineries.

The new export duties on heavy-oil residue products will Commercial fuel oil (sale)
Visbreaker
start in 2015; they are almost 100% for duties on crude oil.7 VR
Because the majority of produced fuel oil is exported from Bitumen (sale)
Bitumen plant
Russia, this measure would cause sharp decreases in profit- Abbreviations:
ability, especially for less-efficient refineries. HT – hydrotreating, CCG – catalytically cracked gasoline, FCC – fluid catalytic cracking, VGO – vacuum gasoil,
SDF – summer diesel fuel, HPU – hydrogen production unit, SRU – sulfur recovery unit, HCGO – heavy catalytic gasoil,
Russia’s refining industry is composed of large refineries, LCGO – light catalytic gasoil, VBR – visbreaking
medium-sized facilities and numerous mini-refineries.1–3 At
FIG. 1. Process flow diagram, gasoline option.
present, all refineries are under evaluation for future revamps
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 Refinery of the Future

Dry gas H2S Sulfur petrochemicals. These schemes also include consideration
SRU
GFU LPG (sale) to handle heavy-oil residue. A sensitivity analysis of ROI ad-
Natural gas H2 dresses variable oil prices.
IBP-62 (sale) HPU
ASSESSMENT CRITERIA
62-140 Reformate (sale)
Naphtha HT Reforming Three key oil refining models are used in the analysis:1
140-240 Kerosine (sale) 1. Gasoline based on catalytic cracking
Atmospheric and vacuum distillation

Kerosine HT 2. Diesel based on vacuum gasoil (VGO) hydrocracking

Gasoline-stripping 3. Petrochemicals for maximum production of
petrochemical feedstock, based on fluid catalytic
Crude oil 240-350 SDF (sale)
DF HT cracking (FCC) with maximum yield of С3–С4 olefins.
FIGS. 1–3 demonstrate the principal processing configuration.
Heavy naphtha
Gasoline DF

Each configuration integrates heavy-oil residues processes:

IBP-62 SHCD (sale)
• Bitumen production
Kerosine (sale) • Residue hydrocracking (70% conversion)
VGO
SHCD DF (sale) • Coking
• Deasphalting.
Unconverted oil To achieve fuel specifications, hydroprocessing capacity is
Commercial fuel oil (sale) also increased.
Visbreaker
VR Estimates for the listed products were calculated for
Bitumen (sale) throughput capacities ranging from 1 MMtpy to 10 MMtpy,
Bitumen plant
Abbreviations:
in increments of 1 MMt. This approach clearly shows the
VGO – vacuum gasoil, SDF – summer diesel fuel, DF – diesel fuel, HT – hydrotreatment, SHCD – VGO hydrocracker, trends in economic efficiency for small-, medium- and large-
HPU – hydrogen production unit, SRU – sulfur recovery unit, VBR - visbreaking
sized refineries. The goal of the study was to identify the mini-
FIG. 2. Process flow diagram, diesel option. mum capacity to revamp that would provide ROI under cur-
rent Russian Federation legislation. The process model used a
Dry gas minimum set of processes to control project investments. The
model focused on producing Euro-5 transportation fuels and
GFU LPG (sale) residue processing. Crude quality is taken equal to Urals oil,
H2S Sulfur with sulfur and light petroleum product content of 1.4% and
SRU
47%, respectively.
IBP-62 Isomerizate (blending) Export duties are set per current Russian Federation law.2
Isomerization
Benzene (sale) Crude prices used in the analysis were $90/bbl to $100/bbl.
IBP-140
Naphtha HT Toluene The analysis also considered price decreases of $80/bbl and
(blending/sale) $60/bbl.
62-140 Reformate
Reforming splitter Raffinate (sale)
Xylene fr. (sale) Capital cost. Investment costs for plant construction are cal-
140-240 Kerosine (sale)
Atmospheric and vacuum distillation

Kerosine HT
H2
culated on the basis of available data for similar plants, as well
Natural gas
Gasoline stripping HPU as data received from КВС and CLG companies.7 Investments
are recalculated for different plant capacities:8
Crude oil 240-350 SDF (sale)
DF HT
I = Iа × (C / Cа )0.6
Gasoline, DF

LCGO

Light CCG TAME TAME fr. (blending/sale)

production where I is the calculated investments for a plant with capacity, C.
Heavy CCG (blending)
CCG HT Iа and Cа are known investments and capacity of a refinery.
BBF MTBE MTBE (blending/sale) Construction costs for auxiliary and power facilities, offsite fa-
production
VGO LPG (blending/sale)
cilities (OSFs) and construction management expenses are es-
VGO HT DFCC
Alkylate
timated as 70% of the cost for the main processing units. This
BBF (blending/sale) level of costs corresponds to constructing a new refinery. If the
DCC HGO

(conv.) Alkylation refinery has a well-developed infrastructure, then this ratio

Propylene (sale) can be decreased. However, taking into account the process
Commercial fuel oil (sale) models of small- and medium-sized refineries in Russia, the
VR Visbreaker modification will be comparable to building new refineries.
Bitumen (sale)
Bitumen plant
Abbreviations:
Operating costs are calculated on the basis of actual plant
HT – hydrotreating, CCG – catalytically cracked gasoline, DFCC – deep fluid catalytic cracking, VGO – vacuum gasoil, performance at OJSC Gazprom Neft refineries and reference
SDF – summer diesel fuel, DF – diesel fuel, HPU – hydrogen production unit, SRU – sulfur recovery unit,
HCGO – heavy catalytic gasoil, LCGO – light catalytic gasoil, VBR – visbreaking data.7 To minimize operating and capital costs, it is assumed
that plants are constructed as complexes rather than as indi-
FIG. 3. Process flow diagram, petrochemical option.
vidual units. Complex construction is executed in parallel,
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 Refinery of the Future

which minimizes the timeframe. The main assessment crite- 5. Minimal refinery capacity in which the ROI for the
ria include: modifications has a payback of less than 15 years.
1. Crude conversion ratio All process models are made and optimized in MS Excel
2. Yield of light petroleum products spreadsheets and validated.a
3. Breakeven point. Note: If the capital investment for
the modifications is high, then depreciation will also HEAVY-OIL RESIDUE PROCESSING OPTIONS
account for a large share of fixed costs. Production of bitumen is the least capital-intensive meth-
4. Net present value (NPV) od for tar processing. A significant drawback of this scheme is
the dependence on seasonal fluctuations
6 of the bitumen market in Russia. Dur-
5
Gasoline
95.8%
Gasoline ing the winter, bitumen consumption
Diesel 93.2% Diesel
Petrochemical 91.2% Petrochemical decreases considerably. FIG. 4 illustrates
4 the efficiency by the selected refinery
CAPEX, $ billion

configurations with bitumen production

3
without restrictions on selling bitumi-
71.0%
2 65.9% nous products.
62.9% The model allows for the oil con-
1 version ratio at the 91%–96% level and
0
the yield of light petroleum products of
0 1 2 3 4 5 6 7 8 9 10 11 12 Crude conversion, % Yield of light petroleum 63%–71%. These estimates apply to a
Refinery capacity, MMtpy products, % 10-MMtpy refinery with an estimated $4
2 1
Gasoline Gasoline
billion (B)–$5.2 B capital expense (CA-
NPV export duties 2015, $ billion

PEX). Because of the high yield of “dark”

NPV export duties 2012, $ billion

Diesel Diesel
Petrochemical Petrochemical oil products, only oil refineries with
1
capacities of more than 9 MMtpy–10
0 MMtpy will be profitable under the new
0 2015 export duties. However, at present
export duties, smaller-capacity refiner-
ies (4 MMtpy–5 MMtpy) can provide
-1 -1 ROI. The breakeven point is 0.6 MMtpy
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 11 12 at the 2012 duties, and it increases up to
Refinery capacity, MMtpy Refinery capacity, MMtpy
1 MMtpy at the 2015 export duties.
FIG. 4. Efficiency of oil refining schemes with production of bitumen.
Residue hydrocracking. Hydrocrack-
7 ing of vacuum residue (VR) is not a wide-
Gasoline Gasoline spread method for processing heavy-oil
6 Diesel residues, although interest in this process
Diesel 85.1% 86.6% Petrochemical
Petrochemical 81.9% has increased. For example, JSC Luk-
5 79.7%
oil made a decision to construct residue
CAPEX, $ billion

76.6%
4
hydrocrackers at the Bourgas (Bulgaria)
3 67.5% and Nizhny Novgorod refineries. More
2 importantly, new residue hydrocracking
processes are under development, along
1
with modifications to established pro-
0 cesses. In 2012, the installation of a new
0 1 2 3 4 5 6 7 8 9 10 11 12 Crude conversion, % Yield of light petroleum
Refinery capacity, MMtpy products, % hydrocracking technology at an Italian
1 1 refinery was announced.
Gasoline Gasoline Considering the relevance of heavy-
NPV export duties 2012, $ billion

NPV export duties 2015, $ billion

Diesel Diesel oil residue processing, Russian research

Petrochemical Petrochemical
institutes are also engaged in develop-
0 0
ing hydrocracking technology. The Rus-
sian Academy of Science Petrochemical
Synthesis Institute is building a demon-
stration facility, called Topchiev. Con-
struction is scheduled to be finished by
-1 -1
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 2015–2016.
Refinery capacity, MMtpy Refinery capacity, MMtpy FIG. 5 shows the performance of refin-
eries with residue hydrocracking capac-
FIG. 5. Performance of oil refining schemes with process of tar hydrocracking.
ity. Conversion is assumed at 70%. Such
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 Refinery of the Future

schemes allow attaining processing efficiency at 82%–87% with capacities of 6 MMtpy–7 MMtpy can provide an ROI.
levels and yield of light-oil products at 68%–80%. Needed The breakeven point is 0.7 MMtpy at the 2012 duties, and it
CAPEX ranges from $5.2 B to $6.2 B, depending on the fi- increases up to 0.8 MMtpy at the 2015 duties level.
nal product slate (gasoline, diesel or petrochemicals) for a
10-MMtpy refinery. Due to incomplete residue conversion Deasphalting. Deasphalting is one of the most widespread
and high investment costs under the 2015 export duties, only processes of VR processing. Selection of asphalt-free oil de-
refineries with capacities of 8 MMtpy–9 MMtpy are profit- pends on the distribution of metals in the initial VR and its
able. However, under present export duty options, refineries CCR. For the VR produced from Urals oil, 55%–60% yield is
realistic.8 Processing schemes with deas-
6 phalting of the VR allow reaching a pro-
Gasoline Gasoline cess efficiency of 77%–84% with yield of
5 Diesel Diesel
Petrochemical 84.3% Petrochemical
light products at 63%–78%. The invest-
4 79.5% 78.4% ment is $4.8 B to $5.5 B for a 10-MMtpy
CAPEX, $ billion

76.7% refinery, as shown in FIG. 6. Because of

73.3%
3 high asphalt yield (11% for oil) and un-
2
der the 2015 export duties, only oil re-
63.0%
fineries with capacities over 7 MMtpy
1 are profitable. Under the existing export
duties, options with oil refining starting
0
0 1 2 3 4 5 6 7 8 9 10 11 12 Crude conversion, % Yield of light petroleum from 6 MMtpy–7MMtpy can provide
Refinery capacity, MMtpy products, % ROI. The breakeven point is 0.7 MMtpy
1 1 at 2012 duties, and it increases to 0.8
Gasoline Gasoline MMtpy at the 2015 duties.
NPV export duties 2012, $ billion

NPV export duties 2015, $ billion

Diesel Diesel
Petrochemical Petrochemical
Coking. Coking installations use vary-
0 0 ing methods. Delayed coking, fluidized-
bed coking and flexicoking are the most
common installations to handle heavy-
oil residues. The coking process was
-1 -1 widely applied in the countries of the
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 former USSR to produce coke for the
Refinery capacity, MMtpy Refinery capacity, MMtpy aluminum industry and ferrous metal-
FIG. 6. Performance of oil refining schemes with process of deasphalting. lurgy. Oil processing in Russia has a
rich experience for the metals industry,
7
which is very important in the final deci-
Gasoline sion making.
6 Gasoline
Diesel Diesel FIG. 7 shows the performance of re-
Petrochemical 89.1% Petrochemical
5 86.1% fineries with coking capabilities. Such
83.6% 82.4% configurations allow attaining refin-
CAPEX, $ billion

4 78.2%
ing efficiency levels of 84%–89% with
3 69.9% light product yields of 70%–82%. In-
2
vestments of $5.2 B–$6.2 B are needed
for a 10-MMtpy refinery. Calculations
1 show that, due to the low coke yield
0 and “dark” oil products (6% for oil), the
0 1 2 3 4 5 6 7 8 9 10 Crude conversion, % Yield of light petroleum 2015 export duties have no impact on
Refinery capacity, MMtpy products, %
2 2 the performance of these schemes. Oil
refineries with capacity over 6 MMtpy
NPV export duties 2012, $ billion

NPV export duties 2015, $ billion

Gasoline Gasoline
Diesel Diesel can provide ROI. The breakdown point
1 Petrochemical 1 Petrochemical is 0.65 MMtpy at 2012 duties, and it in-
creases 0.7 MMtpy at the 2015 duties.

0 0 Next month. In Part 2, the authors

compare the CAPEX and ROI to mod-
ernize select Russian refineries to meet
-1 -1 new legislation governing transporta-
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10
Refinery capacity, MMtpy Refinery capacity, MMtpy tion fuel qualities and excise duties for
crude oil and refined products to begin
FIG. 7. Performance of oil refining schemes with coking process.
in 2015.
64JULY 2014 | HydrocarbonProcessing.com