New mandates for low-sulfur ship fuel are having a much larger knock-on effect among refiners worldwide than might be indicated by the size of the market.

That is because bunker oil and petroleum coke were the last markets where sulfur could be sent. Now that those will be going away in just a couple of years, the effects are being felt up and down the oil supply chain.

Some refiners are already adding coking or desulfurization and that is expected to surge. Others that wish to continue supplying maritime markets but cannot afford the $1 billion for new process units will have to switch their feedslates. Crude buyers, pipeline operators, as well as tanker, barge and rail carriers will experience changing trade patterns.

Late last year the International Maritime Organization (IMO) surprised many in the maritime and refining industries by issuing new mandates for low-sulfur bunker oil (LSBO) worldwide starting in 2020. After sulfur removal mandates in gasoline, on-road diesel and off-road diesel over previous years, the mandate for bunker fuel was widely anticipated. But most refiners and ship operators were expecting a deadline of 2025.

It is estimated that about 200 million tons per year of bunker fuel needs to be switched from high- to low-sulfur. That equates to 4 million barrels per day (MMbbl/d), or just 4% of the global market for oil.

U.S. refiners are already well placed, with many large, complex, deep-conversion units on tidewater. Some refineries in western Europe and a few elsewhere are expected to benefit as well.

Other Routes

However, that there are other routes to compliance. Shipowners can install scrubbers and continue to burn high-sulfur fuel. Or they could switch to other fuels or drive trains. It is anticipated, however, that most operators will rely upon refiners to meet the specs.

“Coking is one way to address the new requirements for 0.5% sulfur,” says Daniel M. McCarthy, executive vice president of technology with global engineering, procurement, and construction ((EPC) firm CB&I. “But it has to be mentioned that coking creates a different type of byproduct, one that can be hard to get rid of.”

McCarthy emphasized that every refiner has to make its own determination how to deal with sulfur in its crude slate.

“CB&I has a great delayed-coking technology, and the experience of several installed units [but] we think the best way to address that is within the refinery, often atmospheric or vacuum residual desulfurization,” he said. “It’s ideal to convert as much of the bottoms into something useable.”

To its established LC Fining and LC Max technologies, CB&I has added a new LC Slurry process that uses the same type of reactors with a new catalyst operating in a slurry as opposed to an ebullating bed.

The “LC” was originally Lummus Cities Services, now part of CB&I’s Chevron Lummus Global technology portfolio (CLG), a 50:50 joint venture with Chevron. CB&I acquired Lummus Technology from ABB in 2007.

McCarthy asserted that the slurry process “achieves almost total conversion. Anything you get out of the bottom has very low sulfur. Sulfur can be recovered from the hydrogen sulfide.”

The initial installation of the slurry technology is expected to be in Sweden. CB&I said in June 2016 that CLG had been awarded a contract by Beowulf Energy Sweden, which in turn had signed a cooperation agreement with top Swedish refiner Preem, for the technology license and development of a residue upgrading complex in Lysekil.

Preem claims primacy as Sweden’s largest refiner, with a total of 345,000 bbl/d. That accounts for 80% of refining capacity in country, and 30% in the Nordic region. About two-thirds of its output is exported.

Lysekil is the larger facility at 220,000 bbl/d; Göteborg has 125,000 b/d. Preem puts an emphasis on being “among Europe’s most modern and most environmentally efficient, with emissions that are far below current environmental requirements,” hence the new process units.

“Some refiners already have coking and want to move away from high-sulfur coke,” says Leon DeBruyn, managing director at CLG. “In those cases they can add desulfurization in front and make higher-value boutique grades such as needle coke. Both bunker fuel and coke have been dumping grounds for sulfur, and both of those markets are changing. Demand is shifting to higher quality. With the IMO decision, refiners now have to treat bunker as a proper fuel, and make strategic decision about continuing to produce and compete in the long term.”

Higher Value

Even without the new sulfur specs, refiners benefit in value and volume—the popcorn effect—from deeper conversion.

“As refiners increase the complexity of their plant, they increase higher value outputs,” DeBruyn said. “That comes without having to add crude capacity. The beauty of optimization is the economic enhancement of the refinery. It’s not just coking or hydrotreating, there are multiple processes that can be dialed up or down.”

Another EPC major, Amec Foster Wheeler, has the most installed cokers in the world, with roughly 60% of units in operation, the company stated. Steve Beeston, vice president of global technology, business development, said that some refiners are moving quickly to be at the front of the queue for long-leadtime process units, while other wait and see.

Beeston says that refiners in close proximity are considering club deals to operate a joint coking facility as a common utility.

“There are toll processing joint ventures all over,” he said. “It can be a most effective use of capital. It’s cheaper to build one 100,000-bbl/d unit than four 25,000-bbl/d units. But the devil is in the details: who operates it, and whose specifications are used?”

He adds that coking plus solvent deasphalting can compete with slurry hydrocracking. “Coking is the core technology. It is still the best, proven technology with the most attractive economics.”

While acknowledging that “refineries are in business to make liquid fuels and lubes, I have yet to find someone who has trouble getting rid of their coke,” Beeston said. “There is plenty of demand from fuel grade up to anode grade.”

Technology Independent

There is no one-size-fits-all, says Maureen Price, Technology & Execution Council lead for big EPC firm Fluor.

“We are technology independent, which is important because every refinery is different and in retrofitting any new process existing technology and configuration are very important,” she said. “Whether it is carbon rejection, coking or catalyst-based processing, the reconfiguration will always vary with feedslates, end uses, existing configuration, operational economics and capital requirements.”

Regardless of the form, she stressed, “the refiners who are ready early and complete their projects on time will reap the benefits. We expect many decisions on how to proceed to be made soon.”

Alan Gelder, vice president of refining, chemicals and oil at consultancy Wood Mackenzie concurs that for all the unknowns, the new bunker oil rules are driving a broad refinery optimization review. He said he believed that in many cases that will accelerate the existing trend toward middle distillates.

“There are huge uncertainties, against which it is difficult to make a billion-dollar commitment,” says Gelder. He is also not sanguine about JV cokers. “Utilities like cogen or gases have worked fine, but refiners, bless them, don’t tend to do joint processing well. Most of the refining JVs have been unwound. There is a drive to get out of minority stakes.”

In his estimation, the long-term response will be bookends or a dumbbell curve.

“The newer refineries will go all in for deep conversion and sulfur removal. Also the big export-oriented facilities,” he said. “But the smaller and mid-sized operations will tend to go more for tweaks and adjustments.”