Emerging Trends in Refining

From total capacity of 62.8 MMTPA in 1998, Indian Refining sector has increased three-folds to 215.6 MMTPA at present and will increase to 310 MMTPA by the end of 12th Five Year Plan in 2017. Industry experts deliberated over the Emerging Trends & Technologies in the Indian Refining Sector during the recently convened “International Refining Conference” organised during the Oil & Gas World Expo 2014. We bring you the lowdown on emerging technologies and trends in Indian refining sector based on the deliberations that were organised during one and a half day meet.

Since the deregulation of sector in 1998, India’s refining sector has witnessed paradigm shift and India has gained significant prominence in the global market as net exporter petrochemicals.

While giving a lowdown on the country’s refining sector, L N Gupta, Secretary Oil Industry Development Board, Ministry of Petroleum & Natural Gas, Government of India, acknowledged the last decade as the period of fastest growth for India’s refining sector and there has been a sizable increase from 62 MMTPA in 1998; country’s refining capacity stood at 215.06 MMTPA by the end of 2012.

Indian PSUs started phased capacity addition to meet the growing product demand with emphasis on upgradation of product quality and bottom of barrel along with enhancement of complexity factor.

Currently, Indian public sector companies comprise approximately 63 per cent of country’s total refining capacity while 37 per cent of capacity if owned by private sector companies. By the end of 2013-14, with the Paradip and Cuddalore grass root refineries, country’s refining capacity is projected to reach around 236 MMTPA, which is expected to increase to 333 MMTPA by 2022.

Currently India has surplus refining capacity of 60 MMTPA which is equivalent to 38 per cent of its consumption. This sector has grown at 5 percent CAGR over the last couple of years and accorded impressive export earnings of USD 59.3 billion during 2012-13.

Amidst Highly Volatile Markets
Crude prices saw maximum swing during 2008 when per day barrel rate peaked to all time high. Globally, over 70 refineries have closed on account of failing to maintaining high profitability so far.

World over, refiners are walking tight rope for maintaining the Gross Refining Margins (GRM) in the era of highly volatile markets and fluctuating crude prices. Report by McKinsey & Company suggests that Indian refiners need at least USD 5-6 per barrel to cover the operating cost and an additional USD 7-8 per barrel to generate an adequate return on capital. Energy is pivotal issue for the refiners since it is the largest component of OPEX and accounts for average of 34 per cent in America, 58 per cent in Europe, 69 per cent in Asia Pacific and 81 per cent in India. As a part of long term sustainable growth strategy, refiners are using cheap petcoke to produce power taking several energy saving measures to optimise energy usage. In addition to carrying out the yield and optimisation studies across hydrogen units, the refiners are emphasising on adoption of energy savings technologies, deriving cheap energy out of petcoke, low level heat recovery and improving power generation efficiency.

Petcoke gasification using CBFC technology for power generation has gained noteworthy momentum as refiners have been able to achieve remarkable decline in the energy costs hence improving GRM. Deploying CFBC technology to produce power is one of the common routes which involves typical investments of approximately Rs 700 crore for 2X300 TPH CFBC boilers, 2X37 MWH STGs result in significant saving in power and steam cost which results in improving GRM of USD 1.3 per barrel and fuel savings of Rs 2.4 crore per day.

Refiners are also adopting various routes to improve GRMs right from enhancing capabilities to process different crude mixes such as - High Sulphur Crudes, Heavy Crudes, High Acid crudes, Unconventional Crudes etc. HMEL, BORL and PDRP refineries are designed for 100 per cent HS crude. Refiners are further widening the product basket through continuous addition of opportunity crudes by setting up refineries with higher complexities.

The Saviour
Changing market dynamics are driving the shift in technology trends, some of them include - preference of HCU over FCC, use of hydroprocessing and mild hydrocracking to meet product demand & quality, RFCC operation to shift towards petrochemical mode, reforming to shift towards high octane operation, Use of Alkylation & Dimerisation to meet MS quality, Hybrid separations (Membranes/ Divided Wall Column for lighter products), Multifunctional Reactors (Catalytic Distillation Units), and Hydrogen Generation Process (Single Stage) etc. to name a few.

Diesel & gasoil leads the pack in refined product demand and maximum demand will come from the BRIC nations. Indian refiners have consistently improved the processes in accordance with the auto fuel policy and introduced BS IV auto fuels in 13 major cities in 2010 which will be extended to 50 additional cities by 2015.

However the refinery - petchem integration is one of the most preferred routes for the refiners. Complete integration of refinery, aromatics & petrochemical complex with supersite concept to sustain global competitiveness. Addition of value added speciality products widens the product slate and enables the refiners to balance the oil and petrochemical products in line with market opportunities and leads to better profit realisation.

Gazing into the Crystal Ball
Future refineries would be high capacity, fully automated, integrated and energy efficient, ZLD, environmental compliance from carbon capture. Refiners will be compelled to maintain refining margins above benchmark refining margins which can only be achieved through technological interventions for meeting product quality with minimum hydrogen consumption, processing heavy crudes optimising refinery costs, emission control and exploring ways to curb water footprint.

Indian refiners have significantly invested in capacity increase and reasonably in research and development and are geared up to play a notable role in the international market. However in the changing scenario like availability of cheap feedstock like shale gas in the US, Indian refiners could find themselves in the tight spot lest they address the energy issues to cut down the overall OPEX and maintain the GRMs.

S M Vaidya, Deputy General Manager, Panipat Refinery and Petrochemical Complex, IOCL reiterated A T Kearney’s statement based on global refinery study, “With one in five oil refineries expected to cease operations over the next five years, choosing the right operating model and level of integration will be crucial for survival and sustained profitability”.