U.S. REFINING INDUSTRY HAS POWERFUL CONFIGURATION

L. R. Aalund
Managing Editor-Technology

U.S. refiners have trimmed down to what may be their leanest and strongest processing configuration ever as they face a new set of major technical and economic challenges. They are posed by the Clean Air Act of 1990, which calls for, among other things, radically new gasoline.

U.S. refining capacity, according to the Journal's most recent annual and exclusive refining survey (p. 84), was as of Jan. 1, 1991, almost 15.5 million b/cd. This is a level typical of the mid-1970s when the industry was on the verge of another watershed -the unleaded gasoline era.

Paradoxically, it was 10 years ago when U.S. refining capacity reached the highest mark in history: 18.5 million b/cd. This included, however, a great deal of flab capacity that had been fostered by crude oil price controls and government subsidies. During the previous decade, over 60 "grassroots" refineries had been added, averaging 11,000 b/cd and with hardly any downstream capacity.

There were, during this pathetic period in U.S. refining productivity, over 300 refineries in the U.S. compared to only 194 now.

Naturally, the subsidized refiners were among the first to disappear as the price of crude oil was decontrolled and the world price became the market price of the land.

Government, however, has not taken its heavy hand out of refining processing and technology. It has extended the "fuel" ethanol subsidy if the alcohol is used to make ethyl tertiary butyl ether, or ETBE. But only if the ethanol is a product of grain fermentation.

INDUSTRY PROFILE

The survey reveals no major changes from 1990, though there was a healthy increase in alkylation capacity (Table 1). It appears that this year will only bring modest increases. Note that the 1990 totals in this table have been revised from those that appeared last year because of the double listing then of the 125,000 b/cd Atlantic refinery in Philadelphia which had been sold to Sun Refining & Marketing Co.

The increase in fluid catalytic cracking capacity during 1990 was primarily because of incremental increases around the country. An entire unit of 34,000 b/d was brought up again by Indian Refining Co. at Lawrenceville, Ill. This is in a former Texaco refinery that had been shut down for a number of years.

However, the shut down of Unocal's Beaumont, Tex., refinery last year took a similarly sized FCC unit off line.

The gain in hydrocracking capacity was also caused by incremental increases at a number of refineries.

The amount of isomerization capacity included in the aromatics/isomerization category is becoming noteworthy. C5 and C5/C6 isomerization capacity now amounts to 425,000 b/sd, a gain of 4.6% over capacity on Jan. 1, 1990.

In 1981, this type isomerization capacity amounted to only 119,200 b/sd. It has more than tripled over the period.

C4 isomerization capacity also showed strong growth in 1990, climbing 26,800 b/sd, a 38.6% gain for the year.

Except for increases in hydrotreating of straight-run distillate, there were no other discernible trends in the hydroprocessing category. Some shifts in units to similar but different service are behind the changes in the hydrorefining category.

With crude distillation capacity diminishing by 3 million b/cd over the decade and downstream capacity increasing, the ratio of downstream capacity to crude capacity has shown major gains.

This is an indicator of the industry's good refining flexibility and capability.

Fig. 1 shows the strong jump in cracking capability, made up of fluid catalytic cracking, hydrocracking, thermal cracking, including coking, and hydrorefining.

The large gains in hydrogen production and recovery capacity, as shown in Fig. 1, are also an indicator of the U.S. industry's capability to process inferior crudes into transportation fuels.

LARGER COMPANIES

There was no change in the rankings of the top ten refiners in the U.S. (Table 3). But Unocal dropped from No. 11 last year to No. 20, and the percentage share of U.S. capacity from larger refiners dropped (Table 4). The reasons for both changes are that Unocal shut down a refinery and sold a 50% interest in its 147,000 b/cd Lemont, Ill., refinery to Petroleos de Venezuela (Pdvsa). The refinery is now operated by Uno-Ven Co.

With its 100% ownership of Citgo Petroleum Corp. and Champlin Refining & Chemicals Inc., Pdvsa has 523,500 b/cd of net refining capacity in the U.S., which would put it among the top 10 U.S. refiners.

BP Oil, with 744,800 b/cd of capacity, and Saudi Arabia with its 50% ownership of Star Enterprises, add further to the major stake of foreign companies in the U.S. refining business.

THE FUTURE

The U.S. refining industry is staring the future straight in the eye. By November 1992 it must supply cities with carbon monoxide problems oxygenated fuels during winter months. Then at the beginning of 1995 it must supply year-round eight major cities with oxygenated fuels. This group accounts for some 25% of U.S. gasoline demand.

In addition, refiners must reduce total aromatics, benzene, and vapor pressure in gasoline.

If that were not enough, the demand for high quality and octane gasoline was headed for record levels until Iraq occupied Kuwait last August. This sent the price of crude oil and gasoline soaring and demand for both dropping.

Prices of both have since declined markedly and some observers believe even steeper drops are in store which will send demand up.

Some observers say the magnitude of the job refiners face in meeting the demands of the Clean Air Act will exceed that required for conversion to unleaded gasoline which began in the mid-1970s.

Already, 20 U.S. refiners have built MTBE plants. Isobutylene, recovered from fluid catalytically cracked (FCC) gasoline, and methanol are the feedstocks. It is believed that FCC isobutylene has been virtually fully recovered where available in meaningful amounts and that the next step will be to build on-purpose plants to make isobutylene.

A number of processes have been developed, but such projects are costly. The ethanol lobby has suggested that the federal government support such plants by tax credits or other means. This would indirectly allow it to subsidize more ethanol.

Refiners are also considering recovery of amylenes from FCC gasoline to produce another ether, tertiary amyl methyl ether (TAME). Catalyst suppliers are working on catalysts to enhance yields of these ether feedstocks.

Changes in catalytic reformer and FCC operations will be necessary as benzene and aromatic limits go into force.

Alkylate will continue to be a prime and necessary gasoline component in the reformulated gasoline era. Capacity showed a solid jump to 1,072,400 b/sd as of the first of this year, a significant gain of 3.8%.

Over half, or 555,900 b/sd, of this capacity is in the HF alkylation process units. HF overtook H2SO4 capacity in 1988.

Although the HF process has a good safety record and years of operational experience behind it, it is under scrutiny. As a result of a lawsuit by the City of Torrance, Calif., Mobil Oil has agreed to modify or replace the HF unit at its refinery there by 1994. The industry is most interested in the outcome of this agreement.

With the new environmental mandates and the size of the gasoline market, it is obvious that refinery personnel and planners will be hopping during the next 4 years.