WORLDWIDE REFINING Distillation capacity exceeds 76 million b/d, hydrotreating surges

Mitteldeutsche Erdöl-Raffinerie GmbH (Mider) is building a grassroots refinery at Leuna in the former East Germany. Mider plans to start up the 170,000 b/d refinery next year. The refinery will replace Leuna Raffineriegesellschaft's antiquated 100,000 b/d Leuna refinery, which will be shut down next year, and a 73,700 b/d refinery at Zeitz, Germany, that was shut down in December 1995 (photo courtesy Mider).

Global crude oil distillation capacity has increased 1.6 million b/d, or 2.2%, since last year's survey. World crude capacity has now surpassed 76 million b/d. This increase resulted from: start-up of one grassroots refinery, expansions at a number of plants, and improved information on refineries in South Korea.

Subtracting out the 600,000 b/d of additional capacity in Korea that was unreported in last year's survey, the increase in global crude capacity during 1996 was 1.0 million b/d, or 1.3%.

Each December, the Journal survey reflects world refining capacity as of Jan. 1 of the following year. The total number of refineries has decreased by four since the last survey (OGJ, Dec. 18, 1995, p. 47).

Three small topping units have been added to Russia's list of refineries. Also new to this year's survey is Star Petroleum Refining Co. Ltd.'s 123,500 b/d refinery at Mab Ta Phut, Thailand, making a total of four new plants.

Seven small refineries have shut down since the last survey (see list, p. 49. The largest of these was Total Petroleum Inc.'s 56,000 b/d refinery at Arkansas City, Kan.

In addition, BP idled its Marcus Hook, Pa., refinery as a result of a strike by the Oil, Chemical & Atomic Workers Union. The refinery is not listed in this year's survey, although Tosco Corp. purchased it and will restart it soon.

In addition to these changes, Tosco recently announced plans to buy Unocal Corp.'s refining and marketing division (OGJ, Nov. 25, p. 32). Tosco's acquisitions, including purchase of BP's Marcus Hook refinery, are turning it into a major U.S. refiner.

Conversion capacity remained relatively steady in all regions during the past year. Figs. 1 [16357 bytes], 2 [16670 bytes], and 3 [16821 bytes] show changes in processing capability in, respectively, the U.S., European Union (E.U.) countries, and the Asia/Pacific region.

In these figures, processing capability is measured by a region's capacity for catalytic cracking, hydrocracking, catalytic reforming, and alkylation, calculated as a percentage of total crude capacity.

Fig. 1 reveals a slight decrease in U.S. refineries' capacity for cracking. This is due mostly to Sun Refining & Marketing's elimination of two fluid catalytic cracking units (FCCUs) from this year's list: the 30,000 b/d unit at its Tulsa refinery, and the 80,000 b/d unit at its Marcus Hook, Pa., plant. The Marcus Hook FCCU is being revamped and expanded (OGJ, Sept. 30, p. 66).

Fig. 3 indicates a decrease in the complexity of refineries in the Asia/Pacific region. This decrease is likely an anomaly resulting from incomplete information about changes to Korea's refining capacity.

It should be noted that in Fig. 3, Asian capacity appeared to make a huge jump in 1995. This increase, however, was the result of greatly improved information on China's refineries published in the year-end 1994 survey.

Ssangyong Oil Refining Co. Ltd.'s refinery in Onsan, Korea, is now thought to have a total distillation capacity of 500,000 b/d, in contrast to the 143,000 b/d last reported by Ssangyong. This major increase in crude capacity-equivalent to a world-scale refinery-is almost certainly accompanied by increases in the capacities of downstream units.

Lack of information about these increases in secondary processing is likely skewing the ratio of downstream process capacity to crude capacity for the region, thereby creating an apparent decrease in process ability, relative to crude capacity.

The dominant companies

Table 1 [11925 bytes] shows the Journal's exclusive list of the top 20 refining companies.

The top five companies have held their rankings since last year. These companies made few capacity changes.

Although Royal Dutch/Shell's total appears to have decreased by 290,000 b/d, most of this difference is the result of an error in the calculation of Shell's total last year.

Saudi Aramco has moved up two notches to sixth place in the list. This is because of the major distillation capacity increase recorded for Ssangyong's Onsan refinery, in which Saudi Aramco holds a 35% stake. Another reason for Saudi Aramco's capacity increase is that it now owns 50% of Motor Oil (Hellas) Corinth Refineries' 100,000 b/d refinery at Aghii Theodori, Greece.

Another interesting change to the list is the addition of Taiwan's Chinese Petroleum Corp. (CPC). CPC expanded capacities at both its refineries, increasing its total to 770,000 b/d.

Yukong Ltd. almost made the list of top 20 refiners on the basis of a single refinery. Yukong's refinery at Ulsan, South Korea, has long been the largest, at 610,000 b/d. But a recent expansion to 769,500 b/d made it a mammoth, and brought it within only 500 b/d of qualifying Yukong for the list.

Table 2 [38811 bytes] lists the world's largest refineries (400,000+ b/d capacity). These top eleven plants have a total capacity of more than 5.4 million b/d.

Consolidation

The most important trend that developed in refining during the past year is the formation of joint venture refining companies. Four such alliances are in various stages of development:

• British Petroleum Co. plc and Mobil Corp. are consolidating their European refineries under a single banner (OGJ, Mar. 4, p. 40).

• Ultramar Corp. and Diamond Shamrock Inc., two independent U.S. refiners, have agreed to merge (OGJ, Sept. 30, p. 34).

• Shell Oil Co., Texaco Inc., and Star Enterprise are forming a refining/marketing alliance in the U.S. (OGJ, Oct. 14, p. 29).

• Elf Oil (U.K.) Ltd., Gulf Oil (Great Britain) Ltd., and Murco Petroleum Ltd. are combining their U.K. downstream assets into a new firm (OGJ, Nov. 11, p. 40).

The two U.S. mergers are designed to reduce operating costs by reducing administrative costs. Layoffs are expected in both cases.

The European mergers are a result of dismal refining margins in the region and the need for capacity rationalization. Both alliances will involve reductions in refining capacity.

The E.U. has approved the BP/Mobil merger, which now must pass antimonopoly rules. The new company is expected to be operational by the end of next year (OGJ, Aug. 26, p. 24).

BP plans to sell or reduce capacity at its three least-profitable refineries (OGJ, July 8, p. 22). The company has offered for sale its plants at Lima, Ohio, and Lavera, France.

BP and Texaco, co-owners of the 399,000 b/d Netherlands Refining Co. plant at Pernis/Europoort, Netherlands, also plan to reduce capacity at that plant by 70,000 b/d.

As a result of Gulf's merger with Elf, Gulf will close its 112,000 b/d refinery in Milford Haven, Wales. The company also will sell its 50% interest in Pembroke Cracking Co.'s cracking refinery to partner Texaco Ltd.

The survey

The survey of worldwide refining capacity begins on p. 49. Table 3 [32605 bytes] summarizes regional capacities for the major refining processes.

Crude capacity is the only category in Table 3 to show a significant increase over last year's figures. Of the remaining processes listed in the table, hydrocracking increased most during 1996. In absolute terms, this 136,000 b/d increase is fairly small, but it represents 3.9% growth since the last survey.

The increase in hydrocracking occurred mostly in the Middle East, with the addition of a 48,600 b/d unit at Bahrain Petroleum Co.'s refinery in Sitra, Bahrain. In Western Europe, Agip Raffinazione added a 16,000 b/d hydrocracker at its refinery in Taranto, Italy, and Turkish Petroleum Refinery Corp. added a 23,000 b/d unit at its Izmit refinery.

World hydrotreating capacity, not shown in Table 3, increased 1.22 million b/d during the past year-even more than the adjusted increase in world crude capacity. Most of the new hydrotreating capacity was added in the Asia/Pacific region.

Countries in this region increased hydrotreating capacity by a total of 792,000 b/d as a result of tightening sulfur specifications. The increases included:

• 40,000 b/d in Australia

• 153,000 b/d in Japan

• 243,000 b/d in South Korea

• 51,000 b/d in Singapore

• 229,000 b/d in Taiwan

• 145,000 b/d in Thailand.

In Australia, Ampol Refineries (NSW) Pte. Ltd. added a 46,000 b/d reformer feed hydrotreater at its refinery in Kurnell. In Japan, five refiners added a total of 139,000 b/d of distillate hydrotreating, which accounts for most of the increase there.

In Korea, Hyundai Oil Refinery Co. added a 64,800 b/d reformer feed pretreater and an 18,000 b/d naphtha desulfurizer. In addition, Yukong Ltd. added 103,000 b/d of distillation capacity at its monster refinery.

Singapore's increases also comprised distillate hydrotreaters. Esso Singapore Pty. Ltd. added a 15,000 b/d unit and Singapore Refining Co. started up a 36,000 b/d unit.

Taiwan's additions arose from expansion of CPC's Kaohsiung refinery. Reformer feed pretreatment increased 59,000 b/d and distillate treating capacity increased 79,000 b/d.

In Thailand, the new Star Petroleum Refining Co. plant accounts for much of the increase, with its three units: a 13,500 b/d reformer feed pretreater, 50,580 b/d distillate hydrotreater, and 25,200 b/d FCC feed pretreater. In addition, Esso Standard Thailand Ltd. added a 49,700 b/d distillate hydrotreater.

Regional processing

Tables 4a, 4b, and 4c [86626 bytes] show changes in processing capabilities for, respectively, the U.S., E.U., and Asia/Pacific.

In the U.S., crude capacity increased only 0.5%. The only category showing a significant change was catalytic cracking, which decreased 103,400 b/d. Most of this change was caused by the delisting of two of Sun's crackers, as explained earlier.

The changes in the hydrorefining and hydrotreating categories are less important than they may at first appear. Because refiners tend to be inconsistent from year to year, in terms of the categories in which they place their hydroprocessing units, it is reasonable to compare the sum of the two categories to evaluate capacity changes.

The total U.S. capacity of hydrorefining and hydrotreating increased 144,700 b/d during 1996. This amounts to growth of 1.4%.

In the E.U., hydroprocessing also showed modest gains. Refiners there have added 175,300 b/d of hydrorefining and hydrotreating capacity, representing an increase of 2.7% since last year.

In the Asia/Pacific region, crude capacity showed a huge increase: almost 1.5 million b/d, or 10%. Responsible for the increase were: major expansions at refineries in Taiwan and Singapore; incremental capacity additions in Japan; Thailand's new refinery; and better information for South Korea.

Hydrotreating capacity increased almost 22% in the region, as the result of the additions listed previously.

Construction

Table 4 also shows expected capacity increases as a result of known construction projects. The data are taken from the Journal's semiannual construction report (OGJ, Sept. 30, p. 55).

In the U.S., crude capacity is projected to increase only 69,000 b/d during 1997. Expected increases to thermal processing capacity total 54,000 b/d.

Based on known projects, U.S. hydrotreating capacity should increase 55,000 b/d during the coming year.

In the E.U., Mitteldeutsche Erd"l-Raffinerie GmbH (Mider) is expected to bring on stream its 170,000 b/d refinery at Leuna, Germany (photo). According to a spokesperson for Elf Aquitaine, the refinery will replace the existing 100,000 b/d refinery at Leuna operated by Leuna Raffineriegesellschaft, and the 73,700 b/d refinery at Zeitz, Germany, that was shut down in December 1995.

The new refinery will therefore add a net capacity of 100,000 b/d in Germany (the capacity of the Zeitz refinery is not included in this calculation because it was reported shut down in last year's survey).

Other expected increases to E.U. capacities in the coming year are:

• 95,800 b/d of FCC capacity

• 242,300 b/d of hydrotreating capacity.

About half of these increases are attributable to the Mider refinery.

In the Asia/Pacific region, crude oil capacity is expected to rise 140,000 b/d and hydrotreating, 75,600 b/d.

Large refiners

Tables 5a and 5b [107365 bytes] list refiners with more than 200,000 b/d capacity in, respectively, the U.S. and E.U. The tables also reveal the E.U.'s lag in conversion capacity, particularly in FCC.

The list of U.S. refiners with more than 200,000 b/d of capacity has changed little since last year. No refiners have been added to or removed from the list. There have, however, been a few minor movements within the list of 25.

BP dropped from sixth place to ninth when it idled its Marcus Hook refinery. Koch Refining Co. moved up to ninth place from eleventh as the result of minor capacity expansion.

In addition, Conoco advanced two notches to twelfth place by adding 36,000 b/d of capacity at its Westlake, La., refinery.

In the E.U. list, Cepsa moved up from eleventh to ninth place when the Journal learned that it owns a majority of Ertoil's 100,000 b/d refinery at Huelva, Spain. In addition, Petronor dropped two places to seventeenth as the result of derating its Somorrostro, Spain, refinery to 209,000 b/d from 240,000 b/d.

Table 6 [69712 bytes] compares the U.S. capacity holdings of large refiners (200,000+ b/d) with smaller ones.

Large refiners are increasing their share of U.S. capacity, as the consolidation trend would indicate. The percentage of U.S. capacity owned by large refiners has increased to 85.7% from 85.0% last year.

Industry sources say the consolidation trend is expected to continue, especially in the U.S. and Western Europe. The extent to which these mergers will reduce capacity and increase margins is yet to be seen.

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