Distillation capacities hold steady, more mergers planned

Thi Chang
Refining/Petrochemical Editor

The regenerator of the FCCU (fluid-catalytic cracking unit) at British Petroleum Co. plc's Grangemouth, Scotland, refinery received a new head and cyclone assembly this year. The revamp was executed under an Alliance agreement among BP Oil Grangemouth Refinery Ltd., Foster Wheeler Energy Ltd., and the principal construction contractors. Photo courtesy of BP.

As of Jan. 1, 1999, according to OGJ's annual refining survey, the worldwide crude-distillation capacity will be 80.3 million b/cd. Last year's survey reported a capacity of 78.3 million b/cd.

It is important to note that 1.4 million b/cd of this increase is an adjustment to correct China's known refining capacity. Also, distillation capacities for the Former Soviet Union (FSU) are about 422,000 b/cd lower this year. This number reflects a correction in FSU data and not real declining refining capacity.

Thus, adjusting for the newly reported capacity in China and the corrected capacity in the FSU, worldwide crude-distillation capacity hardly changed. The worldwide distillation capacity increased by less than 0.2% in 1998.

The survey and this report do not include information about Indian Oil Corp.'s new 120,000 b/d refinery in Panipat, India. Capacity data for this refinery was received after the survey was completed. Details can be found in a related story in the news section.

The North American, the Asia/Pacific, and Western Europe regions contributed about 1.2 million b/cd of additional crude-distillation capacity. The annual growth of each of these areas was about 2%. North America's crude-distillation capacity increased by 551,000 b/cd, Asia/Pacific's by 341,000 b/cd, and Western Europe's by 259,000 b/cd.

New refineries

Excluding Panipat, two refineries were started up in 1998, and two were shut down. The result of these changes was a net increase of 333,000 b/cd in crude-distillation capacity.

Mobil Oil Barbados Ltd. shut down its Bridgetown, Barbados, refinery (4,000 b/cd capacity) in January, and Equilon Enterprises LLC shut down its Odessa, Tex., refinery (28,300 b/cd) in November.

The two new refineries added to this year's survey are located in Melaka, Malaysia, and Norco, La. Although a refinery in Numaligarh, Assam, India, was expected to be completed by yearend, it is not listed in the survey because its start-up could not be confirmed at presstime.

Despite lower petroleum product demands and lower crude margins in the Asia/Pacific, Petronas recently completed its 100,000 b/d Melaka II refinery in Malaysia. Petronas owns 45% of the refinery, Conoco Inc. 40%, and Statoil 15%.
The revival of Trans American Refining Corp.'s Norco, La., refinery adds 200,000 b/cd of crude distillation capacity to Louisiana. After delays, the refinery started receiving crude into its distillation towers in June 1998. The refinery is a revamp of the Good Hope refinery, which was shut down in 1983 (OGJ, Nov. 9, 1998, p.68).
Although not listed in the survey, a 60,000 b/d, Indian grassroots refinery is expected to be commissioned in December at Numaligarh, Assam. The refinery will be jointly owned by Bharat Petroleum Corp. (BPCL), IBH, and the Government of Assam.

China update

This year's refining survey replaces the former 3.0 million b/cd crude distillation capacity that OGJ formerly reported for China with 4.4 million b/cd. Based on industry sources, OGJ feels these data more accurately reflect the refining capacity in China.

The downstream distillation data for many of these newly reported refineries, however, were not available for this year's survey. Thus, the blanks in the survey are a reflection of the lack of knowledge in this area of the world, not zero downstream capacities.

For comparative purposes, calculations performed in this article use the 1997 data for China capacities unless otherwise stated.

Processing capabilities

Fig. 1 [53,601 bytes], Fig. 2 [52,812 bytes], and Fig. 3 [55,360 bytes] graph the conversion capabilities of the U.S., E.U. (European Union), and Asia/Pacific refineries, respectively. Processing capabilities are defined by conversion capacities (catalytic cracking and hydrocracking) and fuels-producing processes (catalytic reforming and alkylation) as a percentage of crude distillation capacity.

It is evident that the U.S., the world's largest gasoline consumer, is the dominant refining area in downstream processes.

Like the previous 5 years, little changes in processing capabilities are identified this year. For comparative purposes, countries included in calculations for the E.U. are Belgium, Denmark, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, Spain, and the U.K.

Asia/Pacific countries are Australia, Bangladesh, Brunei, China, India, Indonesia, Japan, Malaysia, Myanmar, New Zealand, North Korea, Pakistan Philippines, Singapore, Sri Lanka, South Korea, Taiwan, and Thailand.

The 1999 rise in the Asia/Pacific's conversion processes represents an increase of about 136,000 b/cd in hydrocracking capacity. Catalytic cracking capacity remained about the same as last year. Several refineries contributed to this increase.

Chinese Petroleum Corp. reported the largest Asia/Pacific increase in hydrocracking capacity at its Ta-Lin, Taiwan, refinery. The new hydrocracker has a reported capacity of 75,000 b/cd and will be used to upgrade distillate.

In South Korea, SK Corp. added a lube-oil manufacturing, 54,000 b/cd hydrocracker. The new Malaysian Melaka II refinery has a new 28,500 b/cd hydrocracker. Japan Energy Co. reported a new 27,900 b/cd hydrocracker to upgrade resid at its Tokuyama, Yamaguchi, refinery.

The data points for 1999 in Fig. 4 were calculated by using 1997 data for China. Although crude-distillation data for China has been corrected to OGJ's best knowledge, downstream data are still missing. For comparative purposes, therefore, OGJ did not update the Chinese data to generate this graph.

Although Fig. 4 suggests that Asia/Pacific capacities surged in 1995, this is the result of new Chinese data during that year and not total real increases in refining capacity.

Completed and planned mergers

The largest restructuring in this year's survey is the merger among Shell Oil Products Co., Texaco Inc., and Star Enterprise. The merger created two U.S. joint ventures: Equilon Enterprises LLC and Motiva Enterprises LLC.

Equilon Enterprises LLC, formed in January 1998, is owned by Shell (56%) and Texaco (44%). It consists of the mid-western and western U.S. refining and marketing activities as well as total U.S. transportation, trading, and lubricants businesses.

The five refineries owned by Equilon are located in California (three refineries), Washington, Illinois, and Kansas.

The Shell Deer Park refinery, jointly owned by Shell and Petroleos Mexicanos (Pemex), is not part of this new company.

To satisfy the U.S. Federal Trade Commission, the new venture also agreed to divest Shell's Anacortes, Wash., refinery. Tesoro Petroleum Corp. purchased this refinery in August.

Motiva Enterprises LLC, formed in July 1998, serves a 26-state area in the eastern U.S. It is owned by Shell (35%), Saudi Aramco (32.5%), and Texaco (32.5%).

The venture makes Star Enterprise, which was a 50/50 joint venture between Saudi Aramco and Texaco in the U.S., obsolete.

Motiva includes four refineries with a total capacity of 820,000 b/d. The refineries are located in Port Arthur, Tex.; Convent, La.; Norco, La.; and Delaware City, Del.

In spite of changing percentages, the total company capacities did not change enough to warrant a change in company rankings.

In response to Thailand's low refinery margins, Caltex's Star Petroleum Refining Co. and Shell International Holding's Rayong Refining Co. Ltd. merged their Rayong, Thailand, refineries.

The two refineries, both new refineries in 1996, will be connected by pipelines over a 3-km distance (OGJ, Mar. 2, 1998, p. 56). According to Petroleum Authority of Thailand (PTT), the merger is synergistic because Rayong used a hydrocracker to produce diesel, gasoline, kerosine, and jet fuels; whereas Star used a resid fluid-catalytic cracker to produce diesel and low-aromatics gasoline, but no jet fuels.

The new refinery will be owned by PTT (36%), Shell (32%), and Caltex (32%). Owner representatives make up the newly formed Refco (Refinery Co.), which operates the plant.

The merger of British Petroleum Co. plc and Amoco Corp. has the potential to have a huge effect on refining company rankings. If BP Amoco plc keeps the same refining capacities that they own today, this would move the merged company to third in the list of top refiners, below Shell and Exxon (Table 1 [23,983 bytes]).

Although the BP and Amoco merger is expected to occur on Dec. 31, 1998, this year's survey does not reflect those numbers because the downstream restructuring plans have not been finalized at presstime.

Mobil Oil Australia Ltd. & Shell Australia Ltd. signed a memorandum of understanding in August to combine their four refineries. No refinery closures are expected.
Diamond 66 is a proposed joint venture between Phillips Petroleum's Co.'s North American RM&T (refining, marketing, and transportation) operations and Ultramar Diamond Shamrock. Corp. (UDS). Should it occur, it will generate a company with a refining capacity of about 935,000 b/cd (OGJ, Oct. 19, 1998, p. 39).
The effective date of Nippon Oil Co.'s and Mitsubishi Oil Co.'s proposed merger is Apr. 1, 1999. The merger will give the new company more than 1 million b/d of refining capacity (OGJ, Nov. 2, 1998, p. 42).
In early December, Exxon Corp. announced its intentions to acquire Mobil Corp. The merger has the potential to become the largest refiner in the world.
On Dec. 1, Total SA and Petrofina agreed to combine into one company. The new company, Total Fina, is expected to have more than 1.6 million b/cd of refining capacity.

Largest refiners

Like last year, Royal Dutch Shell owns the most refining capacity in the world. Table 1 ranks the capacities of the top 25 refining companies according to their capacities. Capacities are adjusted to account for their individual shares of jointly owned refineries.

New companies on the list this year are China National Petroleum Co., Marathon Ashland Petroleum LLC., and Conoco Inc.

As a result of adjusted data, two Russian companies, which were new to the top 25 list last year, were removed from Table 1 this year: Sidanco and Tyumen Oil Co. Also, Idemitsu Kosan fell off the list to make room for Conoco.

China geographically redistributed 95% of its refineries between the Sinopec Group and China National Petroleum Co. (CNPC) this year as part of the reorganization of its petroleum industry (OGJ, Aug. 10, 1998, p. 33). Sinopec owns about 60% of the domestic refining capacity, and CNPC owns about 40%.
Marathon Ashland resulted from the merger of the Marathon Group's refining, marketing, and transportation with those of Ashland Inc., which became effective in January 1998 (OGJ, Jan. 26, 1998, p. 54).
Sidanco and Tyumen dropped off the list because their capacities were lowered as OGJ corrected ownership data.
Conoco's 40% ownership in Petronas' new Malaysian refinery, Melaka II, moved it back onto the list. Conoco's share adds 40,000 b/cd to its worldwide refining capacity.

Largest refineries

Table 2 [20,911 bytes] ranks the largest single-site refineries in the world. Again, the Ulsan, South Korea, refinery has the highest reported capacity in the world. The refinery is owned by SK Corp., formerly Yukong Ltd.

Except for one refinery, the table merely rearranged last year's top refineries.

Tyumen Oil Co. disappeared from this year's list. Based on industry sources, Tyumen's capacities should not have been as high as reported last year. Sidanco's Angarsk, Russia, refinery was also corrected this year. The refinery capacity is still above 400,000 b/cd and therefore it remains on the list.

Exxon Co., U.S.A.'s Baytown refinery made the largest move in this table-from thirteenth to eighth. It added a little more than 20,000 b/cd of crude distillation capacity to its refinery.

Distillation changes

Table 3 [23,075 bytes] show regional changes in worldwide distillation and processing capacities.

The U.S. crude distillation capacity increased by about 524,000 b/cd. The start-up of the TransAmerican refinery, Norco, La., accounts for 200,000 b/cd of this increase. Next to Louisiana, Texas had the largest capacity change, an increase of about 92,000 b/cd in crude distillation capacity.

Table 4 [57,774 bytes] compares the operating-unit capacities for this year with last year for three regions: the U.S., the E.U., and Asia/Pacific. Crude distillation capacity in the Asia/Pacific region increased by more than 1.8 million b/cd. Most of this increase, as explained before, is a result of more data from Chinese refineries.

Even without China's increase, however, the increase in the Asia/Pacific region is almost 350,000 b/cd. Malaysia, Japan, the Philippines, India, and Australia together account for 92% of this 350,000 b/cd increase.

The new Melaka II Malaysia refinery contributed 100,000 b/cd. In Japan, various refineries contributed to about a 93,400 b/cd of crude distillation capacity. Petron Corp.'s Limay, Bataan, and Pilipinas Shell Petroleum Corp.'s Tabango, Philippines, refineries both reported increases in their capacities also.

Processing changes

It is significant to note that oxygenate capacities for the E.U. and Asia/Pacific regions each increased by 25% (Table 4). Pressures to lower benzene and aromatics contents are likely driving these increases.

In the Asia/Pacific region, hydrocracking capacities also showed a significant increase-178,300 b/cd, or 32%. The change in U.S. hydrocracking capability lagged that of the Asia/Pacific region only slightly. The U.S. hydrocracking capacity increased by 145,500 b/cd, or 11%.

Asia/Pacific hydrotreating capacity also had a noticeable increase in 1998-by 10%. More than half of this increase occurred in Japan (240,000+ b/cd). The Asia/Pacific area has positioned itself to make cleaner fuels, most likely to meet tightening sulfur specifications.

Cokers were particularly popular in the U.S. this year. Coking capacity in the U.S. increased by 174,000 b/cd, or 9%.

This is a reflection of increased reliance on Mexican and Venezuelan heavy crudes, which require cokers for profitability.

Pdvsa largely depends on Citgo for refining of its heavy oils in the U.S. Its 50% ownership of Mobil Corp.'s Chalmette refinery also gives it another outlet for production.

Pemex also has a strong presence in the U.S. It has relied on its 50% ownership of Deer Park, Tex., refinery for use of its production. Shell and Pemex are expanding their Deer Park coking facilities to accommodate even more Mayan crude (OGJ, July 20, 1998, p. 47).

In October, Pemex struck a deal with Exxon Co. USA to supply 65,000 b/d of Maya crude to the Exxon Baytown refinery. Exxon plans to build a 40,000 b/d coker by the second half of 1999 to receive this crude.

Pemex is also reportedly installing new cokers in its Ciudad Madero, Salamanca, and Tula Hidalgo refineries.

Recently, Coastal Aruba Refining signed a 5-year contract with Pemex for supply of as much as 100,000 b/d of Mayan crude. Coastal plans to add a 30,000 b/d delayed coker in 2000 as part of the deal.

Construction

A further look at Table 4 reveals that if all construction projects reported in OGJ's semiannual construction survey (OGJ, Oct. 5,1998, p. 63) are completed next year, the U.S. crude distillation capacity is expected to increase by only 110,000 b/cd, or 0.7%.

New construction in the Asia/Pacific region leads that in the U.S. and Europe. If all reported projects come through, the Asia/Pacific region will have a crude distillation capacity of 19.3 million b/cd, an increase of 3%.

U.S. and E.U. refineries

Table 5a [80,544 bytes] lists companies that own U.S. refineries, and Table 5b lists companies that own European refineries. These companies are ranked by U.S. and European refining capacities.

Only assets in which the company owns at least 65% of the refineries are listed. Changes in assets rearranged refinery ownerships this year, but the lists generally account for the same refineries.

Clark Refining & Marketing Inc. purchased BP Oil Co.'s Lima refinery in the third quarter of this year. Valero Energy acquired Mobil's Paulsboro, N.J., refinery in August 1998, increasing its refining repertoire by 150,000 b/cd (June 1, 1998, p. 39).

Tesoro Petroleum Corp. is new on the list. With its purchase of BHP Hawaii Inc.'s Kapolei, Ha., refinery and Equilon's Anacortes, Wash., refinery its capacity rocketed from 72,000 b/cd to 312,000 b/cd.

Lyondell-Citgo Refining Co., which has historically been on the list, has been removed for accuracy. Neither Lyondell nor Citgo owns more than 65% of the Houston refinery.

Getting bigger

Refineries are also getting larger. Table 6 [26,559 bytes] compares the size and number of U.S. refineries between this year's survey and that of last year. Consistent with the past several years, there are fewer small refineries (less than 200,000 b/cd crude distillation capacity) this year than last but more larger refineries (more than 200,000 b/cd crude distillation capacity).