CHEM SYSTEMS STUDY OUTLINES U.S. REFINERS' STRATEGIC OPTIONS

Strategic options available to U.S. refiners for meeting legislated environmental mandates come under review in three studies by Chem Systems Inc.

The Tarrytown, N.Y., firm said U.S. refiners will have to develop new technological and operational approaches to achieve motor fuel composition and performance standards required by 1990 amendments to the Clean Air Act.

The economic burden of meeting evolving environmental requirements will force the U.S. refining industry to restructure.

In two companion studies, Chem Systems details refining adaptations focusing on reformulated gasoline, low sulfur diesel fuel, and residual desulfurization in the context of U.S. energy use through 2010. Another study focuses on options for reducing benzene content in gasoline.

Chem Systems covers strategic alternatives by refinery type, "from hydroskimming to very complex configurations."

Reorganizational options Chem Systems expects refiners to try in the prevailing harsh business climate include toll processing, joint ventures, sales to or integration with nearby refineries, development of niche businesses, creative financing, or as a last resort process shutdowns.

ENERGY USE FORECAST

Chem Systems' outlook through 2010 for U.S. energy use concludes:

Net U.S. distillation capacity will decline through 1995, as low complexity, poorly capitalized refiners shut down, resulting in high operating rates.
Refining margins will rely heavily on refiners' ability to pass through high costs associated with environmental compliance, remaining more attractive than during the mid-1980s but less attractive than 1989-90 levels.
Ethylene cracking feedslates will remain relatively light through 2000, followed by greater reliance on naphtha and gas oils.
Because of fuel reformulation, the U.S. refining industry's net supplies of gas liquids will grow, as opposed to its historical position as a net consumer.
Despite legislative support for alternative fuels, gasoline will remain the primary U.S. automotive fuel but will achieve the lowest growth rate among major refined products.
Total U.S. energy use will grow about 1%/year with above average growth expected in consumption of gas and coal, at the expense of petroleum, nuclear, and hydroelectric power. Petroleum's proportional share of primary energy consumption will decline to less than 40% by 2010.
Real growth of U.S. GNP will average 2.5% through 2000 and fall to 2% through 2010, while inflation averages 3.3-3.8%/year.

BENZENE OUTLOOK

Chem Systems says many refiners are considering concepts of benzene management in gasoline production. Of greatest concern in Chem Systems' analysis is the limitation to 1 vol % of benzene content in gasoline sold in nonattainment areas starting in 1995.

Chem Systems organizes options for reducing gasoline benzene content into these broad groups: reduced reformer severity or production, reformer feed adjustment, increased levels of diluents such as methyl tertiary butyl ether or isomerate, and posttreatment of reformate through extraction or chemical conversion.

"These options are not entirely independent, and refiners facing a low benzene scenario may be forced to employ more than one option," Chem Systems says.

Approaches adopted at various plants will be based on existing hardware, feedstock supply, operating philosophy, location, and integration with chemical production.