The European Commission in a few months will propose changes to motor fuel specifications arising from a joint study by EC and the oil and automotive industries.
EC, the European Petroleum Industry Association (Europia), and European Motor Vehicle Manufacturers Association last year completed a $12 million study of emissions control requirement beyond 2000.
The Auto-Oil Program, as it became known, found that nitrous oxides should be the key target of air cleanup measures. Europia said refiners will need to spend 30-120 billion ECUs ($24-96 billion) during the next 15 years to meet expected fuel changes.
A warning
Now, Wood Mackenzie Consultants Ltd., Edinburgh, has warned that expected fuel specification changes will have a significant effect on operation and competitiveness of every refinery in Europe. The analyst said EC circulated "discussion" motor fuel specifications to refiners shortly after publication of the Auto-Oil Program's recommendations.
Wood Mackenzie said, "Initially, the specifications were quite severe and caused some strong reactions. But a later release was considerably less onerous, although still more severe than today's specifications."
In a comparison of typical European refinery configurations, Wood Mackenzie found refineries with hydroskimming units will be relatively unaffected by increasingly severe environmental requirements.
"All the thermal cracking processes, including coking, become relatively disadvantaged," the analyst said, "as do refineries with simple fluid catalytic cracking configurations.
"Complex FCC refineries with pretreatment of the FCC feed gain marginally, but it is only the hydrocracking refineries that gain any real advantage."
Refiners will be able to achieve new specifications in a number of ways through new process plant or different stream routings, Wood Mackenzie said.
"Virtually all refineries in Europe will need to make capital investments and will incur additional operating costs," Wood Mackenzie said. "However, because of the different configurations of individual refineries, changes in fuel specifications will have less impact on some refiners that others."
German refiners have complained for some time about their relatively tighter fuel specifications, estimated to cost them an added $4-8/metric ton produced compared with the rest of Europe.
But new EC rules applicable across Europe would give German refiners a relative advantage, Wood Mackenzie argued, because of the investments they have made.
Refinery groups
Europe's refineries fall broadly into three groups: top ranking refineries, with hydrocracking units giving an advantage; middle ranking units, where investment will be needed to yield competitive advantage; and low ranking plants, among which closures may take place as stricter fuel specification deadlines approach.
Wood Mackenzie defined a typical European middle ranking refinery as having 160,000 b/d crude distillation capacity, a 67,000 b/d vacuum unit, 40,000 b/d FCC unit, 28,000 b/d visbreaker, 5,000 b/d alkylation unit, 8,000 b/d isomerization unit, 28,000 b/d reformer, 36,000 b/d naphtha hydrodesulfurization unit, and 60,000 distillate hydrodesulfurization unit.
This typical unit is expected not to be too badly placed to meet new EC fuel specifications. One way to make it more competitive is installation of a mild hydrocracker (MHCU) to pretreat the FCC feed, along ancillary plant.
Wood Mackenzie said, "The competitive position of the refinery is significantly improved, taking it from borderline third European quartile to the first quartile.
"However, the FCC gasoline yield would still be high in olefins and the FCC distillate yield low in cetane, high in density, and generally poor quality even if significantly lower in sulfur content.
"Thus the refinery would not be in a truly secure position, although relatively advantaged compared with the majority of its peers. We estimate addition of an MHCU and associated plant at our typical refinery would cost in the order of $125 million."
To fully secure the refinery's competitive position, Wood Mackenzie said, closure of the FCC and construction of a distillate hydrocracker would be best. This would cost about $400 million.
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