Problems for European refiners seen in EC sulfur proposals

European refiners face new investment requirements at a difficult time, warns the International Energy Agency.

Apr 17th, 2007

By OGJ editors
HOUSTON, Apr. 17 -- European refiners face new investment requirements at a difficult time, warns the International Energy Agency.

A Jan. 31 proposal of the European Commission on fuel quality would impose new sulfur specifications in a relatively short period and necessitate investment in hydrotreating, hydrocracking, and hydrogen production capacity, IEA says in its April Oil Market Report.

The move comes while "anecdotal evidence suggests refinery reliability is deteriorating due to existing sulfur-removal requirements, lowering average utilization rates," the agency says. Regulations are limiting sulfur content of gasoline, diesel fuel, and other distillates, or gas oil.

The EC's proposal would:

-- Confirm the mandatory date for a 10 ppm sulfur limit in diesel as 2009.

-- Reduce to 8% the maximum polyaromatic hydrocarbon content of diesel beginning in 2009.

-- Cut maximum sulfur content of nonroad gas oil to 10 ppm from 1,000 ppm for land uses and to 300 ppm from 1,000 ppm for inland waterways.

-- Increase the allowable oxygenate content of gasoline to encourage use of biofuels, including gasoline containing as much as 10% ethanol, and increase the vapor-pressure limit of gasoline to accommodate ethanol.

-- Require refiners to monitor greenhouse gas emissions and to cut emissions of greenhouse gases by 1%/year beginning in 2011.

-- Adjust vapor-pressure standards to encourage development of a biofuels industry.

Desulfurization hike
The EC proposal responds to requirements in the European Union for greenhouse-gas emission cuts and for a 10% biofuel share of the transportation-fuels market by 2020.

IEA notes discussions about displacement of fuel oil by distillate in marine bunkers and points out that Germany soon will cap the sulfur content of heating oil at 50 ppm.

"The changes to gas oil specifications in Europe would effectively increase European desulfurization requirements by 50%," it says.

Refiners would have to increase high-severity hydrotreating or hydrocracking of high-sulfur gas oil from cokers and catalytic crackers.

"These processes involve significant amounts of hydrogen and energy, neither of which is inexpensive or without significant greenhouse-gas emissions," IEA notes.

Under current regulations, refiners are increasing the frequency of maintenance shutdowns to keep hydrotreaters able to meet product specifications. Operation of the units at high severity and high capacity utilization has increased failure rates.

Hydrotreating problems can lower overall throughputs temporarily because refiners have less spare hydrotreating capacity than before new sulfur limits took effect and fewer outlets for off-specification product.

Refiners also are less able than before to perform partial turnarounds.

While the proposed changes would further lower sulfur levels in gas oil, IEA says, "they could have far-reaching and possibly unintended consequences in terms of reduced product supply and higher greenhouse-gas emissions."

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