Comment: The sulphur complexities aheadby Arabian Oil & Gas Staff on Mar 15, 2017
There is a widely shared belief that the main driver for sulphur management challenge arises from the struggle to improve environmental properties of motor fuels. Indeed, in the 20 years that have elapsed between the introductions of Euro-1 through to Euro-6, refiners had to recover over 400 kilo tons per annum of sulphur from diesel alone in order to comply with quality standards. While improving environmental friendliness of motor fuels is still ongoing, the example below shows that there are other drivers that have come to the forefront.
An example, especially relevant for the Middle Eastern refineries, is India, one of the key export destinations for petroleum products from the region. Presently, India has two environmental standards for motor fuels: Bharat Stage IV for 13 major cities and Bharat Stage III for the rest of the country. In terms of sulphur content, they correspond to Euro-4 and Euro-3 respectively. The expectation is that from April 2017, compliance with Bharat Stage IV will be required across the whole country. From April 2020 onwards, India will switch over to Bharat Stage VI directly – a standard that corresponds to Euro-6 and requires bringing sulphur content to 10 PPM. Yet it will only lead to a 20 kilo tons per annum rise in sulphur recovery.
According to the BP Energy Outlook, energy use for transport in China and India by 2035 will grow by 3.2 percent and 5.1 percent, respectively. Hence, the aspiration to meet the rising demand for motor fuels in these countries is to necessitate refining capacity increase in China, India and beyond, while the products will have to have ultra-low sulphur content. As a result, fuel demand growth in China and India will be the factor driving increase in volumes of sulphur recovery by around 500 kilo tons per annum by 2020.
Another sizable issue contributing to sulphur management challenge has to do with environmental requirements for bunker fuel. Currently, there are two Emission Control Areas (ECAs), along the coastline of North America and Europe that limits airborne sulphur emissions to a maximum 0.1 percent of the bunker fuel used. In other sea areas, the limitation is presently at 3.5 percent, yet International Maritime Organisation (IMO) plans to bring it down to 0.5 percent by 2020.
Meeting the new standard is going to be a complex challenge for refiners and ship-owners alike. With several possible solutions at their disposal – scrubbers put on-board the ships, use of low-sulphur distillate and residual bunker fuel, and development and use of alternative fuels (LNG, methanol, or electricity) – the options they are going to select will depend on a variety of technical and economic factors.
In terms of sulphur management prospects of oil refineries, the option of switching over to low-sulphur bunker fuel seems most relevant. This scenario will realise in case ship-owners refuse to equip the vessels with scrubbers, while the alternative fuels for maritime transport is not sufficiently developed. The scenario realisation may, in turn, take two routes: number one is the use of low-sulphur residual bunker fuel and number two is switching over to low-sulphur distillate bunker fuel.
The second route seems to be more realistic. A natural constraint for this scenario is the growth in global demand for middle distillates – this may lead to substantial price surge and force the ship-owners to search for cheaper alternatives. As for sulphur management implications of this scenario, the global refiners will have to find ways to recover around one million metric tons per annum of sulphur.
The important drivers of sulphur management, which come to the forefront in the next few years are: the challenge of sulphur recovery from increasing volumes of motor fuels produced for the markets with growing consumption of energy in transport as well as the implications of plans to toughen environmental requirements for bunker fuel.
Written by Valentin Kotlomin, director, strategic studies and downstream economics, Euro Petroleum Consultants (EPC). EPC is a technical oil and gas consultancy with offices in Dubai, London, Moscow, Sofia and Kuala Lumpur. EPC also organises leading conferences, including ME-TECH – the Middle East Technology Forum for Refining and Petrochemicals. For further details please visit www.me-tech.biz