(2) Improvement of the system to recover heat from units

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1 Summary Mexico is one of the world s major oil-producing countries (oil reserve of 12.9 billion barrels), with daily production of 3.74 million barrels in 2006 (crude oil and condensate: 88%, natural gas: 12%). The country exported 1.82 million barrels of crude oil in 2005, with the US (90%) and adjacent Latin American countries (10%) as the main importers. While being one of the largest crude oil exporters in the world, Mexico is also a net importer of petroleum products, importing approximately 330,000 barrels of petroleum products in In addition, the import is growing yearly due to increased domestic demand, and it is therefore urgently necessary to improve the cracking capacity (upgrading) of the oil refineries. Pemex has the six domestic oil refineries of Minatitlan, Salamanca, Salina Cruz, Tula, Cadereyta and Madero (refining capacity of 1.54 million barrels). In this study, we examined the economic efficiency and feasibility of applying the energy saving measures implemented in Salamanca in 2006 to the other five refineries, and prepared an energy saving master plan (target value) based on the examination. Pemex is also enhancing the facilities to increase the heavy crude oil throughput and adopting measures to reduce sulfur content in gasoline and diesel in Cadereyta, Madero and other refineries in sequence. In these activities, priority is given to the installation and remodeling of the production facilities, which results in slowing the progress of the modernization of utility facilities and the measures to improve efficiency. Accordingly, this study focused on the modernization of the utility facilities and examined the energy saving measures. We also estimated the amount of light crude oil available for export based on the eventually reduced crude oil and increased ratio of heavy oil to light oil as a result of the modernization of the utility facilities including fuel conversion, and energy saving measures. We examined the economic efficiency of energy saving based on the estimated home fuel oil price of 40 US$/bbl and the unit price per calorific value of US$/Gcal. The average number of operation days of the refineries was regarded to be 340 days/year. As the main energy saving measures, we specified (1) improvement of the steam system, (2) introduction of high efficiency boilers and power generation units, and fuel conversion (from gas and heavy oil to asphalt or coke), (3) heat integration between crude and vacuum distillation units, reinforcement of the heat recovery system, 1

2 and installation of hot high pressure separation tanks in desulfurization units, (4) cogeneration, (5) installation of air preheaters in all furnaces or replacement of furnaces by steam heaters, (6) flare loss reduction and flare gas recovery, (7) installation of gas expanders and waste heat recovery boilers in FCC units and (8) solar energy generation. In the examination of energy saving, we gave priority to the energy saving measures in the process (production facilities) and managed the overall steam/power balance in each refinery by adjusting the utility facilities (boilers and power generation turbines). (1) Improvement of the steam supply system To improve the boiler and power generation efficiency, asphalt (coke) fired high efficiency high pressure boilers and power generation system will be introduced. The power generation turbines are an extraction type with medium pressure (19 kg/cm 2 G). The operation of the existing medium and low pressure boilers and condensing-type power generation turbines will be shut down. Surplus low pressure steam is currently generated, which is used inefficiently or discharged to the atmosphere in some cases. To reduce such steam, we examined measures to correct the steam balance including replacement of turbine-driven machines by motor-driven units, prevention of discharge of live steam through the replacement of defective steam traps (based on field surveys) and the reduction of steam with the heat insulation of tanks. (2) Improvement of the system to recover heat from units We calculated the calorific value of the heat to be recovered after the heat integration between crude and vacuum distillation units and reinforcement of the heat exchange system. With respect to the units where the temperature of the heated fluid is less than 250 o C at the inlet of crude distillation units, we assumed that the heat could be recovered to increase the temperature to 250 o C. We also examined the installation of hot high pressure separation tanks in the heat exchange system in the gas oil hydrodesulfurization units, removal of reboiler furnaces in the stabilizers, modification of the heat exchange system and the use of stripping steam (dehydrators for diesel products). (3) Installation of cogeneration facilities, air preheaters and steam heaters 2

3 We considered the introduction of cogeneration system, where gas turbine power generators are installed to supply the waste gas to furnaces in crude distillation units. The system produces power and steam and also improves the thermal efficiency of the furnaces. The power and steam production has a synergy effect as it can also reduce the operation of existing boilers and power generation units. For all of the furnaces installed in the process (production facilities) except crude distillation, we examined the installation of air preheaters. We also explored replacement of the furnaces with the outlet temperature of the heated fluid less than 250 o C by steam heaters. In practice, the furnaces with the temperature of 200 o C or lower were subject to consideration based on the saturation temperature of medium and low pressure steam. We found that it would be economically inefficient in the case of newly installed furnaces with air preheaters because they have high thermal efficiency although the temperature of the heated fluid is low. (4) Flare gas reduction measure and flare gas recovery facilities Flare gas can be reduced considerably through the improvement of the operation/maintenance, system control and set values. We reviewed the specific examples of the refineries with actual experiences of reduction. To address the flare gas still remaining after the implementation of these measures, we examined the installation of facilities to recover the discharged gas. (5) Gas expanders in FCC units (fluid catalytic crackers) Generally in advanced and modernized refineries, the pressure energy (and thermal energy in part) of flue gas from high temperature catalyst regenerators is recovered as power with power recovery generators (gas expanders), etc., and the remaining thermal energy is recovered in the form of steam with waste heat boilers. We examined the introduction of these gas expanders and waste heat boilers. The power and steam production has a synergy effect as it can also reduce the operation of existing boilers and power generation units, making it economically efficient. (6) Introduction of solar energy generation Taking advantage of the climate suitable for solar energy generation, we considered a measure to install solar panels on the roofs of offices and parking lots and generate power to substitute for much of the power consumed in the offices. Focusing on these six items, we examined energy saving measures. We summarized these measures for each of the refineries and prepared an 3

4 energy saving master plan (target value of energy saving). The master plan is shown in Table 2. We also explored the feasibility of exporting light crude oil based on the simplified production balance in the refineries after the implementation of all energy saving measures, and the results are presented in Figure 1. The table below shows the current crude oil throughput, fuel consumption rate (energy intensity; fuel consumption divided by crude oil throughput in kbtu/bbl) and the rate after the implementation of energy saving measures. Fuel consumption rate before and after the implementation of energy saving measures and improvement rate in the refineries Unit Salamanca Minatitlan Salina Cruz Cadereyta Madero Tula PEMEX Total Current Intensity Kbtu/bbl *1 ALL Energy Saving ES without Flare Gas Recovery Crude BSD 196, , , , , ,700 1,302,300 % *1 Gcal/hr ,891 Amount Kbtu/bbl *2 After Energy Saving Kbtu/bbl Gcal/hr ,460 Amount Kbtu/bbl After Energy Saving Kbtu/bbl *3 *1 FY 2004 by SOLOMON Data *2 Total Energy Saving : 1,890 Gcal/hr, Crude 1,302,230 BSD *3 Energy Saving Except Flare Loss : 1,460 Gcal/hr, Crude 1,302,230 BSD Total energy saved in the six refineries will be approximately 1,890 Gcal/hr, or 30,300 BSD (4,780 kl) per day of fuel oil, which is set as the target in the promotion of the individual energy saving measures. This value is equivalent to 2.3% of the actual throughput in the crude distillation units in 2004 (1,302,230 BSD) and represents the improvement of the fuel consumption rate by 31%. Even when the effect of flare loss recovery is excluded, the energy saving measures will save energy by approximately 1,460 Gcal/hr, which is equivalent to 23,500 BSD (3,690 kl) per day of fuel oil or 1.8% of the actual throughput in the crude distillation units in 2004 (1,302,230 BSD) and represents the improvement of the fuel consumption rate by 24%. When the refineries are considered separately, the effect is especially large in Salina Cruz and Tula, while the other refineries will achieve similar effect to the level outlined above (around 50 to 60% of the effect in the two refineries). The effect is slightly smaller in Salamanca probably because the effect of flare reduction is underestimated and air preheaters will be installed in only a few furnaces. 4

5 Between different measures, although some of them cannot be assessed independently, the effect of 120k boilers accounts for approximately 30%, followed by the flare loss reduction measure with the share of slightly higher than 20%. The measures following these are the introduction of FCC gas expanders and the adoption of gas turbines. In particular, the flare loss reduction measure should be prioritized because the investment efficiency is also high, as mentioned previously. Next, the possibility of exporting crude oil from Mexico, which is a purpose of this study, is mentioned below. Currently, most of the crude oil imported from Mexico is Maya, which is heavy crude oil with high contents of sulfur and metals (V and Ni), but only a limited number of refineries can independently process Maya oil in Japan. Most of the upgrading units (reformers) in Japanese oil refineries consist of heavy oil desulfurization units (fixed bed) and RFCC. All of the units set the operation for four consecutive years as a target, and suitable crude oil is therefore selected to contribute to meeting the target. As a result, the import of Maya oil in Japan[N1] is sharply declining because it can cause corrosion in the units and shorten the life of the catalyst in the desulfurization units and crackers and is also considered to be relatively expensive. In the meantime, refineries in Mexico are working on the plan to introduce upgrading units (reformers) such as cokers to crack the heavy residue of Maya oil and turn it into lighter oil, reduce the API of the input oil in the refineries and save light crude oil for export. Looking at the production balance of the refineries, the reforming of heavy crude oil in the upgrading units will result in lower API in the input crude oil, which leads to the reduction of the input of light crude oil, and keep light crude oil for export. In this study, we consider how much the modernization and refurbishment of utilities can contribute to the increase in light crude oil available for export through the combination with the existing upgrading units (reformers). The oil refineries of Pemex use the cracked gas mainly composed of methane and ethane as well as heavy crude oil (including coke) as fuel for home use, and consume natural gas instead of a portion of heavy oil for environmental purposes. When fuel is saved through energy saving measures, priority is given to the saving of heavy oil and then natural gas irrespective of the types of the fuel actually consumed. This study has identified that, through the implementation of all energy saving measures, heavy oil of 47,200 BSD will be saved and asphalt of 16,900 BSD will be additionally consumed, which will result in the saving of heavy oil of 30,300 BSD. Crude oil is a co-product, and heavy oil is a mixture of 70% of asphalt and 30% of 5

6 kerosene/gas oil based on a simple calculation. Accordingly, replacement of heavy oil by asphalt in the consumption will increase the production of gas oil by 5,070 BSD (approximately 30% of 16,900 BSD) and 9,090 BSD (approximately 30% of 30,300 BSD, the effect of saving of heavy oil), totaling 14,160 BSD. The production of asphalt will grow by 21,210 BSD. In order to meet the changes mentioned above without changing the production of light oil products (gasoline, jet fuel, diesel, etc.), it is necessary to lower the processing ratio of the light crude oil as well as the throughput of crude oil. In this study, we have prepared and examined an oil refinery model to calculate the production volume of main units for the case studies of crude oil throughput and crude oil composition ratio. According to the examination, to maintain constant levels of supply of FCC feed and production of middle distillate and asphalt with the current unit capacity, the crude oil should be composed of 49.7% of Isthmus crude oil and 50.3% of Maya crude oil. Based on this crude oil composition rate, 99,800 BSD of Isthmus crude oil will be surplus. As 49.7% of 30,300 BSD (reduction of the processed crude oil), namely 15,100 BSD, represents Isthmus crude oil, we have come to the conclusion that the potential amount of crude oil available for export will be 114,900 BSD of Isthmus crude oil in total. 6

7 Table 1 Energy saving master plan Salamanca Minatitlan Salina Cruz Cadereyta Madero Tula Total Fuel Elec Steam Fuel Elec Steam Fuel Elec Steam Fuel Elec Steam Fuel Elec Steam Fuel Elec Steam Fuel Gcal/H KW T/H Gcal/H KW T/H Gcal/H KW T/H Gcal/H KW T/H Gcal/H KW T/H Gcal/H KW T/H Gcal/H CDU (174.9) Hot Flash HDD BSD 14,000 BSD 25,000 BSD 45,000 BSD 25,200 BSD 22,500 BSD 61,200 BSD *1 0.4 Gcal/H/1000BSD (for Minatitlan Tula) (46.5) FCC Hot Ch'ge (10.6) All Process Furnace APH (158.0) FCC Gas Expander 7, , , , , , Total (297.1) CDU Cogeneration , , , , , , Total (230.2) Steam Heater Total k Boiler , , , , , Total (560.1) Flare Gas Recovery (430.8) Solar Cell Generation (6.5) Fuel Total Energy Exchange Total 37, , , Elec to Fuel 2,150 kcal/kwh (200.6) *2 Steam to Fuel 750 kcal/kg * (192.2) Total Fuel Substantial Saving (1,890.6) Asphalt Burning Reduced all Energy , (2,969.3) Elec (Electrisity), Steam=Generation Fuel=Consumption Fuel Oil Equivalence *1 90% Operation for Salina Cruz, Cadereyta, Madero & Tula Total Fuel Exclude Flare Loss 0.4 Gcal/H/1000BSD for Salina Cruz Tula) = same as Minatitlan Saving Energy -7,510-6,420 KL/D (Fuel Oil Base) *4 Steam : T/1000BSD = same as Minatitlan (1) Reduced Fuel Oil -47,200-40,400 BSD (Fuel Oil Base) *4 *2 Electricity Generation Efficiency : 40% (2) Asphalt Burning 16,900 16,900 BSD 9,650 Kcal/m 3 *5 860 kcal/kwh 2,150 kcal/kwh (1)-(2) Substantial Saving -30,300-23,500 BSD (Fuel Oil Base) *3 BO efficiency : 80% CDU 1,302,230 1,302,230 BSD FY 2004 Actual 600 kcal/kg 750 kcal/kg Energy Save % vs CDU Capacity *4 Fuel Oil Heating Value 9,489 Gcal/Kl 9,517 Gcal/Kg 997 Kg/m 3 7

8 ALL PEMEX REFINERY SIMPLIFIED FLOW BALANCE, HEAVY MATERIALS AROUND Asphalt Boiler burn Asphalt instead of FO bsd % on Crude LHC LPG Naphtha CCR 5, HDS RF, Isom Reformate Crude WN Isthmus 185, ,100 bsd WK 383, , % 88, K&GO HDS GO ALK, MTBE, Maya 286, TAME 639,830 bsd HGO FCC Feed 50.3 % 73, , FC Gasoline Crude Distillate unit Atmospheric Residue CO (Cycle Oil) 632, , CDU Feedrate bsd % on Crude Cracked Gas DO (Decant Oil) 1,271,930 bsd VGO 46, , , , Reduced Natural Gas Import Delayed Average API 27.1 New Coker Coker Average Sulfur Cokes Vacuum Residue Asphalt Home Fuel Gas Crude Component and Feedrate data are applied 381, (Coke) Constant by 2004 Solomon Basis Asphalt 16, FO Delayed Coker operation are applied by 2004 Boiler 3, Solomon Basis Coker Distillate 48, , Isthmus Differential WK+GO 40, ,800 bsd 15,100 bsd , FO Product 114,900 bsd Fuel Oil 330,000 Substantial Saving Actual Average Fuel Oil Consumption 184, , Blender 30,300 bsd Salamanca 5,900 Minatitlan 3,700 85, Energy Saving FO Equivalent Salina Cruz 3,400 47,200 bsd Cadereyta 3,000 Asphalt Boiler Madero 5,600 16,900 bsd Tula Total 12,400 34,000 Vacuum Distillate unit VGO HDS Figure 1 Balance after the introduction of asphalt-fired boilers and all energy saving measures FCC Gasoline Blender Diesel Existing Boiler & Furnace 25.9 Asphalt 8

9 While Pemex is currently promoting the modernization of the production facilities sequentially as well as the introduction of delayed cokers and modification of the crude and vacuum distillation units to process heavy crude oil along with other remodeling and expansion, the potential of exporting light crude oil will be dramatically improved if the modernization including fuel conversion in the utility facilities is implemented in addition to such activities. The capacity to process Maya oil will be further improved and the possibility of exporting light crude oil will be significantly enhanced when the facilities for processing heavy crude oil including the 55,000 BSD delayed cokers are completed and operated in the Minatitlan refinery, as already practiced in Cadereyta and Madero. Pyrolysis units (delayed cokers) represent the only technology economically established for the upgrading (reforming) of Maya crude oil (which has high contents of nickel and vanadium) in the current situation. The energy saving technologies for the main facilities examined in this study, especially FCC gas expanders, gas turbines (cogeneration), air preheaters (regenerative-type, in particular) and asphalt boilers (including flue gas desulfurization and flue gas denitration), are the fields where Japanese manufacturers are strong (competitive). Japan also has advanced control technologies such as the adjustment of steam/power balance and fuel gas balance. Therefore, it is highly possible that Japanese manufacturers will win the orders. Pemex is also exploring the possibility to implement the energy saving measures as CDM (clean development mechanism) projects to mitigate global warming. Although it is in fact difficult for energy saving projects to be approved as CDM projects, Pemex is discussing some plans for the materialization in coordination with Japanese companies. Thus, if the projects promoted in cooperation with Japanese companies have high investment efficiency, and the profitability and technical reliability are recognized, they are very feasible as investment projects for Japanese companies even if not accepted as CDM projects. Some companies plan to ask for the supply of crude oil in return for the investment, and in such cases, it can be expected that the companies will offer investment subject to the use of Japanese technologies. While continuously providing local training and making efforts to receive orders on the basic design, we will also continue our activities to approach the companies that can potentially contribute to this realization such as engineering firms and trading companies in Japan. 9

10 All rights reserved. The copyright of this material is held by the Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry (METI). Reproduction of all or part of this material without express permission of the copyright holder is strictly prohibited. The Japan External Trade Organization (JETRO) was commissioned by METI to produce this material. Japan External Trade Organization (JETRO) Industry and Technology Division Industry and Technology Department Ark Mori Building 6F, Akasaka 1-chome, Minato-ku, Tokyo, JAPAN TEL: FAX: