Economics of Marine Import Terminal vs Refinery

Transcription

1 Jet Fuel Supply Integrity The impact of Manufacturing and Distribution on fuel quality Dr. Anthony Kitson-Smith Oulton Hall June 2014 February 2010 Economics of Marine Import Terminal vs Refinery Refining margins have been strong for the last few years, but are currently poor The older refineries are going to be increasingly challenged: They are a long way away from the new, growing markets and emerging sources of crude New refineries are now being built closer to these markets New legislation, especially environmental, will add cost and complexity Product specifications across all products Manufacturing restrictions CO2, SO2 emissions Drive to use cheaper, harder to run crudes: More impurities to process out More corrosive properties leading to higher maintenance costs 1

2 World Jet Demand & Supply Imbalance Economics of Marine Import Terminal vs Refinery Simply put: - There is an excess of global refining capability, super refineries have been built in developing countries/emerging markets, built specifically with the intention to export to large sea going vessels, on a huge scale with modern technology and local resource efficiencies which dwarf those of the older, smaller, and less efficient to run refineries sitting in mature markets such as Europe and North America strangled further by the continued investments needed to meet the complexities of the ever more stringent product specs for all clean and dirty grades, as well as on the manufacturing process itself - CO2, SO2 emissions etc. This is not new, this trend has been developing for the past 20 years and is set to increase as the AG/East continue to add to their refining capabilities. 2

3 Economics of Marine Import Terminal vs Refinery This trend is amplified for Jet fuel for three key reasons 1) The Jet product specification is (in theory) Global, it lends itself to a market that needs to balance via global arbitrage more than any other finished grade. 2) Jet fuel typically has lower returns than other more complex/lower sulphur grades and those refineries in the mature markets that have invested to upgrade de-sulphurisation kit to meet these complexities therefore choose to maximise those other grades over jet. As a result we have typically seen refinery Jet yields drop in the developed markets of Europe and North America. 3) Jet fuel demand is in essence concentrated in a few key hub locations, other grades have to dissipate to a much wider network, typically petrol retailer forecourts, manufacturing locations/agriculture, thus incentivising large bulk movements of a single grade to develop to what should be a more efficient bulk import system. QUESTION TIME Which of the following statements best reflects your view? 1. Full compliance with EI 1530 essential throughout the supply chain? 2. Full compliance with EI 1530 essential even if the supply chain is limited as result? 3. Full compliance with EI 1530 essential only for the supply chain from storage direct to airport? 4. Never heard of EI

4 Quality Assurance Fundamentals Make it Right and Keep it Right Make it right is the responsibility of manufacturing. Purchaser needs to be sure of provenance and quality. Keep it right is the responsibility of supplier. Don t break the quality chain. Understand the issues Take great care of the interfaces MAKE IT RIGHT THE ISSUES Heavier Crudes / Increased Barrel Whitening will result in: Increased use of cracking processes since percentage of light products needed from Crude will increase and specifications tighten. More cracking means less stable fuels (Higher Olefin Content unless hydrotreated.) Use of synthetic/ bio components Which Means: Greater use of Anti-Oxidants Greater need for Hydrogen Treating (Increased Saturation) Greater need for improved detergent additives in ground fuels Higher mix energies to achieve homogeneity Which Means: More vigilance for importers Higher risk of mixing issues Higher risk of off-specification during transport and storage 4

5 JET SPECS RISK AREAS COMPOSITION appearance colour acidity aromatics sulphur total sulphur mercaptan hydro processed components severely H P C s VOLATILITY distillation temps distillation residue distillation loss flash point density FLUIDITY freezing point viscosity SHIPPING COMBUSTION specific energy smoke point IMPORT PROCESS CORROSION copper strip corrosion MARINE TERMINAL THERMAL STABILITY JFTOT tube deposit rating CONTAMINANTS particulates existent gums MSEP with SDA MSEP without SDA Conductivity FAME Marine Shipping SHIPPING and IMPORTS Choice of Vessels Vessels selected based on industry-accepted change of service practices (HM-50 etc) Inert Gas systems Soot and Acidic gases may cause cargo to be offspecification on arrival. Loading Documentation to ensure traceability Bon Voyage Additive Dosing Purchase of Cargoes - FOB/ spot Ship to Ship transfers and traceability 5

6 SHIPPING and IMPORTS Dedicated? Segregated? Inert Gas Systems Well Maintained? Typical Ship s Cargo Handling System (20,000 DWT Product Carrier) Jet fuel (Shore Sample Retain) Not Jet fuel (After Voyage) MARINE RECEIPTS Arrival Discharge Approval, documentation, traceability Independent inspection process sampling integrity Facilities Supply Logistics on shore, segregated? FAME? Marine arms and unloading hoses Dedicated? Other Risks Filtration required? Segregated tanks for imports Microbiological growth checks Water management Water management Water management 6

7 MARINE RECEIPTS Water in Ship s Cargo Can you Handle it? Hazy fuel from ship s receipt after 1 week settling Filtration Keeping it Right STORAGE FACILITIES & DESIGN Can your receipt filters handle the pace? 5 th Edition EI 1581 suitably sized Similarity Bypass for wet bottoms? Correctly maintained Cost Effectiveness Filtration vs additional tankage Need for pre-filtratio Other considerations Need for recirculation Need for additive dosing/ re-dosing Salty Jet? 7

8 Filters Fit for purpose.. STORAGE FACILITIES & DESIGN Coalescer elements showing signs of major salt contamination - poorly maintained Merox unit at upstream refinery STORAGE FACILITIES & DESIGN Former refinery off-site facilities? Are pipelines segregated from other grades Can jetty lines cope with import flow rates Is testing complete prior to discharge Is receipt monitored during discharge Receipt Tankage Is import tankage designed for bulk dewatering No re-run capability for drains. Product recovery system Other considerations Microbiological Monitoring? 8

9 STORAGE FACILITIES & DESIGN Vertical tanks should ideally be frangible cone roof to prevent ingress of rain and minimise entry of airborne dust/sand. In tropical climates Internal floating roofs are desirable for safety and environmental reasons. External floating are not recommended Tank floor should be cone down with single central sump. Plates must be lapped to ensure flow to sump with no water retention Horizontal tanks must slope to a sump at the lowest point. All tanks should have top hatches to enable sampling, dipping and inspection All tanks require safe access to top fittings. Tanks shall have separate inlet and outlet connections Terminals tanks should have a raised suction but a floating suction is preferable STORAGE FACILITIES & DESIGN Refinery Tanks Typically flat bottom, side drain, unlined, maybe open floating roof May not be in ideal condition Usually need to improve dewatering as single drain too small for effective water removal May need to line floor and 1 st metre of wall to improve dewatering 1 8 9

10 STORAGE FACILITIES & DESIGN Other Tanks Issues Tank plates incorrectly lapped microbial slime on tank floor Recirculation line creates barrier to good circulation and draining. Tank plates correctly lapped and low point sump below tank plates..pity about the flushing line STORAGE FACILITIES & DESIGN Other Tanks Issues Tank plates correctly lapped and low point sump below tank plates..pity about the flushing line Tank inlets angled? Diffuser? Jet Mixer? Tank outlets raised? Upturned/ slotted? Floating (and working)? 10

11 KEEP IT RIGHT - FACILITIES Capex versus Revenue? (Spend now or pay later?) A well designed system will prevent contamination and possible fuel degradation from: Other products, Untested fuel Dirt, water and rust Unapproved additives Microbiological contamination Unsuitable construction materials The system should ensure that contamination is easily detected and effectively removed Adequate, efficient and effective sampling points Frequent systematic checks Operating experience significantly influences type and frequency of checks Better facilities allow management of distressed cargoes. Off-spec cargo costs can easily exceed $1m NO ONE WANTS THIS! KEEP IT RIGHT OPERATIONS Operating standards and procedures? JIG/API/EI Compliant (ICAO 9977) Tank certified after receipt? Daily water draw off Required Settling Operating personnel Trained, motivated and Competent (understanding) Understand document records and trending Inspection and Verification process Annual external eyes expert audit check? Internal review process Waiver authorisation with appropriate management endorsement Close monitoring of operational interfaces 11

12 QUESTION TIME Which of the following statements best reflects your view? 1. The supply chain has self-audited for years, that is OK 2. The supply chain needs independent oversight paid by the suppliers 3. The supply chain needs independent oversight paid by passenger levy 4. The key part of the supply chain for oversight is that part involved in direct supply to airports STORAGE FACILITIES & DESIGN Tank-side Dewatering Quickflush tanks with product return Easy visual assessment of sample Full Scale Dewatering May need to employ large volume wet bottom or tank flush tank No re-run capability so conserve or waste 12

13 SAMPLING AND TESTING Sampling compliant with industry practise? Fixed sample points flushed Tank top sampling with dedicated equipment? New/clean and rinsed sample containers Labelling Testing Laboratory competent to test Jet fuel Partakes in recognised lab cross-check scheme Effective QC scheme Certification Authorised signatories? Up to date with required standards and methods KEEP IT RIGHT - CERTIFICATION Sampling compliant with industry practise? Fixed sample points flushed Tank top sampling with dedicated equipment? New/clean and rinsed sample containers and labelling.. Testing Laboratory competent to test Jet fuel Partakes in recognised lab cross-check scheme Effective QC scheme Remediation Capability Tank to tank transfer? Recirculation capable? With or without filtration. Certification Authorised signatories? Up to date with required standards and methods 13

14 KEEP IT RIGHT - DELIVERY Inland Options Pipelines. Dedicated? Segregated manifolds? Tank design meets requirements and Filtration if direct to airport Fungible Road and rail loading Dedicated? Usually direct to airport, so tank design and filtration requirements apply Marine Options Barges usually direct to airport, so tank design and filtration requirements apply Large marine transports pumping rates, jetty occupancy, dedicated lines, arms SUPPLY INTEGRITY HOS Ltd. Buncefield Terminal (Dec 6 th, 2005) ~50% of Heathrow Supply Caribbean Petroleum Corp. Puerto Rico Terminal (Oct 23 rd, 2009) Some Jet Storage Hurricane Katrina Aug 29 th, 2005 Took 12% of US Refining Capacity Off-line Volcanic Ash The Rainy Season 14

15 SUPPLY INTEGRITY Contaminated water bottoms of a main refinery supply tank Supply Suspended Heavily Contaminated Water bottom from Storage Tank Supply Suspended QUESTION TIME Which of the following statements best reflects your view? 1. The greatest risk to supply integrity is from longer supply routes 2. The greatest risk to supply integrity is at the refineries 3. The greatest risk to supply integrity is at the airports 4. The greatest risk to supply integrity is the lack of effective oversight 15

16 KEEP IT RIGHT SUPPLY Refineries Direct to Airport May only be tested once at the refinery, single point test reliance Limited options for contamination, but little independent oversight Marine Import Options More complex supply chain, but multiple testing and independent oversight. Higher risk of contamination and loss of traceability Summary The simple supply route has no guarantee of quality and integrity More complex supply chains may increase risk, but with multiple sources supply reliability can be better than the simple chain Quality assurance, good procedures, close monitoring and expert input and oversight are all critical to the integrity of the complex supply chain. QC - The Bottom Line Principle #1 Redundancy is a major part of achieving and maintaining acceptable standards of Quality Control and Operational Integrity Eliminating redundancy by cost cutting = Trouble Principle #2 Shortfalls in equipment specification and performance, due to poor design or deterioration can often be offset by improvements in operating procedure Principle #3 Hardware and Procedures will become outdated if not updated as standards evolve Choose your Supply Route with Care! 16

17 QC - The Bottom Line Any contra-indications or unusual observations SHALL ALWAYS be investigated and the causes identified and resolved Operational and commercial pressures SHALL NEVER be allowed to compromise Quality Control THERE ARE NO LAYBYS IN THE SKY...! QUESTIONS 17