capturing the maximum value in the post-imo 2020 … · 2017-11-21 · capturing the maximum value...
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CAPTURING THE MAXIMUM VALUE IN THE POST-IMO 2020 WORLD Jock Hughson, Licensing Technology Manager, Shell Global Solutions
DEFINITIONS AND CAUTIONARY NOTE
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2016 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 16–17 May 2017. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation.
We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
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AGENDA
The implications of IMO MARPOL 73/78 Annex VI
Potential response options
Planning your response
Selected response options
Case study: How Shell Pernis refinery has increased crude flexibility and simultaneously minimised high-sulphur fuel oil (HSFO) production
The takeaways
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1. SCRUBBERS 2. LNG 3. LOW-SULPHUR FUEL
THE IMPLICATIONS OF IMO MARPOL 73/78 ANNEX VI
The International Maritime Organization (IMO) will tighten the global cap on the maximum sulphur content of marine fuel oil (MFO) from 3.5 to 0.5%.
There are three options for the shipping industry:
3mbd of HSFO bunkers will need to switch to 0.5%-sulphur MFO
Blending low sulphur gas oil and vacuum gas oil (VGO) is an expensive solution.
Many refiners are not prepared for 2020 and have limited low-cost/timely solutions
Issues include:
Space constraints
High capital expenditure (capex)
Safe sludge handling
Issues include:
Space constraints
High capex
Only for new vessels
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RESPONDING TO IMO 2020 WILL BE HIGHLY COMPLEX – AND EXPENSIVE – FOR MOST REFINERS
Key factors that will influence individual refiners’ investment decisions:
Existing process units
How discounted they believe HSFO will be, and for how long
The amount of capex they can afford.
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Do nothing Implement operational changes Evaluate possible options Low capex/quick implementation
solutions Medium capex solutions High capex solutions
How will you respond?
Shell has made Masterplans for all of it’s refineries
POLL Question
How will you refinery respond to the upcoming changes to the Marine Fuel Oil specification;
– Invest in conversion to eliminate High Sulphur fuel oil
– Invest in facilities to reduce High Sulphur fuel oil
– Feedstock changes to reduce HS Fuel Oil production
– Other
– Not affected by the changes in regulations
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Residue conversion, %
HIGH CAPEX, LOW ROI
MEDIUM CAPEX, MEDIUM–HIGH ROI
LOW CAPEX, HIGH ROI
Cap
ex
Delayed coker
SDA + ebullated bed HCU
Deep-flash VDU
SDA + residue gasification revamp
Crude flexibility
Residue slurry HCU
Gasification
SDA + HCU revamp
SRU revamp Add vacuum flasher downstream VBU
YOUR OPTIMUM RESPONSE DEPENDS ON REQUIRED RESIDUE CONVERSION AND AFFORDABILITY
Profitability analysis Risk assessment Integrated economics Implementation road map
Supply and demand Environmental and product quality requirements Business needs Business constraints (eg refinery configuration, capex) Price scenarios (eg HSFO discounts)
Long-term vision (customer led)
Study premises
Long list of options
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Recommended IMO 2020 response option
Long list of identified options and ideas
Short list of options
Initial selection
Option Screening
Option Development
Customer led
Joint development
DEVELOPING YOUR IMO 2020 RESPONSE: THE HYDROCARBON MASTER PLAN STUDY
WHY SHOULD REFINERS CONSIDER CRUDE FLEXIBILITY?
A flexible crude diet could lift current refining margin by up to $1/bbl.
Often requires only moderate capex.
Critical to determine impact of Investments in residue conversion on crude flexibility.
Fully assessing the risks is key:
– Higher risk of reliability issues and unplanned shutdowns (high TAN, high Nitrogen)
– But these can be mitigated. Shell is looking for opportunities to use opportunity crudes, and mitigating the risks, in all its refineries.
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LOW CAPEX RESPONSE OPTION: CRUDE FLEXIBILITY
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Are you operating at the limits of your crude acceptance matrix? If not, you may be failing to capture maximum
value. Some high total acid number (TAN) crudes are
low in sulphur. This refiner could add more high TAN crudes
and still be within its acceptable quality window. High TAN crudes are typically lower cost, so
bring major cost savings while reducing HSFO. Crude changes require a new look at the
catalyst and operations of the conversion and hydroprocessing units.
LOW CAPEX RESPONSE OPTION: SHELL DEEP-FLASH VACUUM DISTILLATION UNIT (VDU)
Key benefits: Low capex Longer onstream unit cycle (four years +) Higher margin, less downtime, reduced
fuel oil production Improved plant availability Lift more and better quality VGO
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VGO HVU
CDU AR
Kerosene/diesel
UCO
Naphtha Gasoline
HCU
CCR
Shell deep-flash technology unlocks your downstream assets, while reducing HSFO.
VGO HVU
CDU AR
Naphtha CCR Gasoline
Gasoline LCO
Slurry oil
CFH
VR: Fuel oil Bitumen
FCC
VR: Fuel oil Bitumen
LOW CAPEX RESPONSE OPTION: LEVERAGE LATEST-GENERATION CATALYSTS AND REACTOR INTERNALS
Comprehensive catalyst portfolio to help produce <0.5 wt% sulphur fuel oil:
Higher HDS, metals and CCR reduction catalyst activity and stability
Higher conversion capability to distillates
Integrating Criterion catalysts and Shell reactor internals to handle heavier and more difficult feeds:
Deasphalted oil (DAO), heavy VGO, ebullated bed VGO, visbreaker (VB) VGO in hydrotreating and hydrocracking units
Increase throughput to handle the heavier feedstocks generated
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LOW CAPEX RESPONSE OPTION DOWNSTREAM VISBREAKER UNIT (VBU)
Key benefits:
Low capex
Reduce fuel oil production
VB gas oil can be upgraded in a hydrotreater or hydrocracker
VBU can process VGO if lower capex solution required
Reduce HSFO by almost 30%
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VGO HVU
CDU AR
Kerosene/diesel
Naphtha
CCR Gasoline/BTX
Fuel oil Bitumen
HCU
UCO VB GO
VBU VF
MEDIUM CAPEX RESPONSE OPTION: SOLVENT DEASPHALTER (SDA) + HCU REVAMP
Comparatively moderate capex
Can help to
– Reduce fuel oil yields
– Increase middle distillates
– Improve crude flexibility
– Improve net cash margin position
No regret investment: a full residue conversion scheme can be added later (phased investment).
Reduce HSFO by almost 50%
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VGO HVU
CDU AR
Kerosene/diesel
Naphtha
UCO For potential LSFO blending?
Asphaltenes: Bitumen Power Gasification
DAO SDA
CCR
HCU
Gasoline
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Moderate capex
Different schemes available depending on existing refinery configuration.
Can help to
– Reduce fuel oil yields
– Increase middle distillates
– Improve net cash margin position
Reduce HSFO by almost 70%
VGO HVU
CDU AR
Cracked gasoil
Gasifier, pelletiser or power
DAO
Residue SDA TGU
Cracked VGO
Asphalt
MEDIUM CAPEX RESPONSE OPTION: INTEGRATING SDA AND VB/THERMAL CONVERSION TECHNOLOGIES
VBU
MEDIUM CAPEX RESPONSE OPTION: COKER DEBOTTLENECKING WITH SDA
Medium capex
Can help to
– Reduce fuel oil yields
– Increase middle distillates
– Improve crude flexibility
– Improve net cash margin position
Proven operation of hydrocracking DAO and heavy coker gas oil (HCGO)
Reduce HSFO by 100%
Generates Petcoke
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VGO HVU
CDU AR
Kerosene/ diesel
Naphtha CCR Gasoline/
BTX
Coke
HCU DAO
UCO HCGO
Coker
SDA
PROOF POINT: SHELL PERNIS INVESTS IN SDA ROSE TO INCREASE CRUDE FLEXIBILITY AND MINIMISE FUEL OIL PRODUCTION
Shell’s Pernis refinery in the Netherlands is
– Installing an SDA ROSE unit
– Revamping its residue desulphurisation unit to a DAO hydrocracker.
Compared with other technology options, the ROI could be extremely high (over 15%)
– Tight integration with other units will be vital.
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AR HVU HVGO HCU Naphtha
Distillates VR
FUEL OIL
Gasoline Distillates
Naphtha Distillates
VR HDT
Hydrogen
FCC VGO
Gasifier
PROOF POINT: SHELL PERNIS INVESTS IN SDA ROSE TO INCREASE CRUDE FLEXIBILITY AND MINIMISE FUEL OIL PRODUCTION
Shell’s Pernis refinery in the Netherlands is
– Installing an SDA ROSE unit
– Revamping its residue desulphurisation unit to a DAO hydrocracker.
Compared with other technology options, the ROI could be extremely high (over 15%)
– Tight integration with other units will be vital.
Value delivered 33% reduction in fuel oil production Increased middle distillate yield Improved crude flexibility
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AR HVU HVGO HCU Naphtha
Distillates VR
FUEL OIL
Gasoline Distillates
Naphtha Distillates
VR HDT
Hydrogen
FCC VGO
Gasifier
AR HVU HVGO HCU Naphtha
Distillates
VR
Gasifier
Gasoline Distillates
Naphtha Distillates
SDA ROSE
Hydrogen
FCC DAO HCU
RESIDUE CONVERSION OPTIONS WILL REQUIRE AN IMPROVED SULPHUR HANDLING SYSTEM
Shell’s SCOT ULTRA technology features two improved technologies and offers a performance step change.
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SCOT ULTRA
Criterion’s C-834 high-activity, low temperature catalyst
Shell/Huntsman’s high-selectivity JEFFTREAT ULTRA family of solvents
Optimised process design
Drivers
Stringent sulphur dioxide (SO2) emission regulations, including World Bank standards (150 mg/Nm3)
Minimising capex and operating costs
Differentiators
New generation of catalyst (Criterion)
New generation of solvent (Shell)
Low-temperature tail gas treating
Largest footprint in the market (+60%)
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2 The highest residue conversion technologies may not be the most profitable investment. Integrated solutions may provide better returns
There is no one-size-fits-all solution to upgrade the BoB. Develop a master plan to identify the optimal responses.
3 Shell Global Solutions, as an operator and catalyst provider, has accumulated vast experience on how refiners can integrate their technology blocks to achieve cost effective solutions to HSFO management.
THE TAKEAWAYS
Questions and answers