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Copyrightcopy
Palladian Publications Ltd 2014 All rights reserved No part of this publication may be reproduced stored in a
retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise
without the prior permission of the copyright owner All views expressed in this journal are those of the respective contributors
and are not necessarily the opinions of the publisher neither do the publishers endorse any of the claims made in the articles or
the advertisements Printed in the UK Uncaptioned images courtesy of wwwbigstockphotocom
2014 Member of ABC Audit Bureau of Circulations
This monthsfront cover
Join theconversation
contents
HydrocarbonEngineering
(03) Comment
(05) World NewsContract awards project updates industry latest news digestdiary dates mergers and acquisitions
(12) Facing headwindsLuisa Sykes Euro Petroleum Consultants discusses the outlook
for the oil and gas sector in Europe
(20) Flood warningMatthew Kuhl Mark Routt and Scott Sayles KBC AdvancedTechnologies USA look at the US shale supply flood focusingon processing developments and issues
(26) Dieselising Europe Part 2Dirk Frame TA Cook Consultants Germany discusses the keyproblems that affect diesel producers and the importance ofcorrect maintenance
(30) Keep it leanSimon Bennett AVEVA UK explains how new technologyadvances are enabling lean construction processes in plantprojects
(35) Fully qualifedSari Aronen Metso Finland discusses the importance ofreliable valves in renewable fuel production
(41) Additional treatmentBerthold Otzisk and Silke Ruumldel Kurita Europe Germanydiscuss the chemical treatment programs that can be applied
to water and wastewater processes in order to remove oilsolids and other troublesome substances
(45) Knowledge nexusKevin Milici GE Water amp Process Technologies USA looks atthe evolution of water management
Catalyst
review (51)
Hydrocarbon Engineering provides an overview of some ofthe most advanced catalyst technologies available within thehydrocarbon processing industry today
(72) 15 questions withRuth Poultney Fuels Development Technologist BP talkswomen in engineering career development her first pet andfavourite band
AVEVAtrade is a leader in engineering designand information management solutionsfor the plant power and marine industriesFor more than 45 years it has deliveredbusiness critical software solutions toowneroperators engineering contractorsand shipbuilders around the world AVEVAemploys over 1400 people and has a global
sales and support network of 49 offices inmore than 30 countries
January 2014 Volume 19 Number 01 ISSN 1468-9340
30
12
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Kurita Europe GmbH Industriering 43 41751 Viersen Germany
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MANAGING EDITOR James Little jameslittlehydrocarbonengineeringcom
EDITOR Claira Lloydclairalloydhydrocarbonengineeringcom
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When thinking about 2013 the death of NelsonMandela the US government shutdown andthe birth of the Royal baby (hard to avoid if inthe UK) spring immediately to mind Yet whenthinking about the world of oil and gas I think
shale and the turbulent situation that has been faced by theEuropean refining industry
The European refining industry is being heavily impacted bythe shale revolution as the US now has an abundance of cheapfossil fuels and the infrastructure to utilise it which is leavingEurope to play catch up And letrsquos face it the wealth of shalegas is Americarsquos biggest asset at the moment as gas is inevitablygoing to be cheaper than oil boosting its downstream industryto incredible heights The level of liquids demand growth inEurope is also a problem as it is flagging as developed marketsare no longer commanding such high levels and the emergingmarkets which still crave liquid fuels are procuring it fromcheap sources such as the US The overcapacity of Europeangasoline production is another area that is not helping theEuropean situation and this is likely to worsen over the nextfive years unless changes are made European refineries need toadapt to increase the production of middle distillates whichare currently being demanded at high volumes all over thecontinent as well as in areas overseas
Sadly Europe is not only competing with the US Russiaand the Middle East are also two strong players in the globalrefining industry that are giving Europe cause for concern Thelevel of subsidisation in the Russian refining industry allows
for expansion and revamps to boost thecountryrsquos distillate production and thereforeallow it access to the global market whichis craving these fuels The subsidisation inthe country also ensures that the domesticrefining industry does not suffer even if demand drops offsomething the European refining industry does not benefit
from When it comes to the Middle East the explosion ofcomplex refineries is the biggest threat These facilities such as Jubail have high levels of efficiency and complexity that dwarfEuropean counterparts
While one cannot deny that the shale revolution isone event negatively impacting Europe it is having manypositive impacts that will no doubt continue into this yearand cannot be ignored The US has now cemented its energysecurity of supply something that economies across theworld strive for on a daily basis Also the country is sharingthe benefits with others (so to speak) as due to tight oilLatin America and West Africa have gained a secure supplyof gasoline to feed ever increasing demand at a relativelycheap price So yes unless changes are made to reduce thecomplexity of European refineries it is possible that therewill be tough times ahead this year in the region howeverthere is hope elsewhere as fossil fuel supply continues to besecure and prices continue to be favourable and competitiveto many
Happy New Year from all of us on the HydrocarbonEngineering team
Claira LloydEditor
comment
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5 January 2014
HYDROCARBON
ENGINEERING
CBampI | THREE CONTRACTS WON
CBampI has been awarded a contract
valued at approximately
US$ 1 billion by Ingleside Ethylene LLC a
joint venture between OccidentalChemical Corporation (OxyChem) a
subsidiary of Occidental Petroleum
Corporation and Mexichem SAB de
CV for the engineering procurement
and construction of an ethane cracker
and associated utilities and offsites to
be located at OxyChems complex in
Ingleside Texas The cracker will have
the capacity to produce approximately
12 billion lbsy of ethylene
Feedstock for the cracker is
anticipated to be ethane derived from
domestic shale gas As previously
announced CBampI provided the
technology license and basic
engineering for the ethylene
technology five SRTreg (short residence
time) cracking heaters and the front end
engineering design (FEED) services
CBampI has also been awarded a
contract by JSC Gazprom Neft for FEED
services for a new oil refining complex
at Gazprom Nefts refinery in Omsk
Western Siberia Russia The existing
refinery is currently the largest
operating refinery in Russia
CBampIs project scope includes FEED
development for multiple new processunits including a 2 million tpy
hydrocracker unit licensed by Chevron
Lummus Global as well as hydrogen
sulfur and other associated units CBampI
delivered a similar hydrocracker
complex earlier this year for Gazprom
Next in Pancevo Serbia
Finally CBampI in a joint venture with
Zachry Industrial Inc has been awarded
two contracts each valued at
approximately US$ 25 billion by FLNG
Liquefaction LLC and FLNG
Liquefaction 2 LLC in order to
construct the first two trains of the
Freeport liquefaction project
The project scope includes
engineering procurement and
construction for the conversion of an
existing regasification terminal in
Freeport Texas to an LNG liquefaction
terminal The two train LNG
liquefaction facility will have a total
capacity in excess of 89 million tpy of
LNG The initiatial contract discussions
for this project began in 2012
USA | ENERGYEFFICIENCY ORDER
Alfa Laval has won an order to supply
Alfa Laval OLMI heat exchangers to
a petrochemical plant in the US The
order booked in the process industry
segment has a value of approximately
SEK 60 million Deliveries are scheduled
for 2014 and 2015
The Alfa Laval OLMI heat
exchangers will be used to incease the
yield and recover energy in the
production of ethylene an important
ingredient for the manufacturing of
industrial chemicals and plastics
products The order is an example of
the reindustrialisation occuring due to
the shale gas revolution in the USThe shale revolution is thought to
be the major driver behind expansion in
the US petrochemical sector The
unlocking of the previously inaccessible
reserves has driven down prices of the
essential inputs to petrochemical
manufacturing
Venezuela | PLANTEXPANSION
Manoir Industries was awarded
catalyst tubes outlet manifolds
and transfer line assembled by Technip
Claremont for the expansion and
upgrade of PDVSA Puerto La Cruz
refinery Venezuela
The furnace components are based
on Manoirs proprietary Manauritereg high
alloy technology They are
manufactured in its leading production
centres in France an the UK under its
One Manoir International production
methodology which guaranteescoherent manufacturing and quality
control processes across all plants in
France UK India and China
Algeria | READY FOR STARTUP
Sonatrach ranked by Forbes as the
worlds 12th largest oil company is
nearing completion of a new paraxylene
crystallisation plant at its integrated
refinerypetrochemical site in Skikda
Algeria Start up was scheduled for
December of 2013
The plants core units will utilise
CrystPXSM and GT-IsomPXSM both
licensed from GTC Technology CrystPX
recovers paraxylene from reformate
feedstock while GT-IsomPX usingISOXYLreg catalysts from Clariant
isomerises C8 aromatics into additional
paraxylene This license also includes
naphtha hydrotreating and reforming
aromatics extraction and other
aromatics operations Samsung
Engineering Co Ltd provided EPC
services for the new facilities
The paraxylene plant was originally
part of Sonatrachs petrochemical
subsiduary Naftec which Sonatrach
absorbed in 2009
The new units continue Sonatrachs
long term expansion plans for
additional refining and petrochemicalcapacity at its facilities in Algeria to
meet with growing local demand for oil
products
w rld news
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6January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Kuwait | PROCESS AUTOMATION SYSTEMS
Honeywell has been selected by
Kuwait National Petroleum
Company (KNPC) to provide the
integrated control and safety
system (ICSS) for its new 615 000 bpd
Al Zour refinery complex to be built in
southern Kuwait Honeywell will also
provide the front end engineering
deisgn for the system
This will be Kuwaits fourth refinery
and the largest refinery in the entire
Middle East The total capacity of
Kuwaits three current refineries is
930 000 bpd The new refinery is
targeted for startup in 2018
Honeywell has provided industrytechnologies to KNPCs refineries for
approximately 30 years through its
Process Solutions business (HPS) and
has long sustained a presence in
Kuwait As the main automation
contractor for the new Al Zour
refinery Honeywell will supply
Experionreg PKS as the main control
system for the refinery complex as
well as integrate all process
automation systems throughout the
site Additionally having HPS perform
front end engineering and design of
the system will help drive consistent
designs from other contractors
throughout the entire project and help
speed its completion
The new refinery complex will help
to meet domestic demand and exportof ultra low sulfur products each as
fuel oil diesel and kerosene as well as
petrochemical feedstocks
Denmark | CELLULOSIC BIOETHANOL
Royal DSM has announced that
together with DONG Energy it hasdemonstrated the combined
fermentation of C6 and C5 sugars from
wheat straw on an industrial scale The
combined fermentation results in a
40 increase in ethanol yieldt of
straw which can result in significant
cost cuts in the production of
bioethanol from cellulosic feedstock
The demonstration took place in
DONG Energys Inbicondemonstration plant in Kalundborg
Denmark the longest running
demonstration facility for cellulosic
bioethanol production in the world
The faciltiy was reconstructed in
2013 in order to be able to conduct
mixed fermentation of C6 and C5
sugars
USA | SULFUR RECOVERY UNITS
Principal Technology Inc a provider
of total system solutions for natural
gas refining chemical process and
manufacturing facilities is supplyingthe small capacity sulfur recovery
units (SRU) and tail gas treating unit
(TGTU) for Dakota Prairie Refining LLC
refinery in southwestern North Dakota
Designed to address the specific needs
of small capacity refineries Principal
Technologys SRUs are based on a
modular platform design that reduces
installation time and enables the units
to meet the tight construction
deadlines imposed to complete the
refinery by the end of 2014The US$ 300 million refinery will
process 20 000 bpd of oil and produce
7000 bpd of diesel fuel specifically to
meet the needs of North Dakota The
remaining petroleum will be shipped to
other refineries for further processing
The technology was chosen as the
facility is at a small scale
USAFourQuest Energy has acquired the assets
of Odyssey Technologies Inc a customchemical solution company based in
Houston Texas OTI has been one of the
process industrys leading suppliers of
speciality chemicals With the acquisition
FourQuest Energy is now in the position
to deliver one of the most powerful and
complete portfolios of services in the
energy industry
Sot AfMAN Diesel amp Turbo South Africa (Pty)
Ltd local subsidiary of the engineering
enterprise MAN Diesel amp Turbo SE(Augsburg Germany) has entered into an
agreement to acquire 100 of the share
in the family owned ELCA Engineering
(Pty) Ltd near Johannesburg Closing of
the transaction is subject to approval
of the South African Competition
Commission The parties agreed not
to disclose any financial details of the
transaction
USAAMETEK Inc has acquired Powervar a
provider of power management systemsand uninterruptible power supply systems
for approximately US$ 128 million
Headquartered in Waukegan Illinois the
privately held company has annual sales
of approximately US$ 70 million
AstThe sale of Caltex Australias Sydney
based import bitumen business to
Puma Energy a subsidiary of Trafigura
Beheer BV has now been completed The
details of the sale remain commercial
in confidence Caltex no longer deemsbitumen to be a core business hence the
sale
w rld news
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8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
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Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
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8132019 Preview HydrocarbonEngineering January2014
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10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
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HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
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8132019 Preview HydrocarbonEngineering January2014
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You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
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8132019 Preview HydrocarbonEngineering January2014
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Energy_Global
followEnergy Globallike
HydrocarbonEngineering
connect join
Copyrightcopy
Palladian Publications Ltd 2014 All rights reserved No part of this publication may be reproduced stored in a
retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise
without the prior permission of the copyright owner All views expressed in this journal are those of the respective contributors
and are not necessarily the opinions of the publisher neither do the publishers endorse any of the claims made in the articles or
the advertisements Printed in the UK Uncaptioned images courtesy of wwwbigstockphotocom
2014 Member of ABC Audit Bureau of Circulations
This monthsfront cover
Join theconversation
contents
HydrocarbonEngineering
(03) Comment
(05) World NewsContract awards project updates industry latest news digestdiary dates mergers and acquisitions
(12) Facing headwindsLuisa Sykes Euro Petroleum Consultants discusses the outlook
for the oil and gas sector in Europe
(20) Flood warningMatthew Kuhl Mark Routt and Scott Sayles KBC AdvancedTechnologies USA look at the US shale supply flood focusingon processing developments and issues
(26) Dieselising Europe Part 2Dirk Frame TA Cook Consultants Germany discusses the keyproblems that affect diesel producers and the importance ofcorrect maintenance
(30) Keep it leanSimon Bennett AVEVA UK explains how new technologyadvances are enabling lean construction processes in plantprojects
(35) Fully qualifedSari Aronen Metso Finland discusses the importance ofreliable valves in renewable fuel production
(41) Additional treatmentBerthold Otzisk and Silke Ruumldel Kurita Europe Germanydiscuss the chemical treatment programs that can be applied
to water and wastewater processes in order to remove oilsolids and other troublesome substances
(45) Knowledge nexusKevin Milici GE Water amp Process Technologies USA looks atthe evolution of water management
Catalyst
review (51)
Hydrocarbon Engineering provides an overview of some ofthe most advanced catalyst technologies available within thehydrocarbon processing industry today
(72) 15 questions withRuth Poultney Fuels Development Technologist BP talkswomen in engineering career development her first pet andfavourite band
AVEVAtrade is a leader in engineering designand information management solutionsfor the plant power and marine industriesFor more than 45 years it has deliveredbusiness critical software solutions toowneroperators engineering contractorsand shipbuilders around the world AVEVAemploys over 1400 people and has a global
sales and support network of 49 offices inmore than 30 countries
January 2014 Volume 19 Number 01 ISSN 1468-9340
30
12
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 422
Kurita Europe GmbH Industriering 43 41751 Viersen Germany
Phone+49 2162 9580110 wwwkuritade
We keep a close eye
on your plant efciency
The trouble-free operation of your plant is the precondition for maximum
economic efciency Kuritarsquos patented ACF technology inhibits the formation
of chloride and ammonium salts thereby preventing fouling and corrosion
This is only one example of how Kurita protects your production unit against
unscheduled shutdowns extends its runtime and lowers process costs ndashwhile at the same time increasing plant and operational safety Particularly
for reneries and petrochemical plants Kurita offers innovative and sustain-
able process technologies as well as a broad portfolio of products for water
management From consultation through to implementation and maintenance
we support you with a comprehensive range of services As you can see we
keep a close eye on the effcient operation of your plant
Process technologies for reneries and petrochemical plants
Water treatment technologies for cooling water boiler water waste water
and reverse osmosis
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 522
MANAGING EDITOR James Little jameslittlehydrocarbonengineeringcom
EDITOR Claira Lloydclairalloydhydrocarbonengineeringcom
EDITORIAL ASSISTANT Emma McAleaveyemmamcaleaveyhydrocarbonengineeringcom
ADVERTISEMENT DIRECTOR Rod Hardyrodhardyhydrocarbonengineeringcom
ADVERTISEMENT MANAGER Chris Atkinchrisatkinhydrocarbonengineeringcom
ADVERTISEMENT EXECUTIVE Will Powellwillpowellhydrocarbonengineeringcom
PRODUCTION Chloe Ozwellchloeozwellhydrocarbonengineeringcom
WEB MANAGER Tom Fullerton
tomfullertonhydrocarbonengineeringcom
WEB EDITOR Callum OrsquoReilly
callumoreillyhydrocarbonengineeringcom
CIRCULATION MANAGER Victoria McConnell
victoriamcconnellhydrocarbonengineeringcom
REPRINTMARKETING ASSISTANT Catherine Gower
catherinegowerhydrocarbonengineeringcom
CONTRIBUTING EDITORS
Nancy Yamaguchi Gordon Cope
PUBLISHER Nigel Hardy
SUBSCRIPTION RATES
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Fax +44 (0) 1252 718 992
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Claims for non receipt of issues must be made within 3 months of publication of the issue or they will not be honouredwithout charge
APPLICABLE ONLY TO USA amp CANADA
Hydrocarbon Engineering (ISSN No 1468-9340 USPS No 020-998) is published monthly by Palladian Publications LtdGBR and is distributed in the USA by Asendia USA 17B South Middlesex Avenue Monroe NJ 08831 and additional mailingoffices Periodicals postage paid at New Brunswick NJ POSTMASTER send address changes to Magazine Name 17BSouth Middlesex Avenue Monroe NJ 08831
When thinking about 2013 the death of NelsonMandela the US government shutdown andthe birth of the Royal baby (hard to avoid if inthe UK) spring immediately to mind Yet whenthinking about the world of oil and gas I think
shale and the turbulent situation that has been faced by theEuropean refining industry
The European refining industry is being heavily impacted bythe shale revolution as the US now has an abundance of cheapfossil fuels and the infrastructure to utilise it which is leavingEurope to play catch up And letrsquos face it the wealth of shalegas is Americarsquos biggest asset at the moment as gas is inevitablygoing to be cheaper than oil boosting its downstream industryto incredible heights The level of liquids demand growth inEurope is also a problem as it is flagging as developed marketsare no longer commanding such high levels and the emergingmarkets which still crave liquid fuels are procuring it fromcheap sources such as the US The overcapacity of Europeangasoline production is another area that is not helping theEuropean situation and this is likely to worsen over the nextfive years unless changes are made European refineries need toadapt to increase the production of middle distillates whichare currently being demanded at high volumes all over thecontinent as well as in areas overseas
Sadly Europe is not only competing with the US Russiaand the Middle East are also two strong players in the globalrefining industry that are giving Europe cause for concern Thelevel of subsidisation in the Russian refining industry allows
for expansion and revamps to boost thecountryrsquos distillate production and thereforeallow it access to the global market whichis craving these fuels The subsidisation inthe country also ensures that the domesticrefining industry does not suffer even if demand drops offsomething the European refining industry does not benefit
from When it comes to the Middle East the explosion ofcomplex refineries is the biggest threat These facilities such as Jubail have high levels of efficiency and complexity that dwarfEuropean counterparts
While one cannot deny that the shale revolution isone event negatively impacting Europe it is having manypositive impacts that will no doubt continue into this yearand cannot be ignored The US has now cemented its energysecurity of supply something that economies across theworld strive for on a daily basis Also the country is sharingthe benefits with others (so to speak) as due to tight oilLatin America and West Africa have gained a secure supplyof gasoline to feed ever increasing demand at a relativelycheap price So yes unless changes are made to reduce thecomplexity of European refineries it is possible that therewill be tough times ahead this year in the region howeverthere is hope elsewhere as fossil fuel supply continues to besecure and prices continue to be favourable and competitiveto many
Happy New Year from all of us on the HydrocarbonEngineering team
Claira LloydEditor
comment
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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5 January 2014
HYDROCARBON
ENGINEERING
CBampI | THREE CONTRACTS WON
CBampI has been awarded a contract
valued at approximately
US$ 1 billion by Ingleside Ethylene LLC a
joint venture between OccidentalChemical Corporation (OxyChem) a
subsidiary of Occidental Petroleum
Corporation and Mexichem SAB de
CV for the engineering procurement
and construction of an ethane cracker
and associated utilities and offsites to
be located at OxyChems complex in
Ingleside Texas The cracker will have
the capacity to produce approximately
12 billion lbsy of ethylene
Feedstock for the cracker is
anticipated to be ethane derived from
domestic shale gas As previously
announced CBampI provided the
technology license and basic
engineering for the ethylene
technology five SRTreg (short residence
time) cracking heaters and the front end
engineering design (FEED) services
CBampI has also been awarded a
contract by JSC Gazprom Neft for FEED
services for a new oil refining complex
at Gazprom Nefts refinery in Omsk
Western Siberia Russia The existing
refinery is currently the largest
operating refinery in Russia
CBampIs project scope includes FEED
development for multiple new processunits including a 2 million tpy
hydrocracker unit licensed by Chevron
Lummus Global as well as hydrogen
sulfur and other associated units CBampI
delivered a similar hydrocracker
complex earlier this year for Gazprom
Next in Pancevo Serbia
Finally CBampI in a joint venture with
Zachry Industrial Inc has been awarded
two contracts each valued at
approximately US$ 25 billion by FLNG
Liquefaction LLC and FLNG
Liquefaction 2 LLC in order to
construct the first two trains of the
Freeport liquefaction project
The project scope includes
engineering procurement and
construction for the conversion of an
existing regasification terminal in
Freeport Texas to an LNG liquefaction
terminal The two train LNG
liquefaction facility will have a total
capacity in excess of 89 million tpy of
LNG The initiatial contract discussions
for this project began in 2012
USA | ENERGYEFFICIENCY ORDER
Alfa Laval has won an order to supply
Alfa Laval OLMI heat exchangers to
a petrochemical plant in the US The
order booked in the process industry
segment has a value of approximately
SEK 60 million Deliveries are scheduled
for 2014 and 2015
The Alfa Laval OLMI heat
exchangers will be used to incease the
yield and recover energy in the
production of ethylene an important
ingredient for the manufacturing of
industrial chemicals and plastics
products The order is an example of
the reindustrialisation occuring due to
the shale gas revolution in the USThe shale revolution is thought to
be the major driver behind expansion in
the US petrochemical sector The
unlocking of the previously inaccessible
reserves has driven down prices of the
essential inputs to petrochemical
manufacturing
Venezuela | PLANTEXPANSION
Manoir Industries was awarded
catalyst tubes outlet manifolds
and transfer line assembled by Technip
Claremont for the expansion and
upgrade of PDVSA Puerto La Cruz
refinery Venezuela
The furnace components are based
on Manoirs proprietary Manauritereg high
alloy technology They are
manufactured in its leading production
centres in France an the UK under its
One Manoir International production
methodology which guaranteescoherent manufacturing and quality
control processes across all plants in
France UK India and China
Algeria | READY FOR STARTUP
Sonatrach ranked by Forbes as the
worlds 12th largest oil company is
nearing completion of a new paraxylene
crystallisation plant at its integrated
refinerypetrochemical site in Skikda
Algeria Start up was scheduled for
December of 2013
The plants core units will utilise
CrystPXSM and GT-IsomPXSM both
licensed from GTC Technology CrystPX
recovers paraxylene from reformate
feedstock while GT-IsomPX usingISOXYLreg catalysts from Clariant
isomerises C8 aromatics into additional
paraxylene This license also includes
naphtha hydrotreating and reforming
aromatics extraction and other
aromatics operations Samsung
Engineering Co Ltd provided EPC
services for the new facilities
The paraxylene plant was originally
part of Sonatrachs petrochemical
subsiduary Naftec which Sonatrach
absorbed in 2009
The new units continue Sonatrachs
long term expansion plans for
additional refining and petrochemicalcapacity at its facilities in Algeria to
meet with growing local demand for oil
products
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 822
6January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Kuwait | PROCESS AUTOMATION SYSTEMS
Honeywell has been selected by
Kuwait National Petroleum
Company (KNPC) to provide the
integrated control and safety
system (ICSS) for its new 615 000 bpd
Al Zour refinery complex to be built in
southern Kuwait Honeywell will also
provide the front end engineering
deisgn for the system
This will be Kuwaits fourth refinery
and the largest refinery in the entire
Middle East The total capacity of
Kuwaits three current refineries is
930 000 bpd The new refinery is
targeted for startup in 2018
Honeywell has provided industrytechnologies to KNPCs refineries for
approximately 30 years through its
Process Solutions business (HPS) and
has long sustained a presence in
Kuwait As the main automation
contractor for the new Al Zour
refinery Honeywell will supply
Experionreg PKS as the main control
system for the refinery complex as
well as integrate all process
automation systems throughout the
site Additionally having HPS perform
front end engineering and design of
the system will help drive consistent
designs from other contractors
throughout the entire project and help
speed its completion
The new refinery complex will help
to meet domestic demand and exportof ultra low sulfur products each as
fuel oil diesel and kerosene as well as
petrochemical feedstocks
Denmark | CELLULOSIC BIOETHANOL
Royal DSM has announced that
together with DONG Energy it hasdemonstrated the combined
fermentation of C6 and C5 sugars from
wheat straw on an industrial scale The
combined fermentation results in a
40 increase in ethanol yieldt of
straw which can result in significant
cost cuts in the production of
bioethanol from cellulosic feedstock
The demonstration took place in
DONG Energys Inbicondemonstration plant in Kalundborg
Denmark the longest running
demonstration facility for cellulosic
bioethanol production in the world
The faciltiy was reconstructed in
2013 in order to be able to conduct
mixed fermentation of C6 and C5
sugars
USA | SULFUR RECOVERY UNITS
Principal Technology Inc a provider
of total system solutions for natural
gas refining chemical process and
manufacturing facilities is supplyingthe small capacity sulfur recovery
units (SRU) and tail gas treating unit
(TGTU) for Dakota Prairie Refining LLC
refinery in southwestern North Dakota
Designed to address the specific needs
of small capacity refineries Principal
Technologys SRUs are based on a
modular platform design that reduces
installation time and enables the units
to meet the tight construction
deadlines imposed to complete the
refinery by the end of 2014The US$ 300 million refinery will
process 20 000 bpd of oil and produce
7000 bpd of diesel fuel specifically to
meet the needs of North Dakota The
remaining petroleum will be shipped to
other refineries for further processing
The technology was chosen as the
facility is at a small scale
USAFourQuest Energy has acquired the assets
of Odyssey Technologies Inc a customchemical solution company based in
Houston Texas OTI has been one of the
process industrys leading suppliers of
speciality chemicals With the acquisition
FourQuest Energy is now in the position
to deliver one of the most powerful and
complete portfolios of services in the
energy industry
Sot AfMAN Diesel amp Turbo South Africa (Pty)
Ltd local subsidiary of the engineering
enterprise MAN Diesel amp Turbo SE(Augsburg Germany) has entered into an
agreement to acquire 100 of the share
in the family owned ELCA Engineering
(Pty) Ltd near Johannesburg Closing of
the transaction is subject to approval
of the South African Competition
Commission The parties agreed not
to disclose any financial details of the
transaction
USAAMETEK Inc has acquired Powervar a
provider of power management systemsand uninterruptible power supply systems
for approximately US$ 128 million
Headquartered in Waukegan Illinois the
privately held company has annual sales
of approximately US$ 70 million
AstThe sale of Caltex Australias Sydney
based import bitumen business to
Puma Energy a subsidiary of Trafigura
Beheer BV has now been completed The
details of the sale remain commercial
in confidence Caltex no longer deemsbitumen to be a core business hence the
sale
w rld news
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8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
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Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
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10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
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DESIGN
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2014Plant Professional
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EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
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18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
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Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
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infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
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Copyrightcopy
Palladian Publications Ltd 2014 All rights reserved No part of this publication may be reproduced stored in a
retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise
without the prior permission of the copyright owner All views expressed in this journal are those of the respective contributors
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the advertisements Printed in the UK Uncaptioned images courtesy of wwwbigstockphotocom
2014 Member of ABC Audit Bureau of Circulations
This monthsfront cover
Join theconversation
contents
HydrocarbonEngineering
(03) Comment
(05) World NewsContract awards project updates industry latest news digestdiary dates mergers and acquisitions
(12) Facing headwindsLuisa Sykes Euro Petroleum Consultants discusses the outlook
for the oil and gas sector in Europe
(20) Flood warningMatthew Kuhl Mark Routt and Scott Sayles KBC AdvancedTechnologies USA look at the US shale supply flood focusingon processing developments and issues
(26) Dieselising Europe Part 2Dirk Frame TA Cook Consultants Germany discusses the keyproblems that affect diesel producers and the importance ofcorrect maintenance
(30) Keep it leanSimon Bennett AVEVA UK explains how new technologyadvances are enabling lean construction processes in plantprojects
(35) Fully qualifedSari Aronen Metso Finland discusses the importance ofreliable valves in renewable fuel production
(41) Additional treatmentBerthold Otzisk and Silke Ruumldel Kurita Europe Germanydiscuss the chemical treatment programs that can be applied
to water and wastewater processes in order to remove oilsolids and other troublesome substances
(45) Knowledge nexusKevin Milici GE Water amp Process Technologies USA looks atthe evolution of water management
Catalyst
review (51)
Hydrocarbon Engineering provides an overview of some ofthe most advanced catalyst technologies available within thehydrocarbon processing industry today
(72) 15 questions withRuth Poultney Fuels Development Technologist BP talkswomen in engineering career development her first pet andfavourite band
AVEVAtrade is a leader in engineering designand information management solutionsfor the plant power and marine industriesFor more than 45 years it has deliveredbusiness critical software solutions toowneroperators engineering contractorsand shipbuilders around the world AVEVAemploys over 1400 people and has a global
sales and support network of 49 offices inmore than 30 countries
January 2014 Volume 19 Number 01 ISSN 1468-9340
30
12
8132019 Preview HydrocarbonEngineering January2014
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Kurita Europe GmbH Industriering 43 41751 Viersen Germany
Phone+49 2162 9580110 wwwkuritade
We keep a close eye
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The trouble-free operation of your plant is the precondition for maximum
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unscheduled shutdowns extends its runtime and lowers process costs ndashwhile at the same time increasing plant and operational safety Particularly
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management From consultation through to implementation and maintenance
we support you with a comprehensive range of services As you can see we
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Process technologies for reneries and petrochemical plants
Water treatment technologies for cooling water boiler water waste water
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8132019 Preview HydrocarbonEngineering January2014
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MANAGING EDITOR James Little jameslittlehydrocarbonengineeringcom
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When thinking about 2013 the death of NelsonMandela the US government shutdown andthe birth of the Royal baby (hard to avoid if inthe UK) spring immediately to mind Yet whenthinking about the world of oil and gas I think
shale and the turbulent situation that has been faced by theEuropean refining industry
The European refining industry is being heavily impacted bythe shale revolution as the US now has an abundance of cheapfossil fuels and the infrastructure to utilise it which is leavingEurope to play catch up And letrsquos face it the wealth of shalegas is Americarsquos biggest asset at the moment as gas is inevitablygoing to be cheaper than oil boosting its downstream industryto incredible heights The level of liquids demand growth inEurope is also a problem as it is flagging as developed marketsare no longer commanding such high levels and the emergingmarkets which still crave liquid fuels are procuring it fromcheap sources such as the US The overcapacity of Europeangasoline production is another area that is not helping theEuropean situation and this is likely to worsen over the nextfive years unless changes are made European refineries need toadapt to increase the production of middle distillates whichare currently being demanded at high volumes all over thecontinent as well as in areas overseas
Sadly Europe is not only competing with the US Russiaand the Middle East are also two strong players in the globalrefining industry that are giving Europe cause for concern Thelevel of subsidisation in the Russian refining industry allows
for expansion and revamps to boost thecountryrsquos distillate production and thereforeallow it access to the global market whichis craving these fuels The subsidisation inthe country also ensures that the domesticrefining industry does not suffer even if demand drops offsomething the European refining industry does not benefit
from When it comes to the Middle East the explosion ofcomplex refineries is the biggest threat These facilities such as Jubail have high levels of efficiency and complexity that dwarfEuropean counterparts
While one cannot deny that the shale revolution isone event negatively impacting Europe it is having manypositive impacts that will no doubt continue into this yearand cannot be ignored The US has now cemented its energysecurity of supply something that economies across theworld strive for on a daily basis Also the country is sharingthe benefits with others (so to speak) as due to tight oilLatin America and West Africa have gained a secure supplyof gasoline to feed ever increasing demand at a relativelycheap price So yes unless changes are made to reduce thecomplexity of European refineries it is possible that therewill be tough times ahead this year in the region howeverthere is hope elsewhere as fossil fuel supply continues to besecure and prices continue to be favourable and competitiveto many
Happy New Year from all of us on the HydrocarbonEngineering team
Claira LloydEditor
comment
8132019 Preview HydrocarbonEngineering January2014
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5 January 2014
HYDROCARBON
ENGINEERING
CBampI | THREE CONTRACTS WON
CBampI has been awarded a contract
valued at approximately
US$ 1 billion by Ingleside Ethylene LLC a
joint venture between OccidentalChemical Corporation (OxyChem) a
subsidiary of Occidental Petroleum
Corporation and Mexichem SAB de
CV for the engineering procurement
and construction of an ethane cracker
and associated utilities and offsites to
be located at OxyChems complex in
Ingleside Texas The cracker will have
the capacity to produce approximately
12 billion lbsy of ethylene
Feedstock for the cracker is
anticipated to be ethane derived from
domestic shale gas As previously
announced CBampI provided the
technology license and basic
engineering for the ethylene
technology five SRTreg (short residence
time) cracking heaters and the front end
engineering design (FEED) services
CBampI has also been awarded a
contract by JSC Gazprom Neft for FEED
services for a new oil refining complex
at Gazprom Nefts refinery in Omsk
Western Siberia Russia The existing
refinery is currently the largest
operating refinery in Russia
CBampIs project scope includes FEED
development for multiple new processunits including a 2 million tpy
hydrocracker unit licensed by Chevron
Lummus Global as well as hydrogen
sulfur and other associated units CBampI
delivered a similar hydrocracker
complex earlier this year for Gazprom
Next in Pancevo Serbia
Finally CBampI in a joint venture with
Zachry Industrial Inc has been awarded
two contracts each valued at
approximately US$ 25 billion by FLNG
Liquefaction LLC and FLNG
Liquefaction 2 LLC in order to
construct the first two trains of the
Freeport liquefaction project
The project scope includes
engineering procurement and
construction for the conversion of an
existing regasification terminal in
Freeport Texas to an LNG liquefaction
terminal The two train LNG
liquefaction facility will have a total
capacity in excess of 89 million tpy of
LNG The initiatial contract discussions
for this project began in 2012
USA | ENERGYEFFICIENCY ORDER
Alfa Laval has won an order to supply
Alfa Laval OLMI heat exchangers to
a petrochemical plant in the US The
order booked in the process industry
segment has a value of approximately
SEK 60 million Deliveries are scheduled
for 2014 and 2015
The Alfa Laval OLMI heat
exchangers will be used to incease the
yield and recover energy in the
production of ethylene an important
ingredient for the manufacturing of
industrial chemicals and plastics
products The order is an example of
the reindustrialisation occuring due to
the shale gas revolution in the USThe shale revolution is thought to
be the major driver behind expansion in
the US petrochemical sector The
unlocking of the previously inaccessible
reserves has driven down prices of the
essential inputs to petrochemical
manufacturing
Venezuela | PLANTEXPANSION
Manoir Industries was awarded
catalyst tubes outlet manifolds
and transfer line assembled by Technip
Claremont for the expansion and
upgrade of PDVSA Puerto La Cruz
refinery Venezuela
The furnace components are based
on Manoirs proprietary Manauritereg high
alloy technology They are
manufactured in its leading production
centres in France an the UK under its
One Manoir International production
methodology which guaranteescoherent manufacturing and quality
control processes across all plants in
France UK India and China
Algeria | READY FOR STARTUP
Sonatrach ranked by Forbes as the
worlds 12th largest oil company is
nearing completion of a new paraxylene
crystallisation plant at its integrated
refinerypetrochemical site in Skikda
Algeria Start up was scheduled for
December of 2013
The plants core units will utilise
CrystPXSM and GT-IsomPXSM both
licensed from GTC Technology CrystPX
recovers paraxylene from reformate
feedstock while GT-IsomPX usingISOXYLreg catalysts from Clariant
isomerises C8 aromatics into additional
paraxylene This license also includes
naphtha hydrotreating and reforming
aromatics extraction and other
aromatics operations Samsung
Engineering Co Ltd provided EPC
services for the new facilities
The paraxylene plant was originally
part of Sonatrachs petrochemical
subsiduary Naftec which Sonatrach
absorbed in 2009
The new units continue Sonatrachs
long term expansion plans for
additional refining and petrochemicalcapacity at its facilities in Algeria to
meet with growing local demand for oil
products
w rld news
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6January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Kuwait | PROCESS AUTOMATION SYSTEMS
Honeywell has been selected by
Kuwait National Petroleum
Company (KNPC) to provide the
integrated control and safety
system (ICSS) for its new 615 000 bpd
Al Zour refinery complex to be built in
southern Kuwait Honeywell will also
provide the front end engineering
deisgn for the system
This will be Kuwaits fourth refinery
and the largest refinery in the entire
Middle East The total capacity of
Kuwaits three current refineries is
930 000 bpd The new refinery is
targeted for startup in 2018
Honeywell has provided industrytechnologies to KNPCs refineries for
approximately 30 years through its
Process Solutions business (HPS) and
has long sustained a presence in
Kuwait As the main automation
contractor for the new Al Zour
refinery Honeywell will supply
Experionreg PKS as the main control
system for the refinery complex as
well as integrate all process
automation systems throughout the
site Additionally having HPS perform
front end engineering and design of
the system will help drive consistent
designs from other contractors
throughout the entire project and help
speed its completion
The new refinery complex will help
to meet domestic demand and exportof ultra low sulfur products each as
fuel oil diesel and kerosene as well as
petrochemical feedstocks
Denmark | CELLULOSIC BIOETHANOL
Royal DSM has announced that
together with DONG Energy it hasdemonstrated the combined
fermentation of C6 and C5 sugars from
wheat straw on an industrial scale The
combined fermentation results in a
40 increase in ethanol yieldt of
straw which can result in significant
cost cuts in the production of
bioethanol from cellulosic feedstock
The demonstration took place in
DONG Energys Inbicondemonstration plant in Kalundborg
Denmark the longest running
demonstration facility for cellulosic
bioethanol production in the world
The faciltiy was reconstructed in
2013 in order to be able to conduct
mixed fermentation of C6 and C5
sugars
USA | SULFUR RECOVERY UNITS
Principal Technology Inc a provider
of total system solutions for natural
gas refining chemical process and
manufacturing facilities is supplyingthe small capacity sulfur recovery
units (SRU) and tail gas treating unit
(TGTU) for Dakota Prairie Refining LLC
refinery in southwestern North Dakota
Designed to address the specific needs
of small capacity refineries Principal
Technologys SRUs are based on a
modular platform design that reduces
installation time and enables the units
to meet the tight construction
deadlines imposed to complete the
refinery by the end of 2014The US$ 300 million refinery will
process 20 000 bpd of oil and produce
7000 bpd of diesel fuel specifically to
meet the needs of North Dakota The
remaining petroleum will be shipped to
other refineries for further processing
The technology was chosen as the
facility is at a small scale
USAFourQuest Energy has acquired the assets
of Odyssey Technologies Inc a customchemical solution company based in
Houston Texas OTI has been one of the
process industrys leading suppliers of
speciality chemicals With the acquisition
FourQuest Energy is now in the position
to deliver one of the most powerful and
complete portfolios of services in the
energy industry
Sot AfMAN Diesel amp Turbo South Africa (Pty)
Ltd local subsidiary of the engineering
enterprise MAN Diesel amp Turbo SE(Augsburg Germany) has entered into an
agreement to acquire 100 of the share
in the family owned ELCA Engineering
(Pty) Ltd near Johannesburg Closing of
the transaction is subject to approval
of the South African Competition
Commission The parties agreed not
to disclose any financial details of the
transaction
USAAMETEK Inc has acquired Powervar a
provider of power management systemsand uninterruptible power supply systems
for approximately US$ 128 million
Headquartered in Waukegan Illinois the
privately held company has annual sales
of approximately US$ 70 million
AstThe sale of Caltex Australias Sydney
based import bitumen business to
Puma Energy a subsidiary of Trafigura
Beheer BV has now been completed The
details of the sale remain commercial
in confidence Caltex no longer deemsbitumen to be a core business hence the
sale
w rld news
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8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1122
Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
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HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 422
Kurita Europe GmbH Industriering 43 41751 Viersen Germany
Phone+49 2162 9580110 wwwkuritade
We keep a close eye
on your plant efciency
The trouble-free operation of your plant is the precondition for maximum
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of chloride and ammonium salts thereby preventing fouling and corrosion
This is only one example of how Kurita protects your production unit against
unscheduled shutdowns extends its runtime and lowers process costs ndashwhile at the same time increasing plant and operational safety Particularly
for reneries and petrochemical plants Kurita offers innovative and sustain-
able process technologies as well as a broad portfolio of products for water
management From consultation through to implementation and maintenance
we support you with a comprehensive range of services As you can see we
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Process technologies for reneries and petrochemical plants
Water treatment technologies for cooling water boiler water waste water
and reverse osmosis
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 522
MANAGING EDITOR James Little jameslittlehydrocarbonengineeringcom
EDITOR Claira Lloydclairalloydhydrocarbonengineeringcom
EDITORIAL ASSISTANT Emma McAleaveyemmamcaleaveyhydrocarbonengineeringcom
ADVERTISEMENT DIRECTOR Rod Hardyrodhardyhydrocarbonengineeringcom
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PRODUCTION Chloe Ozwellchloeozwellhydrocarbonengineeringcom
WEB MANAGER Tom Fullerton
tomfullertonhydrocarbonengineeringcom
WEB EDITOR Callum OrsquoReilly
callumoreillyhydrocarbonengineeringcom
CIRCULATION MANAGER Victoria McConnell
victoriamcconnellhydrocarbonengineeringcom
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catherinegowerhydrocarbonengineeringcom
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APPLICABLE ONLY TO USA amp CANADA
Hydrocarbon Engineering (ISSN No 1468-9340 USPS No 020-998) is published monthly by Palladian Publications LtdGBR and is distributed in the USA by Asendia USA 17B South Middlesex Avenue Monroe NJ 08831 and additional mailingoffices Periodicals postage paid at New Brunswick NJ POSTMASTER send address changes to Magazine Name 17BSouth Middlesex Avenue Monroe NJ 08831
When thinking about 2013 the death of NelsonMandela the US government shutdown andthe birth of the Royal baby (hard to avoid if inthe UK) spring immediately to mind Yet whenthinking about the world of oil and gas I think
shale and the turbulent situation that has been faced by theEuropean refining industry
The European refining industry is being heavily impacted bythe shale revolution as the US now has an abundance of cheapfossil fuels and the infrastructure to utilise it which is leavingEurope to play catch up And letrsquos face it the wealth of shalegas is Americarsquos biggest asset at the moment as gas is inevitablygoing to be cheaper than oil boosting its downstream industryto incredible heights The level of liquids demand growth inEurope is also a problem as it is flagging as developed marketsare no longer commanding such high levels and the emergingmarkets which still crave liquid fuels are procuring it fromcheap sources such as the US The overcapacity of Europeangasoline production is another area that is not helping theEuropean situation and this is likely to worsen over the nextfive years unless changes are made European refineries need toadapt to increase the production of middle distillates whichare currently being demanded at high volumes all over thecontinent as well as in areas overseas
Sadly Europe is not only competing with the US Russiaand the Middle East are also two strong players in the globalrefining industry that are giving Europe cause for concern Thelevel of subsidisation in the Russian refining industry allows
for expansion and revamps to boost thecountryrsquos distillate production and thereforeallow it access to the global market whichis craving these fuels The subsidisation inthe country also ensures that the domesticrefining industry does not suffer even if demand drops offsomething the European refining industry does not benefit
from When it comes to the Middle East the explosion ofcomplex refineries is the biggest threat These facilities such as Jubail have high levels of efficiency and complexity that dwarfEuropean counterparts
While one cannot deny that the shale revolution isone event negatively impacting Europe it is having manypositive impacts that will no doubt continue into this yearand cannot be ignored The US has now cemented its energysecurity of supply something that economies across theworld strive for on a daily basis Also the country is sharingthe benefits with others (so to speak) as due to tight oilLatin America and West Africa have gained a secure supplyof gasoline to feed ever increasing demand at a relativelycheap price So yes unless changes are made to reduce thecomplexity of European refineries it is possible that therewill be tough times ahead this year in the region howeverthere is hope elsewhere as fossil fuel supply continues to besecure and prices continue to be favourable and competitiveto many
Happy New Year from all of us on the HydrocarbonEngineering team
Claira LloydEditor
comment
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 722
5 January 2014
HYDROCARBON
ENGINEERING
CBampI | THREE CONTRACTS WON
CBampI has been awarded a contract
valued at approximately
US$ 1 billion by Ingleside Ethylene LLC a
joint venture between OccidentalChemical Corporation (OxyChem) a
subsidiary of Occidental Petroleum
Corporation and Mexichem SAB de
CV for the engineering procurement
and construction of an ethane cracker
and associated utilities and offsites to
be located at OxyChems complex in
Ingleside Texas The cracker will have
the capacity to produce approximately
12 billion lbsy of ethylene
Feedstock for the cracker is
anticipated to be ethane derived from
domestic shale gas As previously
announced CBampI provided the
technology license and basic
engineering for the ethylene
technology five SRTreg (short residence
time) cracking heaters and the front end
engineering design (FEED) services
CBampI has also been awarded a
contract by JSC Gazprom Neft for FEED
services for a new oil refining complex
at Gazprom Nefts refinery in Omsk
Western Siberia Russia The existing
refinery is currently the largest
operating refinery in Russia
CBampIs project scope includes FEED
development for multiple new processunits including a 2 million tpy
hydrocracker unit licensed by Chevron
Lummus Global as well as hydrogen
sulfur and other associated units CBampI
delivered a similar hydrocracker
complex earlier this year for Gazprom
Next in Pancevo Serbia
Finally CBampI in a joint venture with
Zachry Industrial Inc has been awarded
two contracts each valued at
approximately US$ 25 billion by FLNG
Liquefaction LLC and FLNG
Liquefaction 2 LLC in order to
construct the first two trains of the
Freeport liquefaction project
The project scope includes
engineering procurement and
construction for the conversion of an
existing regasification terminal in
Freeport Texas to an LNG liquefaction
terminal The two train LNG
liquefaction facility will have a total
capacity in excess of 89 million tpy of
LNG The initiatial contract discussions
for this project began in 2012
USA | ENERGYEFFICIENCY ORDER
Alfa Laval has won an order to supply
Alfa Laval OLMI heat exchangers to
a petrochemical plant in the US The
order booked in the process industry
segment has a value of approximately
SEK 60 million Deliveries are scheduled
for 2014 and 2015
The Alfa Laval OLMI heat
exchangers will be used to incease the
yield and recover energy in the
production of ethylene an important
ingredient for the manufacturing of
industrial chemicals and plastics
products The order is an example of
the reindustrialisation occuring due to
the shale gas revolution in the USThe shale revolution is thought to
be the major driver behind expansion in
the US petrochemical sector The
unlocking of the previously inaccessible
reserves has driven down prices of the
essential inputs to petrochemical
manufacturing
Venezuela | PLANTEXPANSION
Manoir Industries was awarded
catalyst tubes outlet manifolds
and transfer line assembled by Technip
Claremont for the expansion and
upgrade of PDVSA Puerto La Cruz
refinery Venezuela
The furnace components are based
on Manoirs proprietary Manauritereg high
alloy technology They are
manufactured in its leading production
centres in France an the UK under its
One Manoir International production
methodology which guaranteescoherent manufacturing and quality
control processes across all plants in
France UK India and China
Algeria | READY FOR STARTUP
Sonatrach ranked by Forbes as the
worlds 12th largest oil company is
nearing completion of a new paraxylene
crystallisation plant at its integrated
refinerypetrochemical site in Skikda
Algeria Start up was scheduled for
December of 2013
The plants core units will utilise
CrystPXSM and GT-IsomPXSM both
licensed from GTC Technology CrystPX
recovers paraxylene from reformate
feedstock while GT-IsomPX usingISOXYLreg catalysts from Clariant
isomerises C8 aromatics into additional
paraxylene This license also includes
naphtha hydrotreating and reforming
aromatics extraction and other
aromatics operations Samsung
Engineering Co Ltd provided EPC
services for the new facilities
The paraxylene plant was originally
part of Sonatrachs petrochemical
subsiduary Naftec which Sonatrach
absorbed in 2009
The new units continue Sonatrachs
long term expansion plans for
additional refining and petrochemicalcapacity at its facilities in Algeria to
meet with growing local demand for oil
products
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 822
6January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Kuwait | PROCESS AUTOMATION SYSTEMS
Honeywell has been selected by
Kuwait National Petroleum
Company (KNPC) to provide the
integrated control and safety
system (ICSS) for its new 615 000 bpd
Al Zour refinery complex to be built in
southern Kuwait Honeywell will also
provide the front end engineering
deisgn for the system
This will be Kuwaits fourth refinery
and the largest refinery in the entire
Middle East The total capacity of
Kuwaits three current refineries is
930 000 bpd The new refinery is
targeted for startup in 2018
Honeywell has provided industrytechnologies to KNPCs refineries for
approximately 30 years through its
Process Solutions business (HPS) and
has long sustained a presence in
Kuwait As the main automation
contractor for the new Al Zour
refinery Honeywell will supply
Experionreg PKS as the main control
system for the refinery complex as
well as integrate all process
automation systems throughout the
site Additionally having HPS perform
front end engineering and design of
the system will help drive consistent
designs from other contractors
throughout the entire project and help
speed its completion
The new refinery complex will help
to meet domestic demand and exportof ultra low sulfur products each as
fuel oil diesel and kerosene as well as
petrochemical feedstocks
Denmark | CELLULOSIC BIOETHANOL
Royal DSM has announced that
together with DONG Energy it hasdemonstrated the combined
fermentation of C6 and C5 sugars from
wheat straw on an industrial scale The
combined fermentation results in a
40 increase in ethanol yieldt of
straw which can result in significant
cost cuts in the production of
bioethanol from cellulosic feedstock
The demonstration took place in
DONG Energys Inbicondemonstration plant in Kalundborg
Denmark the longest running
demonstration facility for cellulosic
bioethanol production in the world
The faciltiy was reconstructed in
2013 in order to be able to conduct
mixed fermentation of C6 and C5
sugars
USA | SULFUR RECOVERY UNITS
Principal Technology Inc a provider
of total system solutions for natural
gas refining chemical process and
manufacturing facilities is supplyingthe small capacity sulfur recovery
units (SRU) and tail gas treating unit
(TGTU) for Dakota Prairie Refining LLC
refinery in southwestern North Dakota
Designed to address the specific needs
of small capacity refineries Principal
Technologys SRUs are based on a
modular platform design that reduces
installation time and enables the units
to meet the tight construction
deadlines imposed to complete the
refinery by the end of 2014The US$ 300 million refinery will
process 20 000 bpd of oil and produce
7000 bpd of diesel fuel specifically to
meet the needs of North Dakota The
remaining petroleum will be shipped to
other refineries for further processing
The technology was chosen as the
facility is at a small scale
USAFourQuest Energy has acquired the assets
of Odyssey Technologies Inc a customchemical solution company based in
Houston Texas OTI has been one of the
process industrys leading suppliers of
speciality chemicals With the acquisition
FourQuest Energy is now in the position
to deliver one of the most powerful and
complete portfolios of services in the
energy industry
Sot AfMAN Diesel amp Turbo South Africa (Pty)
Ltd local subsidiary of the engineering
enterprise MAN Diesel amp Turbo SE(Augsburg Germany) has entered into an
agreement to acquire 100 of the share
in the family owned ELCA Engineering
(Pty) Ltd near Johannesburg Closing of
the transaction is subject to approval
of the South African Competition
Commission The parties agreed not
to disclose any financial details of the
transaction
USAAMETEK Inc has acquired Powervar a
provider of power management systemsand uninterruptible power supply systems
for approximately US$ 128 million
Headquartered in Waukegan Illinois the
privately held company has annual sales
of approximately US$ 70 million
AstThe sale of Caltex Australias Sydney
based import bitumen business to
Puma Energy a subsidiary of Trafigura
Beheer BV has now been completed The
details of the sale remain commercial
in confidence Caltex no longer deemsbitumen to be a core business hence the
sale
w rld news
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8132019 Preview HydrocarbonEngineering January2014
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8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1122
Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
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8132019 Preview HydrocarbonEngineering January2014
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
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DESIGN
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2014Plant Professional
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Bringing you the power of information
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HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
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18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
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8132019 Preview HydrocarbonEngineering January2014
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You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
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MANAGING EDITOR James Little jameslittlehydrocarbonengineeringcom
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callumoreillyhydrocarbonengineeringcom
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victoriamcconnellhydrocarbonengineeringcom
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catherinegowerhydrocarbonengineeringcom
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Hydrocarbon Engineering (ISSN No 1468-9340 USPS No 020-998) is published monthly by Palladian Publications LtdGBR and is distributed in the USA by Asendia USA 17B South Middlesex Avenue Monroe NJ 08831 and additional mailingoffices Periodicals postage paid at New Brunswick NJ POSTMASTER send address changes to Magazine Name 17BSouth Middlesex Avenue Monroe NJ 08831
When thinking about 2013 the death of NelsonMandela the US government shutdown andthe birth of the Royal baby (hard to avoid if inthe UK) spring immediately to mind Yet whenthinking about the world of oil and gas I think
shale and the turbulent situation that has been faced by theEuropean refining industry
The European refining industry is being heavily impacted bythe shale revolution as the US now has an abundance of cheapfossil fuels and the infrastructure to utilise it which is leavingEurope to play catch up And letrsquos face it the wealth of shalegas is Americarsquos biggest asset at the moment as gas is inevitablygoing to be cheaper than oil boosting its downstream industryto incredible heights The level of liquids demand growth inEurope is also a problem as it is flagging as developed marketsare no longer commanding such high levels and the emergingmarkets which still crave liquid fuels are procuring it fromcheap sources such as the US The overcapacity of Europeangasoline production is another area that is not helping theEuropean situation and this is likely to worsen over the nextfive years unless changes are made European refineries need toadapt to increase the production of middle distillates whichare currently being demanded at high volumes all over thecontinent as well as in areas overseas
Sadly Europe is not only competing with the US Russiaand the Middle East are also two strong players in the globalrefining industry that are giving Europe cause for concern Thelevel of subsidisation in the Russian refining industry allows
for expansion and revamps to boost thecountryrsquos distillate production and thereforeallow it access to the global market whichis craving these fuels The subsidisation inthe country also ensures that the domesticrefining industry does not suffer even if demand drops offsomething the European refining industry does not benefit
from When it comes to the Middle East the explosion ofcomplex refineries is the biggest threat These facilities such as Jubail have high levels of efficiency and complexity that dwarfEuropean counterparts
While one cannot deny that the shale revolution isone event negatively impacting Europe it is having manypositive impacts that will no doubt continue into this yearand cannot be ignored The US has now cemented its energysecurity of supply something that economies across theworld strive for on a daily basis Also the country is sharingthe benefits with others (so to speak) as due to tight oilLatin America and West Africa have gained a secure supplyof gasoline to feed ever increasing demand at a relativelycheap price So yes unless changes are made to reduce thecomplexity of European refineries it is possible that therewill be tough times ahead this year in the region howeverthere is hope elsewhere as fossil fuel supply continues to besecure and prices continue to be favourable and competitiveto many
Happy New Year from all of us on the HydrocarbonEngineering team
Claira LloydEditor
comment
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 722
5 January 2014
HYDROCARBON
ENGINEERING
CBampI | THREE CONTRACTS WON
CBampI has been awarded a contract
valued at approximately
US$ 1 billion by Ingleside Ethylene LLC a
joint venture between OccidentalChemical Corporation (OxyChem) a
subsidiary of Occidental Petroleum
Corporation and Mexichem SAB de
CV for the engineering procurement
and construction of an ethane cracker
and associated utilities and offsites to
be located at OxyChems complex in
Ingleside Texas The cracker will have
the capacity to produce approximately
12 billion lbsy of ethylene
Feedstock for the cracker is
anticipated to be ethane derived from
domestic shale gas As previously
announced CBampI provided the
technology license and basic
engineering for the ethylene
technology five SRTreg (short residence
time) cracking heaters and the front end
engineering design (FEED) services
CBampI has also been awarded a
contract by JSC Gazprom Neft for FEED
services for a new oil refining complex
at Gazprom Nefts refinery in Omsk
Western Siberia Russia The existing
refinery is currently the largest
operating refinery in Russia
CBampIs project scope includes FEED
development for multiple new processunits including a 2 million tpy
hydrocracker unit licensed by Chevron
Lummus Global as well as hydrogen
sulfur and other associated units CBampI
delivered a similar hydrocracker
complex earlier this year for Gazprom
Next in Pancevo Serbia
Finally CBampI in a joint venture with
Zachry Industrial Inc has been awarded
two contracts each valued at
approximately US$ 25 billion by FLNG
Liquefaction LLC and FLNG
Liquefaction 2 LLC in order to
construct the first two trains of the
Freeport liquefaction project
The project scope includes
engineering procurement and
construction for the conversion of an
existing regasification terminal in
Freeport Texas to an LNG liquefaction
terminal The two train LNG
liquefaction facility will have a total
capacity in excess of 89 million tpy of
LNG The initiatial contract discussions
for this project began in 2012
USA | ENERGYEFFICIENCY ORDER
Alfa Laval has won an order to supply
Alfa Laval OLMI heat exchangers to
a petrochemical plant in the US The
order booked in the process industry
segment has a value of approximately
SEK 60 million Deliveries are scheduled
for 2014 and 2015
The Alfa Laval OLMI heat
exchangers will be used to incease the
yield and recover energy in the
production of ethylene an important
ingredient for the manufacturing of
industrial chemicals and plastics
products The order is an example of
the reindustrialisation occuring due to
the shale gas revolution in the USThe shale revolution is thought to
be the major driver behind expansion in
the US petrochemical sector The
unlocking of the previously inaccessible
reserves has driven down prices of the
essential inputs to petrochemical
manufacturing
Venezuela | PLANTEXPANSION
Manoir Industries was awarded
catalyst tubes outlet manifolds
and transfer line assembled by Technip
Claremont for the expansion and
upgrade of PDVSA Puerto La Cruz
refinery Venezuela
The furnace components are based
on Manoirs proprietary Manauritereg high
alloy technology They are
manufactured in its leading production
centres in France an the UK under its
One Manoir International production
methodology which guaranteescoherent manufacturing and quality
control processes across all plants in
France UK India and China
Algeria | READY FOR STARTUP
Sonatrach ranked by Forbes as the
worlds 12th largest oil company is
nearing completion of a new paraxylene
crystallisation plant at its integrated
refinerypetrochemical site in Skikda
Algeria Start up was scheduled for
December of 2013
The plants core units will utilise
CrystPXSM and GT-IsomPXSM both
licensed from GTC Technology CrystPX
recovers paraxylene from reformate
feedstock while GT-IsomPX usingISOXYLreg catalysts from Clariant
isomerises C8 aromatics into additional
paraxylene This license also includes
naphtha hydrotreating and reforming
aromatics extraction and other
aromatics operations Samsung
Engineering Co Ltd provided EPC
services for the new facilities
The paraxylene plant was originally
part of Sonatrachs petrochemical
subsiduary Naftec which Sonatrach
absorbed in 2009
The new units continue Sonatrachs
long term expansion plans for
additional refining and petrochemicalcapacity at its facilities in Algeria to
meet with growing local demand for oil
products
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 822
6January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Kuwait | PROCESS AUTOMATION SYSTEMS
Honeywell has been selected by
Kuwait National Petroleum
Company (KNPC) to provide the
integrated control and safety
system (ICSS) for its new 615 000 bpd
Al Zour refinery complex to be built in
southern Kuwait Honeywell will also
provide the front end engineering
deisgn for the system
This will be Kuwaits fourth refinery
and the largest refinery in the entire
Middle East The total capacity of
Kuwaits three current refineries is
930 000 bpd The new refinery is
targeted for startup in 2018
Honeywell has provided industrytechnologies to KNPCs refineries for
approximately 30 years through its
Process Solutions business (HPS) and
has long sustained a presence in
Kuwait As the main automation
contractor for the new Al Zour
refinery Honeywell will supply
Experionreg PKS as the main control
system for the refinery complex as
well as integrate all process
automation systems throughout the
site Additionally having HPS perform
front end engineering and design of
the system will help drive consistent
designs from other contractors
throughout the entire project and help
speed its completion
The new refinery complex will help
to meet domestic demand and exportof ultra low sulfur products each as
fuel oil diesel and kerosene as well as
petrochemical feedstocks
Denmark | CELLULOSIC BIOETHANOL
Royal DSM has announced that
together with DONG Energy it hasdemonstrated the combined
fermentation of C6 and C5 sugars from
wheat straw on an industrial scale The
combined fermentation results in a
40 increase in ethanol yieldt of
straw which can result in significant
cost cuts in the production of
bioethanol from cellulosic feedstock
The demonstration took place in
DONG Energys Inbicondemonstration plant in Kalundborg
Denmark the longest running
demonstration facility for cellulosic
bioethanol production in the world
The faciltiy was reconstructed in
2013 in order to be able to conduct
mixed fermentation of C6 and C5
sugars
USA | SULFUR RECOVERY UNITS
Principal Technology Inc a provider
of total system solutions for natural
gas refining chemical process and
manufacturing facilities is supplyingthe small capacity sulfur recovery
units (SRU) and tail gas treating unit
(TGTU) for Dakota Prairie Refining LLC
refinery in southwestern North Dakota
Designed to address the specific needs
of small capacity refineries Principal
Technologys SRUs are based on a
modular platform design that reduces
installation time and enables the units
to meet the tight construction
deadlines imposed to complete the
refinery by the end of 2014The US$ 300 million refinery will
process 20 000 bpd of oil and produce
7000 bpd of diesel fuel specifically to
meet the needs of North Dakota The
remaining petroleum will be shipped to
other refineries for further processing
The technology was chosen as the
facility is at a small scale
USAFourQuest Energy has acquired the assets
of Odyssey Technologies Inc a customchemical solution company based in
Houston Texas OTI has been one of the
process industrys leading suppliers of
speciality chemicals With the acquisition
FourQuest Energy is now in the position
to deliver one of the most powerful and
complete portfolios of services in the
energy industry
Sot AfMAN Diesel amp Turbo South Africa (Pty)
Ltd local subsidiary of the engineering
enterprise MAN Diesel amp Turbo SE(Augsburg Germany) has entered into an
agreement to acquire 100 of the share
in the family owned ELCA Engineering
(Pty) Ltd near Johannesburg Closing of
the transaction is subject to approval
of the South African Competition
Commission The parties agreed not
to disclose any financial details of the
transaction
USAAMETEK Inc has acquired Powervar a
provider of power management systemsand uninterruptible power supply systems
for approximately US$ 128 million
Headquartered in Waukegan Illinois the
privately held company has annual sales
of approximately US$ 70 million
AstThe sale of Caltex Australias Sydney
based import bitumen business to
Puma Energy a subsidiary of Trafigura
Beheer BV has now been completed The
details of the sale remain commercial
in confidence Caltex no longer deemsbitumen to be a core business hence the
sale
w rld news
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8132019 Preview HydrocarbonEngineering January2014
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8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1122
Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
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DESIGN
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copy2013 Intergraph Corporation All rights reserved
Intergraph is part of Hexagon Intergraph and the
Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
in other countries AutoCAD is a registered trademark
of Autodesk Inc
EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
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18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 622RAISING PERFORMANCE TOGETHERtrade
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 722
5 January 2014
HYDROCARBON
ENGINEERING
CBampI | THREE CONTRACTS WON
CBampI has been awarded a contract
valued at approximately
US$ 1 billion by Ingleside Ethylene LLC a
joint venture between OccidentalChemical Corporation (OxyChem) a
subsidiary of Occidental Petroleum
Corporation and Mexichem SAB de
CV for the engineering procurement
and construction of an ethane cracker
and associated utilities and offsites to
be located at OxyChems complex in
Ingleside Texas The cracker will have
the capacity to produce approximately
12 billion lbsy of ethylene
Feedstock for the cracker is
anticipated to be ethane derived from
domestic shale gas As previously
announced CBampI provided the
technology license and basic
engineering for the ethylene
technology five SRTreg (short residence
time) cracking heaters and the front end
engineering design (FEED) services
CBampI has also been awarded a
contract by JSC Gazprom Neft for FEED
services for a new oil refining complex
at Gazprom Nefts refinery in Omsk
Western Siberia Russia The existing
refinery is currently the largest
operating refinery in Russia
CBampIs project scope includes FEED
development for multiple new processunits including a 2 million tpy
hydrocracker unit licensed by Chevron
Lummus Global as well as hydrogen
sulfur and other associated units CBampI
delivered a similar hydrocracker
complex earlier this year for Gazprom
Next in Pancevo Serbia
Finally CBampI in a joint venture with
Zachry Industrial Inc has been awarded
two contracts each valued at
approximately US$ 25 billion by FLNG
Liquefaction LLC and FLNG
Liquefaction 2 LLC in order to
construct the first two trains of the
Freeport liquefaction project
The project scope includes
engineering procurement and
construction for the conversion of an
existing regasification terminal in
Freeport Texas to an LNG liquefaction
terminal The two train LNG
liquefaction facility will have a total
capacity in excess of 89 million tpy of
LNG The initiatial contract discussions
for this project began in 2012
USA | ENERGYEFFICIENCY ORDER
Alfa Laval has won an order to supply
Alfa Laval OLMI heat exchangers to
a petrochemical plant in the US The
order booked in the process industry
segment has a value of approximately
SEK 60 million Deliveries are scheduled
for 2014 and 2015
The Alfa Laval OLMI heat
exchangers will be used to incease the
yield and recover energy in the
production of ethylene an important
ingredient for the manufacturing of
industrial chemicals and plastics
products The order is an example of
the reindustrialisation occuring due to
the shale gas revolution in the USThe shale revolution is thought to
be the major driver behind expansion in
the US petrochemical sector The
unlocking of the previously inaccessible
reserves has driven down prices of the
essential inputs to petrochemical
manufacturing
Venezuela | PLANTEXPANSION
Manoir Industries was awarded
catalyst tubes outlet manifolds
and transfer line assembled by Technip
Claremont for the expansion and
upgrade of PDVSA Puerto La Cruz
refinery Venezuela
The furnace components are based
on Manoirs proprietary Manauritereg high
alloy technology They are
manufactured in its leading production
centres in France an the UK under its
One Manoir International production
methodology which guaranteescoherent manufacturing and quality
control processes across all plants in
France UK India and China
Algeria | READY FOR STARTUP
Sonatrach ranked by Forbes as the
worlds 12th largest oil company is
nearing completion of a new paraxylene
crystallisation plant at its integrated
refinerypetrochemical site in Skikda
Algeria Start up was scheduled for
December of 2013
The plants core units will utilise
CrystPXSM and GT-IsomPXSM both
licensed from GTC Technology CrystPX
recovers paraxylene from reformate
feedstock while GT-IsomPX usingISOXYLreg catalysts from Clariant
isomerises C8 aromatics into additional
paraxylene This license also includes
naphtha hydrotreating and reforming
aromatics extraction and other
aromatics operations Samsung
Engineering Co Ltd provided EPC
services for the new facilities
The paraxylene plant was originally
part of Sonatrachs petrochemical
subsiduary Naftec which Sonatrach
absorbed in 2009
The new units continue Sonatrachs
long term expansion plans for
additional refining and petrochemicalcapacity at its facilities in Algeria to
meet with growing local demand for oil
products
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 822
6January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Kuwait | PROCESS AUTOMATION SYSTEMS
Honeywell has been selected by
Kuwait National Petroleum
Company (KNPC) to provide the
integrated control and safety
system (ICSS) for its new 615 000 bpd
Al Zour refinery complex to be built in
southern Kuwait Honeywell will also
provide the front end engineering
deisgn for the system
This will be Kuwaits fourth refinery
and the largest refinery in the entire
Middle East The total capacity of
Kuwaits three current refineries is
930 000 bpd The new refinery is
targeted for startup in 2018
Honeywell has provided industrytechnologies to KNPCs refineries for
approximately 30 years through its
Process Solutions business (HPS) and
has long sustained a presence in
Kuwait As the main automation
contractor for the new Al Zour
refinery Honeywell will supply
Experionreg PKS as the main control
system for the refinery complex as
well as integrate all process
automation systems throughout the
site Additionally having HPS perform
front end engineering and design of
the system will help drive consistent
designs from other contractors
throughout the entire project and help
speed its completion
The new refinery complex will help
to meet domestic demand and exportof ultra low sulfur products each as
fuel oil diesel and kerosene as well as
petrochemical feedstocks
Denmark | CELLULOSIC BIOETHANOL
Royal DSM has announced that
together with DONG Energy it hasdemonstrated the combined
fermentation of C6 and C5 sugars from
wheat straw on an industrial scale The
combined fermentation results in a
40 increase in ethanol yieldt of
straw which can result in significant
cost cuts in the production of
bioethanol from cellulosic feedstock
The demonstration took place in
DONG Energys Inbicondemonstration plant in Kalundborg
Denmark the longest running
demonstration facility for cellulosic
bioethanol production in the world
The faciltiy was reconstructed in
2013 in order to be able to conduct
mixed fermentation of C6 and C5
sugars
USA | SULFUR RECOVERY UNITS
Principal Technology Inc a provider
of total system solutions for natural
gas refining chemical process and
manufacturing facilities is supplyingthe small capacity sulfur recovery
units (SRU) and tail gas treating unit
(TGTU) for Dakota Prairie Refining LLC
refinery in southwestern North Dakota
Designed to address the specific needs
of small capacity refineries Principal
Technologys SRUs are based on a
modular platform design that reduces
installation time and enables the units
to meet the tight construction
deadlines imposed to complete the
refinery by the end of 2014The US$ 300 million refinery will
process 20 000 bpd of oil and produce
7000 bpd of diesel fuel specifically to
meet the needs of North Dakota The
remaining petroleum will be shipped to
other refineries for further processing
The technology was chosen as the
facility is at a small scale
USAFourQuest Energy has acquired the assets
of Odyssey Technologies Inc a customchemical solution company based in
Houston Texas OTI has been one of the
process industrys leading suppliers of
speciality chemicals With the acquisition
FourQuest Energy is now in the position
to deliver one of the most powerful and
complete portfolios of services in the
energy industry
Sot AfMAN Diesel amp Turbo South Africa (Pty)
Ltd local subsidiary of the engineering
enterprise MAN Diesel amp Turbo SE(Augsburg Germany) has entered into an
agreement to acquire 100 of the share
in the family owned ELCA Engineering
(Pty) Ltd near Johannesburg Closing of
the transaction is subject to approval
of the South African Competition
Commission The parties agreed not
to disclose any financial details of the
transaction
USAAMETEK Inc has acquired Powervar a
provider of power management systemsand uninterruptible power supply systems
for approximately US$ 128 million
Headquartered in Waukegan Illinois the
privately held company has annual sales
of approximately US$ 70 million
AstThe sale of Caltex Australias Sydney
based import bitumen business to
Puma Energy a subsidiary of Trafigura
Beheer BV has now been completed The
details of the sale remain commercial
in confidence Caltex no longer deemsbitumen to be a core business hence the
sale
w rld news
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8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
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Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
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HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
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8132019 Preview HydrocarbonEngineering January2014
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You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 722
5 January 2014
HYDROCARBON
ENGINEERING
CBampI | THREE CONTRACTS WON
CBampI has been awarded a contract
valued at approximately
US$ 1 billion by Ingleside Ethylene LLC a
joint venture between OccidentalChemical Corporation (OxyChem) a
subsidiary of Occidental Petroleum
Corporation and Mexichem SAB de
CV for the engineering procurement
and construction of an ethane cracker
and associated utilities and offsites to
be located at OxyChems complex in
Ingleside Texas The cracker will have
the capacity to produce approximately
12 billion lbsy of ethylene
Feedstock for the cracker is
anticipated to be ethane derived from
domestic shale gas As previously
announced CBampI provided the
technology license and basic
engineering for the ethylene
technology five SRTreg (short residence
time) cracking heaters and the front end
engineering design (FEED) services
CBampI has also been awarded a
contract by JSC Gazprom Neft for FEED
services for a new oil refining complex
at Gazprom Nefts refinery in Omsk
Western Siberia Russia The existing
refinery is currently the largest
operating refinery in Russia
CBampIs project scope includes FEED
development for multiple new processunits including a 2 million tpy
hydrocracker unit licensed by Chevron
Lummus Global as well as hydrogen
sulfur and other associated units CBampI
delivered a similar hydrocracker
complex earlier this year for Gazprom
Next in Pancevo Serbia
Finally CBampI in a joint venture with
Zachry Industrial Inc has been awarded
two contracts each valued at
approximately US$ 25 billion by FLNG
Liquefaction LLC and FLNG
Liquefaction 2 LLC in order to
construct the first two trains of the
Freeport liquefaction project
The project scope includes
engineering procurement and
construction for the conversion of an
existing regasification terminal in
Freeport Texas to an LNG liquefaction
terminal The two train LNG
liquefaction facility will have a total
capacity in excess of 89 million tpy of
LNG The initiatial contract discussions
for this project began in 2012
USA | ENERGYEFFICIENCY ORDER
Alfa Laval has won an order to supply
Alfa Laval OLMI heat exchangers to
a petrochemical plant in the US The
order booked in the process industry
segment has a value of approximately
SEK 60 million Deliveries are scheduled
for 2014 and 2015
The Alfa Laval OLMI heat
exchangers will be used to incease the
yield and recover energy in the
production of ethylene an important
ingredient for the manufacturing of
industrial chemicals and plastics
products The order is an example of
the reindustrialisation occuring due to
the shale gas revolution in the USThe shale revolution is thought to
be the major driver behind expansion in
the US petrochemical sector The
unlocking of the previously inaccessible
reserves has driven down prices of the
essential inputs to petrochemical
manufacturing
Venezuela | PLANTEXPANSION
Manoir Industries was awarded
catalyst tubes outlet manifolds
and transfer line assembled by Technip
Claremont for the expansion and
upgrade of PDVSA Puerto La Cruz
refinery Venezuela
The furnace components are based
on Manoirs proprietary Manauritereg high
alloy technology They are
manufactured in its leading production
centres in France an the UK under its
One Manoir International production
methodology which guaranteescoherent manufacturing and quality
control processes across all plants in
France UK India and China
Algeria | READY FOR STARTUP
Sonatrach ranked by Forbes as the
worlds 12th largest oil company is
nearing completion of a new paraxylene
crystallisation plant at its integrated
refinerypetrochemical site in Skikda
Algeria Start up was scheduled for
December of 2013
The plants core units will utilise
CrystPXSM and GT-IsomPXSM both
licensed from GTC Technology CrystPX
recovers paraxylene from reformate
feedstock while GT-IsomPX usingISOXYLreg catalysts from Clariant
isomerises C8 aromatics into additional
paraxylene This license also includes
naphtha hydrotreating and reforming
aromatics extraction and other
aromatics operations Samsung
Engineering Co Ltd provided EPC
services for the new facilities
The paraxylene plant was originally
part of Sonatrachs petrochemical
subsiduary Naftec which Sonatrach
absorbed in 2009
The new units continue Sonatrachs
long term expansion plans for
additional refining and petrochemicalcapacity at its facilities in Algeria to
meet with growing local demand for oil
products
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 822
6January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Kuwait | PROCESS AUTOMATION SYSTEMS
Honeywell has been selected by
Kuwait National Petroleum
Company (KNPC) to provide the
integrated control and safety
system (ICSS) for its new 615 000 bpd
Al Zour refinery complex to be built in
southern Kuwait Honeywell will also
provide the front end engineering
deisgn for the system
This will be Kuwaits fourth refinery
and the largest refinery in the entire
Middle East The total capacity of
Kuwaits three current refineries is
930 000 bpd The new refinery is
targeted for startup in 2018
Honeywell has provided industrytechnologies to KNPCs refineries for
approximately 30 years through its
Process Solutions business (HPS) and
has long sustained a presence in
Kuwait As the main automation
contractor for the new Al Zour
refinery Honeywell will supply
Experionreg PKS as the main control
system for the refinery complex as
well as integrate all process
automation systems throughout the
site Additionally having HPS perform
front end engineering and design of
the system will help drive consistent
designs from other contractors
throughout the entire project and help
speed its completion
The new refinery complex will help
to meet domestic demand and exportof ultra low sulfur products each as
fuel oil diesel and kerosene as well as
petrochemical feedstocks
Denmark | CELLULOSIC BIOETHANOL
Royal DSM has announced that
together with DONG Energy it hasdemonstrated the combined
fermentation of C6 and C5 sugars from
wheat straw on an industrial scale The
combined fermentation results in a
40 increase in ethanol yieldt of
straw which can result in significant
cost cuts in the production of
bioethanol from cellulosic feedstock
The demonstration took place in
DONG Energys Inbicondemonstration plant in Kalundborg
Denmark the longest running
demonstration facility for cellulosic
bioethanol production in the world
The faciltiy was reconstructed in
2013 in order to be able to conduct
mixed fermentation of C6 and C5
sugars
USA | SULFUR RECOVERY UNITS
Principal Technology Inc a provider
of total system solutions for natural
gas refining chemical process and
manufacturing facilities is supplyingthe small capacity sulfur recovery
units (SRU) and tail gas treating unit
(TGTU) for Dakota Prairie Refining LLC
refinery in southwestern North Dakota
Designed to address the specific needs
of small capacity refineries Principal
Technologys SRUs are based on a
modular platform design that reduces
installation time and enables the units
to meet the tight construction
deadlines imposed to complete the
refinery by the end of 2014The US$ 300 million refinery will
process 20 000 bpd of oil and produce
7000 bpd of diesel fuel specifically to
meet the needs of North Dakota The
remaining petroleum will be shipped to
other refineries for further processing
The technology was chosen as the
facility is at a small scale
USAFourQuest Energy has acquired the assets
of Odyssey Technologies Inc a customchemical solution company based in
Houston Texas OTI has been one of the
process industrys leading suppliers of
speciality chemicals With the acquisition
FourQuest Energy is now in the position
to deliver one of the most powerful and
complete portfolios of services in the
energy industry
Sot AfMAN Diesel amp Turbo South Africa (Pty)
Ltd local subsidiary of the engineering
enterprise MAN Diesel amp Turbo SE(Augsburg Germany) has entered into an
agreement to acquire 100 of the share
in the family owned ELCA Engineering
(Pty) Ltd near Johannesburg Closing of
the transaction is subject to approval
of the South African Competition
Commission The parties agreed not
to disclose any financial details of the
transaction
USAAMETEK Inc has acquired Powervar a
provider of power management systemsand uninterruptible power supply systems
for approximately US$ 128 million
Headquartered in Waukegan Illinois the
privately held company has annual sales
of approximately US$ 70 million
AstThe sale of Caltex Australias Sydney
based import bitumen business to
Puma Energy a subsidiary of Trafigura
Beheer BV has now been completed The
details of the sale remain commercial
in confidence Caltex no longer deemsbitumen to be a core business hence the
sale
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1022
8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1122
Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
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2014Plant Professional
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Bringing you the power of information
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HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
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18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 822
6January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Kuwait | PROCESS AUTOMATION SYSTEMS
Honeywell has been selected by
Kuwait National Petroleum
Company (KNPC) to provide the
integrated control and safety
system (ICSS) for its new 615 000 bpd
Al Zour refinery complex to be built in
southern Kuwait Honeywell will also
provide the front end engineering
deisgn for the system
This will be Kuwaits fourth refinery
and the largest refinery in the entire
Middle East The total capacity of
Kuwaits three current refineries is
930 000 bpd The new refinery is
targeted for startup in 2018
Honeywell has provided industrytechnologies to KNPCs refineries for
approximately 30 years through its
Process Solutions business (HPS) and
has long sustained a presence in
Kuwait As the main automation
contractor for the new Al Zour
refinery Honeywell will supply
Experionreg PKS as the main control
system for the refinery complex as
well as integrate all process
automation systems throughout the
site Additionally having HPS perform
front end engineering and design of
the system will help drive consistent
designs from other contractors
throughout the entire project and help
speed its completion
The new refinery complex will help
to meet domestic demand and exportof ultra low sulfur products each as
fuel oil diesel and kerosene as well as
petrochemical feedstocks
Denmark | CELLULOSIC BIOETHANOL
Royal DSM has announced that
together with DONG Energy it hasdemonstrated the combined
fermentation of C6 and C5 sugars from
wheat straw on an industrial scale The
combined fermentation results in a
40 increase in ethanol yieldt of
straw which can result in significant
cost cuts in the production of
bioethanol from cellulosic feedstock
The demonstration took place in
DONG Energys Inbicondemonstration plant in Kalundborg
Denmark the longest running
demonstration facility for cellulosic
bioethanol production in the world
The faciltiy was reconstructed in
2013 in order to be able to conduct
mixed fermentation of C6 and C5
sugars
USA | SULFUR RECOVERY UNITS
Principal Technology Inc a provider
of total system solutions for natural
gas refining chemical process and
manufacturing facilities is supplyingthe small capacity sulfur recovery
units (SRU) and tail gas treating unit
(TGTU) for Dakota Prairie Refining LLC
refinery in southwestern North Dakota
Designed to address the specific needs
of small capacity refineries Principal
Technologys SRUs are based on a
modular platform design that reduces
installation time and enables the units
to meet the tight construction
deadlines imposed to complete the
refinery by the end of 2014The US$ 300 million refinery will
process 20 000 bpd of oil and produce
7000 bpd of diesel fuel specifically to
meet the needs of North Dakota The
remaining petroleum will be shipped to
other refineries for further processing
The technology was chosen as the
facility is at a small scale
USAFourQuest Energy has acquired the assets
of Odyssey Technologies Inc a customchemical solution company based in
Houston Texas OTI has been one of the
process industrys leading suppliers of
speciality chemicals With the acquisition
FourQuest Energy is now in the position
to deliver one of the most powerful and
complete portfolios of services in the
energy industry
Sot AfMAN Diesel amp Turbo South Africa (Pty)
Ltd local subsidiary of the engineering
enterprise MAN Diesel amp Turbo SE(Augsburg Germany) has entered into an
agreement to acquire 100 of the share
in the family owned ELCA Engineering
(Pty) Ltd near Johannesburg Closing of
the transaction is subject to approval
of the South African Competition
Commission The parties agreed not
to disclose any financial details of the
transaction
USAAMETEK Inc has acquired Powervar a
provider of power management systemsand uninterruptible power supply systems
for approximately US$ 128 million
Headquartered in Waukegan Illinois the
privately held company has annual sales
of approximately US$ 70 million
AstThe sale of Caltex Australias Sydney
based import bitumen business to
Puma Energy a subsidiary of Trafigura
Beheer BV has now been completed The
details of the sale remain commercial
in confidence Caltex no longer deemsbitumen to be a core business hence the
sale
w rld news
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1122
Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
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2014Plant Professional
UP TO 30
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Bringing you the power of information
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HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
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Germany +49 (0) 7253-9400-0
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1022
8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1122
Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1522
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1622
14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
reg
2014Plant Professional
UP TO 30
FASTER MODELING
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AutoCADreg-based intelligent 3D
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EXCLUSIVE TO
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Bringing you the power of information
NEW AND
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HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
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Need a Partner
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8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1022
8January 2014
HYDROCARBON
ENGINEERING
INBRIEF
Oman | INDUSTRIAL GASES VENTURE
Air Products and Takamul Investment
Company a subsidiary of the Oman
Oil Company have signed a joint
venture agreement to establish an
integrated industrial gases venture
which will become a one stop provider
for a full range of industrial gases such
as hydrogen nitrogen and oxygen for
all customers in the Special Economic
Zone at Duqm (SEZAD) Oman
The joint venture will support the
economic development of the SEZADand enhance its competitiveness to
attract further industrial investments It
will also aim to deliver the highest
operational excellence by leveraging
Air Products world class capabilities in
large industrial gas plant design
pipeline infrastructure development
and operational know how as well as
Takamuls strong multi utilitiy
infrastructure position in Duqm via its
Centralised Utility Company
Strategically located along the Gulf
of Oman Duqm has been targeted for
development as a major maritime
gateway for trade in crude oil from theGulf and as an important industrial and
commerical hub Duem will be the
largest SEZ in the Middle East
Belgium | INCREASING EFFICIENCY
INEOS Oxide part of the INEOS Group
of companies and a leading producer
of ethylene oxide and ethylene oxide
derivaties propylene oxide andpropylene oxide derivatives plus a
range of solvents and chemical
specialties has purchased CADWorxreg
Plant Professional and CADWorx PampID
Professional to increase plant efficiency
for its site in Belgium
With strategic locations in both
Europe and the US INEOS focuses on
continually improving cost structures
technologies and safety health and
environment initiatives while combining
plant scalability and reliability After abenchmark analysis the CADWorx Plant
Design Suite was adopted to
standardise and automate work
processes minimise the amount of
transportation errors and enable
integration between CADWorx Plant
Professional and CADWorx PampID
Professional
Canada | LICENSE AGREEMENT
BASF and Pacific NorthWest LNG have
concluded a license agreement on
the use of BASFs OASEreg technology forthe removal of carbon dioxide and sulfur
containing components from natural gas
for all trains of Pacific NorthWest LNGs
proposed LNG facility in the district of
Port Edward near Prince Rupert British
Columbia Canada The facility
anticipates shipping first gas to
customers by the end of 2018 The use of
BASFs OASE technology for gas treating
is essential for the production of LNG
OASE technology removes
contaminants contained in the gas to
enable its liquefaction at temperatures
of approximately -160 ˚C The
technology has a proven track recordin LNG facilities around the world and
its robustness and flexibility to meet
stringent removal requirements is well
recognised in the industry
Front end engineering and design
(FEED) for the LNG faciltiy is currently
ongoing with three international
engineering contractors The FEED is
expected to be complete and in time
for a financial investment decision by
the end of 2014
WodwdBASF and the Petroleum Institute of
Abu Dhabi intend to develop newprocesses for removing aggressive sulfur
compounds from acid gases in a research
collboration The two parties have
already signed an agreement
USAAthalon Solutions has announced the
purchase of a 36 acre chemical plant in
Bayport Texas from Clear Lake Chemicals
The company has significantly added
to its existing manufacturing base in
Louisiana with this purchase
TkIntertek has opened a new petroleum
testing laboratory in Kirikkale Turkey
close to the capital city Ankara The
laboratory supports both local and
regional customers with fuel quality
testing for diesel and gasoline and is
adding a full range of tests to analyse
LPG
RssBASF and Gazprom have signed a final
agreement to swap assets of equivalent
value Through the swap the BASF
subsidiary Wintershall will further expand
its production of oil and gas and exit
the gas trading and storage business
The completion of the transaction is
expected to take place mid 2014 and will
be economically effictive retroactively
to April 1st 2013 Sales and earnings of
BASFs Natural Gas Trading business
will continue to be reported in the
oil and gas segment until completion
The transaction was approved by the
European Commission at the beginning ofDecember 2013
w rld news
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1122
Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1322
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1422
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1522
8132019 Preview HydrocarbonEngineering January2014
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
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CADWorx
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2014Plant Professional
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copy2013 Intergraph Corporation All rights reserved
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Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
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of Autodesk Inc
EXCLUSIVE TO
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Bringing you the power of information
NEW AND
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HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
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italyinfowatlowcom
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infowatlowes
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Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1122
Dynamic testing to
ISOIEC 17025 ensures
accuracy
wwwfmctechnologiescom
Copyright copy FMC Technologies Inc 983105ll Rights Reserved
FMC Technologies Flow
Research and Test Center
is accredited through NVL983105P
(NVL983105P Laboratory Code 200939-0)
FMC Technologiesrsquo accredited Flow Research and Test Center puts every
meter manufactured through the paces giving you confidence that thevolume of product delivered is accurate Our experienced technicians
perform dynamic testing of flow rates to 6670 m3h (42000 bph) and
viscosities to 250 cSt the widest measurement capabilities in the world
today Whether itrsquos a custom ultrasonic or a specialized turbine meter
you know that Smith Meterreg products from FMC Technologies will perform
in the field as they did in our test center For more information visit
wwwfmctechnologiescomlabhc
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1322
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1422
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1522
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1622
14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
reg
2014Plant Professional
UP TO 30
FASTER MODELING
Intergraphreg CADWorx 2014 is the
latest release of the popular
AutoCADreg-based intelligent 3D
plant design and PampID solution
The new routing tools piping
specification system and self-
aware components help increase
flexibility and reduce delivery
times thanks to faster modeling
and design modifications
Enhanced
bull Pipe auto routing
bull Piping specifications
bull Change pipe spec
bull Change pipe size bull Piping branch tables
bull Assembly builder
copy2013 Intergraph Corporation All rights reserved
Intergraph is part of Hexagon Intergraph and the
Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
in other countries AutoCAD is a registered trademark
of Autodesk Inc
EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1222
10January 2014
HYDROCARBON
ENGINEERING
| DIARYDATES
Worldwide | CYBER PROTECTION
Protecting smart grids from cyber
attack is a popular conversation in
information security circles But the
threats are far worse than generally
believed Lila Kee chief product officer
at GlobalSign has commented
Of all CNI sectors the energy
industry is the recipient of a
disproportional number of cyber
related attacks as hackers prey on
systems in desperate need of
modernisation and if penetrated could
lead to devastating consequences
Smart grid equipment and software
manufacturers as well as operators are
urged to step up efforts to upgrade
technology especially around the area
of replacing weak passwords with
stronger authentication measures As
in any cyber security planning IT and
security professionals should
incorporate the level of security
necessary for the associated risk of a
breach in the case of smart grids
potentially catastrophic As
participants in North American Energy
Standards Board (NAESB) GlobalSign
encourages energy participants to
incorporate cyber security standards
developed by NAESB and NERC that if
adopted will lead to a safer smart grid
ecosystem
USA | WHAT AMERICA IS THIINKING
Overwhelming numbers of US voters
of all political persuasions agree
that increased development of the
nations energy infrastructure is in the
countrys best interests according to a
poll conducted for the American
Petroleum Institute (API) by Harris
Interactive API DownstreamOperations Senior Manager Refining
and Oilsands Cindy Schild commented
on the results of the poll
The American people understand
the value of investing in our energy
transportation network in order to get
energy to consumers efficiently and to
businesses that are thriving and
creating jobs due to the abundance of
affordable oil and natural gas 93 of
respondents agree that increased
development of energy infrastructure
would help create jobs while 89
agree infrastructure investment would
strengthen Americas energy security
One obvious infrastructure project
with significant economic and energy
security benefits is the Keystone XL
pipeline and voters remain supportive
of moving forward with the project72 agree it is in the USs national
interest to approve the Keystone XL
Pipeline so that it can transport North
American oil to US refineries while 63
would like to see America import more
of the oil it needs from Canada rather
than other foreign countries
The telephone poll of more than
1000 registered voters also found that
88 said that increased development
of energy infrastructure is good for
American consumers
18 - 19 FebruaryMETECH 2014
Madinat JumeirahDubai UAE
Tel +44 (0) 20 7357 8394
Email enquirieseuropetrocom
23 - 26 FebruaryLaurence Reid Gas Conditioning
Conference
University of Oklahoma
Norman Oklahoma USA
Tel +1 4-5 325 3891
Email tstuueerouedu
18 - 20 MarchStocExpo 2014
Ahoy Rotterdam
Rotterdam The Netherlands
Tel +44 (0)20 8843 8820
Email camillastocexpocom
23 - 25 MarchAFPM Annual Meeting
Hyatt Regency Orlando
Florida USA
Email meetings afpmorg
24 - 27 MarchGastech Conference amp Exhibition
KINTEX
Korea
Tel + 44 (0) 203 615 2847
Email infogastechcouk
31 March - 2 AprilGlobal Refining Summit 2014
Hesperia Tower
Barcelona Spain
Tel +44 (0)20 7202 7690
Email enquirewtgeventscom
w rld newsn ew s di g e s t
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1322
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1422
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1522
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1622
14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
reg
2014Plant Professional
UP TO 30
FASTER MODELING
Intergraphreg CADWorx 2014 is the
latest release of the popular
AutoCADreg-based intelligent 3D
plant design and PampID solution
The new routing tools piping
specification system and self-
aware components help increase
flexibility and reduce delivery
times thanks to faster modeling
and design modifications
Enhanced
bull Pipe auto routing
bull Piping specifications
bull Change pipe spec
bull Change pipe size bull Piping branch tables
bull Assembly builder
copy2013 Intergraph Corporation All rights reserved
Intergraph is part of Hexagon Intergraph and the
Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
in other countries AutoCAD is a registered trademark
of Autodesk Inc
EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
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18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
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8132019 Preview HydrocarbonEngineering January2014
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14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
reg
2014Plant Professional
UP TO 30
FASTER MODELING
Intergraphreg CADWorx 2014 is the
latest release of the popular
AutoCADreg-based intelligent 3D
plant design and PampID solution
The new routing tools piping
specification system and self-
aware components help increase
flexibility and reduce delivery
times thanks to faster modeling
and design modifications
Enhanced
bull Pipe auto routing
bull Piping specifications
bull Change pipe spec
bull Change pipe size bull Piping branch tables
bull Assembly builder
copy2013 Intergraph Corporation All rights reserved
Intergraph is part of Hexagon Intergraph and the
Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
in other countries AutoCAD is a registered trademark
of Autodesk Inc
EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1422
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1522
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1622
14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
reg
2014Plant Professional
UP TO 30
FASTER MODELING
Intergraphreg CADWorx 2014 is the
latest release of the popular
AutoCADreg-based intelligent 3D
plant design and PampID solution
The new routing tools piping
specification system and self-
aware components help increase
flexibility and reduce delivery
times thanks to faster modeling
and design modifications
Enhanced
bull Pipe auto routing
bull Piping specifications
bull Change pipe spec
bull Change pipe size bull Piping branch tables
bull Assembly builder
copy2013 Intergraph Corporation All rights reserved
Intergraph is part of Hexagon Intergraph and the
Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
in other countries AutoCAD is a registered trademark
of Autodesk Inc
EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
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support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1522
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1622
14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
reg
2014Plant Professional
UP TO 30
FASTER MODELING
Intergraphreg CADWorx 2014 is the
latest release of the popular
AutoCADreg-based intelligent 3D
plant design and PampID solution
The new routing tools piping
specification system and self-
aware components help increase
flexibility and reduce delivery
times thanks to faster modeling
and design modifications
Enhanced
bull Pipe auto routing
bull Piping specifications
bull Change pipe spec
bull Change pipe size bull Piping branch tables
bull Assembly builder
copy2013 Intergraph Corporation All rights reserved
Intergraph is part of Hexagon Intergraph and the
Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
in other countries AutoCAD is a registered trademark
of Autodesk Inc
EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1622
14 January 2014 HYDROCARBON
ENGINEERING
more flexible business practices Gas markets are likely to
be affected by price volatility as conflicting interests from
LNG renewables and carbon markets interplay In contrast
with the US natural gas consumption in Europe has been
declining in the last three years and market share has been
lost to both coal and renewable energy
Coal versus gasThe IEA revised down its forecast for European gas
consumption for the period between 2013 and 2018
According to the IEA gas consumption will increase by
only 12 billion m3 from 513 billion m3 in 2012 to
525 billion m3 in 2018 The new forecast places future
European gas consumption below pre recession levels
The revision was based on lower estimates for European
GDP growth and more conservative estimates for gas
consumption in the power generation sector According
to the IEA the high price of gas relative to coal and the
low price of carbon will negatively affect gas
consumption in the period between 2013 and 2018 TheIEA is forecasting a further drop in European gas
consumption in the next two years because of the
unfavourable relationship between gas coal and carbon
price before consumption starts to recover after 2015 As
coal produces more carbon per unit of heat than natural
gas coal is more affected by the carbon price This
explains why under the current scenario of low price for
carbon European power generation suppliers are opting
for coal rather than gas whenever possible Data by the
IEA shows that carbon price of euro 45t of CO2 equivalent
would be required to motivate the switch from a coal
fired plant to a gas fired plant At present EuropeanTrading Scheme (ETS) allowances are traded at
approximately euro 4t of CO2 equivalent
Many European electric power producers with the
flexibility to use coal fired generators switched to coal
to take advantage of lower coal prices relative to gas
The US has become the main supplier of coal to Europe
as low US gas prices turned coal less competitive in the
US market and made exports of coal to Europe more
attractive
However the preference for coal could be short lived
as many European countries will be decommissioning
older less efficient coal plants in the next five years and
the European environmental agenda takes precedent overprofitability considerations In 2013 coal consumption
dropped 6 mainly because of the decommissioning of
several coal fired power plants in Europe Some of these
plants were decommissioned on environmental grounds
rather than profitability assessments The environmental
agenda will benefit renewable energy that will become the
fastest growing energy for European power generation in
the future It will also benefit gas exporters in the long
term and limit the scope for expansion of coal fired plants
bypassing price and profitability considerations
Russias expanding gasmarket shareRussian physical gas deliveries into Europe increased by
10 in the first six months of 2013 This increase in Russian
gas imports was driven by lower supplies from Norway and
North Africa and lower LNG imports LNG imports into
Europe have been falling in the last two years and
estimates from Societe Generale suggest a 24 decline in
LNG demand for 2013 This follows a drop of 31 in 2012
relative to 2011 The decline in demand for LNG in Europe
was motivated by weak gas consumption and high LNG
prices LNG producers and traders have been focusing on
the growing Asia LNG markets and some LNG cargoes
designated for Europe have been reloaded and redirected
to Asia This trade is emerging as an important additional
supply source for Asia and has the unintended
consequence of benefiting Russian gas exports
The European economic downturn has had a negative
impact on gas consumption for power generation in the
majority of European countries and particularly in the
Southern European countries The combined gas
consumption for power generation in Italy Spain UK
France and Belgium declined by 21 in the second quarter
of 2013 relative to the same period in 2012 High price ofgas low ETS prices and high growth of renewables
replacing gas for electricity generation were some of the
contributory factors explaining the low intake of gas in the
power sector
In spite of the recent steep decline in LNG imports
into Europe these trade flows are not doomed The UK
which has been experiencing a decline in gas production
from the North Sea and requires higher levels of gas
imports has recently completed two deals with US
suppliers for the import of LNG into the UK
A slump in US natural gas prices caused by increased
shale gas production has created an opportunity for US gassuppliers to sell LNG into Europe and Asia US benchmark
natural gas prices have remained below US$ 4million BTUs
since October 2011 compared to the current benchmark
price of approximately US$ 10million BTU in the UK On
the other hand LNG prices in Japan during 2013 were on
average 55 - 70 above the UK National Balancing
Point (NBP) and German border prices and four and a half
times higher than US Henry Hub prices These price
differentials make LNG exports into Europe and Asia very
attractive for US Exporters
The IEA forecasts considerable tightness in LNG
markets for 2014 with some incremental LNG demand from
Asia surpassing the additional LNG capacity expected tocome on line in 2014 The supply and demand balance may
change from 2015 depending on Australia LNG projects
currently pending approval
Oil indexation versus hubprice indexationA great proportion of natural gas price in Europe is still
based on oil prices It is not possible to get an accurate
view on oil indexation versus hub indexation levels The
majority of the supply contracts are structural long term
contracts with confidentiality clauses The European
Commission estimates that approximately 50 ofEuropean natural gas supply is indexed to oil Moreover
approximately 80 of Russian natural gas supplies to
OECD Europe are linked to oil
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
reg
2014Plant Professional
UP TO 30
FASTER MODELING
Intergraphreg CADWorx 2014 is the
latest release of the popular
AutoCADreg-based intelligent 3D
plant design and PampID solution
The new routing tools piping
specification system and self-
aware components help increase
flexibility and reduce delivery
times thanks to faster modeling
and design modifications
Enhanced
bull Pipe auto routing
bull Piping specifications
bull Change pipe spec
bull Change pipe size bull Piping branch tables
bull Assembly builder
copy2013 Intergraph Corporation All rights reserved
Intergraph is part of Hexagon Intergraph and the
Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
in other countries AutoCAD is a registered trademark
of Autodesk Inc
EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1722
DESIGN
SMARTER
CADWorx
reg
2014Plant Professional
UP TO 30
FASTER MODELING
Intergraphreg CADWorx 2014 is the
latest release of the popular
AutoCADreg-based intelligent 3D
plant design and PampID solution
The new routing tools piping
specification system and self-
aware components help increase
flexibility and reduce delivery
times thanks to faster modeling
and design modifications
Enhanced
bull Pipe auto routing
bull Piping specifications
bull Change pipe spec
bull Change pipe size bull Piping branch tables
bull Assembly builder
copy2013 Intergraph Corporation All rights reserved
Intergraph is part of Hexagon Intergraph and the
Intergraph logo are registered trademarks of Intergraph
Corporation or its subsidiaries in the United States and
in other countries AutoCAD is a registered trademark
of Autodesk Inc
EXCLUSIVE TO
wwwenergyglobalcom
Bringing you the power of information
NEW AND
wwwenergyglobalcom
HOW TO GET THE MOST FROM OPTICAL GAS IMAGING
Over the last few years one of the most significant advances in infrared
thermographic cameras has been the introduction of OGI These
cameras use spectral wavelength filtering and streling cooler cold
filtering technology but how do you utilise them to the max
For further information go to wwwenergyglobalcom
ILLEGAL REFINING IN NIGERIA 2013 FIGURES
It has been reported that during 2013 the Nigerian Navy destroyed 1556
illegal oil refineries and arrested 1646 suspects related to illegal refining
activity 103 barges 69 606 auxiliary equipment and 1443 large wooden
boats were also seized by the naval forces In relation to these arrests it
has been reported that piracy and sea robbery in surrounding areas has
dropped
For further information go to wwwenergyglobalcom
US GASOLINE PRICES
It was predicted by the US AAA that 945 million Americans would travelat least 50 miles from home during the holiday season which breaks
the 2012 record of 94 million This is the fifth consecutive year of travel
increases in the US over the holiday season The period was defined by
the AAA as 21st December - 1st January
For further information go to wwwenergyglobalcom
GLOBAL SHIFT TO SHALE - PART TWO
Recently the EIA examined 137 shale basins around the world
and concluded that there were almost 8000 trillion ft3 of technically
recoverable natural gas in regions outside North AmericaFor further information go to wwwenergyglobalcom
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1822
16 January 2014 HYDROCARBON
ENGINEERING
The increasing level of hub indexation in European gas
supply contracts has been one of the main trends marking
the evolution of the gas market over the past few years
Hub indexation has been gathering momentum as North
West European hub prices have traded below oil indexed
contract levels for the last five years This has been a key
factor in the development of hub liquidity and
transparency and opened a gap between high cost long
term contracts and short term contract prices
Gazprom and North Africa producers have been keen
defenders of oil price indexation However there are signs
that even Gazprom is beginning to make concessions The
marketing and trading arm of Gazprom in Germany has
signed a 3 year deal with Centrica for the supply of
24 billion m3 gas to the UK priced at the NBP hub Statoil
has been more willing to accept increasing levels of hub
indexation and has recognised that the majority of the
companyrsquos gas supply contracts will be hub indexed in the
future Recently the company has signed a 10 year
45 billion ft3 supply deal with BASF linked to the Germanhubs
It remains to be seen if the Centrica deal is a turning
point for Gazprom towards accepting hub indexation as
the standard for gas pricing in the future It is nevertheless
a recognition of the way the gas market is developing and
the difficulty in finding buyers for oil indexed gas deals for
example in the UK where hub indexation has become
more widespread The progress towards hub indexed gas
prices is inevitable However oil indexed gas prices are
still going to linger for a long time thanks to the long term
contracts that underpin most of the European pipeline
imports
European oil demand in 2014European oil markets are slowly coming out of the
doldrums and in 2014 some European countries are
expected to experience increases in oil demand triggered
by more dynamic economic growth The IMF European
GDP forecast of 1 for 2014 cannot be considered
impressive but it is still an improvement from the 06
GDP decline expected for 2013 The signs of recovery in oil
demand during 2013 were mixed with Germany and UK
showing encouraging increases in diesel demand but Spain
and Italy still exhibiting sharp declines in motor fuel
demand by 4 and 8 respectively in the first six monthsof 2013 France recorded a combined decline of diesel and
gasoline demand of 18 in the first half of 2013 according
to the industry group Union Francaise of the Industries
Petrolieres (UFIP) The outlook for European oil demand is
expected to be weak in the next two years with the UK
Petroleum Industry Association (UKPIA) forecasting oil
demand growth of 01y until 2015 Oil demand growth is
expected to increase slightly after 2015 according to the
UKPIA particularly in the southern European countries that
enjoy greater prospects of economic growth
The positive signs of economic recovery in the Euro
Zone are improving the outlook for the European refiningindustry but there are very serious risks looming over the
future prospects of the industry Compliance with
environmental regulation lack of investment mismatch
between product supply and market requirements are just
some of the problems facing the industry These issues are
not easily resolved but lack of a strategic framework for
the industry in Europe and lack of political engagement to
resolve some of these problems leave the industry
vulnerable and at risk of becoming another casualty ofmodern times While other refining centres prosper
European refining is perishing US refiners are on a mission
to expand their product exports to all corners of the
world The Russian refinery industry is embarking on a
massive modernisation program which will turn Russian
refiners into more competitive players in global refining
markets Middle East and Asia hold state of the art
refineries and petrochemical complexes and are able to
compete on the basis of economies of scale and lower
production costs In contrast with such positive
developments from refining centres around the world
European refining is being left behind struggling tocompete with more innovative and more profitable
refining centres elsewhere
Increased dependency on oilimportsThe structural imbalance between gasoline churning
European refineries and market requirements for increasing
volumes of diesel places the European industry at a great
disadvantage The economic downturn high crude oil
prices and vehicles efficiencies reduced oil demand and
forced refiners to cut runs imposing additional downward
pressure on refinery margins As a result 16 European
refineries had to shut down since 2008 Data from BPshows France suffered the steepest refining capacity loss
25 while Germany UK and Italy lost 11 11 and 8
respectively between 2008 and 2012 Many refineries are
still under threat of closure Cepsarsquos 88 000 bpd refinery in
Tenerife has been idle for the last four months and
Hellenic Petroleumrsquos Thessaloniki refinery in northern
Greece is also idle both refineries are at risk of permanent
closure MOLrsquos Mantova refinery in Italy is scheduled to
close down at the start of 2014
Diesel demand has been growing strongly in the last
10 years The switch from gasoline to diesel has been
driven by a combination of taxation favouring diesel andefficiencies in diesel engine In contrast to diesel robust
growth gasolinersquos demand in Europe has been declining at
a rate of 3y for more than a decade In Central and East
Figure 1 OECD Europe gasoline exports gasoilimports
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 1922
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2022
18 January 2014 HYDROCARBON
ENGINEERING
Europe gasoline has been growing but in countries such as
Poland Turkey and Ukraine the switch from gasoline to
diesel has been taking place for the last few years The
overall net effect is an increasing gasoline surplus that will
continue to be exported to the US and West Africa
The imbalance between refinery production and
market requirements resulted in a growing deficit of
dieselgasoil and a surplus of gasoline Total gasoildiesel
imports grew from 49 million tpy in 2008 to over
53 million t in 2012 (Figure 1) with the impact of the
recession on demand being generally offset by temporary
or permanent refinery closures Gasoline exports exceeded
48 million t from 2008 although there was a small decline
over the period as a result of refinery closures and
reduction in refinery utilisation rates
Threats and challenges facingthe oil sectorThe weakness of the European refining sector is being
exacerbated by the drastic reduction of gasoline exportsto the US markets A combination of lower US
consumption and domestic production replacing imports
has significantly reduced gasoline import requirements by
the US Refiners in Europe are struggling to find new
markets to replace the volumes of gasoline previously sent
to the US and face tough competition from other refining
centres for markets in West Africa and in the
Mediterranean region
US refiners benefit from discounts on domestic crude
and can afford to send products to far off markets During
2013 US refiners have been sending significant volumes of
gasoline to North and West Africa markets traditionallyconsumers of European gasoline West Africa and North
Africa reportedly increased gasoline imports from the US
in the first half of 2013 by more than 50 US refiners have
been able to gain market share in Africa and also capture
gasoline market share at home thanks to improved
domestic logistics The 5500 miles colonial pipeline from
Texas to New York Harbour has recently increased
capacity by 160 000 bpd reducing gasoline imports
requirements from Europe US gasoline and diesel exports
to Africa are expected to continue well into 2014 and
beyond seriously undermining European competitive
position within these markets
The growing European diesel deficit has also createdexport opportunities for other world refining centres US
refiners have been sending increasing volumes of diesel to
Europe Diesel shipments from the US exceeded 2 million t
in September 2013 the highest volume on record
Additional supply requirements into Europe are met by
imports from Asia and Russia The Jubail refinery in Saudi
Arabia is ready to start exporting diesel to Europe at the
time when Asia oil demand appears to be weakening
Indian refiners such as Reliance are also keen to send
diesel and jet fuel to Europe Exports from Russia into
Europe have increased to 650 000 bpd in 2013 and further
increases are expected in 2014 as more Russian refineriescomplete their upgrades
The upgrade of Russian refineries is also imposing a
serious challenge for the European refining industry
European refiners have for many years relied on supply of
untreated Russian gasoil for further processing The cheap
low quality material enables refiners in Europe to increase
their middle distillate yields and improve their margins
The prospect of diminishing supplies of gasoil will add
extra pressure on the profitability of European refining
operations
No rosy prospects for the oilindustry in 2014The continuing switch from gasoline to diesel in Europe
has boosted diesel growth rates in the past 10 years
However diesel growth rates in Europe are forecast to be
much reduced in the future compared to past performance
due to improved engine efficiencies and market saturation
Spain and France for example are approaching diesel
market share of 80 of total cars on the road Therefore
in the future the European diesel market needs to rely on
real economic growth rather than fuel substitution to
sustain a good level of diesel demand growth Theprospects for European fuel demand in 2014 are going to
be mixed Germany and the UK are already showing good
recovery in diesel demand and both countries are expected
to achieve diesel demand growth of approximately 2 in
2014 relative to 2013 On the other hand Italy Spain
Portugal and Greece have been the worst affected by the
economic downturn and oil demand in those countries are
still expected to decline in 2014
Many refineries in Europe will have to make substantial
investments and switch upgrading capacity from catalytic
cracking to hydrocracking and coking to boost middle
distillate production or face the alternative option ofclosing down These investment decisions are impaired by
current low level refinery profitability which makes the
investment case look unattractive
ConclusionEuropean oil and gas industries are undergoing many
changes and facing many challenges The nature of these
challenges can potentially change the outlook for both the
oil and the gas sectors in Europe Energy dependency and
security of supply are underlying lsquothemesrsquo linking the two
industries European authorities and European consumers
are increasingly concerned with oil and gas supply
reliability and affordable prices Despite all these fears thedependency on oil and gas imports is estimated to increase
in 2014 and beyond The expansion of European gas hubs is
regarded as a positive development by European
consumers and will help to keep gas prices under control
Under intense pressure from consumer countries and facing
competitive challenges from other sources of energy the
gas industry is being forced to renegotiate long term
contracts and accept more flexible price mechanisms
In the oil sector European refinery closures will have
very negative implications from the point of view of both
energy security and prices Europe will become more
dependent on product imports and more vulnerable tosupply disruptions and higher costs as long haul transport
costs and storage have to be added to the price of
imported products
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2122
Call Watlow today for the best thermal solutionfor your energy process application
European Technical Sales Offices
Germany +49 (0) 7253-9400-0
infowatlowde
France +33 1 41 32 79 70
infowatlowfr
Italy +39 (0) 2 458-8841
italyinfowatlowcom
Spain +34 91 675 1292
infowatlowes
UK +44 (0) 115-964-0777
infowatlowcouk
Watlowreg supplies engineering design
support services and products for
Liquefied Natural Gas (LNG)
Gas Dehydration and Sweetening
Catalytic Cracking and Regeneration
Polycrystalline Silicon Ingot Production
Nuclear Pressurizers
Designing and manufacturing complete thermal systems is
Watlowrsquos expertise We have over 20 yearsrsquo experience working
with our energy process customers to determine optimum thermalsolutions for process heating applications
Need a Partner
You Can Trust
8132019 Preview HydrocarbonEngineering January2014
httpslidepdfcomreaderfullpreview-hydrocarbonengineering-january2014 2222
You will need to be a subscriber to read the full editionPlease log in to wwwenergyglobalcom
or alternatively click here to subscribe
For more information about the comprehensive
Hydrocarbon Engineering subscription package please contact uswwwenergyglobalcom
E subscriptionshydrocarbonengineering com
8132019 Preview HydrocarbonEngineering January2014
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