vibeke leal - hc fuels
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fuel consumptiomTRANSCRIPT
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Has coal displaced petcoke as the cement industrys fuel of choice ?
Vibeke LealDirector Coal and Petcoke TradingHC Fuels Ltd
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Slide 2 - 11.06.08McCloskey Houston Conf Vibeke Leal
1. Introduction
HeidelbergCement Markets & prices Milling & combustion CO2 emission factors Logistics The smart fuel for cement Conclusions
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Slide 3 - 11.06.08McCloskey Houston Conf Vibeke Leal
2. HeidelbergCement Group
77,000 employees EUR 17 billion turnover Operations in 60+ countries Vertically integrated in most countries Annual coal burn about 8 million mt Petroleum coke burn 0.5 (1.5 million mt
potential)
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HeidelbergCement Africa
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HeidelbergCement Far East
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HeidelbergCement Europe and Central Asia
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HeidelbergCement Middle East
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HeidelbergCement North America
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HC Fuels Ltd
Wholly owned subsidiary of Heidelberg Cement
London based Team of 10 with expertise in fuel &
emissions trading and logistics Key objective fuel cost optimisation
for HC Group plants globally Responsible for;
Procurement of fuels (coal, petroleum coke, oil and gas) for HC Group companies
Procurement of fuel related products such as lubricants
Trading emissions on behalf of HC Group companies, including CERs from Group CDM projects
Supplying third party clients
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Slide 10 - 11.06.08McCloskey Houston Conf Vibeke Leal
3. Markets and Prices
Trading ranges : Coal(API2 Steam Coal, Basis 6000 Kcal pr Kg, CIF ARA)
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Argus/McCloskey
Forw ard Market (based onArgus.D.C.I. 23/05/08)
Range USD 25 - 50
Range USD 50 - 145
Range USD 75 - 169
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Slide 11 - 11.06.08McCloskey Houston Conf Vibeke Leal
Coal outlook short term
US expected 20 mi mt in 2008, forecast now 12 mi mt
China net importer in March. Some claim China will need to import 250 mi mt over next 12 months.
China faces power shortage this summer with 1% of power plants now out of coal
25 power plants in India listed as critical with less than 7 days stock
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Slide 12 - 11.06.08McCloskey Houston Conf Vibeke Leal
Coal outlook long term
600 GW additional global power demand (50% coal) = 500 million mt additional coal demand by 2012
Strong Asian demand growth likely to outstrip supply
HIGHER COAL COSTS
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Slide 13 - 11.06.08McCloskey Houston Conf Vibeke Leal
Trading ranges : Petroleum cokePetroleum coke FOB US Gulf
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2002 2003 2004 2005 2006 2007 2008
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.+35 HGI 6.5% S
.+50 HGI 6.5%S
.+50 HGI 4.5%S
.+35 HGI 6.5% S Forward
.+50 HGI 6.5%S Forward
.+50 HGI 6.5%S Forward
Range USD 5 - 28
Range USD 8 - 35
Range USD 20 - 60
Range USD 45-125
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Slide 14 - 11.06.08McCloskey Houston Conf Vibeke Leal
Fuel Oil2%
HVFO0.2%
Gas2%
Alternative Fuels21%
Coal24%
Petcoke42%
Lignite/Shale/Schiste9%
CEMBUREAU EL 21 June 2007
(Average:Austria, Denmark, Finland, Germany, Luxembourg, The Netherlands, Spain, United Kingdom, Czech rep., Estonia, Hungary, Latvia, Poland, Romania)
Energy consumption by European Cement Plants - 2005
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Slide 15 - 11.06.08McCloskey Houston Conf Vibeke Leal
World Petroleum Coke Market Profile - 2004
Power Generation
20%
Iron & Steel6%
Cement34%
Calcining23%Residential
1%Inventory
2%
Other Industry10%
Permanent Storage
4%
Total = 77 Million MT
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Slide 16 - 11.06.08McCloskey Houston Conf Vibeke Leal
New Cokers
Source Cembureau
0123456789
Mt
2007 2008 2009 2010 2011
Year
US &CanadaRest ofWorld
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Slide 17 - 11.06.08McCloskey Houston Conf Vibeke Leal
Forward pricing
All new petcoke before 2015 will be low HGI, high sulphur
Prices for high sulphur should drop from USD 85/mt FOB today as demand weakens
Prices for 4.5% sulphur expected to remain firm for longer
Low/high sulphur spread expected to increase
PETCOKE PRICES WILL FOLLOW COAL AS POWER PLANTS SWITCH BETWEEN FUELS
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Slide 18 - 11.06.08McCloskey Houston Conf Vibeke Leal
4. Petcoke - milling & operational constraints
MILLINGGrinding material finer due to low volatile
CALCINER OPERATIONDont want un burnt carbon in cyclone stage - cause build ups, increase CO and sulphur cycle.
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Slide 19 - 11.06.08McCloskey Houston Conf Vibeke Leal
Process constraints
SULPHATISATIONHigh sulphur in fuel or raw material generally bad news - blockage
NOX EMISSIONSPetcoke generate higher NOX than coal in calciner
CLINKER GRINDABILITYReplacement of 100% coal by 100% petcoke on main burner increases power demand for milling cement by 5kWh/te
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Slide 20 - 11.06.08McCloskey Houston Conf Vibeke Leal
Operating cost increase on petcoke
Additional cost of milling 100% petcoke v 100% coal = EUR 1/mt
Additional cost of milling clinker produced by firing petcoke instead of coal = EUR 0.2/mt of clinker = EUR 2/mt of fuel
Assume no additional blockage clearing costs
Total additional cost = EUR 3/mt of fuel or 3% of delivered plant cost
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Slide 21 - 11.06.08McCloskey Houston Conf Vibeke Leal
Additional cost on 100% petcoke
Additional CO2 & milling cost 14% of CIF fuel cost
Above assumption assumes single fuel use. Blending coal and petcoke increases storage costs, incurs blending costs and poor blendingimpacts on clinker quality.
Petcoke further disadvantaged by lower fuel efficiency, higher cleaning costs and more downtime on kiln
TAKING ACCOUNT OF ALL COSTS, PETCOKE MUST BE SOLD AT A MINIMUM DISCOUNT OF 20% TO COAL ON CIF BASIS, THERMALLY EQUATED
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Slide 22 - 11.06.08McCloskey Houston Conf Vibeke Leal
5. Co2 emission factors
Current price for emitting 1 Mt of Co2 is 26.50 Euro
Emissions from the production of Cement incl.1) Co2 from the process related to raw material2) Co2 from burning kiln fuel
Rule of thumb: 1 Mt of clinker emits ca 1 Mt Co2
Why is this important to consider when youare buying fossil fuels?
The emissions from the kiln fuel varies from fuel to fuel and can have a dramatic impact on the life cycle cost of the fuel.
The EU Emission Trading Scheme has made reducing emissions an important commercial objective for cement plants.
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Slide 23 - 11.06.08McCloskey Houston Conf Vibeke Leal
Emission factors
Enclosed are emission factors for Phase I of the EU ETS given bythe Deutsche Emissionshandelsstelle for Germany:
Fuel quality Emission factor: Mt Co2 /GJ
A. API2 Coal Russian coal 0.0950 South African 0.0960 Average 0.0955
B. Lignite Rheinland 0.0980
C. Petcoke All 0.1090
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Slide 24 - 11.06.08McCloskey Houston Conf Vibeke Leal
Emission costs for Lignite, Coal and Petcoke
Lignite Coal Petcoke
Total Mt 113,227 100,000 80,014
GJ/Mt 22.19 25.13 31.41
Total GJ for fuel volume 2,513,000 2,513,000 2,513,000
Emission factor mt Co2/GJ 0.098 0.0955 0.109
Mt of Co2 pr Mt of fuel 2.18 2.40 3.43
Total Mt Co2 for fuel volume 246,274 239,992 274,288
Price of Co2 pr Mt 26.50 26.50 26.50
Price of Co2 pr Gj 2.60 2.53 2.89
Total Co2 cost in Euro for fuel volume 6,526,261 6,359,775 7,268,625
Co2 disadvantage in Euro compared to coal 166,486 - 908,850Co2 disadvantage in Euro pr GJ compared to coal 0.07 - 0.36Co2 disadvantage in Euro pr Mt compared to coal 1.47 - 11.36
Comparison of the emissions costs from the use of Int. coal (API2), Petcoke and lignite in Germany.
Same CVin GJ
Different amount of co2 emissions
Additional Co2 cost compared to steam coal
Different Tonnage
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Slide 25 - 11.06.08McCloskey Houston Conf Vibeke Leal
Example, Fuel Life Cycle Cost pr GJ
4.14 4.51
0.35 0.32 0.32
0.25
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Med Petcoke 4.5% CFR Med Coal
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GrindingLogistics incl. StorageFuel cost FOB ARA b/b
Fuel cost prior toburning
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Slide 26 - 11.06.08McCloskey Houston Conf Vibeke Leal
Example, Fuel Life Cycle Cost pr GJ
4.14 4.38
0.38 0.32
2.89 2.53
0.25 0.32
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CFR Med 4.5% P.coke CFR Med Coal
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EmissionsGrindingLogistics incl. StorageFuel cost FOB ARA b/b
Fuel cost prior toburning
Fuel cost after burning
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Slide 27 - 11.06.08McCloskey Houston Conf Vibeke Leal
6. Logistics
Many European plants are supplied via their own ports
Coastwise coal holds big advantage for delivery to shallow draught ports
USG petcoke cargoes must be broken in deep water ports for transfer to coasters
Typical additional cost for discharge, re-load and short sea freight EUR 12/mt
Refineries must offer petcoke at a discount of over 30%, thermally equated, to attract coastal cement plants back from coal.
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Slide 28 - 11.06.08McCloskey Houston Conf Vibeke Leal
So why havent petcoke prices dropped ?
Sold out cement market but for how long? Incremental fuel demand from petcoke only
plants Milling capacity limitations designed on
7500kcal fuel Failure to install explosion suppression
systems White cement More sophisticated stock management by
refineries Utility petcoke trial programmes underway Face value price differential modest High and firm international coal prices Petcoke market illiquid with most deals PACE
related
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Slide 29 - 11.06.08McCloskey Houston Conf Vibeke Leal
7. Alternative Fuels the new petcoke?
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Alternative Fuel Utilisation in Germany 2004
Source HTC
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Slide 30 - 11.06.08McCloskey Houston Conf Vibeke Leal
Alternative fuels use by the Cement Industry, 2004
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EU Average 17%
Source HTC
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Slide 31 - 11.06.08McCloskey Houston Conf Vibeke Leal
Can cement plants burn 100% alternative fuels ?
Each change of energy mix leads to changes of the kiln heat balance which reduces kiln production
Lower heat content of AF forces the kiln operator to increase energy supplied to the kiln in comparison with primary fuels.
Using AF lowers the nominal clinker output of the kiln
but:YES !
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Slide 32 - 11.06.08McCloskey Houston Conf Vibeke Leal
8. Conclusions
Cement has not abandoned petcoke but those who have gone will come back reluctantly
DISCOUNT OF AT LEAST 25% WILL BE NEEDED TO CHANGE FUELLING STRATEGY FOR INLAND PLANTS, perhaps 35% for coastal plants
CEMENT PLANTS WILL PLACE EVEN HIGHER PRIORITY ON INCREASING USE OF ALTERNATIVE FUELS
Has coal displaced petcoke as the cement industrys fuel of choice ?1. Introduction2. HeidelbergCement GroupHC Fuels Ltd3. Markets and PricesTrading ranges : Coal(API2 Steam Coal, Basis 6000 Kcal pr Kg, CIF ARA)Coal outlook short term Coal outlook long term Trading ranges : Petroleum cokePetroleum coke FOB US GulfWorld Petroleum Coke Market Profile - 2004New CokersForward pricing4. Petcoke - milling & operational constraintsProcess constraintsOperating cost increase on petcokeAdditional cost on 100% petcoke5. Co2 emission factorsEmission factorsEmission costs for Lignite, Coal and PetcokeExample, Fuel Life Cycle Cost pr GJExample, Fuel Life Cycle Cost pr GJ6. LogisticsSo why havent petcoke prices dropped ?7. Alternative Fuels the new petcoke?Alternative fuels use by the Cement Industry, 2004 Can cement plants burn 100% alternative fuels ?8. Conclusions