Natural Resources Canada
The overall economics or viability of a refinery relies on the interaction of three key components: the choice of crude oil used (crude slates), the complexity of the refining gear (refinery configuration) and the desired type and quality of merchandise produced (product slate). Refinery utilization rates and environmental considerations additionally influence refinery economics.
Utilizing dearer crude oil (lighter, sweeter) requires much less refinery upgrading but supplies of light, candy crude oil are reducing and the differential between heavier and extra sour crudes is growing. Point Using cheaper heavier crude oil means more funding in upgrading processes. Costs and payback durations for refinery processing units have to be weighed against anticipated crude oil prices and the projected differential between light and heavy crude oil prices.
Crude Oil Input
Crude oil is the first enter into the petroleum refining industry. While Canada is a big and growing net oil exporter, crude oil imports satisfy greater than half of domestic refinery demand. The transportation costs related to moving crude oil from the oil fields in Western Canada to the consuming areas in the east and the better selection of crude qualities make it more economic for some refineries to make use of imported crude oil. Subsequently, Canada’s oil financial system is now a dual market. Refineries in Western Canada run domestically produced crude oil, refineries in Quebec and the japanese provinces run primarily imported crude oil, while refineries in Ontario run a mix of both imported and domestically produced crude oil. In more moderen years, japanese refineries have begun working Canadian crude from east coast offshore production.
Whatever the source of crude oil, the worth is set on the planet market and both imported and domestic crude oil is priced based on the availability/demand steadiness and pricing dynamics on the world oil market. In this respect, Canadian refiners are “price takers” and have little or no influence on the price they pay for crude oil. Utilizing costlier crude oil (lighter, sweeter) requires less refinery upgrading but supplies of gentle, sweet crude oil are reducing and the differential between heavier and extra sour crudes is growing. Using cheaper heavier crude oil means extra funding in upgrading processes. Prices and payback intervals for refinery processing models must be weighed against anticipated crude oil prices and the projected differential between mild and heavy crude oil costs.
Crude slates and refinery configurations must take into consideration the type of products that can ultimately be wanted in the market. The quality specifications of the final products are additionally increasingly essential as environmental requirements change into more stringent.
Various kinds of crude oil yield a distinct mix of products relying on the crude oil’s pure qualities. Crude oil varieties are typically differentiated by their density (measured as API gravity) and their sulphur content. Crude oil with a low API gravity is considered a heavy crude oil and typically has the next sulphur content material and a bigger yield of decrease-valued products. Due to this fact, the decrease the API of a crude oil, the decrease the worth it has to a refiner as it can both require more processing or yield the next percentage of decrease-valued by-products similar to heavy fuel oil, which normally sells for less than crude oil.
Crude oil with a high sulphur content material known as a sour crude while candy crude has a low sulphur content. Sulphur is an undesirable characteristic of petroleum products, significantly in transportation fuels. It could hinder the efficient operation of some emission control applied sciences and, when burned in a combustion engine, is launched into the atmosphere where it may possibly form sulphur dioxide. With increasingly restrictive sulphur limits on transportation fuels, sweet crude oil sells at a premium. Sour crude oil requires more extreme processing to take away the sulphur. Refiners are generally keen to pay more for mild, low sulphur crude oil.
Most refineries in Western Canada and Ontario had been designed to course of the light candy crude oil that’s produced in Western Canada. Unlike leading refineries in the U.S. Canadian refineries in these areas have been slower to reconfigure their operations to process decrease value, less desirable crude oils, instead choosing to rely extensively on the abundant, domestically produced, gentle, candy crudes. So long as these lighter crudes had been accessible, refining economics were inadequate to warrant new investment in heavy oil conversion capacity.
However, with rising oil sands production and the declining production of typical gentle sweet crudes, refineries in Western Canada and Ontario have began to make the investment required to process the increasing provide of heavier crudes. A lot of this investment by the large integrated oil corporations (corporations which are involved in each the manufacturing of crude oil and the manufacturing and distribution of petroleum products) is related to making certain a market for their growing oil sands manufacturing.
In Western Canada and Ontario, nearly 50% of the crude oil processed by refiners is typical gentle, candy crude oil and another 25% is top quality synthetic crude oil. Artificial crude is a light crude oil that’s derived by upgrading oil sands. Most of the remaining crude oil processed by these refineries is heavy, bitter crude. The crude slate is predicted to alter considerably within the years forward as refiners enhance their capacity to course of heavy crude oil price prediction oil and lower quality synthetic crudes.
Refineries in Atlantic Canada and Quebec are dependent on imported crudes and are inclined to process a extra numerous crude slate than their counterparts in Western Canada and Ontario. These refiners have the capability to purchase crude oil produced almost anyplace on the planet and subsequently have unbelievable flexibility in their crude buying choices. Roughly 1/three of crude processed in Eastern Canada and Quebec is conventional, gentle candy crude and one other 1/3 is medium sulphur, heavy crude oil. The remaining 1/three is a mixture of sour light, bitter heavy and really heavy crude oil. The crude slate in Japanese Canada is predicted to stay way more static than that in Western Canada and Ontario, as these refiners usually are not constrained by the quality or volume of home crude production.
A refiner’s choice of crude oil will probably be influenced by the type of processing units on the refinery. Refineries fall into three broad classes. The simplest is a topping plant, which consists solely of a distillation unit and doubtless a catalytic reformer to supply octane. Yields from this plant would most carefully replicate the natural yields from the crude processed. Usually solely condensates or light candy crude can be processed at one of these facility except markets for heavy gasoline oil (HFO) are readily and economically obtainable. Asphalt plants are topping refineries that run heavy crude oil because they are only serious about producing asphalt.
The next degree of refining known as a cracking refinery. This refinery takes the gasoline oil portion from the crude distillation unit (a stream heavier than diesel gas, however lighter than HFO) and breaks it down additional into gasoline and distillate parts utilizing catalysts, high temperature and/or strain.
The final degree of refining is the coking refinery. This refinery processes residual gasoline, the heaviest material from the crude unit and thermally cracks it into lighter product in a coker or a hydrocraker. The addition of a fluid catalytic cracking unit (FCCU) or a hydro cracker significantly will increase the yield of higher-valued merchandise like gasoline and diesel oil from a barrel of crude, allowing a refinery to course of cheaper, heavier crude while producing an equal or greater volume of high-valued products.
Hydrotreating is a course of used to remove sulphur from finished merchandise. As the requirement to provide extremely low sulphur merchandise will increase, further hydrotreating functionality is being added to refineries. Refineries that presently have giant hydrotreating capability have the ability to process crude oil with a better sulphur content.
Canada has primarily cracking refineries. These refineries run a mixture of gentle and heavy crude oils to satisfy the product slate required by Canadian consumers. Historically, the abundance of domestically produced gentle sweet crude oils and a better demand for distillate products, resembling heating oil, than in some jurisdictions diminished the need for upgrading capability in Canada. Nevertheless, in newer years, the supply of light candy crude has declined and newer sources of crude oil tend to be heavier. Many of the Canadian refineries are now being geared up with upgraders to handle the heavier grades of crude oil at present being produced.
Refinery configuration can also be influenced by the product demand in every region. Refineries produce a wide range of products together with: propane, butane, petrochemical feedstock, gasolines (naphtha specialties, aviation gasoline, motor gasoline), distillates (jet fuels, diesel, stove oil, kerosene, furnace oil), heavy gas oil, lubricating oils, waxes, asphalt and still gas. Nationally, gasoline accounts for about forty% of demand with distillate fuels representing about one third of product sales and heavy fuel oil accounting for less than eight percent of sales.
Total petroleum product demand is distributed virtually equally throughout the regions, with Atlantic/Quebec, Ontario and the West every accounting for about one third of complete gross sales. Nevertheless, the mix of products varies fairly considerably among the areas.
In the Atlantic provinces, the place furnace oil (light heating oil) is the first supply of home heating, distillate fuels make up forty% of product demand, and heavy gas oil, used to generate electricity, accounts for another 24%. Gasoline sales account for less than 30% of product demand.
In Quebec, the place pure gas and hydroelectricity are prevalent, distillate gas has a 34% share of sales and gasoline is about 40%. Equally, in Ontario, gasoline gross sales outpace distillate sales and account for more than forty five% of whole product demand, with distillates at lower than 30%.
In Western Canada, agricultural use is one in all the first drivers behind distillate demand and gasoline and distillate each account for about 40% of complete petroleum product sales. These regional differences in product demand have influenced the configurations of the refineries in every area.
By comparison, in the U.S. the demand for gasoline is far larger than distillate demand and, subsequently, refiners configure their installations to maximize gasoline manufacturing. Gasoline gross sales account for almost 50% of demand whereas distillate gross sales account for less than 30% of product demand. In several Western European international locations, most notably Germany and France, policies exist that encourage using diesel engines making a a lot stronger distillate component. Gasoline accounts for lower than 20% of petroleum product gross sales in Europe.
The US refineries are configured to process a large share of heavy, excessive sulphur crude and to produce large portions of oil price prediction gasoline, and low amounts of heavy fuel oil. U.S. refiners have invested in more advanced refinery configurations, which permit them to make use of cheaper feedstock and have a better processing functionality.
Canada’s refineries would not have the high conversion functionality of the US refineries, because, on average, they course of a lighter, sweeter crude slate. Canadian refineries additionally face a better distillate demand, as a % of crude, than those discovered within the U.S. so gasoline yields are not as excessive as those within the US, but are nonetheless significantly larger than European yields.
The connection between gasoline and distillate sales also can create challenges for refiners. A refinery has a limited vary of flexibility in setting the gasoline to distillate production ratio. Past a certain level, distillate manufacturing can solely be elevated by also increasing gasoline manufacturing. Methanol Recovery Column For that reason, Europe is a significant gasoline exporter, primarily to the U.S.
One other important element of refining economics is the utilization charge, or how effectively the refining advanced is working. The Canadian refining sector has undergone vital rationalization within the last three a long time. Within the early 1970s, there were 40 refineries in Canada. Since that time a number of elements have contributed to a major rationalization of company operations. The oil price shocks in 1973 and 1979 led to improvements in the efficiency of vehicles and to gas switching from oil to natural gas and electricity. This curbed the demand for petroleum products and resulted in a considerable surplus of refining capability. The spare capacity resulted in increased competitors among refiners, which additional eroded refining margins. Much less efficient, smaller refiners have been closed, generally in favor of latest larger amenities.
Weak economic situations within the early 1980s put extra pressure on the business to rationalize their operations, leading to a major number of refinery closures. At this time there are 19 refineries producing petroleum products in Canada. Nonetheless, as a consequence of expansions on the remaining refineries over the past decade, present refining capability in Canada is larger than it was within the 1970s.
In recent times, growth within the demand for petroleum merchandise has led to an improvement in capability utilization, rising working efficiency and lowering prices per unit of output. Because of this, refinery utilization rates have been above 90% nationally for six of the last ten years. A utilization rate of about 95% is taken into account optimum as it permits for regular shut downs required for maintenance and seasonal changes.
Refinery capacity is based on the designed dimension of the crude distillation unit(s) of a refinery (often referred to as nameplate capability). Often, by way of upgrades or de-bottlenecking procedures, refineries can process more crude than the nameplate measurement of the distillation unit would indicate. In such cases, a refinery is ready to attain a utilization fee higher than one hundred p.c for short durations of time.
Not all investment choices are driven by refinery economics. Refiners additionally make investment decisions because of voluntary actions or legislative and regulatory necessities. In recent times, governments and business have directed considerable effort towards lowering the environmental impression of burning fossil fuels. Most of the initiatives have been geared toward providing ‘cleaner´ fuels for Canadians. Petroleum refining is a really sophisticated and capital-intensive industry. New environmental rules require industry to make additional investments to meet the more stringent standards.