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INTRODUCTION
Hydrocarbon masterplanning is a high-level techno-economic assessment of business opportunities. Its
principal purpose is to help you to select the right project. The quality of the masterplanning work is
vitally important, as good project definition during the early stages when costs are low has a massive
impact on overall value (Figure 1). Get it right and you can reap long-term rewards.
This white paper highlights five key areas for consideration when undertaking hydrocarbon
masterplanning that could help you to select your next projects.
FIGURE 1: GOOD PROJECT DEFINITION IN THE EARLY STAGES, WHEN COSTS ARE LOW, HAS A MASSIVE IMPACT ON
OVERALL VALUE.
MASTERPLANNING FUNDAMENTALS
Hydrocarbon masterplanning is the process of selecting the right projects for a refinery. It is a high-level
techno-economic assessment of business opportunities with the potential to prepare companies for the
challenges ahead. Masterplanning typically includes:
a reality assessment and gap analysis;
base case modelling;
idea generation, screening and selection;
development and modelling tactics;
a high-level feasibility check (looking for showstoppers);
an economic assessment based on gross margin and capital expenditure;
options for next phase and a recommendation on the way forward;
the identification of key investigations and risk assessments for the next project phases;
identification of flexibility opportunities (crudes, feedstocks, products, assets, units, logistics, etc.);
and
main threats and potential responses, road map for the future.
It does not include detailed technical design work, the development and implementation of
recommendations, key investigations or final investment decisions.
A masterplan proposes a way forward into the scouting and basis-of-design project phases, supports
your strategy for meeting future challenges and provides investment proposals for further development.
METHODOLOGY
By way of illustration, let us assume that you need to increase your middle distillates capacity in
response to market changes. You could do this in several ways:
build a new unit;
revamp an existing unit;
upgrade to a higher-activity desulphurisation catalyst; or
improve the refinerys hydrocarbon management another way.
But which option would be the best fit for your particular refinery?
Having established the economic premises and understood your companys strategy, the hydrocarbon
management and project team at Shell Global Solutions would screen the options and make detailed
technical and economic evaluations. The team would estimate the capital cost using our extensive
projects database and establish the operating costs using our operating experience and best-in-class
benchmarks. A scenario-based approach is applied so that the selected option is robust under a wide
range of economic and environmental circumstances.
This option is then developed into a firm investment proposal that aligns with your long-term vision and
overarching strategic objectives.
This may sound simple, but carrying out a good masterplanning study relies on deep insight and
experience. There are many technical and economic factors to consider, some obvious and others less
so. For example, a seemingly value-adding project could potentially turn into a poor investment decision
if integration opportunities are overlooked during the early phases. Can all the existing units cope with
the streams from a new unit? If additional hydrogen is likely to be required, how much will be needed
and from where will it come? Are the existing utilities sufficient? Are there new governmental and
environmental regulations to be applied? There have been cases where refiners have discovered at a
very late stage that the existing boilers could not cope with the extra demand, which has resulted in
operations being dialled down or an additional boiler at considerable expense.
A high degree of interaction is necessary with the technical people at the refinery, but also with other
stakeholders, including traders (more generally, the people buying feedstock and selling products) and
those working in the integrated supply chain. A simple evaluation of refinery economics often only
captures a small proportion of the assets overall value to the interfacing businesses, so the whole chain
must be considered.
Environmentally driven emission and product quality standards, and product demands are changing.
Legislation that controls refinery emissions, for example, sulphur dioxide, nitrogen oxides and
particulates, and product quality is constantly tightening. Europe, the USA and some other countries
have moved by steps to a 10-ppm transport fuel sulphur limit, with Asia and other regions following
closely. Reducing emissions and making cleaner products can put strain on margins.
In some countries, the amount of energy a business uses is being controlled and demand for certain
products may fall as people act to mitigate global warming.
Do you understand how best to meet new specifications to remain compliant while
protecting margins? Do you have the flexibility to burn gas in your asset rather than
liquid fuels to meet emissions limits?
business to another, and some intermediate solutions or different FCC operations may also be a realistic
path forwards.
You need to understand why a particular investment would fit well with your asset and business, and the
feedstocks you would like to be able to process and the products you aim to make.
Consequently, the solution right for your asset and your business is likely to be unique. In that respect, it
is particularly important to establish the margin drivers of a site: to understand why you are doing
business and which products, units, and supply and trading options generate the most value.
4 BE FLEXIBLE
Being flexible applies to projects, feedstocks, asset configurations, products and logistics, and to an
organisation as a whole.
As mentioned, your economic premises may prove incorrect. The economic landscape can change and
there are major uncertainties in the industry, not least the marine bunker fuel situation. For that reason,
building flexibility into projects so that they can be successful in a range of economic environments can
be a major advantage.
Decision makers are increasingly thinking about how to capture the value in optionality and flexibility.
For example, for an average price set, a particular option may not provide much value, but that same
option might generate substantial income for a few weeks or months a year, so it may be worth
considering. Similarly, investing in a particular logistics flexibility may give you an advantage or
product premium for a short period, and you may get a full return on your investment over just a few
weeks. In addition, trading and marketing value derive from building refinery capabilities and they
should be properly reflected when allocating capital expenditure.
Ultimately, the solution needs to be one that is believable: a flexible solution where the risk can be
mitigated and that will succeed in different economic environments.
Increasing feedstock flexibility can be beneficial. Many refineries with good margins can process a
wider range of crudes and intermediate feedstocks (leftover feedstock by other refiners). It is important
to understand crude constraints, such as nitrogen content and acidity, and decide whether you could
profitably process technically challenging opportunity crudes with the right improvement projects.
Logistics are important too. For example, do you have enough tankage to handle the desired products
flexibly?
Organisational flexibility means having the ability to take decisions and respond quickly. In a large
organisation, you have a good chance of being right, but often decisions are taken too late to take full
advantage of the opportunity. For example, traders in your organisation may have the opportunity to
buy cheap crude with an unusual or challenging composition, and need to know quickly whether it can
be processed at your asset. Within a few hours, the opportunity may have gone, so good asset
knowledge and a quick response are vital.
This is not easy, especially as more data are now available. There are numerous technology providers,
consultants and analysts keen to offer data and information, and managers are asking for more
information and analyses before making decisions. However, there is a risk of overanalysing
information, such that decisions are deferred and opportunities are missed. Ultimately, you must make a
decision and that involves risk.
CASE STUDIES
Masterplanning aims to find the most cost-effective solution; one that aligns with your long-term vision
and overarching strategic objectives, is informed by your economic premises, is tested against pricing
scenarios and has the flexibility to work in different economic conditions. To choose a selection of
options, you need to understand your asset and its technical capabilities. Then it is a case of getting
people with good experience of refinery technologies and economics to consider the best options for
the strategy and premises, and to deliver the full potential margin during project development. Although
there is no standard solution that is transferable between refineries, there are trends and projects
implemented in one refinery that could be adapted as options for another, so it pays to use consultants
with wide experience from different assets.
The following case studies give a small taste of the range of projects defined in partnership with Shell
Global Solutions hydrocarbon management and project team.
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The solution was to revisit the routing of gas oil molecules and to fill the hydroprocessing units from low
pressure to high pressure to enable more tonnes of product to be treated per tonne of hydrogen. The
idea was to put the easier molecules in the lower-pressure units and leave the more difficult molecules
for the higher-pressure units with higher conversion potential. This meant going to the kerosene
hydrotreater, the gas oil HDS unit, the ULSD unit and then the HCU. The hydrogen saved by rerouting
the molecules is being used to upgrade more and heavier vacuum gas oil in the HCU and to
desulphurise fuel oil cutter stock to middle distillates.
The result is a US$55 million/year margin improvement. This was achieved quickly and at virtually no
cost by increasing the heavy gas oilextra heavy gas oil and extra heavy gas oilatmospheric residue
cut points, which saved about 30 t/d in hydrogen. The change in cut points unlocked spare capacity in
the HVU and the HCU, and avoided cracking some gas oil into naphtha. More atmospheric residue
and/or vacuum gas oil import can now be routed to the HVU and the HCU, and a deeper cut is made
at the HVU.
Building on this first quick success, moderate capital expenditure solutions are now being implemented,
including deeper flash at the HVU and recovery of thermally cracked vacuum gas oil to the HCU;
desulphurised fuel oil cutter stocks becoming available for finished middle distillates; and conversion at
the visbreaker unit can be increased.
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FIGURE 2: THE FEEDSTOCK DIET HAS BECOME INCREASINGLY FLEXIBLE ALLOWING THE REFINER TO FOLLOW THE OPTIMUM
CRUDE ECONOMICS.
SUMMARY
With high margins that are unlikely to last, now is the time to prepare for the future. Engaging
experienced people in masterplanning can help you to select and define the right project. Key to the
masterplanning process is to set economic premises, to form a strategy, to establish where you stand
and what makes you different, to be flexible in terms of capabilities and configuration, feeds, products
and organisation, and to attract and retain good people.
So what steps should you take to make a robust investment?
In Shell Global Solutions view, it pays to get the early phases right when costs are low but the
implications for overall value are substantial. There is no hard and fast route to selecting the right
project and that project will be unique to your circumstances. However, multi-asset experience is vital
for success.
The hydrocarbon management and project team at Shell Global Solutions typically deliver more than
10 investment planning studies a year for refineries and petrochemical plants around the world. As an
owneroperator with a global portfolio of assets, Shell has broad operational experience, including
first-hand understanding of capital constraints, project development issues, asset start-up and operation,
and optimising integrated margin in volatile environments.
Ask us how we can help you to select the right project.
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ABOUT US
Shell Global Solutions provides technical consultancy and licensed technologies for both the Shell
Group and third party customers within the energy industry. Shell Global Solutions strives to deliver
innovative technical solutions and effective technology to support its customers in their day-to-day
operations and delivery of strategic plans to improve the capacity and performance of existing units;
integrate new process units into existing refineries and petrochemical complexes; incorporate advanced
proprietary catalyst systems (CRI/Criterion) and reactor internals; through to the design of grassroots
refineries.
Shell Global Solutions is affiliated with Shells catalyst companies which innovate and sell catalysts
through a network that includes Criterion Catalysts & Technologies, Zeolyst International, CRI Catalyst
Company and CRI Leuna (formerly known as Kataleuna).
www.shell.com/globalsolutions
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