US refiners face gasoline sulfur/octane pinch with Tier 3
Two key findings from Hoekstra Trading’s 3-year research project on Tier 3 (10 ppm sulfur) gasoline were:
- The octane destruction accompanying desulfurization of gasoline for Tier 3 will be five times higher than the industry was led to believe.
- the US refining industry has not made the necessary investments in hydro-desulfurization capacity to provide for flexible, profitable production of 10 ppm sulfur gasoline.
The first conclusion came from extensive pilot plant and field tests on commercial desulfurizers which showed octane loss on fluid catalytic cracking (FCC) gasoline desulfurizers for Tier 3 is typically 2.5 octane numbers versus the industry-expected 0.5 octane number loss.
The second conclusion came from comparing the actual configuration of US refinery fluid catalytic cracking (FCC) process trains to that required for reliable and profitable production of Tier 3 gasoline. Industry studies completed in 2013 showed these FCC trains would require 88 capital investment projects in new and revamped hydro-desulfurization units to bring them up to requirements. EPA allowed 6 years (2013-2019) for these investments to occur, and our study showed virtually none of that capital investment occurred.
Skyrocketing octane price and stock price impact.
The retail value of octane has continued its relentless increase to now over 4 times its value when the Tier 3 studies were done.
And since Tier 3 kicked-in in January 2021, there has been a shift in refining profit margins and stock prices away from refiners with weak FCC process train capability to those with strong FCC process train capability.
Join us in Galveston on Wednesday May 11 2:30 pm when George Hoekstra will present “Clean gasoline and the FCC” covering this topic. Roger Read, Senior Analyst, Refining and Integrated Oil & Gas from Wells Fargo Corporate & Investment Banking will also be present to participate in the discussion.
Every refining executive should have a comprehensive understanding of the technical, regulatory, and economic aspects of Tier 3 gasoline, the sulfur credit program and how they will affect your profitability. Those wanting a quick education on the Tier 3 issue should get Gasoline Desulfurization for Tier 3 Compliance, which will make you an expert in a day. Once you have become expertly informed of the problem, you can save yourself and your team years of research by buying Hoekstra Research Report 8. We saw the problem coming, gathered the required data, ran the simulations and analyzed the results so you and your team can concentrate on initiating informed remedies that will immediately go to the bottom line. The report includes detailed pilot plant and commercial field test data, full detail of sulfur credit prices, process and economic models to help refineries quickly improve gasoline optimization, investment decisions, sulfur credit strategy and refining margin capture in the Tier 3 world. You will also get the spreadsheet tools we developed that others are using now to help manage Tier 3 gasoline production and credit strategy.
Don’t get caught panic buying after the credits spike!
