Tier 3 Q&A part 2

The following questions were asked in two web conferences this summer

What is the cost of compliance for different processing methods?

•It depends mostly on the hydroprocessing capabilities of the FCC train
•Refineries with a feed pretreater and post treater have lowest cost
•Refineries with just a pretreater or just a post treater have higher cost
•The cost of replacing lost octane will be measured in $billions/year 

Could the low estimated cost of compliance have assumed investments in FCC pretreat?

•Yes, that is a big part of the reason for the 5-fold error
•Another big reason is US refiners have more variable crude slates
•And we feed coker and other nasty streams to FCCs
•Other contributing factors are given in our reports

Were there major investments to get to Tier 2?

•Tier 2 (30 ppm S) was enacted Feb 10, 2000 and phased in 2004-2006
•93 new FCC-train hydroprocessing units were installed in the USA

What do you mean by “there’s been no net investment” in FCC train hydroprocessing capability for Tier 3?

•This refers to the distribution of FCC-trains in three  categories: 
1. Refineries with feed pretreat + gasoline posttreat
2. Refineries with feed pretreat only
3. Refineries with gasoline posttreat only
•The 2014 expectation was that capital investments would be made
•They would shift this distribution substantially toward category 1
• Investment was nowhere near the 82 projects / $3 billion expected
•Most of them were tweaks compared to the big upgrades expected
•Some capabilities were lost
•The net result is no change among the 3 categories of capability

What went wrong to cause underinvestment in FCC-train hydrotreaters for Tier 3?

•The root cause was bad information on incremental octane loss
•This was known to be the most critical and least certain factor
•0.5 octane loss was accepted with no substantiation
•Our pilot plant tests showed much higher octane loss
•Field tests on 14 units verified our pilot plant findings
•The correct number is 2.5 octane loss, five times higher
•The difference means higher compliance costs by $billions/year

Next post – more Q&As from the RefComm and AFPM conferences

For more information, watch these short videos:
Tier 3 – a wolf in sheep’s clothing?
contact: George.hoekstra@hoekstratrading.com +1 630 330-8159

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