August 2019
24
August 2019
Transcript of August 2019
August 2019
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CONTENTS
THIS MONTH'S FRONT COVER
August 2019 Volume 24 Number 08 ISSN 1468-9340
03 Comment
05 World news
12 What's up in the land down under?Nancy Yamaguchi, Contributing Editor, explores Australia’s love-hate relationship with fossil fuels, and questions whether the energy sector can meet its carbon pledge.
22 Predicting the IMO impactBevan Houston, Matrix PDM Engineering, USA, makes four predictions on the implementation and impact of the International Maritime Organization’s Marine Fuels Sulfur Content Regulation.
28 Hitting the markJenny Seagraves, ExxonMobil Chemical, USA, and Robert B. Fedich, Essex Consulting, USA, compare amine-based tail gas treating technologies.
34 Valve tray selectionChewPeng Ang, Sulzer Chemtech, Singapore, reviews the requirements and properties that petrochemical and chemical industries look for when selecting valve trays for their distillation processes.
39 Overcoming challenges: part twoIn this concluding article, Izak Nieuwoudt and Neil Sandford, Koch-Glitsch, USA, use case studies to question whether there needs to be a trade-off between capacity and effi ciency in large diameter trayed towers.
43 A balancing act: part twoIn the fi nal instalment of this two part article, David A.G. Suares, Fluor Daniel India Pvt. Ltd, India, outlines the applicability of the unbalanced heat method through two case studies.
49 Purging with nitrogenM. Sirajuddin, Gas Land Inc., USA, outlines how nitrogen generation from membrane technology plays a key role in the LNG industry.
55 LNG troubleshootingDavid Engel, Cody Ridge, and Scott Williams, Nexo Solutions, Amine Optimization Company Division, USA, analyse cryogenic heat exchanger fouling troubleshooting at LNG facilities.
61 Small but mightyMassimo Pardocchi, Bilfi nger EMS GmbH, Germany, explains how small scale LNG plants could open up new markets.
65 Power upManish Verma, TMEIC, USA, details how using medium voltage adjustable speed drives can help plants save energy and improve power factor.
71 A juggling actVinai Misra, Woodward, USA, outlines the important role that compressor controllers play in the successful operation of ethylene plants.
75 Next steps in axial compressionDr Stefan Ubben, MAN Energy Solutions, Germany, looks back at the most important developments of axial compressors and explains why the focus is now on CO2 compressor technology.
79 In the mixMassimiliano Di Febo and Pasquale Paganini, IPC, Italy, suggest a method for analysing centrifugal compressor performance and evaluate the infl uence gas mixture composition has on this.
83 Compressor reviewHydrocarbon Engineering presents a selection of advanced compressor equipment, technology and services that are available in the downstream oil and gas industry.
Mitsubishi Heavy Industries Compressor International’s state-of-the-art equipment packaging and service facility in Houston, Texas, US, will be introducing a newly-constructed compressor test stand. MHI will become the only major OEM in the Gulf Coast Region to have a compressor test stand performing PTC 10 Type 2 Testing. The new test stand will off er suffi cient capacity to conduct performance tests on small to mid-size API 617 centrifugal compressors, enabling MHI to manufacture, assemble and test all in the US. For inquiries, email [email protected]
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COMMENTCALLUM O'REILLYSENIOR EDITOR
L ast month, we celebrated the 50th
anniversary of one of mankind’s greatest
achievements: the Apollo 11 moon landing,
which took place on 20 July 1969.
While doing some research into the essential
role that our industry played in the success
of this project, I stumbled upon a very interesting blog by Jim Cooper, Senior
Petrochemical Advisor for American Fuel & Petrochemical Manufacturers (AFPM).1
Jim outlines exactly why the mission would not have been possible without our
sector, and he’s not even referring to the kerosene that was used as rocket fuel to
actually get man to the moon...
Once in space, the astronauts required special suits to survive the harshest
of environments, and petrochemicals provided the building blocks that made
the advanced materials for these space suits possible. Jim goes on to explain
how Neil Armstrong’s suit was composed of 21 diff erent layers of synthetic
materials, most of which used petrochemicals as the basis for their manufacture.
The outer layers were made from materials including Tefl on® (a brand name
for polytetrafl uoroethylene [PTFE], which is made from chloroform derived
from methane); aluminised Kapton® (a polymide fi lm made from benzene and
mixed xylenes); and Mylar® (a special type of polyester that uses ethylene and
paraxylene). Following a four-layer spacer made from non-woven Dacron®
polyester, the inner layers of the suit included materials such as neoprene-coated
nylon (neoprene is made from butadiene, while nylon uses butadiene as well as
benzene) and polyester laminated with polyurethane (made using benzene or
toluene, as well as ethylene and paraxylene). On top of all that, the space suit
included a liquid cooling garment made out of Spandex, and used vinyl tubing
made out of polyvinyl chloride (the primary building block of which is ethene).
If all that wasn’t enough, we also have the space helmets, which are made from
materials that rely upon petrochemicals. And it is important to remember that
modern space suits use a variety of petrochemical-dependent advanced materials
that were not available when designing the kit for the Apollo 11 crew.
All of this serves to remind us of the essential – although often forgotten – role
that petrochemicals play in so many diff erent aspects of life, both on planet Earth
and beyond.
For more details on the suits worn by the Apollo 11 team, I’d encourage you to
read Jim’s full blog on the AFPM website (details can be found at the bottom of
this page). We have also included a link to this story on Hydrocarbon Engineering’s
new LinkedIn Showcase page, which can be found at www.linkedin.com/
showcase/hydrocarbonengineeringmagazine.
If you’re a member of LinkedIn, I’d encourage you to join our community.
In addition to publishing the latest news highlights from our website
(www.hydrocarbonengineering.com) and snippets from upcoming issues of the
magazine, we regularly delve into issues past and refl ect upon how our industry
has developed throughout the years. Our Showcase page is also a great way to
interact with our content (and fellow readers) and let us know about any features
that you would like to see more of in the year ahead.
1. COOPER, J., ‘One small step for man, one giant leap for petrochemicals’, AFPM, (19 July 2019), https://www.afpm.org/newsroom/blog/one-small-step-man-one-giant-leap-petrochemicals-0
As your compression needs evolve, we meet demand with continuously improved products, to keep your business thriving. Whether you need a new compressor, or superior parts to upgrade your existing units, our innovation keeps you on the cutting edge of compression technology.
WORLD NEWS
August 2019HYDROCARBONENGINEERING
5
Kuwait | KIPIC to expand Al-Zour refinery with Honeywell UOP technology
Kuwait Integrated Petroleum Industries Co. (KIPIC) will use
Honeywell UOP to reconfigure refining and petrochemicals sections of its Al-Zour refinery.
The newly designed complex will increase the plant’s output capacity of fuels and petrochemicals.
Honeywell UOP will revise the configuration and capacity of the refinery’s gasoline production facilities, as well as supply technology licenses, design services, key equipment, and state-of-the-art catalysts and adsorbents to produce clean-burning fuels, paraxylene, propylene and other petrochemicals.
“When completed, this will be the largest integrated refinery and petrochemicals plant ever constructed in Kuwait,” said Bryan Glover, Vice President and General Manager, Petrochemicals & Refining Technologies at Honeywell UOP. “In addition to aromatics and propylene, the Euro-V fuels it will produce will be the cornerstone of Kuwait’s clean fuels initiative.”
Asia | LNG demand in South and Southeast Asia to quintuple by 2040
LNG demand from the South and Southeast Asia region will grow over
fi ve times to reach 236 million tpy by 2040, according to Wood Mackenzie.
The research and consultancy group expects almost half of that demand to come from Indonesia and India. India’s demand is driven by
industrial and city gas, while Indonesia’s is power-driven.
There is active interest in the regasifi cation terminals, but uncertainty lies more in the downstream connectivity. Some existing regasifi cation terminals face low utilisation rates and will remain so
while awaiting pipeline connectivity and demand growth in the long-term.
For Indonesia, LNG imports will only be required in the 2030s, which means in the near term, national oil company (NOC) Pertamina will need to manage its various purchase commitments.
Worldwide | IEA establishes Commission for Urgent Action on Energy Efficiency
The International Energy Agency (IEA) has established an
independent high-level global commission to examine how progress on energy effi ciency can be rapidly accelerated through new and stronger policy action.
Prime Minister Leo Varadkar of Ireland will be the honorary chair of the IEA Commission for Urgent Action on Energy Effi ciency, composed of government ministers, top business executives and thought leaders from around the world.
The members include current and former ministers for energy and environment from Denmark, Germany, Ireland, Japan, Luxembourg, Morocco,
New Zealand and Spain. Dr Amani Abou-Zeid, the African Union Commissioner for Energy and Infrastructure, and Dr Wan Gang, the previous Chinese Minister of Science and Technology, who is known as the ‘father of electric vehicles’ in China, have also agreed to take part.
Mr Richard Bruton, Ireland’s Minister of Communications, Climate Action and Environment, will chair the commission’s ongoing work. Business leaders taking part include Ben van Beurden, the CEO of Royal Dutch Shell; Lisa Davis, the Chief Executive of Gas and Power at Siemens; and Gil Quiniones, the President of the New York Power Authority.
China | World’s largest catalytic dehydrogenation plant successfully started up
McDermott International has announced the recent successful
start-up of the world’s largest catalytic dehydrogenation plant, which is located at Hengli Petrochemical (Dalian) Refi nery Co. Ltd’s site in Liaoning Province, China, and uses McDermott’s Lummus CATOFIN® technology.
This single-train dehydrogenation unit uses a CATOFIN catalyst and heat
generating material (HGM) from Lummus Technology’s catalyst partner, Clariant, to process 500 000 tpy of propane and 800 000 tpy of isobutene for the production of propylene and isobutylene. In addition to the technology licence, McDermott also provided the process design package, training, and technical support for this plant.
WORLD NEWSIN BRIEF
August 2019 HYDROCARBONENGINEERING
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Germany | OMV invests €64 million in new petrochemicals plant
OMV has invested €64 million in the construction of an ISO C4
plant – the building phase of which is to begin in summer 2019 at the Burghausen Refi nery, with operations planned to start in September 2020. From this point onwards, high-purity isobutene will be produced in Burghausen using a brand new technology.
The idea behind the method for heat integration came about through a collaboration by OMV and BASF and a global patent was jointly fi led by both companies. BASF off ers a catalyst system that fulfi ls the
specifi c process requirements. The new unit for the production of high-purity isobutene will be integrated into the existing metathesis plant at the OMV Burghausen Refi nery, which is responsible for the energy-effi cient manufacturing of propylene for the plastics industry. The strategy developed by OMV for heat integration allows up to 80% of the heating energy required by the new process to be met by waste heat from existing facilities. The ISO C4 unit will have a production capacity of approximately 60 000 tpy.
USA | EPA proposes renewable volume obligations for 2020
US Environmental Protection Agency (EPA) Administrator
Andrew Wheeler has issued a proposed rule under the Renewable Fuel Standard (RFS) programme that would set the minimum amount of renewable fuels that must be supplied to the market in calendar year 2020, as well as the biomass-based diesel volume standard for calendar year 2021.
This puts the EPA on target to publish the fi nal RFS Renewable
Volume Obligations (RVOs) on time for the third consecutive year.
Under the action, ‘conventional’ renewable fuel volumes, primarily met by corn ethanol, would be maintained at the implied 15 billion gal. target set by Congress. The EPA is also proposing an advanced biofuel volume requirement for 2020 of 5.04 billion gal., which is 0.12 billion gal. higher than the advanced biofuel volume requirement for 2019.
Chevron Lummus Global (CLG)
has been awarded the licence
and engineering contracts for a
270 000 tpy lubricants base oil
plant at Indian Oil Corp. Ltd’s Haldia
Refinery in West Bengal, India. The
plant will use CLG’s ISODEWAXING
and ISOFINISHING technologies.
ExxonMobil has started production
on a new high-performance
polyethylene line at its Beaumont,
Texas polyethylene plant. The
expansion increases plant production
capacity by 65% or 650 000 tpy,
bringing site capacity to nearly
1.7 million tpy.
After four years of teamwork
for project development and
execution, Axens has announced
that the new PolyFuel® unit at the
Petrobrazi refinery was started-up
and has been fully functional
since April 2019. In June 2019, the
unit test-run was successfully
completed, demonstrating that the
unit performances are in line with
expectations.
DuPont Clean Technologies has
been awarded contracts to supply
Shenghong Petrochemical Group
Co. with a STRATCO® alkylation
technology licence, engineering, and
proprietary equipment. Shenghong is
undertaking a project to design and
construct a new alkylation unit as
part of its grassroots petrochemical
and refining facility with crude oil
capacity of 16 million tpy located in
Lianyungang City, Jiangsu Province,
China.
UAE | ADNOC awards Bilfinger contracts
B ilfi nger’s Middle East division has been awarded multiple
engineering contracts by Abu Dhabi National Oil Co. (ADNOC). The projects entail the provision of front-end engineering design (FEED) for onshore facilities.
Under the terms of the FEED contracts, Bilfi nger Tebodin Middle East will provide engineering services for a new wastewater treatment plant located in a refi nery complex in Ruwais, as well as a basic design
and detailed engineering package to enhance existing sulfur dust control systems at two sulfur handling facilities.
“We are excited to bring Bilfinger Tebodin’s extensive experience, quality and competitive expertise to these important projects, while adding value to the local economy in Abu Dhabi,” said Marco van der Linden, UAE Country Director of Bilfinger Tebodin Middle East.
MOVING FORWARD TOGETHERShell Catalysts & Technologies has brought our catalyst, technology licensing and services businesses together.
We’ve combined over 100 years of knowledge to provide integrated and differentiated customer solutions into the
marketplace. As a leading global energy company that owns and operates its own plants and refineries, we are
uniquely positioned to tackle any challenge through the energy transition. Our solutions have been proven, tried,
and repurposed into something better – and provided to our customers to improve their business for years to come.
Learn more about the promise of Shell Catalysts & Technologies at Shell.com/CT
WORLD NEWSIN BRIEF
August 2019 HYDROCARBONENGINEERING
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Canada | Air Liquide and Shell Chemicals sign renewal contracts
A ir Liquide and Shell Chemicals have announced the signing of
renewal contracts for the supply of oxygen, nitrogen, steam and electricity to Shell’s Scotford facility near Fort Saskatchewan, Alberta, Canada.
Air Liquide will further enhance its Scotford site operations and invest in
the site to enhance its operational effi ciency. This will enable Air Liquide to provide additional long-term value, while continuing to deliver safe, high quality and reliable supply to the Shell Chemicals facility, which produces chemicals used in the manufacturing of several commercial and consumer products.
Haldor Topsoe will build a 10 kg/hr
methanol plant to demonstrate the
company’s electrified, compact eSMR
MethanolTM technology for the production
of sustainable methanol from biogas.
Arcline Investment Management has
announced that it has signed a definitive
agreement to acquire the Reciprocating
Compression division of Baker Hughes, a
GE company.
Frames designed and supplied an
electrostatic colaescer for kerosene
treatment to the Compañía Española
de Petróleos, S.A.U. (Cepsa) San Roque
Refinery, located in the Bay of Gibraltar.
Frames’ electrostatic coalescence
technology is used as a prewash to
reduce the acidity of a kerosene feed
stream.
Woodside Energy Ltd has entered
into a long-term gas sale and purchase
agreement with Worsley Alumina Joint
Venture for the supply of approximately
40 PJ of pipeline gas. The gas is being
supplied to the joint venture from
Woodside’s portfolio of domestic gas
facilities, including the North West Shelf,
Pluto and Wheatstone.
Jacobs Engineering Group Inc. has
added seats to its existing hosted
subscription service of Coreworx
Interface Management (CIM). This will
support extending use to its upcoming
US$400 million refinery rebuild project.
The project is scheduled for operation
in 2020. CIM will be used to manage
the project’s vast number of interfaces
and ensure full collaboration between
contracting parties.
USA | Chevron Phillips and Qatar Petroleum to develop petrochemical plant
Chevron Phillips Chemical Co. and Qatar Petroleum have signed an
agreement to jointly pursue the development of a new petrochemical plant in the Gulf Coast region of the US. The US Gulf Coast II Petrochemical Project (USGC II) will include a 2 million tpy ethylene cracker and two 1 million tpy high-density polyethylene units.
Chevron Phillips Chemical will be the majority owner with a 51% share and Qatar Petroleum will own the remaining 49% of the project. Chevron
Phillips Chemical would provide project management and oversight and be responsible for the operation and management of the facility.
The preliminary cost of USGC II is approximately US$8 billion. Chevron Phillips Chemical and Qatar Petroleum expect a fi nal investment decision (FID) no later than 2021, followed by full funding and the award of engineering, procurement and construction (EPC) contracts, with targeted start-up of the new facility in 2024.
USA | Sulzer acquires GTC Technology
Sulzer has extended its petrochemical process capability
further with the purchase of GTC Technology.
The move adds a range of licensed technologies and additional engineering resources to Sulzer’s existing process plant design, construction and commissioning capabilities, expanding its off ering to process industries worldwide.
With this signifi cant acquisition, Sulzer Chemtech is consolidating its role as a petrochemical process technology provider. Adding to the
company’s capacity to design and deliver a broad range of off erings from refi nery column internals to complete bioplastic (PLA) production plants, the new expanded business broadens Sulzer’s capability into a much wider territory. The complementary scope of GTC’s expertise pushes Sulzer Chemtech further into technology licensing for the refi nery and petrochemical industry, including complete engineering packages, proprietary equipment, and the supply of chemical solvents and catalysts.
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WORLD NEWS
August 2019 HYDROCARBONENGINEERING
10
Russia | TechnipFMC awarded contract for Arctic LNG 2 Project
TechnipFMC has been awarded a major engineering, procurement
and construction (EPC) contract by Novatek and its partners for the Arctic LNG 2 project located in the Gydan peninsula in West Siberia, Russia.
This development will consist of three LNG trains, each with a capacity of 6.6 million tpy, which will be installed on three gravity-based structure platforms.
TechnipFMC will execute this project under a lump sum and
reimbursable basis. It will cover the EPC of the three LNG trains and associated topsides, which will be manufactured on a modular basis in Asian and Russian yards.
Nello Uccelletti, President Onshore/Off shore at TechnipFMC, commented: “We are extremely honoured to be entrusted with this new contract by Novatek and its partners. We are leveraging our successful track record on the Yamal LNG project and notably the modular fabrication scheme.”
GCC | KBC awarded PIPs for three refineries
KBC (A Yokogawa Company) has announced that it has been
awarded Profi t Improvement Programs (PIPs) for three oil refi neries in the Gulf Cooperation Council (GCC) region.
The PIPs, which are focused on improving techno-economic aspects of refinery operations, will deliver improved safety, reliability and profitability outcomes that
enhance triple bottom line performance.
Via the PIPs, KBC will identify and implement a series of on-site productivity and effi ciency improvements across each of the refi neries focusing on capacity utilisation, molecular management, yield improvement, corrosion and fouling mitigation and energy effi ciency.
India | Grace licenses polypropylene technology to Nayara Energy
W . R. Grace & Co. has licensed its UNIPOL® PP Process
Technology to Nayara Energy.Located at the Vadinar Refi nery
in Gujarat, India, the new, world-scale capacity UNIPOL PP facility will utilise 450 000 tpy of propylene feedstock.
Nayara Energy intends to produce phthalate-free homopolymer products for the Indian market using one of the most
advanced PP process and catalysts technologies available.
Grace’s all gas-phase technology provides a broad range of polypropylene homopolymers, random copolymers, and impact copolymers in the industry. This process technology has no moving parts inside the reactor and has a reliable, safe, and stable operation that leads to lower capital, operating, and maintenance costs.
DIARY DATES10 - 12 September 2019Turbomachinery & Pump SymposiaHouston, Texas, USA
tps.tamu.edu
17 - 19 September 2019GastechHouston, Texas, USA
www.gastechevent.com
24 - 25 September 20194th International Rotating Equipment ConferenceWiesbaden, Germany
www.introequipcon.com
25 - 26 September 2019Tank Storage AsiaSingapore
www.tankstorageasia.com
14 - 16 October 2019AFPM Operations & Process Technology SummitSan Antonio, Texas, USA
www.afpm.org/conferences
22 - 24 October 2019Chem ShowNew York City, New York, USA
www.chemshow.com
29 October 2019Hydrocarbon Engineering: Catalysts 2019Online conference
www.hydrocarbonengineering.com/catalysts
4 - 7 November 2019Sulphur 2019 + Sulphuric AcidHouston, Texas, USA
events.crugroup.com/sulphur/home
4 - 7 November 2019ERTCWarsaw, Poland
ertc.wraconferences.com
10 - 14 November 2019The International Water ConferenceOrlando, Florida, USA
eswp.com/water/overview/
11 - 14 November 2019ADIPECAbu Dhabi, UAE
www.adipec.com
MissionCritical
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August 2019 12 HYDROCARBONENGINEERING
August 201913HYDROCARBONENGINEERING
A ustralia is a resource-rich country. It is a major
exporter of minerals, energy, and food, yet it has
worked diligently to avoid over-reliance on
resource extraction. It has an open market and a
diverse economic base. Australia is a key member in
numerous international organisations including the
Organization for Economic Cooperation and Development
(OECD), the World Trade Organization (WTO), the Group
of Twenty (G20), and Asia-Pacifi c Economic Cooperation
(APEC). The country has also expanded trade and economic
cooperation via bilateral agreements and free trade
agreements with virtually every major economy in the
Asia-Pacifi c region. Australia is viewed as highly attractive to
foreign investment, which has made it possible to complete
long-term, capital-intensive projects including LNG
installations.
Yet there is a limit to how many more drilling, mining,
and heavy industry installations Australia can accommodate.
The country’s economy is carbon-intensive on a per-capita
basis. Its population is approximately 24.8 million,
accounting for only 0.32% of the world’s population. Yet
according to BP, Australia accounted for 1.2% of global
carbon emission in 2018. BP’s ‘Statistical Review of World
Energy’ reported that Australia relied on fossil energy for
92.8% of primary energy needs in 2018 – one of the highest
levels among OECD countries.
It is noteworthy that the subtitle of BP’s 2019 Statistical
Review is ‘Energy in 2018: an unsustainable path’. BP reported
that global coal consumption grew for the second
consecutive year, following three years of declines.
Carbon dioxide (CO2) emissions expanded by 2%, twice the
average increase seen between 2007 and 2017.
Nancy Yamaguchi, Contributing Editor, explores Australia’s love-hate
relationship with fossil fuels, and questions whether the energy sector
can meet its carbon pledge.
August 2019 HYDROCARBONENGINEERING
14
BP’s Chief Economist, Spencer Dale, observed that some of
the world’s increase in energy demand stemmed from
severe weather – a symptom of global climate change. Thus,
the cycle worsened in 2018. Dale concluded “Last year’s
developments sound yet another warning alarm that the
world is on an unsustainable path.”1
Australia is in the midst of battling global climate
change, and the country has relatively more to lose if the
battle is lost. The actions taken on this issue will aff ect the
Australian energy industry more than any other single
factor. This article will discuss Australia’s love-hate
relationship with fossil energy, the challenge of global
climate change, the growth of the LNG industry, the
shrinking of the downstream oil industry, and the impact
this has had on refi ned product trade.
Fossil dependence and the short-lived carbon taxAustralia possesses signifi cant reserves of oil, natural gas, and
coal. Developing, using, and trading these fuels contributed
enormously to Australia’s overall economic development and
prosperity in past decades. They also provide for the great
majority of Australia’s energy needs today. Fossil energy
accounts for 92.8% of Australian primary energy. Clearly,
whittling away at this fuel mix is an immense undertaking. Yet
Australia must take steps to reduce its emissions. The
government remains determined to meet its Paris Agreement
target of a 28% reduction in emissions between the 2005
baseline and 2030. But recent developments have placed
Australia even further away from meeting this pledge.
It was clear more than a decade ago that coal and fossil
energy use would have to be cut, and that a carbon tax
would be the logical way to achieve this. The
government, led by the Labor Party, instituted a carbon
tax in July 2012. However, there was not enough
bipartisan support for the tax. The opposition
Liberal-National coalition quickly launched a campaign
with a catchy ‘axe the tax’ slogan, won control of the
government, and repealed the tax in July 2014. Australian
coal consumption, which had been declining for fi ve
years, ratcheted back up in 2015 and 2016. CO2 emission
also rose in 2014, 2015, and 2016.
Australia has made some progress on its overwhelming
dependence on fossil energy. As Figure 1 illustrates, fossil
energy dependence was 95% in 1965, and it gently trended
up to a peak of over 97% in the 2007 – 2009 period. Coal
use hit an all-time high in 2008, which was the year that
oil prices spiked, making domestic coal even more
economically attractive. Oil prices collapsed in 2009, and
oil demand began to rise. During the decade from
2008 – 2018, BP reports that Australian oil demand rose at
1.7% per year, natural gas use rose at 3.8% per year, and
alternatives and renewables use grew at 11.5% per year.
Coal use shrank at a rate of 2.7% per year.
Coal’s downward path has been bumpy, however. Coal
demand fell in the years leading to the carbon tax, then
edged back up when the tax was repealed. According to
the Department of Environment and Energy, coal use in
the electric power sector fell for fi ve years in a row from
2008 – 2009 to 2013 – 2014 before rising again in
2014 – 2015 and 2015 – 2016. Despite this small recovery, coal’s
share of electric power generation shrank at a rate of 1.5% per
year on average during the decade from 2007 – 2008 to
2017 – 2018. The share of renewables expanded at a rate of
8.3% during that time, led by hydro, wind, and solar power.
Unsurprisingly, Australia’s CO2 emissions also rose as fossil
energy use increased. The 2008 peak in coal use
corresponded with a peak of 421 million t of CO2 emissions,
as shown in Figure 2. Government actions including the
carbon tax helped fl atten the upward trend in carbon
emissions. CO2 emissions fell to 402.6 million t in 2013. The
carbon tax was repealed in 2014, and CO2 emissions crept
back up to 417.1 million t in 2018.
The debate continues over how much should be spent,
and by whom, to protect the environment. The carbon
intensity of coal, for example, is approximately twice that of
natural gas, but Australia has a massive coal industry.
Australia is the world’s largest exporter of coal, with exports
in 2018 valued at US$47 billion. Many coal deposits are
located close to consumers, and favourable transport
economics channel coal into the domestic market. Coal is
considered a low-cost source of energy, and it accounted for
30.8% of Australia’s energy mix in 2018. This level has been
cut signifi cantly, from 44.3% a decade earlier in 2008. Still, it
remains one of the highest percentages in OECD, exceeded
only by the Czech Republic and Poland, who joined the
OECD in the mid-1990s.
According to the Australian government, the country’s
resources and energy sector accounted for 8.8% of Australian
GDP in 2018.2 These commodities include iron ore, LNG, coal
and metals. This economic sector represented 57% of goods
exports in 2018 and provided 250 000 jobs.
Figure 2. Australia CO2 emissions (million t). Source: BP.
Figure 1. Australia primary energy consumption (% fossil). Source: BP.
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These are major contributions to the economy. Some
segments of the population balk at the projected costs of
cutting emissions if it endangers these profi table ventures.
Yet the costs of doing nothing are also high, and the true
costs may be hidden and hard to quantify. Scientists have
noted that Australia is especially vulnerable to climate
change. Fresh water supplies are limited, and many inland
areas are extremely dry. Drought, hot weather, and high
winds can lead to bushfi res. The next rain cycle or storm can
quickly give way to localised fl ooding. This jeopardises
communities, wild and domesticated animals, agricultural
areas, and infrastructure. Already in 2019, two cyclones
(Trevor and Veronica) hit Northern and Western Australia in
quick succession, bringing heavy rains and destructive winds.
Higher sea surface temperatures feed higher rainfall and
stronger storms.
Australia’s coastal area and populationThe majority of Australians have been concerned about
global climate change for years. A decade ago, in 2009, the
Australian government produced a report titled ‘Climate
Change Risks to Australia’s Coasts’. The vast majority of the
population lives along coastal areas and, as a trade-oriented
country, Australia’s coastal areas and ports are vital to the
energy industry and the overall economy. There are fi ve
cities in Australia with populations of over 1 million: Sydney
(4.9 million), Melbourne (4.5 million), Brisbane (2.3 million),
Perth (2 million), and Adelaide (1.3 million). Each of these
cities is famous for coastlines and ports, and dependent
on them for livelihoods.
Sydney is home to Port Jackson and Botany Bay. Port
Jackson was the site of the fi rst European settlement on
the Australian mainland. Botany Bay’s deep-water port
handles container ships and oil and gas. Sydney Harbour
also gave birth to an unusual unit of measure: the
Sydharb, defi ned as the amount of water in the harbour,
estimated to be approximately 562 gigalitres.
Melbourne is situated in the middle of the huge,
sheltering arms around Port Phillip Bay. The Port of
Melbourne is the busiest commercial port in the country.
The nearby Port of Geelong handles dry bulk and oil. The
Port of Hastings handles oil products, steel, and other
commodities.
Brisbane is on the eastern coast famous for some of
Australia’s fi nest beaches, all along the Sunshine Coast to the
north and the Gold Coast to the south. It is a focal point for
Australia’s tourism industry. Further north is the iconic Great
Barrier Reef, the world’s largest coral reef system.
Perth is the site of Fremantle Harbour, the largest cargo
port in Western Australia. Western Australia’s only refi nery is
BP’s gasoline-oriented Kwinana facility, around 32 km down
the coast from Perth.
Port Adelaide was one of the earliest European
settlements in South Australia, built along the Port Adelaide
River. The port was built to support the settlement, and it
now handles a wide array of products including minerals, ores
and metals, oil products, motor vehicles, foods, and fertilizers.
Australia LNG projects and exportsNatural gas use is around half as carbon intensive as coal.
Around the world, countries concerned with reducing
carbon emissions have increased the use of natural gas and
pared down the use of coal and oil when possible.
Liquefying natural gas made it possible to develop and
transport remote resources. Over the past decade, Australia
has emerged as a global leader in LNG, poised this year to
capture the crown from Qatar as the largest exporter in the
world. Although oil prices were relatively low in the past
few years, Australia has continued with the expansion of
LNG infrastructure. Moreover, Australia has worked to build
regasifi cation facilities in its more populous states so that
quantities of LNG are used domestically.
Recent developments include Chevron’s Wheatstone
and Gorgon projects, Woodside’s Pluto project, INPEX’s
Ichthys project, and Shell’s Prelude fl oating LNG (FLNG)
project. Australia also completed projects using coalbed
methane as feedstock. The Queensland Curtis LNG project
was the world’s fi rst LNG project of this type. In 2018,
Australia was the world’s second largest exporter of LNG,
following Qatar. BP reported that Australian LNG exports
totalled 91.8 billion m3 in 2018 vs 104.8 billion m3 from Qatar.
However, by late 2018, Australian LNG loadings were
exceeding Qatari loadings, and Australia is forecast to take
the number one spot in 2019 as Shell’s Prelude project
comes fully online. Shell announced in late December 2018
that initial production had commenced, and that the
project was ramping up.
Figure 3. Australian LNG exports by destination (billion m3). Source: BP.
Table 1. Australia LNG projects
Name Capacity (million t) Start date
North West Shelf Venture 16.3 1989
Darwin LNG 3.7 2006
Pluto 4.3 2012
Queensland Curtis 8.5 2014
Gladstone LNG 7.8 2015
Australia Pacific LNG 9 2015
Gorgon 15.6 2016
Wheatstone 8.9 2017
Ichthys 8.9 2018
Prelude 3.6 2019
Total 86.6
Source: Department of Industry, Innovation and Science
August 2019 HYDROCARBONENGINEERING
18
Table 1 presents a summary of Australia’s LNG projects, as
reported by the Department of Industry, Innovation, and
Science.
According to the Australian Department of the
Environment and Energy, national LNG exports in fi nancial
year (FY) 2017 – 2018 totalled nearly 61.691 million t valued at
over AUS$30.9 billion. Japan was the largest customer,
importing 27.422 million t, followed by China, which
purchased 19.644 million t, and South Korea, which imported
6.028 million t. The Department noted that new customers
have emerged, including small markets of New Caledonia and
Timor-Leste.
Australia’s LNG exports have soared, and they are reaching
a larger number of customers. Figure 3 shows the growth and
diversifi cation of exports from 1997 through 2018. Japan is the
single-largest customer, but exports to other Asian customers
have grown signifi cantly. In the early years, Japan took
essentially all (more than 95%) of Australia’s output, with
occasional cargoes going to the US or Europe (Spain and the
UK.) South Korea received its fi rst cargo in 2000, and exports to
South Korea rose to 10.8 billion m3 in 2018. Taiwan and India
both started purchasing Australian LNG in 2005. Taiwan
imported 3.5 billion m3 in 2018, while India imported
2 billion m3. China received its fi rst cargo of Australian LNG in
2006, and China has emerged as a major consumer. Exports to
China jumped from a modest 1 billion m3 in 2006 to
32.1 billion m3 in 2018 – nearly as much as Japan imported.
Australian oil product demandAustralia’s domestic sales of petroleum products have grown
at a robust rate of 2.2% per year on average between
FY 2010 – 2011 and 2017 – 2018. Demand grew from
893 600 bpd in 2010 – 2011 to over 1.041 million bpd in
2017 – 2018. Diesel and jet fuel have posted the most rapid
growth. The demand barrel is high in value, with the
percentage share of fuel oil and other products falling from
6.1% in 2007 – 2008 to 3.3% in 2014 – 2015. Fuel oil demand fell
from 27 000 bpd in 2007 – 2008 to 12 400 bpd in 2012 – 2013,
but it crept back up to 16 900 bpd in 2016 – 2017. This may in
part be explained by the declining price of oil, the
introduction of Australia’s carbon tax in 2012, and its repeal in
2014, as discussed.
Australia’s gasoline demand fell from 331 500 bpd in
2007 – 2008 to 312 100 bpd in 2014 – 2015. It crept back up
to 316 500 bpd in 2017 – 2018. The market is growing
more oriented toward diesel, demand for which grew
from 314 800 bpd in 2007 – 2008 to 486 800 bpd in
2017 – 2018. Gasoline’s share of the demand barrel fell
from 37.8% in 2007 – 2008 to 30.4% in 2017 – 2018,
while diesel’s share has risen from 35.9% in 2007 – 2008
to 46.8% in 2017 – 2018. Jet fuel demand also has grown
quickly, with demand rising from 108 600 bpd in
2007 – 2008 to 161 600 bpd in 2017 – 2018.
Ethanol blended gasolines of up to 10% ethanol by
volume began to be phased in beginning in 2006. The
State of New South Wales was the fi rst to institute a
blending mandate, and Queensland followed. The
mandates are limited in scope and area, and biofuels
have had to compete with inexpensive oil over the past
few years. Sales of ethanol blended gasoline jumped to
57 900 bpd in FY 2010 – 2011, but sales languished, and they
averaged just 40 300 bpd in 2014 – 2015. An uptick in
demand to 44 500 bpd came in FY 2017 – 2018 as additional
ethanol blended gasoline was required in Queensland. A
steady upward trend would require additional blending
mandates and/or more favourable economics.
Australian fuel demand has grown, yet refi nery output
has fallen. Figure 4 compares the trend in demand with
refi nery production. In 2010 – 2011, fuel sales exceeded
refi nery output by 178 000 bpd. In FY 2017 – 2018, the supply
gap had tripled, with fuel sales exceeding refi nery
production by 547 000 bpd. The following section discusses
the contraction of Australia’s refi ning sector.
Australian refining: plans for expansion turn to contractionThe 1980s and 1990s were known as the time of the Asian
demand boom. By the mid- to late-1980s, oil prices had
collapsed, and demand began to grow in some Asian
countries at double-digit rates. Essentially every country in
the region expanded its refi ning industry during that time.
Australian refi nery capacity expanded also. For a time,
Australian refi ning companies and potential new entrants
explored the idea of building export-oriented refi neries
targeted at the growing Asia-Pacifi c market. These ideas
included proposals to build sophisticated grassroots
refi neries in the Northern Territory and Western Australia.
These states possessed oil and gas reserves that hitherto
had been less attractive because of their distance from
larger population centres. The Asian Boom provided more
incentive to develop Western Australian basins, which were
also essential to replace supplies from mature and declining
oilfi elds in Victoria and South Australia.
But these were not low-cost developments, and
Australia remained a net importer of refi nery feedstock.
Building export refi neries would therefore have relied upon
imported feedstock, likely shipped in from the Middle East,
and product then would be shipped into Asia, where it
would have had to compete with other exporters, including
Singapore. The economics were not compelling, and
Australian export refi nery proposals were postponed and
ultimately cancelled.
Australia’s downstream companies then began to
contemplate the outlook for growth in their existing
Figure 4. Australia’s refinery output falling below demand product sales (‘000 bpd). Source: Department of Environment and Energy.
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August 2019 HYDROCARBONENGINEERING
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market area. Some of them decided to close their refi neries
entirely. Thus, not only did Australia fail to become a major
export refi ning hub in the region, the refi ning industry
began to shrink. The domestic market was limited, and
gasoline demand was forecast to decline. Domestic crude
oil production was declining as well, pointing to a future of
imported crude feedstocks. The Department of
Environment and Energy reported that the percentage of
indigenous refi nery inputs fell to 20.3% in 2017 – 2018.
Figure 5 traces how Australia’s crude refi ning capacity
peaked at 829 000 bpd in 2002, dropped below
700 000 bpd in 2006, and collapsed to 452 000 bpd in 2016
before creeping back slightly to 454 000 bpd in 2018.
Caltex closed its Kurnell refi nery at the end of 2014. BP
closed its Bulwer Island refi nery in 2015. Shell already had
begun to divest itself of refi nery assets in many parts of
the globe, and this included Australia. Shell announced
that it would convert its Clyde refi nery to a product
terminal in 2013, and Shell sold its Geelong refi nery to the
oil trading company Vitol in 2014. This refi nery is now
known as the Viva Vitol refi nery.
Today, only four refi neries remain in operation: BP
Kwinana, Caltex Lytton, ExxonMobil Altona, and Vitol Viva
Geelong. These refi neries share a number of similarities.
They are mid-sized, they rely on catalytic cracking as their
central upgrading technology, and they use a
combination of catalytic reforming, alkylation, and
isomerisation for octane provision. The refi neries are
oriented toward gasoline. Australian refi nery output in
FY 2017 – 2018 was 39.8% gasoline, 32% diesel, 13.3% jet
fuel, 2.7% fuel oil, 3.4% LPG, and 8.7% other products.
Australia now depends on imports for most of its
needs. Diesel sales in FY 2017 – 2018, for example,
were 486 800 bpd. Refi nery production was only
158 300 bpd, less than 33% of demand. Domestic
refi neries satisfi ed 62% of the gasoline market.
Gasoline production in 2017 – 2018 was 197 000 bpd,
against sales of 316 500 bpd.
Refined product exports dwindle, imports growAustralia’s refi ned product exports have fallen, while
imports have risen. As Figure 6 illustrates, refi ned
product imports have more than doubled from
300 000 bpd in 2010 – 2011 to 626 000 bpd in
2017 – 2018. Looking back further in history, in
2001 – 2002, Australia imported only around
74 000 bpd of refi ned products. The wave of refi nery
closures brought a steady increase in imports.
Middle distillate imports have grown swiftly. In
FY 2001 – 2002, middle distillate imports were only
26 000 bpd. In FY 2007 – 2008, this jumped to
160 700 bpd. By 2017 – 2018, diesel imports had
expanded to 346 800 bpd. In total, Australia’s imports
of refi ned product increased at rates averaging 11.1%
per year between 2010 – 2011 and 2017 – 2018. This has
amounted to an increase of nearly 325 500 bpd of
refi ned products in just seven years.
Product exports have fallen and stagnated in
recent years. In 2001 – 2002, product exports were
114 000 bpd. This fell to 58 600 bpd in 2010 – 2011, and
product exports averaged 60 900 bpd in 2017 – 2018.
Exports exclude international bunkering, which were
reported at 38 600 bpd in 2017 – 2018. Most of this
(33 650 bpd) was aviation fuels.
Most of Australia’s product exports are LPG. In
FY 2017 – 2018, LPG accounted for 65% of the 60 900 bpd
exported. Most of this is shipped to Asia-Pacifi c
destinations such as Japan, South Korea, Indonesia, and
Singapore, but cargoes travel as far as Africa.
Gasoline and diesel exports are now quite small: in
FY 2017 – 2018, gasoline exports were 2600 bpd, and diesel
exports were a mere 1500 bpd.
Australia is a key supplier of fuel to some of the
smaller markets in the Pacifi c, including the Solomon
Islands, New Caledonia, Papua New Guinea, Vanuatu, Fiji,
French Polynesia, and Samoa. Although the amounts are
small, in many cases Australia is the sole source of supply
for these islands, and the export avenues therefore have a
greater signifi cance than the volumes suggest.
Conclusion: can Australia reduce its carbon intensity as pledged?There is no doubt that fossil energy resources have
contributed enormously to the Australian economy.
Figure 6. Australia’s refined product imports are growing, exports stagnating (‘000 bpd). Source: Department of Environment and Energy.
Figure 5. Australia’s refinery capacity (‘000 bpd). Source: BP.
There is also no doubt that the industry is under pressure,
and that new projects and developments will face
increasingly stringent environmental regulations. Despite
eff orts to reduce fossil fuel consumption, it still provides
for nearly 93% of Australia’s primary energy needs. The
country committed itself to reducing carbon emissions,
but the path toward reducing carbon intensity has been a
political battle. Australia must cut coal use if it is to meet
its goals, but recent years have stalled progress. The
country possesses massive coal reserves, and is the world’s
largest exporter of coal, with exports in 2018 valued at
US$47 billion. BP notes that the reserve-to-production
ratio for Australia’s coal is 304 years. However, a growing
number of Australians fear that they may not have a viable
country in 300 years if global climate change continues to
worsen.
On the downstream petroleum side, several Australian
refi neries have already closed, and the remaining four still
have work to do. The industry lobbied for a
postponement to 2027 of the switch to 10 ppm maximum
sulfur gasoline, stating that a rapid move to this standard
could threaten their viability. The European Union moved
to Euro 5 standards in 2009, so Australia is lagging far
behind its European allies. Auto manufacturers have
criticised the oil industry, noting that the most advanced
and effi cient engines require ultra-low sulfur fuel. The
Australian Institute of Petroleum was quick to point out
that each remaining refi nery contributes approximately
AUS$1 billion per year to the local economy, and that over
AUS$2 billion has been invested in the refi neries over the
past fi ve years. They now have eight years to make the
investments needed to produce 10 ppm sulfur gasoline.
LNG is the brightest spot among the fossil fuels, since
so many importing countries rely on LNG as a means of
reducing carbon emission from coal and oil. By late 2018,
Australia was exporting more LNG than Qatar, and it
appears that Australia will be the world’s largest LNG
exporter this year. Australia is expanding its infrastructure
to increase natural gas use domestically as well.
Australia’s 2020 target was to reduce greenhouse gas
emissions 5% below 2000 levels. Early on, the Department
of the Environment and Energy stated that the country
would beat this target. But the carbon tax was enacted
and quickly repealed, and Australian CO2 emission rose. BP
reports that year 2018 emissions were 16% above 2000
emissions, making its initial pledge nearly impossible to
achieve. In November 2016, Australia ratifi ed the Paris
Agreement and the Doha Amendment to the Kyoto
Protocol. Under the Paris Agreement, Australia must
reduce emissions by 26 – 28% below 2005 levels by the
year 2030. Australia intends to cut per-capita emissions by
half, since its per-capita emissions are so far above most
OECD countries. But for the past few years, Australia has
been moving in the wrong direction, raising the question,
can Australia reduce its carbon intensity as pledged?
References1. ‘Statistical Review of World Energy 2019’, BP, Group Chief
Economist’s analysis.2. ‘Resources and Energy Quarterly’, Australian Department of
Industry, Innovation and Science, (March 2019).
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