Fueling Refineries With Gas

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abarrelfull wrote on 04 Jan 2011 10:28
Tags: gas orl refinery reliance valero

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A number of recent news items got me thinking about the potential impact of refineries switching fuels. Refineries use a lot of energy, and that energy has been typically supplied by fuel oil, produced from the crude that is being processed. When refiners talk about their production numbers, this volume is usually hidden, so if a refinery starts to purchase its fuel, the production volumes would increase.

Currently there is a big price differential between Fuel Oil and Natural Gas, and the indications are that this will not go away in a hurry. So we are starting to see a lot more interest in substituting fuel oil with natural gas as the energy source for refineries.

Reliance is the latest.

Reliance Industries Ltd is mulling the establishment of a USD 1.2 billion liquefied natural gas (LNG) import terminal on either the East or West Coast to meet demand at its refineries and petrochemical plants.

This however comes hot on the heels of Valero.

Generating power through liquefied natural gas rather than more expensive fuel oil has significant potential to reduce costs both for the refinery and the island.

Bearing in mind that this refinery is only just being restarted after 18 months due to poor economics, it shows how energy strategy can impact refinery feasibility.

Finally we have a company that actually puts a figure on the savings. ORL who has signed an agreement to buy natural gas from Egypt, has great expectations from the deal.

Annual Saving for the Group is Estimated to be in Excess of US$130m, Based on Full Year Consumption, Following Connection to the Natural Gas Delivery Line in Haifa Bay and on Current Fuel Prices.

Nort only does this approach reduce the cost to the refiner, it increases the amount of product available for sale. If this fuel oil is cracked to produce diesel or gasoline, it amounts to an effective way of converting excess natural gas into scarce oil products, without converting any vehicles at all.