CAPTURING THE MAXIMUM VALUE IN THE POST-IMO 2020 WORLD Jock Hughson, Licensing Technology Manager, Shell Global Solutions

DEFINITIONS AND CAUTIONARY NOTE

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AGENDA

The implications of IMO MARPOL 73/78 Annex VI

Potential response options

Planning your response

Selected response options

Case study: How Shell Pernis refinery has increased crude flexibility and simultaneously minimised high-sulphur fuel oil (HSFO) production

The takeaways

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1. SCRUBBERS 2. LNG 3. LOW-SULPHUR FUEL

THE IMPLICATIONS OF IMO MARPOL 73/78 ANNEX VI

The International Maritime Organization (IMO) will tighten the global cap on the maximum sulphur content of marine fuel oil (MFO) from 3.5 to 0.5%.

There are three options for the shipping industry:

3mbd of HSFO bunkers will need to switch to 0.5%-sulphur MFO

Blending low sulphur gas oil and vacuum gas oil (VGO) is an expensive solution.

Many refiners are not prepared for 2020 and have limited low-cost/timely solutions

Issues include:

Space constraints

High capital expenditure (capex)

Safe sludge handling

Issues include:

Space constraints

High capex

Only for new vessels

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RESPONDING TO IMO 2020 WILL BE HIGHLY COMPLEX – AND EXPENSIVE – FOR MOST REFINERS

Key factors that will influence individual refiners’ investment decisions:

Existing process units

How discounted they believe HSFO will be, and for how long

The amount of capex they can afford.

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Do nothing Implement operational changes Evaluate possible options Low capex/quick implementation

solutions Medium capex solutions High capex solutions

How will you respond?

Shell has made Masterplans for all of it’s refineries

POLL Question

How will you refinery respond to the upcoming changes to the Marine Fuel Oil specification;

– Invest in conversion to eliminate High Sulphur fuel oil

– Invest in facilities to reduce High Sulphur fuel oil

– Feedstock changes to reduce HS Fuel Oil production

– Other

– Not affected by the changes in regulations

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Residue conversion, %

HIGH CAPEX, LOW ROI

MEDIUM CAPEX, MEDIUM–HIGH ROI

LOW CAPEX, HIGH ROI

Cap

ex

Delayed coker

SDA + ebullated bed HCU

Deep-flash VDU

SDA + residue gasification revamp

Crude flexibility

Residue slurry HCU

Gasification

SDA + HCU revamp

SRU revamp Add vacuum flasher downstream VBU

YOUR OPTIMUM RESPONSE DEPENDS ON REQUIRED RESIDUE CONVERSION AND AFFORDABILITY

Profitability analysis Risk assessment Integrated economics Implementation road map

Supply and demand Environmental and product quality requirements Business needs Business constraints (eg refinery configuration, capex) Price scenarios (eg HSFO discounts)

Long-term vision (customer led)

Study premises

Long list of options

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Recommended IMO 2020 response option

Long list of identified options and ideas

Short list of options

Initial selection

Option Screening

Option Development

Customer led

Joint development

DEVELOPING YOUR IMO 2020 RESPONSE: THE HYDROCARBON MASTER PLAN STUDY

WHY SHOULD REFINERS CONSIDER CRUDE FLEXIBILITY?

A flexible crude diet could lift current refining margin by up to $1/bbl.

Often requires only moderate capex.

Critical to determine impact of Investments in residue conversion on crude flexibility.

Fully assessing the risks is key:

– Higher risk of reliability issues and unplanned shutdowns (high TAN, high Nitrogen)

– But these can be mitigated. Shell is looking for opportunities to use opportunity crudes, and mitigating the risks, in all its refineries.

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LOW CAPEX RESPONSE OPTION: CRUDE FLEXIBILITY

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Are you operating at the limits of your crude acceptance matrix? If not, you may be failing to capture maximum

value. Some high total acid number (TAN) crudes are

low in sulphur. This refiner could add more high TAN crudes

and still be within its acceptable quality window. High TAN crudes are typically lower cost, so

bring major cost savings while reducing HSFO. Crude changes require a new look at the

catalyst and operations of the conversion and hydroprocessing units.

LOW CAPEX RESPONSE OPTION: SHELL DEEP-FLASH VACUUM DISTILLATION UNIT (VDU)

Key benefits: Low capex Longer onstream unit cycle (four years +) Higher margin, less downtime, reduced

fuel oil production Improved plant availability Lift more and better quality VGO

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VGO HVU

CDU AR

Kerosene/diesel

UCO

Naphtha Gasoline

HCU

CCR

Shell deep-flash technology unlocks your downstream assets, while reducing HSFO.

VGO HVU

CDU AR

Naphtha CCR Gasoline

Gasoline LCO

Slurry oil

CFH

VR: Fuel oil Bitumen

FCC

VR: Fuel oil Bitumen

LOW CAPEX RESPONSE OPTION: LEVERAGE LATEST-GENERATION CATALYSTS AND REACTOR INTERNALS

Comprehensive catalyst portfolio to help produce <0.5 wt% sulphur fuel oil:

Higher HDS, metals and CCR reduction catalyst activity and stability

Higher conversion capability to distillates

Integrating Criterion catalysts and Shell reactor internals to handle heavier and more difficult feeds:

Deasphalted oil (DAO), heavy VGO, ebullated bed VGO, visbreaker (VB) VGO in hydrotreating and hydrocracking units

Increase throughput to handle the heavier feedstocks generated

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LOW CAPEX RESPONSE OPTION DOWNSTREAM VISBREAKER UNIT (VBU)

Key benefits:

Low capex

Reduce fuel oil production

VB gas oil can be upgraded in a hydrotreater or hydrocracker

VBU can process VGO if lower capex solution required

Reduce HSFO by almost 30%

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VGO HVU

CDU AR

Kerosene/diesel

Naphtha

CCR Gasoline/BTX

Fuel oil Bitumen

HCU

UCO VB GO

VBU VF

MEDIUM CAPEX RESPONSE OPTION: SOLVENT DEASPHALTER (SDA) + HCU REVAMP

Comparatively moderate capex

Can help to

– Reduce fuel oil yields

– Increase middle distillates

– Improve crude flexibility

– Improve net cash margin position

No regret investment: a full residue conversion scheme can be added later (phased investment).

Reduce HSFO by almost 50%

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VGO HVU

CDU AR

Kerosene/diesel

Naphtha

UCO For potential LSFO blending?

Asphaltenes: Bitumen Power Gasification

DAO SDA

CCR

HCU

Gasoline

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Moderate capex

Different schemes available depending on existing refinery configuration.

Can help to

– Reduce fuel oil yields

– Increase middle distillates

– Improve net cash margin position

Reduce HSFO by almost 70%

VGO HVU

CDU AR

Cracked gasoil

Gasifier, pelletiser or power

DAO

Residue SDA TGU

Cracked VGO

Asphalt

MEDIUM CAPEX RESPONSE OPTION: INTEGRATING SDA AND VB/THERMAL CONVERSION TECHNOLOGIES

VBU

MEDIUM CAPEX RESPONSE OPTION: COKER DEBOTTLENECKING WITH SDA

Medium capex

Can help to

– Reduce fuel oil yields

– Increase middle distillates

– Improve crude flexibility

– Improve net cash margin position

Proven operation of hydrocracking DAO and heavy coker gas oil (HCGO)

Reduce HSFO by 100%

Generates Petcoke

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VGO HVU

CDU AR

Kerosene/ diesel

Naphtha CCR Gasoline/

BTX

Coke

HCU DAO

UCO HCGO

Coker

SDA

PROOF POINT: SHELL PERNIS INVESTS IN SDA ROSE TO INCREASE CRUDE FLEXIBILITY AND MINIMISE FUEL OIL PRODUCTION

Shell’s Pernis refinery in the Netherlands is

– Installing an SDA ROSE unit

– Revamping its residue desulphurisation unit to a DAO hydrocracker.

Compared with other technology options, the ROI could be extremely high (over 15%)

– Tight integration with other units will be vital.

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AR HVU HVGO HCU Naphtha

Distillates VR

FUEL OIL

Gasoline Distillates

Naphtha Distillates

VR HDT

Hydrogen

FCC VGO

Gasifier

PROOF POINT: SHELL PERNIS INVESTS IN SDA ROSE TO INCREASE CRUDE FLEXIBILITY AND MINIMISE FUEL OIL PRODUCTION

Shell’s Pernis refinery in the Netherlands is

– Installing an SDA ROSE unit

– Revamping its residue desulphurisation unit to a DAO hydrocracker.

Compared with other technology options, the ROI could be extremely high (over 15%)

– Tight integration with other units will be vital.

Value delivered 33% reduction in fuel oil production Increased middle distillate yield Improved crude flexibility

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AR HVU HVGO HCU Naphtha

Distillates VR

FUEL OIL

Gasoline Distillates

Naphtha Distillates

VR HDT

Hydrogen

FCC VGO

Gasifier

AR HVU HVGO HCU Naphtha

Distillates

VR

Gasifier

Gasoline Distillates

Naphtha Distillates

SDA ROSE

Hydrogen

FCC DAO HCU

RESIDUE CONVERSION OPTIONS WILL REQUIRE AN IMPROVED SULPHUR HANDLING SYSTEM

Shell’s SCOT ULTRA technology features two improved technologies and offers a performance step change.

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SCOT ULTRA

Criterion’s C-834 high-activity, low temperature catalyst

Shell/Huntsman’s high-selectivity JEFFTREAT ULTRA family of solvents

Optimised process design

Drivers

Stringent sulphur dioxide (SO2) emission regulations, including World Bank standards (150 mg/Nm3)

Minimising capex and operating costs

Differentiators

New generation of catalyst (Criterion)

New generation of solvent (Shell)

Low-temperature tail gas treating

Largest footprint in the market (+60%)

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1

2 The highest residue conversion technologies may not be the most profitable investment. Integrated solutions may provide better returns

There is no one-size-fits-all solution to upgrade the BoB. Develop a master plan to identify the optimal responses.

3 Shell Global Solutions, as an operator and catalyst provider, has accumulated vast experience on how refiners can integrate their technology blocks to achieve cost effective solutions to HSFO management.

THE TAKEAWAYS

Questions and answers