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Petcoke: an alternative fuel source

An alarming rise in the Middle East’s use of oil to generate power threatens the region’s exports of the resource. Robert Giglio says a refinery byproduct can be an economical alternative energy source.

Unlike anywhere else in the world, the Middle East depends strongly on oil to produce electricity. About 30 per cent of the electricity generated in the region comes from oil fuels, predominantly diesel, crude oil and heavy fuel oil (HFO). In the rest of the world the fraction is only 8 per cent. This is a direct consequence of decades of generous government subsidies for oil and power.

Electricity rates are typically regulated so that consumers pay little for it, and to ensure that power producers stay in business, the value of oil fuel is set so that these companies earn a profit. This subsidised in-country oil fuel value can be ten to 20 times less than the global market value.

The intention behind most government subsidies in the region is to grow and diversify the economy and create employment for a rising population by expanding or developing industries such as refining, petrochemicals, manufacturing, steel, aluminum, computing and data storage.

These industries happen to be energy intensive. Another aim is to provide an energy discount to all consumers. But the negative side of this is the inefficiency and over-consumption of electricity and valuable oil fuels.

In the past this model has worked because the electricity consumption in the region has been modest. However, with electricity demand now growing, the use of oil fuels for power production is dramatically increasing and driving domestic oil consumption to high levels. The low value of domestic oil and electricity is exacerbating the situation because it discourages energy efficiency and oil conservation.

While the economies of North America, Europe and now China are slowing due to a weak global economic recovery, annual GDP growth in the Middle East is expected to average 4.5 per cent to five per cent over the next five years, driven primarily by the expectation of sustained global oil demand and high prices.

Power consumption growth in the Middle East is expected to be even higher, averaging from 5-10 per cent over this period, driven by not only high GDP growth, but also by energy intensive structural changes occurring to many economies in the region.

Growth in new residential homes, tourism, and commercial and industrial sectors is creating new electric loads needed to support more fresh water, air conditioning, lighting, appliances, home and business electronics, as well as energy-intensive industries.

The energy challenge

A perfect example of the energy challenges facing many countries in the region is the kingdom of Saudi Arabia, the region’s largest and fastest growing power market. Over the last 11 years, total electricity consumption in this nation has grown by 91 per cent. Residential consumption has more than doubled over the same period, as Figure 1 shows. This high growth in power demand puts the country’s power supply infrastructure under stress in summer, when peak loads can even cause temporary power shortages.

Figure 1: Sectorial power consumption growth
Figure 1: Sectorial power consumption growth

To keep up with the expected future growth in the demand for power, Saudi Arabia’s power capacity would have to nearly double by 2020, which works out to be an ambitious average annual capacity addition of 5.8 Gwe per year over the next eight years.

Today about 55 per cent of the power generated in the country is from oil fuels, and if the current plans to build capacity are implemented, the nation’s internal oil consumption will dramatically increase due to a heavy reliance on HFO, crude and diesel fuels to produce the bulk of the power needed in 2020 (see Figure 2).

Figure 2: 60 per cent of power capacity is expected to depend on oil fuels in 2020
Figure 2: 60 per cent of power capacity is expected to depend on oil fuels in 2020

Saudi Arabia’s government has realised that this is a serious energy issue for the country and has embarked on energy efficiency, nuclear and renewable energy initiatives that aim to decrease the growth of oil consumption. But many believe that these initiatives will take at least 10-15 years to realise even a modest impact, and will not be sufficient to avoid the threat of declining oil exports. But countries in the region do have another option.

Petroleum coke (petcoke) is an economical and secure alternative fuel for power that can reduce the region’s growing oil dependency. Two enabling technologies behind it are delayed coking (DC) and the circulating fluidised bed (CFB), which are proven in other parts of the world and can bring multiple benefits to the power and oil-refining sectors in the region.

Using petcoke as a fuel and feedstock for power and hydrogen would provide strategic benefits to the Middle East. These are:

  • provision of a large-scale solution for new power capacity that does not use liquid oil fuels
  • improvement of fuel security for the region because petcoke is a byproduct of oil refining
  • improvement in refinery efficiency and economics because DC technology improves refinery yields by more than 20 per cent
  • provision of new jobs in the refining, petrochemical, power and construction sectors

Foster Wheeler has established a proven concept for turning petcoke into power. It uses DC and CFB technology, extracts additional light petroleum products from refinery residues, and produces power and steam from the solid petcoke byproduct from the delayed cokers.

The technology

The gases and liquids the DC process creates from refinery residues are: coker gas; liquefied petroleum gas (LPG); naphtha, which is processed and blended into gasoline; light coker gas oil (LCGO), which is processed and blended into diesel; and heavy coker gas oil (HGCO), which is suitable for downstream hydrodesulphurisation (HDS), hydrocracking (HC) or fluid catalytic cracking (FCC) to produce transportation fuels.

Across the world more than 170 refineries in 37 countries employ cokers. Despite the Middle East’s crude oil reserves, refineries in this region and in Africa account for only about 3 per cent of the total global coking capacity today.

However, as petroleum-producing nations in the Middle East pursue plans to become major exporters of petroleum products, complex refinery projects with delayed coking units (DCUs) are underway in Saudi Arabia, Oman and UAE’s Abu Dhabi.

Projections are that by 2014 coking capacity in the Middle East will triple from its current level and grow at 25 per cent per year on average between 2011-16, the highest rate in the world.

CFB steam generation

CFB boiler technology has proven its ability to convert petcoke into high-value steam and power efficiently, cleanly and reliably (see Figure 3). There are 44 Foster Wheeler CFBs units operating in the world today that fire petcoke as their primary fuel, producing a total of 4700 MWe. The largest operating petcoke-fired power plant in the world is in Louisiana, US. It employs two 330 MWe CFBs.

Figure 3: Foster Wheeler's CFB steam generating technology
Figure 3: Foster Wheeler’s CFB steam generating technology

CFB technology is ideal for petcoke because its long burning process ensures the complete combustion of the lowly volatile petcoke.

The technology also captures a large amount of the petcoke’s sulphur during the combustion process – typically 5-7 per cent. The vigorous mixing of the fuel, limestone and ash particles during the low-temperature fluidised process allows the CFB to cleanly and efficiently burn almost any combustible material, while minimising the formation of NOx and optimising the capture of SOx as the fuel burns.

The combustion temperature is well below the melting point of the fuel’s ash, which allows the CFB to minimise the corrosion and fouling issues experienced in conventional boilers. For petcokes with high levels of metals, such as vanadium, nickel, sodium and potassium, CFB technology has demonstrated years of reliable and low-maintenance operation.

Comparing economics

A typical refinery in the Middle East uses a two-step atmospheric and vacuum distillation process that produces a heavy vacuum residue (VR) byproduct. The VR has limited uses and is typically blended with distillates, such as kerosene and diesel, to produce HFO, which is a high-sulphur fuel (containing 2-4 per cent) typically limited to use in barges, ships and power plants.

The process of blending consumes about 20 per cent more distillates, whereas the PetroPower concept uses DC technology to convert about 45 per cent of the VR into high-value distillates and gases.

Figure 4 compares a conventional 400,000 barrels per day refinery linked to an HFO power plant with one that uses PetroPower technology. The latter produces petcoke instead of HFO, resulting in a 23 per cent boost in high-value liquids and gases.

Figure 4: Comparison of typical refinery vs. PetroPower configuration
Figure 4: Comparison of typical refinery vs. PetroPower configuration

The typical 400,000 barrels per day refinery produces enough HFO for about 2,600 MWe of net power, whereas the PetroPower power refinery produces only enough petcoke for about 600 MWe of power.

But additional petcoke can be supplied from both domestic and international sources to increase the power of the PetroPower configuration to be the same or more than the conventional refining case.

This is achievable because new delayed cokers are under construction and planned for the region. In addition, there is a vibrant international petcoke market, which allows petcoke to be easily imported into the region.

By applying an aggregate market value to the refined liquids and gases at $160 per barrel (bbl), the PetroPower configuration produces $11 million of refined products each stream day than the conventional HFO refinery. On an annual basis, assuming a 90 per cent onstream factor, this works out to be $3.6 billion per year.

Figure 5 compares the electricity production cost for both configurations. It shows that, with assumptions, the PetroPower configuration can produce power at less than half the cost of the HFO power plant. This is primarily due to the dramatic difference in the international values of HFO and petcoke, which stand at $80 per bbl and $60 per tonne, respectively, or $11 per bbl of oil equivalent.

Figure 5: Comparison of electricity production cost between typical refinery and PetroPower configuration
Figure 5: Comparison of electricity production cost between typical refinery and PetroPower configuration

In order to ensure a consistent comparison of economies, HFO and PetroPower plants are both assumed to produce 2600 MWe of net electrical power.

Additional petcoke is supplied to the Petropower plant from domestic or import petcoke markets at the same $60/tonne market value assumed for the petcoke produced by the refinery, which is based on the current market price for petcoke delivered to the region.

If you then add the value for the additional refined products to the savings in electricity generation, the annual value from the PetroPower configuration totals $5 billion compared with the conventional refinery configuration.

Since the PetroPower option requires a capital investment of about $2.3 billion for the delayed coker and CFB power plants, above that of the typical case of a refinery and HFO power plant, the analysis shows that the payback period is only about five months.

Further, by deducting the $2.3 billion capital investment from the 10-year net present value (NPV) of the annual $5 billion, this works out to an NPV of $24 billion.

The analysis assumes that only 80 per cent of the additional sales of refined products translates into additional profits for the refinery because additional operating and capital expenditures would be needed to operate the DCUs and refine the light products.

A significant factor in the analysis is the large difference between the market values of solid and liquid fuels, which has ballooned over the last ten years. The latter has risen by four times that of the former.

Petcoke is a viable economic and secure alternative fuel for power that can reduce the region’s growing oil dependency. It has been demonstrated that DC and CFB technologies can bring multiple benefits to both the power and oil refining sectors in the region.

Robert Giglio is Vice President of Strategic Planning and Marketing for Foster Wheeler’s Global Power Group, and is responsible for marke forecasting, strategic analysis and planning. For more information, visit www.fwc.com

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