44123 No. 10 Petroleum Sector Briefing Note April 2008 Refining Crude Oil ­ Part 1 Crude oil is what we extract out of the ground; refined products (such as gasoline and diesel) are what we consume. As of end-2007, there were 657 refineries around the world with a combined crude processing capacity of 85 million barrels per day (bpd). This briefing note provides technical background information on the characteristics of fuels which refineries produce and the refining processes that are needed to make the fuels. The next briefing note will describe what key global trends are affecting the refining industry. The Petroleum Sector Briefing Notes up to this issue Gasoline have focused on upstream exploration and production. But crude oil has to be traded, refined, and marketed Gasoline is used primarily as an automotive fuel. An before it can be used. This note describes what is in- important characteristic of gasoline is its octane num- volved in refining. It outlines the characteristics of vari- ber, which is a measure of the fuel's resistance to self- ous refined petroleum products, followed by a brief ignition (or knocking). A vehicle's octane requirement summary of main refining processes. is determined by the compression ratio of its engine-- the higher the compression ratio, the higher the fuel Fuels Produced economy and the higher the octane requirement. There Crude oil comprises a large number of compounds, are no benefits to using gasoline with an octane num- consisting mostly of hydrocarbons (which are made up ber higher than that which the vehicle engine requires. of carbon and hydrogen), but also such "contaminants" If the octane number is lower than required, however, as sulfur, nitrogen, metals, salts, and acids. The lower the resulting knock can damage the engine. Modern the levels of these contaminants, the more desirable-- gasoline engines require a research octane number (oc- and higher priced--the crude is. At its simplest, pro- tane number that is applicable in city, as opposed to cessing units at refineries take crude oil, separate these highway, driving conditions) of 91­92 or higher, depend- various components, convert them through chemical ing on the engine's compression ratio. reactions, and produce gas (used internally as a refin- ery fuel), liquefied petroleum gas (LPG), gasoline, kero- For environmental and health reasons, other charac- sene, diesel, heating oil, and residual fuel oil. These re- teristics that are increasingly regulated around the world fined products in turn consist of numerous hydrocar- include gasoline's volatility (temperature stability) and bons of varying size and shape. Depending on its con- amount of sulfur, metals, and aromatics (a type of hy- figuration, a refinery may also produce lubricants, as- drocarbon, one of which is benzene). If gasoline is too phalt, and petroleum coke. volatile, it may cause vapor locks during driving (result- ing in a temporary loss of power or even stalling) as LPG well as excessive evaporation of light hydrocarbons. Also known as bottled or cooking gas when used by Light hydrocarbons can contribute to ground-level ozone households and restaurants for cooking, LPG is a gas air pollution, and for this reason tight volatility limits are at room temperature and atmospheric pressure. LPG imposed in cities with ozone problems. High ambient is a clean cooking and transportation fuel and behaves concentrations of ozone can cause respiratory illnesses similarly to natural gas. Pressurizing it in a container and even premature mortality. liquefies LPG. It takes much less space to store a given amount of fuel as a liquid than as a gas, and LPG is Growing environmental health concerns in recent years always sold as a liquid under pressure. have called for lower levels of sulfur, metals, and aro- 2 Petroleum Sector Briefing Note April 2008 matics. Sulfur interferes with the operation of catalytic requirement for the cetane number. The same drive converters--by far the most effective means of re- to minimize sulfur in gasoline is also leading to fuel ducing pollution from gasoline vehicles. The United specifications that call for sulfur-free diesel. Ultra States, Europe, and Japan are now mandating the so- low-sulfur diesel enables adoption of advanced ex- called sulfur-free gasoline and diesel. It is not possible haust emissions control devices to control the emis- to rid gasoline (or diesel) of sulfur completely, but the sions of fine particles and oxides of nitrogen (NOx). automotive fuels in these areas have the vast majority Fine particulate emissions from diesel engines are of sulfur removed during refining, at great expense. In among the most damaging pollutants and have been addition to interfering with the operation of catalytic receiving considerable attention from policymakers, converters, high sulfur levels in gasoline (and diesel) environmentalists, and health specialists. NOx is re- can contribute to acid rain and fine particulate forma- sponsible for acid rain, ground-level ozone, and fine tion in the atmosphere. Fine particulate air pollution is particulate formation in the atmosphere. Advanced the most serious threat to public health from urban air exhaust emission control devices can make diesel pollution in most developing country cities. vehicles virtually as clean as advanced gasoline and even natural gas vehicles. Environmental health concerns have also led to fuel standards requiring no measurable amounts of heavy Heating oil is similar to diesel fuel and is burned in metals, the most famous of which is lead. Historically, furnaces in buildings. Kerosene, diesel, and heating lead has been added to gasoline as an octane enhancer. oil can be used interchangeably to a considerable ex- But mounting evidence of the damaging public health tent without the user noticing marked differences, at impact of lead, and particularly on the intellectual de- least in the short run. Illegal adulteration of diesel-- velopment of children, has resulted in a worldwide call which must meet the most stringent fuel specifica- for a ban on the use of lead in gasoline. Gasoline in tions--with kerosene or heating oil occurs in many most countries is lead-free today. developing countries. Lastly, aromatics enhance gasoline's octane number but Residual fuel oil are associated with two environmental health problems. Residual fuel oil is what is left over after other fuels One is that some aromatics break down inside engines are produced. It is used to power ships' engines, for during combustion and are emitted as benzene, a can- generating electricity at power plants, and as a fuel cer-causing agent. Benzene in gasoline may also be for industrial boilers. Two important characteristics emitted out of the tailpipe unburned. Another is that of residual fuel oil are its viscosity and sulfur content. larger-size aromatics can lead to ozone air pollution. Viscosity can be thought of as the ease with which a Before these problems became widely known, aromat- fluid flows--water is much less viscose than residual ics were used extensively without limits as an octane fuel oil.As with gasoline and diesel, the sulfur specifi- enhancer, especially after gasoline lead phase-out be- cations for residual fuel oil are increasingly being tight- gan. Today, alternative sources of high-octane gasoline ened. components are sought. Refinery Processing Units Kerosene, diesel, and heating oil There is wide range of refineries, from simple top- These fuels are collectively known as middle distil- ping refineries to very large, complex refineries in- lates; diesel and heating oil are also known as gasoil. tegrated with petrochemicals plants. The tighter the Kerosene is used as an aviation fuel as well as for fuel specifications that a refinery must meet, the cooking, heating and lighting. The fuel specifications larger, more complex and expensive the refinery is for kerosene are not as severe as those on gasoline likely to be. A simplified diagram of a refinery is and diesel. sketched below. Diesel is used first and foremost as an automotive Crude distillation Units fuel, and also for power generation. Specifications Every refinery has one or more crude distillation units for automotive diesel are increasingly tightening. The and the entire crude is fed to these units first, where it equivalent of the octane number for diesel fuel is is heated. Distillation separates the various components cetane: automotive diesel fuel must meet a minimum of crude oil according to their boiling points. The tem- April 2008 Petroleum Sector Briefing Note 3 peratures at which compounds boil are affected by pres- by converting hydrocarbons to aromatics. This is sure.Atmospheric crude distillation units, which every needed up to a point, but recently environmental health refinery has, operate at normal pressure. Some refin- concerns have led to limits on relying solely on aro- eries have vacuum distillation units, which operate be- matics for boosting octane. low atmospheric pressure to separate residual fuel oil further into different components. Reformers are also an important source of hydrogen, which is needed for removing sulfur compounds. Re- The nameplate capacity of a refinery is the combined formers use catalysts (catalysts speed up chemical re- capacity of its atmospheric crude distillation units. Re- actions) that are readily poisoned by sulfur, and there- fineries that have only atmospheric distillation units fore the feedstock to a reforming unit is treated first to are called topping refineries. Fuels made from distil- reduce sulfur to a negligible level in a unit called a lation and with no further chemical reaction are called hydrotreater.All hydrotreaters consume hydrogen, typi- straight-run fuels.Absent tight fuel specifications, vir- cally sourced from the reformer. tually all straight-run fuels can be used without fur- ther modification, except gasoline. The octane num- Refineries with only distillation, reforming, and asso- ber of straight-run gasoline is normally too low and ciated hydrotreating units are called hydroskimming further upgrading is required. refineries. They represent the simplest refinery con- figuration among refineries that produce usable re- Topping refineries are usually small and common in fined products. remote areas. Straight-run diesel and a few other fuels Isomerization units may be consumed locally, and the rest may be put into a pipeline to be sent to more sophisticated refineries. Isomerization units take what is called light naphtha and, Reforming units by means of a chemical reaction, increase its octane. There is no environmental health damage associated Reformers increase the octane number of naphtha with the products of isomerization units. Isomerization (and more specifically what is called heavy naphtha). units require a hydrotreated feedstock. Naphtha is a portion of distilled crude oil comprising components with the same boiling points as those Catalytic Cracking units making up gasoline. Reforming units increase octane Catalytic cracking units take heavier fractions of dis- 4 Petroleum Sector Briefing Note April 2008 tilled crude oil and, using a catalyst, break them up into to construct, building the same processing unit twice smaller components to make gasoline and middle distil- the size--30,000 bpd--will not double the cost to lates. Catalytic cracking products have a high sulfur con- US$300 million but will increase it to US$227 mil- tent unless the feedstock has been pretreated to remove lion (=150´20.6). That is, a 15,000 bpd unit costs sulfur--which is an expensive process. Catalytic crack- US$10,000 per daily barrel (US$150 million divided ing produces high-octane gasoline components but poor- by 15,000 bpd), but a 30,000 bpd unit costs quality diesel. The sulfur in the cracked products can be US$7,579 per daily barrel. This scaling factor makes lowered by reacting with hydrogen, but doing so typi- it cheaper to make refined products in large refin- cally lowers the octane number of the gasoline fraction. eries. These economics are driving oil companies Catalytic cracking is an important source of a feedstock to build fewer and larger refineries. component for alkylation (see below). Refining does not generate much employment. Valero, Hydrocracking units the largest refiner in the United States with 15 refiner- In hydrocracking, heavier components of distilled crude ies, employs on average about 510 workers at each oil are cracked in the presence of hydrogen to produce refinery which has an average size of 200,000 bpd. high-quality middle distillates. Hydrocracking units re- The number of employees at Valero increases with quire large amounts of hydrogen and are expensive. refinery capacity with a power of 0.89. The number Alkylation units ranges from 220 workers at an 88,000 bpd refinery to 820 at a 340,000 bpd refinery [1]. Alkylates are premium gasoline blending components: they have exceptionally high octane numbers, and, un- Observations like aromatics, are relatively safe for public health. Refining is an important part of the petroleum supply However, alkylation units require other processing units chain and its economic structure is different from that to produce the feedstock: catalytic cracking and (pos- in the upstream. The ease of refining a particular crude sibly) isomerization units. Alkylation units require plays a role in determining the refinery economics, and hydrotreated feedstocks. the types of products that are increasingly in demand Hydrogen units require more complex processing. The drive to reduce sulfur in fuels is leading to a hy- Small hydroskimming refineries continue to operate, drogen imbalance in refineries. Hydrocracking and usually under protection, in a number of developing hydrotreating require hydrogen, with hydrocracking re- countries. They are finding it increasingly difficult to quiring far more than hydrotreating. The only source meet modern fuel specifications, yet governments are of hydrogen as a by-product of refining processes is often reluctant to take the politically difficult step of reforming. The amount of hydrogen produced during opening up the market to competition for fear that such reforming increases with increasing amounts of aro- a step might lead to eventual closure of the refinery. matics made, but with the new interest in limiting the The next briefing note will deal with market trends in aromatics content in gasoline, the amount of hydro- refining. gen produced by reforming units has been declining in recent years. To meet the demand for hydrogen, re- References fineries are building dedicated hydrogen units, where hydrogen is made from methane. This adds to the cost [1] Valero Energy Corporation at www.valero.com/. of refining processes. Economies of Scale For more information contact: It is not possible to meet tight fuel specifications Mr. Bun Veasna without hydrotreating and other processes, all of Infrastructure Officer which benefit from large economies of scale. A stan- Email: vbun@worldbank.org or Masami Kojima dard rule of thumb used in the industry is that the Lead Energy Specialist cost per unit size increases with increasing overall Email: mkojima@worldbank.org size of the processing unit with a power of 0.6. For example, if a 15,000 bpd unit costs US$150 million