October 2015

HYDROCARBONENGINEERING October 2015 www.hydrocarbonengineering.com

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 contents October 2015 Volume 20 Number 10 ISSN 1468-9340
(03) Comment (59) The dirt on sulfur remelting
(05) Guest Comment Izza Humayun, Enersul Limited Partnership, Canada, outlines a
recommended approach to managing contaminated sulfur
(07) World News
(66) Automatic systematic
(14) The calm before the storm Offsites account for a significant proportion of a typical refinery’s
Ng Weng Hoong, Contributing Editor, explains why LNG markets are on bottom line. Paul Dickens, ABB Limited, UK, explains how operators can
the precipice of massive change use automation opportunities to improve profitability
(20) Rationalising regulation: part one (73) Hands off operation: part two
Aaron Wright, Robert Ohmes and Joni Lipkowitz, Paul Lyon and Maria Chwal, Vympel, Germany, discuss automated
KBC Advanced Technologies, Inc., discuss the impact of proposed new hydrocarbon dew point measurement
Environmental Protection Agency regulations on delayed coking and
catalytic reforming units (80) A guide to vapour pressure
Kevin Fogarty, Icon Scientific, UK, provides an introduction to the
(29) Measure for measure standards and solutions for the safe measurement of vapour pressure in
Rhys Jenkins, Servomex Group Limited, UK, discusses points of gas the production, storage and use of petroleum products
analysis in ethylene production, providing a comprehensive guide to
processes and analysis measurement technologies (85) The tricky trickle valve
Adam Brandt, Jim Miller and Mark Noppenberger, NextGen Cyclones, LLC,
(35) Acute analysis USA, discuss the intricacies of trickle or flapper valve design and function
Randy Hauer, Ametek Process Instruments, USA, explains how the latest within a refinery’s FCC reactor and regenerator cyclone
generation of sulfur recovery analysers can boost reliability and safety in
Claus sulfur recovery units (91) Downsizing downtime
Andy Dunn and Jennifer Hopkins, Cameron International, explain how
(40) Here to stay partnering with a valve service provider can help companies increase the
Greg Hall, BCCK Engineering, Inc., USA, explains why nitrogen rejection return on their investments
will continue to be used throughout the gas processing industry, despite
low commodity prices (95) Pump protection
Massimiliano Di Febo, Pasquale Paganini and Giacinto Di Mango, IPC, Italy,
(43) Planning for uncertainties present an advanced diagnostic and protection system for centrifugal
Anton Demmers, Neha Gupta and Rick van der Vaart, Shell Global pumps
Solutions International BV, outline how operators can reduce project risks
through early adoption of a robust gas processing concept (99) The step forward
Pasquale Delio Manicone and Francesco Annese, GE Oil & Gas, Italy, take
(51) Scrub up a look at new pump designs for the hydrocarbon processing industry that
Yves Herssens, MECS/DuPont, Belgium, and Steven Meyer, represent a major step forward in pump suction operability
MECS/DuPont, USA, explain how tail gas scrubber sulfur plant bypass
ability aids emergency shutdowns and startups (105) Getting to grips with HIPPS
Robert Walker, Severn Glocon Group, UK, takes a closer look at high
(55) A staged approach integrity pressure protection systems
Hal Alper and Elizabeth Copeland, MYCELX Technologies Corp., USA,
highlight the benefits of a sequential staged approach to the treatment (109) Sulphur Show Preview
of complex condensate streams Hydrocarbon Engineering previews a selection of companies that
are exhibiting their downstream oil and gas sulfur technologies at
Sulphur 2015 in Toronto, Canada
(128) 15 questions...
We talk to John Rudolph, Honeywell Process Solutions, about
cyber security, STEM and time travel

Paqell is a 50/50 joint venture of

This month's Paques water purification company and

front cover
Shell Global Solutions. Oil and gas companies
around the world are implementing Paqell’s
sustainable THIOPAQ O&G gas desulfurisation
technology because it has proven to be more
safe, stable and cost effective than alternative
solutions for sulfur removal of gas streams.

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 It’s what we do.
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n End-to-end process capability –
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www.processsystems.sandvik.com
 comment
Rosalie Starling Assistant Editor

T
he subject of diesel has been ‘trending’ in recent weeks.
Whether it is related to prices, supply and demand,
emissions or new technology, diesel is currently
a hot topic for news outlets, industry bodies and
environmental lobbyists worldwide.
In the days before this issue went to press, the UK was rocked
by reports that growing dependence on foreign fuel has left the
country facing a nationwide diesel drought. Transport policy and
motoring research organisation, the RAC Foundation, announced
that UK refineries, most of which were set up to produce light
(petrol) and heavy (fuel oil) distillates, are struggling to cope with
domestic diesel demand, which has risen by a staggering 76% over
the past 20 years, compared with a 46% fall for petrol.
“Most of our refineries were built when diesel was a niche
product. Retrofitting them is a billion pound decision that has
failed to stack up for investors who see refining as a low margin
business despite our sky high pump prices. The result: since 2009
three UK refineries have closed, and others have been up for
sale,” said Steve Gooding, Director of the RAC Foundation. “That
leaves us at the mercy of the global market and much of the rest
of Europe is in the same boat. We are having to look further and
further afield for the fuel we need.”
In addition to the diesel-petrol imbalance, the RAC’s
'Readdressing the balance between petrol and diesel demand'
report addresses concerns over air quality and emissions.
Unsurprisingly, due to the ever increasing number of diesel engined
vehicles on the road, this has become a major talking point not
only in the UK, but across the globe. In 2014, the EU implemented
strict Euro 6 engine standards for light and heavy duty vehicles
to help tackle emissions of NOX, particulates and hydrocarbons,
while, across the pond, President Obama’s Climate Action Plan
promises to reduce transport related pollution across the US
by 2025.
In light of growing environmental concerns and new related
contact info
legislation, the ‘clean diesel movement’
has made notable progression over
the past few years, and initiatives to
promote it have been resoundingly
successful. In the US, the EPA has
funded nearly 60 000 pieces of clean
diesel technology since 2008 through
the National Clean Diesel Campaign,
and, in response to Euro 6 emissions
standards, the European automotive
and motor trading industries have joined
forces to raise awareness. The #CleanDieselTech online campaign,
launched by ACEA, AECC, CECRA and CLEPA, provides statistics
and information to the general public about the latest generation
of diesel technology.
Naturally, the downstream oil and gas industry has been
increasing research and development in this area. Refiners with a
specific focus on lower emission fuels are making an impact across
the globe – production of renewable diesel at Finland’s Neste
helped to reduce CO2 emissions by approximately 5.6 million t in
2014 – while industry giants, including ExxonMobil, Shell, Total and
BP, have made huge developments in the production of low sulfur
diesel, biodiesel and clean fuels. Moreover, manufacturers such
as Honeywell are leading the way in clean process technology.
Last year, the company announced that its renewable fuel
technology had been chosen to power the largest commercial
advanced biofuel plant in the US. The Diamond Green Diesel
facility in Norco, Louisiana, is designed to produce more than
130 million gal./y of renewable diesel.
Air pollution and particulate emissions are, and always will
be, a major concern within the diesel industry. However, as noted
by the US based Diesel Technology Forum, new generation
approaches, which include increasingly advanced refining
techniques and technological innovations, will ensure that ‘clean
diesel engines continue to play a dominant role in the future, as
well as help countries around the world to meet energy security,
greenhouse gas and clean air objectives'.

MANAGING EDITOR James Little PRODUCTION Ben Munro

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ASSISTANT EDITOR Rosalie Starling WEB EDITOR Callum O’Reilly

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 Guest
comment
Giacomo Rispoli,
Portfolio Management & Supply and Licensing,
Executive Vice President, Eni S.p.A.

'
European product demand, long in secular decline, swung low sulfur marine fuel. This product
back to growth in some markets in early 2015, and the region’s falls into the range of middle
refining sector has found renewed vigour amid weaker than distillate quality, therefore this
expected runs elsewhere’: this was reported by the International new environmental constraint may
Energy Agency (IEA) in the last April Oil Market Report. But the actually represent an opportunity
real situation seems to be more complex as the European refinery for refineries.
industry has to face many external factors that may have a strong In terms of refining capacity,
impact on its health. Even if nobody can deny that in recent Europe has to face new refining
months, European refiners have been able to take advantage of exporting hubs appearing in the Middle East, China, India and other
the dramatic fall in crude oil price. Refinery margins have risen emerging economies. The implications of these profound shifts in
strongly to highly positive the regional distribution of oil demand and
values, after being negative in supply growth will redefine the refining
2014, with smaller downstream Refinery margins have risen industry and force European refiners to
operators benefitting from address this new scenario.
the lower crude oil prices.
strongly to highly positive In this difficult business landscape, oil
Moreover, despite predictions values, after being negative in and gas companies’ ‘temptation’ towards a
that the recovery would not reduction in costs as a solution for ‘staying
last, margins continue to 2014, with smaller downstream in business’ is obviously high. But in the
outperform expectations, medium to long term this could be a risky
delaying or postponing
operators benefitting from option. Instead, European refineries should
potential closures. the lower crude oil prices... maintain the reinvestment rates, focusing
But there are also many on increasing flexibility and efficiency as
other external factors that have But there are also many other technology innovation is mandatory to
to be considered and monitored survive in these choppy waters. For instance,
in order to properly plan for external factors that have to be more efficient ‘zero residue’ technologies
the future. The most important considered and monitored in will help to squeeze the barrel and diversify
one is the global demand for the crude supply, thus increasing a refinery’s
oil products: since the 2008 order to properly plan for the flexibility. Moreover, a more efficient use
crisis, the demand for refined of hydrogen will allow production of high
products in Europe has been in future. quality distillates, thus optimising operating
continuous decline, not only as costs, and yet, the development of more
a consequence of the weak economic situation, but also because advanced process control systems may increase energy efficiency
of the strong commitment based on the Kyoto protocol that is and reliability. In some cases, the reconversion of refineries into
pushing the automotive industry to increase engine efficiency and green biorefineries (such as Eni’s Venice refinery) can give a new
reduce emissions. Today there are weak signals for some increase lease of life to obsolete facilities. Finally, a strong integration with
in light products demand, but this is unlikely to be enough to the petrochemical industry (as seen with Asian and Middle East
balance out overcapacity, which is still huge. According to this, industrial complexes) can help to optimise industrial assets.
despite European refining capacity decreasing in recent years, The above are only few examples of actions and strategies that
further rationalisation of some assets in Europe will be necessary European refineries can implement to protect and improve their
in order to better balance the supply/demand. In this scenario position.
the demand for the ‘new’ low sulfur bunker oil is expected to The ERTC 20th Annual Meeting in Rome (17 - 19 November 2015)
increase significantly. In fact, according to the introduction of will be a great opportunity to discuss the latest advancements in
MARPOL regulations, since January 2015, sulfur specifications have process and technology and to share best practices and experiences
changed and the high sulfur bunker oil will be replaced by new with professionals from the world leading oil refining companies.

HYDROCARBON 5
ENGINEERING October 2015
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USA | ENGINEERING SERVICES
W ood Group is providing detailed
engineering, procurement and
other services to Flint Hills Resources
Corpus Christi, LLC (FHR) for the Eagle
Ford modification project at its West
refinery in South Texas. The project will
enable the refinery to process 100% US
crude, primarily from the Eagle Ford
shale region into transportation fuels.
Wood Group Mustang successfully
completed the conceptual and front
Oman | PTA LICENSING AGREEMENT
B P and Oman International
Petrochemical Industries Company
(OMPET), a joint venture between
Oman Oil Company, LG International
Corp and Takamul Investment
Company, have entered into a licensing
agreement for BP’s latest generation
purified terephthalic acid (PTA)
technology.
OMPET is planning to build a
1.1 million tpy unit at Sohar, Oman, to
produce PTA, the primary feedstock for
polyesters used in the textile and
packaging industry.
“This is the first licence for BP’s PTA
technology in the Middle East, which is
an important and strategic region for BP.
This is a testimony to the advantages of
USA | LIQUEFACTION AND EXPORT PROJECT
B urckhardt Compression has been
chosen to deliver numerous
reciprocating compressors for
Freeport LNG’s liquefaction and export
project. The customers, CB&I and
Chiyoda (engineering) and Zachary
(construction), selected Burckhardt
Compression due to its highly flexible
compression solution that provides
best efficiency and best process
w rld news
end engineering design phases of the
project and is now providing detail
engineering, procurement services,
module fabrication oversight and
construction engineering support
services. Work is being carried out in
Houston and Bogota, Colombia, via a
collaborative work share model that
provides an efficient, effective solution
for FHR. Engineering is scheduled to be
completed in mid 2016.
BP’s technology and to BP’s extensive
experience as a PTA producer,” said
Nick Elmslie, Chief Operating Officer,
BP Petrochemicals.
"BP will provide a wide range of
technical and knowledge transfer
services as well as a commitment to
assist Omani staff within the OMPET
joint venture. The front end
engineering design (FEED) package for
the licence has been completed and
delivered to OMPET on schedule. I am
very proud that OMPET has chosen
BP’s PTA technology and we look
forward to a long standing relationship
between our companies,” said Daniel
Leonardi, Vice President, Technology
and Licensing, BP Petrochemicals.
controllability at varying gas conditions
at the Freeport LNG terminal.
Burckhardt Compression’s Laby®
Compressors have been used for
decades for boil off gas handling in LNG
receiving and export terminals and
other cryogenic applications. The skid
mounted and ready to bolt up
reciprocating compressor systems will
be delivered by the end of 2016.
PROFIT
Middle East |
IMPROVEMENT
K BC Advanced Technologies plc has
announced the award of a three
year, US$8.5 million consulting contract
to assist a major Middle Eastern client
with margin improvement and
workforce capability development
across three refineries. The award,
which was subject to competitive
bidding, includes provision for a further
US$2.4 million of optional services.
KBC conducted profit improvement
programmes for this client in the late
1990s, with significant benefits
identified and agreed, and is pleased to
be asked to return with more
sophisticated tools and a wider
portfolio of capabilities to assist in the
identification of improvement
opportunities. The award is in addition
to the company's current consulting
engagement in the country, which is to
assess the feasibility of investing in a
new petrochemical complex.
STORAGE
USA |
CONTRACT
C B&I has been awarded a
US$300 million contract by Sunoco
Partners Marketing & Terminals, LP for
the expansion of the Marcus Hook
Industrial Complex in Pennsylvania. The
award is part of Sunoco's Mariner East 2
project.
The scope of work includes the
engineering, procurement, fabrication
and construction of four large low
temperature tanks that will be used for
the storage of refrigerated ethane,
butane and propane. CB&I previously
announced it is providing an ethane and
propane tank for the complex as part of
the Mariner East 1 project.
HYDROCARBON 7
ENGINEERING October 2015

INBRIEF
usa
Houston Interests recently signed an
agreement acquiring the remaining
ownership shares of Devco and
River Consulting from Kinder Morgan.
This was a company goal for 2015 and
was achieved ahead of schedule. The
acquisition will not cause any immediate
changes in Houston Interests' operating
methodology or reporting structure, and
Doug Houston will remain as CEO of all
the Houston Interests Companies.
worldwide
Hoerbiger Group, headquartered in Zug,
Switzerland, has acquired explosion
protection specialist IEP Technologies, LLC
based in Marlborough, Massachusetts,
USA, from Sentinel Capital Partners.
This acquisition will make Hoerbiger
one of the world's leading providers
of sophisticated safety and explosion
protection technology for a broad
range of industrial plant engineering
applications. The parties agreed to keep
the purchase price confidential.
usa
McJunkin Red Man Corporation, a subsidiary
of MRC Global Inc., has signed a five year
contract to supply pipe, valve and fitting
(PVF) products and services for Phillips 66.
The global agreement is an expansion of the
existing North American supply contract
between the two companies and has been
expanded to include refining in Europe.
worldwide
Rolta has received an additional
US$13 million contract for the Engineering
Information Asset Solution it has
designed, developed and deployed for
one of the world's largest petrochemical
complexes. The project is being managed
by a global Rolta team working out of the
US, India and the Middle East.
8 HYDROCARBON
October 2015 ENGINEERING
w rld news
Egypt | REFINERY EXPANSION
E gypt’s Alexandria National Refining
& Petrochemicals Company
(ANRPC) will use technology and
equipment from UOP LLC, a Honeywell
company, as part of a US$300 million,
multi year project to expand an
existing, state of the art gasoline
production facility to meet growing
domestic demand for high octane
gasoline.
ANRPC is planning to add a
second UOP CCR Platforming™
process unit, including a modular CCR
section, at the facility in Alexandria
to produce high quality reformate,
which is used to produce high octane,
low sulfur gasoline. The first UOP
CCR unit was installed at the site
in 2001.
USA | ACQUISITION OF PROCESSING UNITS
H
ollyFrontier Corporation and
Holly Energy Partners, L.P. have
announced an agreement in principle
for the acquisition by Holly Energy of
the newly constructed naphtha
fractionation and hydrogen generation
units at HollyFrontier's El Dorado
refinery.
Czech Republic | NEW POLYETHYLENE PLANT
U nipetrol a.s. has awarded Technip
an important contract on a
lumpsum turnkey basis, covering the
engineering, procurement and
construction (EPC) of a new
polyethylene plant (PE3) in Litvinov,
Czech Republic. Based on Ineos
technology, the new unit will have a
capacity of 270 000 tpy of high density
polyethylene.
The project, which is scheduled to
be completed in mid 2018, will be
“This expansion is critical as it will
significantly reduce the amount of high
octane gasoline imported by Egypt,”
said ANRPC Chairman Ahmed Abo
El Rooh. “We selected a second
continuous catalytic reforming unit
from Honeywell UOP, which will be
delivered in modular form, to help
ensure reliable operations and the
shortest possible project schedule.”
“A second CCR Platforming process
unit will help Egypt meet its own
growing demand for fuel and provide
cleaner burning, high octane fuels to
address air quality issues in large cities
such as Cairo,” added Mike Millard,
Vice President and General Manager of
Honeywell UOP’s Process Technology
and Equipment business.
Holly Energy is expected to pay
HollyFrontier cash consideration of
approximately US$62.0 million, subject
to the execution of definitive
agreements and other customary
closing conditions. Both HollyFrontier
and Holly Energy expect the proposed
transaction will close during 4Q15.
executed by Technip’s operating
centres in Rome, Italy, and
Lyon, France.
“This award confirms Technip as
one of the world leaders in the
petrochemical field," said Marco Villa,
Technip Region B President. "At the
same time, it further strengthens our
presence as key EPC contractor in the
Eastern European market. In addition,
this reflects another successful step in
our cooperation with Ineos.”
 COMPLETE SOLUTIONS FOR
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c Managing stringent sulfur limits
c Monetizing orphan streams
c Upgrading residuals

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INBRIEF
usa
CIG Logistics has opened a new rail
terminal in Jal, New Mexico, to reduce
transportation, transloading and storage
costs for oil producers operating in the
Delaware Basin. The large scale Jal terminal
includes more than 550 rail car spots and
12 000 t of silo storage capacity.
canada
Atlas Copco has acquired Air Repair
Sales and Services Limited, based in
Moncton, New Brunswick, Canada. The
company, which was privately owned, is
an authorised Atlas Copco distributor that
sells and services industrial air compressors
and air treatment systems. The acquired
company becomes part of Atlas Copco
Compressors Canada and the Compressor
Technique Service division.
uk
Hi-Force has taken over all the manufacturing
rights to produce a wide range of
lightweight aluminium jacks, previously
manufactured and sold under the Astro
Manufacturing brand. As part of the deal,
which was concluded in August 2015, four
HAAS CNC Machines and associated tooling
were transferred from Astro facilities in
Birmingham to Hi-Force's manufacturing
plant in Daventry, Northants, where
component parts are now being produced.
norway
Statoil Petroleum AS has successfully
completed a detailed risk analysis at its
downstream oil refinery. The analysis,
'Environmental Risk and Oil Spill
Emergency Preparedness', was performed
by Lloyd’s Register Consulting to help
Statoil put in place the latest safeguards
in to its Mongstad oil refinery to minimise
risk to life, property and the environment.
HYDROCARBON
October 2015 10 ENGINEERING
w rld news
USA | NEW OWNERSHIP
C HS has completed its purchase of
the National Cooperative Refinery
Association (NCRA) petroleum refinery
and related operations based at
McPherson, Kansas, and is now its sole
owner.
"As the nation's leading
cooperative energy company,
becoming the sole owner of this
refinery and its related pipelines and
terminals is a critical step in adding
value for our member owners and
Italy | R&D COOPERATION AGREEMENT
E
ni and Total have entered into a
special license and R&D
Cooperation Agreement for Eni Slurry
Technology (EST) and have started work
to evaluate and tailor the technology
to Total’s requirements. Eni Slurry
Technology (EST) is a refining process
for converting heavy feedstock into
lighter components. It has been entirely
developed in Italy by Eni R&D, and
implemented in the Sannazzaro refinery
since 2013.
“After two years of successful
operation of the Sannazzaro refinery’s
USA | PETROCHEMICAL FEED CONTRACT
P TT Global Chemical Public
Company (PTTGC) has selected a
Fluor Corporation led team to perform
front end engineering and design work
for its proposed petrochemical
complex in Belmont County, Ohio. The
team includes Fluor, Technip and
SK E&C. Fluor will book the undisclosed
contract value into backlog in 3Q15.
The project will include an ethane
cracker and derivatives units by
leveraging the availability of
feedstock from gas taken from the
Utica and Marcellus shale formations
in the region to create chemical
other customers," said Jay Debertin,
CHS Executive Vice President and
Chief Operating Officer, Energy and
Foods. "Given our 70 year history with
this well run operation and its 700
dedicated employees, we are proud to
make this operation fully part of CHS."
CHS sells more than 3 billion gal./y
of gasoline and diesel fuel products,
marketing the products under the
Cenex brand at more than 1500 Cenex
branded retail locations.
EST unit, the first of its kind in the
world, a new, proven technology is
now commercially available to be
assessed as an option for upgrading
the bottom of the barrel. The
technology arrives more than 40 years
after the existing processes were first
developed and is the result of 15 years
of R&D and commercial
demonstrations,‘ said Giacomo Rispoli,
Eni’s Refining & Marketing and
Chemicals Executive Vice President,
Portfolio Management & Supply and
Licensing.
products. Front end activities are
expected to be completed in 2016.
“Working closely with PTTGC on
the front end activities, we will
identify the most capital efficient
integrated solutions to support the
project’s advancement,” said Jim
Brittain, President of Fluor’s Energy &
Chemicals Americas business line.
“Our team has partnered together on
numerous world class petrochemical
projects. We will leverage this
experience and our innovative design
technologies to bring this project to
fruition.”
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| DIARYDATES
27 - 30 October
Gastech 2015
Singapore Expo, Singapore
Tel: +44 (0) 203 772 6029
Email: HopeGrant@dmgevents.com
9 - 12 November
Sulphur 2015
Sheraton Centre
Toronto, Canada
Tel: +44 (0) 20 7903 2444
Email: conferences@crugroup.com
9 - 12 November
ADIPEC 2015
Abu Dhabi National Exhibition Centre
United Arab Emirates
Tel: +971 2 697 0515
Email: noursoliman@dmgeventsme.com
17 - 19 November
2015 Chem Show
Javits Convention Center
New York City, USA
Tel: 011-203-221-9232
Email: info@chemshow.com
17 - 19 November
ERTC 20th Annual Meeting
Rome Cavalieri Hotel, Italy
Tel: +44 (0) 207 316 9037
Email: rebecca.hancock@gtforum.com
25 - 26 January
Tank Storage Middle East 2016
Abu Dhabi National Exhibition Centre
United Arab Emirates
Tel: +44 (0)20 8843 8819
Email: james@stocexpo.com
HYDROCARBON
October 2015 12 ENGINEERING
w rld news
igest
ne
API | ETHANOL MANDATES ARE INFEASIBLE
A new study by NERA Economic
Consulting, released by the API,
states that the statutory biofuel
mandates under the Renewable Fuel
Standard (RFS) are infeasible to achieve
in 2015.
“Current mandates try to force
more ethanol into gasoline than is safe
for the majority of cars on the road,”
said Bob Greco, API Downstream
Group Director. “Rather than risk
damage to vehicles, NERA predicts
that refiners will instead be forced to
reduce the nation’s supply of gasoline
CEDIGAZ | GAS DEMAND TRENDS
S
tatistics from CEDIGAZ confirm
that 2014 was a second year of
moderate natural gas activity
worldwide. Marketed natural gas
production increased by only 1.3% to
3445 billion m3 in 2014, on a par with
2013, which saw a similar trend (+ 1.2%).
These results are in contrast with
sustained average growth in the order
EIA | CRUDE EXPORT RESTRICTIONS
A new EIA report, 'Effects of
Removing Restrictions on US
Crude Oil Exports', states that the
recent rise in domestic crude oil
production and the prospect of
continued supply growth, have
prompted questions as to how the
relaxation of current policies might
affect the crude and petroleum
product markets.
The EIA found no difference
between projections with or without
current export restrictions in two
analysis cases, in which projected
production with current export
restrictions remains below
10.6 million bpd over the next decade.
However, in two other analysis cases
w s d
and diesel by as much as 30%.”
“You don’t have to be an economist
to know that removing almost one third
of our nation’s fuel supply would deal a
crippling blow to our economy,” said
Greco. “Such a large decrease in fuel
supplies would have a broad impact
across the entire economy, and NERA
predicts this would dramatically increase
fuel costs for consumers.
"We urge EPA to reduce the total
renewable fuels volume requirement
and waive the cellulosic ethanol
requirement for 2014, 2015, and 2016.”
of 2.8%/y recorded in the 2000s. This
underperformance was mostly
explained by demand side factors,
related to increased competition from
coal in Europe and Asia, the economic
slowdown (China) and the exceptional
warm weather conditions in the
northern hemisphere, which put a
break on the expansion of gas demand.
where domestic production in 2025
ranges between 11.7 - 13.6 million bpd,
projections without export restrictions
show increased domestic production,
higher crude exports, reduced product
exports, and lower gasoline prices to
US consumers.
Although unrestricted exports of
US crude oil would leave global prices
unchanged or result in a small price
reduction, other factors affecting
supply and demand will largely
determine whether prices remain close
to their current level. Resource and
technology outcomes as well as global
price drivers will affect growth in US
crude production, whether or not
current export policies are maintained.
WHEN CONDITIONS
WHEN CONDITIONS
HEAT UP
HEAT UP
DON’T LET
DON’T LET CORROSION
CORROSION
SHUT YOU
SHUT YOU DOWN
DOWN
Whether it’s higher temperatures, rising pressures or more acidic media, conditions in
Whether it’s higher temperatures, rising pressures or more acidic media, conditions in
oil refineries have never been more extreme. Tube and pipe corrosion are a constant
oil refineries have never been more extreme. Tube and pipe corrosion are a constant
threat, causing as many as half of all major shutdowns. This is why hundreds of the
threat, causing as many as half of all major shutdowns. This is why hundreds of the
world’s most demanding petrochemicals refiners are turning to the next generation of
world’s most demanding petrochemicals refiners are turning to the next generation of
corrosion resistant alloys. Like one German oil refinery, which used Sandvik SAF 2707
corrosion resistant alloys. Like one German oil refinery, which used Sandvik SAF 2707
HD hyper-duplex heat exchanger tubes to reduce the number of shutdowns from 8 to
HD hyper-duplex heat exchanger tubes to reduce the number of shutdowns from 8 to
1 over a period of four years. The result was massive savings on material replacement.
1 over a period of four years. The result was massive savings on material replacement.
So as your tubes’ performance is pushed to new heights, find out how we can help
So as your tubes’ performance is pushed to new heights, find out how we can help
keep corrosion from shutting you down.
keep corrosion from shutting you down.

SMT.SANDVIK.COM
SMT.SANDVIK.COM
 Ng Weng Hoong, Contributing Editor, explains why LNG markets are on the precipice of
massive change amid new supply surge, growing spot trades and the use of new pricing indices.

October 2015 14 HYDROCARBON

ENGINEERING
The
calm
before
the
storm

T
he global LNG market is undergoing major structural changes as a result of the fuel’s
continuing supply glut, its prolonged price weakness, Asia’s demand for US linked
pricing, and the growing popularity of short term deals and spot trades, according
to three recent research reports.
Since oil and gas prices began collapsing in mid 2014, Asia, which accounts for the bulk of
the world’s LNG consumption, has been gaining the upper hand in pushing for changes to the
decades old system for trading, supplying and pricing the fuel.
The sharp increase in near term supply is creating conditions to support spot cargo trading,
according to separate reports issued by Australia’s Department of Industry and Science (DIS)
and the Institute of Energy Economics Japan (IEEJ).
‘The global LNG market is on the precipice of massive change,’ declared the DIS in its June
quarterly update. A prolonged period of LNG tightness has stimulated large investment in new
capacities, mostly in the Pacific Basin led by Australia.
The DIS expects global LNG production capacity to surge by nearly 13.9% to 287 million t
next year, while demand will rise by a slower rate of 13.3% to 271 million t. As a result, the
global LNG glut will widen from 32 million t to 35 million t.

HYDROCARBON 15
ENGINEERING October 2015
 ‘One of the largest ever expansions in liquefaction
capacity is expected to occur in 2016, increasing from
252 to 287 million t,’ the report noted. The projects
adding to the world’s supply include Queensland Curtis
(QCLNG), Australia Pacific (APLNG), Gladstone LNG
(GLNG) and Gorgon in Australia, Sabine Pass in the US, and
a few plants in Indonesia and Malaysia. GLNG, APLNG and
GLNG are expected to reach full production by the end of
2015.
The DIS predicts that LNG companies will operate
their plants to capacity in an all out fight for market
share, even if this led to a larger supply glut and lower
prices. Having invested so heavily in their projects, the
companies will want to maximise production and will not
be concerned that term customers are unable to fully take
up their contracted volumes.
The resulting additional uncommitted cargoes will
give rise to a spot market serving Europe, Southeast Asia
and India. The DIS said it expects this expanded region
will import a total of 116 million t of spot LNG cargoes in
2016, up from 95 million t in 2014. Chinese demand will
remain strong, growing from 18 million t in 2014 to
28 million t in 2016.
LNG suppliers will face competition from Central Asia,
which is expanding pipeline reach and capacity to increase
the export of natural gas to China, and other parts of Asia.
The department is forecasting Australia’s natural gas
production to surge 30% to 85.1 billion m3, or 62 million t,
next year, largely thanks to the start up of new LNG
capacity. Australia produced 65.7 billion m3, or
48 million t, of natural gas last year.
In his research paper, IEEJ Analyst Hiroshi Hashimoto
noted that three major trends will rule the LNG markets
over at least the next two years. The fuel’s supply and
demand will continue to grow, prices will remain weak
with buyers pushing for changes in the pricing formula,
and spot trades will become more frequent as the
traditional system based on rigid long term contracts
breaks down. Hashimoto predicts that the global LNG
market will quadruple in size from 100 million t in 2000 to
400 million t by 2020 as gas becomes an increasingly
important part of the world’s energy mix.
The sharp drop in Asia’s spot LNG prices from a range
of US$15 - 18/million Btu in early 2014 to between
US$7 - 8/million Btu now is deterring buyers from
committing to long term contracts requiring them to lift
large volumes of the fuel at high prices linked to crude oil.
Those who had committed to buy large fixed volumes on
term prices are regretting their decisions amid the large
supply of cheap LNG spot cargoes.
As another sign of the market’s transition, Hashimoto
notes that some Japanese and Indian buyers have recently
succeeded in breaking away from oil linked deals and
tying LNG contracts to Henry Hub gas prices in the US.
Weak global demand
threatens proposed projects
Affirming the bearish conclusions of the Australian and
Japanese researchers, London based Carbon Tracker
Initiative (CTI) said companies may have to delay or cancel
October 2015 16 HYDROCARBON
ENGINEERING
proposed LNG projects worth a total of US$283 billion
through 2025 to reflect the world’s slowing energy
demand.
In a 28 page report, the UK lobby group noted that
16 of the world’s 20 largest LNG companies are under
pressure to reconsider planned investments amid the
increasingly downbeat outlook on the world economy
over the next few years.
The report predicts that Canada, the US and Australia
will bear the brunt of project losses worth a combined
US$221 billion, or nearly 79% of the global total. Canada,
which has yet to build an export LNG terminal, will have
to give up on as much as US$82 billion worth of proposed
investments, followed by the US’ US$71 billion and
Australia’s US$68 billion.
These ‘high cost, energy intensive’ projects, requiring
long lead development times and LNG spot prices of
more than US$10/million Btu to Japan, are most at risk in
a disappointing demand scenario, said CTI’s ‘Carbon
Supply Cost Curves: Evaluating Financial Risk to Gas
Capital Expenditures’ report. 'With the costs of
renewables falling, gas is already struggling to compete in
some markets, or could be priced out soon in others. The
shale gas revolution in the US has been the exception, but
this has not been replicated in Europe where the swing has
been from coal to renewables'.
As a result, CTI said the ‘golden age of gas’, as earlier
proclaimed by the International Energy Agency and other
energy experts, has failed to materialise in most regions.
Iran’s nuclear deal with world
powers reignites regional race
to construct gas pipelines
The owner of the world’s largest natural gas reserves is
preparing to unleash new supplies into the glutted
markets for years ahead as it plans for life free of trade
sanctions.
Iran’s successful nuclear energy talks with the P5+1
group, the five UN Security Council members (US, China,
France, Russia and the UK), and Germany, has also reignited
a race among key players in Asia and the Middle East to
construct new regional pipelines to connect natural gas
producers and consuming countries.
India and Pakistan are each looking to revive decades
old plans to build pipelines to tap Iran’s natural gas
reserves, while Central Asia, Russia and China are stepping
up bilateral and regional discussions to expand pipeline
infrastructure to boost cross border gas flows and
consumption.
The impetus for these pipeline discussions came from
the breakthrough 14 July talks between Iran and the P+1 group
over Tehran’s controversial nucelar energy programme. The
two sides announced they had reached a comprehensive
agreement that will pave the way for the global powers to
lift longstanding trade sanctions against Iran.
India and Pakistan are each separately looking to
construct pipelines to tap Iran’s enormous 34 trillion m3 of
natural gas reserves that BP ranks as the world’s largest.
Pakistan made the first move in 1995 with an agreement
with Iran to build a pipeline to tap the giant South Pars
Latest News
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 gas field. It was expanded four years later to become the
2775 km Iran-Pakistan-India (IPI) pipeline network that was
then estimated to cost US$7.5 billion.
But the project was immediately stymied by a
combination of factors including objections from the US,
Iran’s pariah status in the international community,
constant bickering between India and Pakistan over the
pipeline’s route and configuration, the rising cost of
pipeline construction and natural gas prices, security
threats from disffected local groups and terrorists, and
the emergence of competing projects.
Pakistan and Iran relaunched the project in March 2013
when they officially began construction of a 1800 km pipeline
to connect South Pars to the Pakistani town of Nawabshah
near Karachi city. While Iran has completed its section,
Pakistan is struggling to pay for its portion, potentially opening
the door for Russia or China to play a role.
China is already a major player in Pakistan, with
Prime Minister Le Keqiang announcing in April that Beijing
is supporting a US$46 billion programme to develop the
China-Pakistan Economic Corridor (CPEC) that includes
the construction of a gas pipeline between Nawabshah
and Gwadar port. Having invested some US$50 billion in
oil and gas infrastructure in Central Asia over the past
decade, China is to keen to include Pakistan and Iran in its
expanding network of energy suppliers.
As part of its pushback against the West, Russia also wants
a major role in the pipeline project, and to supply natural gas
to South Asia to cement its close ties with Pakistan, Iran and
China. Russia expects to start work on building a separate gas
pipeline to link up Karachi and Lahore city.
Not to be outdone by its rivals, India has resurrected a
two decade old plan for a subsea pipeline to import
natural gas from Iran and Oman, while adding an onshore
link to tap the rich gas fields of Turkmenistan and other
Central Asian producers. The case for an extended
pipeline network to tap Iran’s natural gas gained credence
following Tehran’s breakthrough 14 July talks with the
UN Security Council and Germany over its nuclear energy
programme. To be built at a cost of US$5.6 billion, the
proposed updated 1600 km subsea pipeline will deliver
400 billion m3/y of natural gas from Oman to India’s
northwestern Gujarat state.
Prime Minister Narendra Modi discussed the idea with
Turkmenistan, which was among five Central Asian
countries including Kazakhstan, Kyrgyzstan, Tajikistan and
Uzbekistan that he visited from 6 - 11 July. Turkmenistan
has the world’s fourth largest natural reserves of
17.5 trillion m 3, according to BP.
Modi also discussed the US backed
Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline
project in his meetings with the Central Asian leaders.
Work on the proposed US$10 billion project had been
expected to start later this year, according to some
officials from the participating governments and the Asian
Development Bank (ADB), but this could be delayed again.
But the business case for TAPI may have collapsed as
oil and gas prices are not expected to recover, possibly for
some years, after plunging by more than half since
mid 2014. The proposed route through Afghanistan and
October 2015 18 HYDROCARBON
ENGINEERING
Pakistan has become a heightened source of security
concern due to the growing threats from the Taliban,
Islamic State and local insurgents.
Analysts predict China to
add to LNG’s bearish outlook
through 2017
Analysts are reducing their forecasts for China’s natural
gas consumption over the next two years in view of a
slowing economy, low oil and coal prices, and the high
cost of gas fired electricity.
UK consulting firm Wood Mackenzie has sharply reduced
its forecast for Chinese gas demand to 360 billion m3 in 2020
and 560 billion m3 in 2030, compared with 420 billion m3 and
640 billion m3 previously for the two respective years.
In the short term, Chinese gas demand growth is being
held down by low oil prices and high domestic gas prices,
reversal of environmental policies, competition from coal
and hydro and warmer winter weather, said the firm’s
principal gas consultant Gavin Thompson.
Structural factors are also in play as China is
developing its services sector to reduce the country’s
dependence on heavy industries and manufacturing to
continue driving the economy.
The sharp slowdown in China’s gas demand growth
appears to have surprised the country’s main gas
companies, which have signed on to import an annual
total of 66 billion m 3 of LNG, including a ramp up of
23 billion m 3 into the domestic market by 2018. The
increasingly oversupplied market is exerting downward
pressure on domestic prices and hurting the bottom lines
of the gas importers.
According to Wood Mackenzie, the companies are
attempting to renegotiate with suppliers longer import
schedules, lower pricing terms and increased flexibility for
the resale of their LNG allocations to other markets in the
Pacific. Central Asia is a major source of the new LNG
supplies into China.
“We expect China will be over contracted by approximately
18 billion m3 from 2015 till 2017,” said Thompson.
The state owned firms will deal with the looming glut
by restricting or delaying investment in expensive
projects, and maximising contract sales to domestic
customers, while PetroChina will control the import of
pipeline gas using take or pay provisions.
“With strong growth in contracted LNG and low
prices, we expect that some LNG will be sold back into
the broader market,” said Thompson. Some of this will be
seasonal, in particular LNG that might otherwise have
supplied northern China during the warmer months, but
even at times of higher demand it is unlikely that all
contracted LNG will find a market in China.
If and when it occurs, an oil price recovery will
stimulate Chinese gas demand. Separately, the CNPC
Economics & Technology Research Institute reported that
Chinese gas demand has been growing at a slower rate. It
rose 6.9% over the first four months of 2015, compared
with a much faster 9.8% for the same period last year. It
attributed to the slower demand growth to the weaker
pace of China’s economic expansion.
India’s natural gas deficit to
fall by nearly 58% on surging

The Quiet Work-Horse!

supply
India’s natural gas deficit will fall by nearly 58% over the next
10 years as annual supply will rise by nearly 8.5% to outpace
domestic demand’s annual 3.8% growth, according to credit
rating agency ICRA.
The deficit will fall from around 101 million m3/d in the
current 2015 financial year to 43 million m3/d by FY2025.
According to the Gurgaon, New Delhi based firm, India’s
natural gas demand will rise from 229 million m3/d to
332 million m3/d over the 10 year period while domestic
supply will more than double from 128 million m3/d to
289 million m3/d.
Most of the new domestic production will come from
Gujarat State Petroleum Corp’s (GSPC) Deen Dayal field, and
the KG Basin blocks operated separately by state upstream
firm ONGC and privately held Reliance Industries Ltd (RIL).
Despite India’s huge appetite for the clean burning fuel,
ICRA said the demand outlook for natural gas is clouded by
the growing competition from alternative fuel sources and
the expectations for crude oil prices to remain weak for
5
C 201
ADIPEabi / V. A. E.
years.
h
Abu D 15
Uncertain outlook on LNG . 11. 20
9. – 12 n d 872
7
a
regasification utilisation Hall 8
.0 · S t

As a result of the demand uncertainty, ICRA expects India to

under use its LNG regasification capacity over the next ECOTROL® control valve
10 years. Indian firms will add between 10 and 15 million tpy
of regasification capacity from approximately 25 million tpy. Advantages,
ICRA said India operates less than 70% of its current that should not be kept quiet!
regasification capacity due to infrastructure deficiencies at ● High reliability guaranteed by
two major terminals and insufficient pipeline capacity to precision manufacturing processes
deliver the gas from import terminals to end users. and quality control
Petronet’s 5 million tpy terminal at Kochi lacks pipeline ● Emission control and leakage
connectivity, while GAIL’s Dabhol terminal in Maharashtra conforming to the highest international
state is exposed to stormy ocean weather without the standards
protection of a breakwater. ● Tubeless, integrated mounting of
Based on relatively ‘firm’ plans, ICRA said it projects positioners acc. to VDI 3847
India’s regasification capacity to increase to approximately ● Minimal life cycle cost
44 million tpy (155 million m3/d) by FY2020 and ● A range of awarded patents
approximately 55 million tpy (190 m3/d) by FY2025. Take advantage of the most technically
ICRA expects expansions at the Dahej and Hazira terminals innovative control valve in a generation,
along with the construction of new greenfield projects will up to DN700 (28")!
boost India’s regasification capacity, which includes: For further
nn A floating storage and regasification unit (FSRU) at product
Kakinada port in Andhra Pradesh state by GAIL, AP Gas information
Distribution Company, GDF, Shell and Kakinada Port.
nn An FSRU terminal at Pipavav in Gujarat state by
Swan Energy Ltd.
nn An onshore terminal at Mundra, Gujarat, by a GSPC-Adani
joint venture firm.
nn An onshore terminal at Ennore, Tamil Nadu, by Indian Oil ARCA Regler GmbH, D-47913 Tönisvorst
Corporation Ltd. Phone +49-2156-7709-0, Fax …-55, sale@arca-valve.com

‘A key challenge for the new terminals is their ability to tie www.arca-valve.com
up LNG supplies through long term contracts at competitive ARCA • Competence in valves, pumps & cryogenics
prices and the competition faced by regasified LNG from Flow Group • Subsidiaries and partners in Switzerland, the Netherlands,
worldwide: India, P.R. China, South Korea, Mexico and USA!
liquid fuels,’ noted ICRA. The operators must also focus on the
credit risks posed by prospective customers who want to sign
long term contracts for slots in their terminals.
 OCTOBER ISSUE

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