NEDO—1C—00ER43

[Feasibility Study on an Energy Conservation Project at Tabriz Refinery in ]

March, 2001

New Energy and Industrial Technologies Development Organization (NEDO) Entrusted to Idemitsu Kosan Co., Ltd.

02 0005070-6 Basic Study for Promotion of Joint Operations: [ Feasibility $tudy on an Energy Conservation Project at Tabriz Refinery in Iran] Entrusted Company: Idemitsu Kosan Co., Ltd. Date of Issue:March, 2001 Objectives of study: In December 1997, the Third Conference of the Parties to the Framework Convention on Climate (COP-3) was held in Kyoto. The conference adopted the “Kyoto Protocol”, which, in order to prevent the global warming due to greenhouse effect gases including carbon dioxide, aim to reduce the average emissions in every country. Japan’s target of the reduction was decided to be 6%. This study makes it final object to find out effective projects that can be linked with future joint implementation for emission reduction of the greenhouse effect gas(Carbon Dioxide). Accordingly, feasibility study was conducted on the energy saving project to improve energy efficiency of oil refining facilities including Atmospheric Distillation and Naphtha Catalytic Reforming units in Tabriz Refinery affiliated by National Iranian Oil Refining & Distribution Company(NIORDQ in Islamic Republic of Iran..______[Feasibility Study on an Energy Conservation Project

at

Tabriz Refinery in Iran]

March, 2001

New Energy and Industrial Technologies Deve I opment Organ i zat i on (NEDO) Entrusted to Idemitsu Kosan Co., Ltd. PREFACE

This report contains results of the "Basic Research to Promote Joint Implementation: Investigation into Energy Saving Project Regarding Tabriz Refinery In Ran" that was entrusted to us by the New Energy and Industrial Technologies Development Organization (NEDO) as one of their FY2000 projects.

In December 1997, the 3rd Conference of the Parties to the United Nations Framework Convention on Climate Change (COP3) was held in Kyoto. At the conference, the "Kyoto Protocol" was adopted with the intent of preventing global warming caused by emission of greenhouse effect gases including carbon dioxide. The Protocol set emission targets that were the average maximum emissions to be attained by developed nations by "2008 to 2012", which included reduction of minimum 5% below 1990 emissions levels. The reduction target for Japan was set at 6%. Further, the Kyoto Protocol agreed on a mechanism which was to provide target attaining procedures with some flexibility. These procedures include "Joint Implementation (JI)" in that developed countries with emissions targets may get towards their targets through project-based emission reductions in other such countries and "Clean Development Mechanism (CDM)" which are practiced jointly by developing countries. Japan, also, will work toward attainment of targets through actively using this mechanism.

This investigation concerns National Iranian Oil Refining and Distribution Company (NIORDQ of Islamic Republic of Iran and, through a feasibility study of the energy saving project to improve energy efficiency of refining plants at Tabriz Refinery, the investigation aims to develop promising project linked to the future Clean Development Mechanism(CDM) for reduction of discharging greenhouse effect gas.

The details of the feasibility study for energy conservation are 1) Modification of process furnaces and boilers for controlling excess air for combustion in order to reduce consumption at Atmospheric Distillation and Naphtha Reforming Units, 2) Installation of Air Pre-heater or Waste Heat Boiler for recovering heat from flue gas, 3)lncrease and optimum rearrangement of heat exchangers for increasing recovery heat from high temperature side oil 4) Improvement of operation control for distillation tower reflux for saving energy release from reflux oil Through the above modification of existing facilities and improvement of operations, it is aimed to reduce fuel consumption at operating plants as results of energy saving studies. It is expected that, based on these results of investigation an energy saving modification projects are practiced and reduction in emission of carbon dioxide as a greenhouse gas is attained through the reduction of fuel consumption at Tabriz Refinery in the near future. Finally, we would like to express our sincere thanks to all the parties concerned who kindly cooperated for this investigation. We hope that the investigation results given in this report will be able to provide you with some useful information.

March, 2001 Idemitsu Kosan Co., Ltd. Members in charge of Site Survey and Feasibility Study in Idemitsu Co., Ltd. Assignment Company Name Title & Position Project Manager, Idemitsu Kosan Mr. Hisayoshi Assistant to GM & Group Leader & Study Member Co., Ltd. Tanda Overseas Technical Coop. G., Manuf. Dept. Chief Study Idemitsu Kosan Mr. Shohachi Overseas Technical Cooperation Group Member Co., Ltd. Tokuda Manufacturing Dept. Study Idemitsu Kosan Mr. Ryuzo Overseas Technical Cooperation Group Member Co., Ltd. Hurukawazono Manufacturing Dept. Study Idemitsu Kosan Mr.Temo Refining Technology Center, Manufacturing Member Co., Ltd. Mori Dept. Study Idemitsu Kosan Mr. Yoshihiko Refining Technology Center, Manufacturing Member Co., Ltd. Fuiiwara Dept. Technical Manager Idemitsu Kosan Mr. Toshio Branch Office of Idemitsu Engineering Co., & Study M ember Co., Ltd. Izawa Ltd.IGeneral Manager, Overseas Operations) Sub-chief(Non-Tech Idemitsu Kosan Mr. Satosi Branch Office of Idemitsu Engineering Co., )Study Member Co., Ltd. Nakayama Ltd.fManager, Overseas Operations) Sub-chief(Tech) Idemitsu Kosan Mr. Yasuhiko Branch Office of Idemitsu Engineering Co., Study Member Co., Ltd. Miura Ltd. Study Idemitsu Kosan Mr. Naoki Branch Office of Idemitsu Engineering Co., Member Co., Ltd. Yada Ltd. Study Idemitsu Kosan Mr. Hideto Branch Office of Idemitsu Engineering Co., Member Co., Ltd. Takahashi Ltd. Study Idemitsu Kosan Mr. Ikuo Branch Office of Idemitsu Engineering Co., Member Co., Ltd. Ohkubo Ltd. Stud}' Idenritsu Kosan Mr. Shuhei Branch Office of Idemitsu Engineering Co., Member Co., Ltd. Ono Ltd. CONTENTS

Basic Research to Promote Joint Implementation [Feasibility Study on an Energy Conservation Project at Tabriz Refinery in Iran]

Outline 1

CHAPTER 1 Fundamental Matter Relevant to Project ...... 3 1. Current Situations of Partner Country...... 4 1.1 Political/ Economic/ Social Conditions ...... 4 1.1.1 Political Conditions ...... 5 1.1.2 Economic Conditions ...... 7 1.1.3 Social Conditions ...... 10 1.2 Energy Conditions ...... 12 1.2.1 General Conditions of Energy ...... 12 1.2.2 Production and Consumption of Oil...... 12 1.2.3 Production and Consumption of Natural Gas...... 13 1.2.4 Electric Power Production ...... 13 1.3 Needs for CDM Project ...... 14 2. Needs for Introducing Energy-Saving Technology into Industries Concerned ...... 15 2.1 Current Conditions of Oil Refineries In Iran And Needs for Introduction of Energy- Saving Technology ...... 15 2.2 Progress and Current Situation of Iran's Oil Refining Industry...... 16 2.3 .Current Situation and Future Assignment for Oil Refineries of Iran...... 17 3. Significance/ Needs/ Possible Outcome of This Project and Possible Influence over Similar Industries, etc...... 19 3.1 Significance/ Needs/ Possible Outcome of Project ...... 19 3.2 Possible Influence over Similar Industries, etc...... 19

CHAPTER 2 Specific Details of Project Plan...... 21 1. Project Plan...... 22 1.1 Outline of Project Area...... 22 1.1.1 Location of Project Region ...... 22 1.1.2 Geography / Climate...... 23 1.1.3 History/Population/People ...... 23 1.1.4 Natural Resorces ...... 25 1.1.5 Industries...... 25 1.2 Description of Project ...... 26 1.2.1 Units Concerned and Details of Project ...... 26 1.2.2 Description of Energy-Saving Project ...... 26 1.3 Greenhouse Gas, etc. Covered by Project ...... 29 2. Outline of Work Site (Target Corporation) ...... 30 2.1 Expressed by Work Site (Target Corporation) ...... 30 2.2 Outline of Work Site Plants & Equipment (Target Corporation) ...... 31 2.2.1 Outline of NIORDC...... 31 2.2.2 Outline of Tabriz Refinery...... 33 2.2.3 Outline and Present Conditions of Units to be Studied for Energy Saving ...... 36 2.2.4 Way of Thinking and Setting of Target for Energy Saving ...... 41 2.2.5 Present Conditions of Operation and Studies for Energy Saving ...... 50 2.3 Competence of Work Site (Target Corporation) to accomplish project ...... 52 2.3.1 Technical Competence ...... 52 2.3.2 Management Structure...... 52 2.3.3 Business Fundation and Management Policy ...... 53 2.3.4 Abiility to Pay Funds...... 54 2.3.5 Personnel Capacity...... 54 2.3.6 Organization for implementation ...... 54 2.4 Contents of Project and Specifications of Modification Work of the Units at the Site...... 55 2.4.1 Specifications of Modification Work in Each Unit...... 55 2.4.2 Contents of Modification Work and Studies of Specifications for Energy Saving in Each Unit...... 60 2.4.3 Energy Saving Potential by Modification Work in Each Unit...... 91 2.5 Scope of Fund/ Equipment/ Service, etc. To be Bom by Each Party in Implementation of This Project ...... 94 2.6 Prerequisites/ Problems, etc. Concerning Implementation of This Project ...... 95 2.7 Implementation Schedule of Project ...... 96 3. Implementation of Fund Plan...... 97 3.1 Funding for Project Implementation...... 97 3.2 Funding Prospect ...... 97 4. Matters Concerning COM Conditions ...... 98 4.1 Adjustments to be Made between both Parties toward Realization of COM Concerning Project Implementation Conditions and Scope of Works of Each Party, etc...... 98 4.2 Possibility of This Project to be Agreed As CDM...... 99

CHAPTER 3 Effect of Project ...... 100 1. Effect of Saving Energy ...... 101 1.1 Technical Background to be caused Effect of Saving Energy ...... 101 1.2 Baseline as Basis for Calculation of Energy Saving Effect...... 101 1.3 Clarified Quantity, Period and Accumulated Volume brought by Elect of Energy Saving ...... 105 1.3.1 Contents of Modification and Clarified Quantity of Energy Saving Effect...... 105 1.3.2 Period and Accumulated Volume of Energy Saving Effect...... 106 1.4 How to Accurately Check Reduction of Greenhouse Effect Gas (Monitoring Method)...... 108 2. Effect of Reduction of Greenhouse Gas...... 110 2.1 Technical background to be caused effect of reduction of Greenhouse Gas...... 110 2.2 Baseline as basis for calculation of effectiveness of greenhouse gas reduction ...... 110 2.3 Concrete quantity, period and accumulated volume brought by effect of reduction of greenhouse gas ...... 112 2.4 How to Accurately Check Reduction of Greenhouse Effect Gas (Monitoring Method) ...... 114 3. Possible Influences over Productivity...... 115

CHAPTER 4 Profitability ...... 116 1. Effect of Economic Return for investment...... 117 1.1 Amount of investment and return for energy saving modification ...... 117 1.2 Investment in modifications and payout year for energy saving in each unit...... 119 2. Effectiveness of project versus Modification Cost ...... 121 2.1 Effect of energy saving versus Investment...... 121 2.2 Effect of Carbon Dioxide Reduction in terms of Investment...... 124

CHAPTER 5 Discussion of Possible Pervasive Effect...... 126 1. Pervasive Effect Expected in Target Country Brought about by Technologies Introduced through Project ...... 127 1.1 Possible Pervasive Effect into Taget Corporation ...... 127 1.2 Possible Pervasive Effect into Other Area and Other Corporation ...... 127 2. Effectiveness in View of Possible Pervasion ...... 128 2.1 Energy-Saving Effect...... 128 2.2 Reduction of Greenhouse Effect Gas...... 128

CHAPTER 6 Other Influences...... 130 1. Other Influences brought by Implementation of Energy Saving Project ...... 131 1.1 Influences over Other Environmental Aspects...... 131 1.2 Influences over Economical Aspects...... 131 1.3 Influences over Social Aspects...... 132 2. Other Influences brought by Up-grading Project of Heavy Oil...... 133 2.1 Background of Pre-FS for Up-grading of Heavy Oil...... 133 2.2 Outline of Pre-FS for Up-grading of Heavy Oil...... 134 2.3 Influences over Environmental Aspects...... 135 2.4 Influences over Economical Aspects...... 135 2.5 Influences over Social Aspects...... 136

Conclusion. 137 Attachment- 139

Attachment-1: Process Flow Diagrams of Target Units for FS survey

(1) Refinery Process Diagram of Tabriz Refinery------140 (2) Flow Diagram of Crude Distillation Unit------141 (3) Flow Diagram of Vacuum Distillation Unit------142 (4) Flow Diagram of Visbreaking Unit------143 (5) Flow Diagram of Naphtha Hydro-desulfinization Unit------144 (6) Flow Diagram of Catalytic Reforming Unit------145 (7) LPG Recovery Unit------146 (8) HydroOCracking Unit------147

Attachment-2: Site Survey Records of FS for Energy Saving Project

(1)Record of First Site Survey for FS (Duration, Personnel, Contents)------148 (2)Record of First Site Survey for FS (Duration, Personnel, Contents) ------148 (3) Record of First Site Survey for FS (Duration, Personnel, Contents) ------149 (4) Members of Energy Conservation Project in Iran------150

Attachment-3: Relevant Maps of Iran for Energy Saving Project (1) Location Map of Tabriz City------151 (2) Location Map of Tabriz Refinery------151 (3) Country Map of Iran (Central and Northern Region) ------152 (4) Country Map of Iran )Central and Southern Region) ------153 OUTLINE

A basic research was conducted to discuss energy saving measures concerning oil refining equipment of Tabriz of Islamic Republic of Iran as a part of NEDO's FY2000 basic researches to promote joint implementation aiming to prevent global warming by emission of greenhouse gases such as carbon dioxide.

The investigation specifically concerned 10 units which were constructed in 1977 and revamped in 1992 including all of refining units and utility facilities at Tabriz Oil Refinery. The units included a 115,000BD atmospheric distillation unit, a 47,500BD vacuum distillation unit, a 16,500BD visbreaker unit, a 13,500BD naphtha hydrofiesulfurization unit, a 12,100BD naphtha reforming unit, a 15,000BD vacuum gas oil hydro- unit, a 34MMSCFD hydrogen production unit, 11MMSCFD amine treating unit, 5,000BD x2 asphalt unit, lOOTon/h x 5 boilers.. The major items concerning improvement/modification for energy saving operation commonly applicable to these units are as follows. 1) Modification of process furnaces and boilers for controlling excess air for combustion 2)Installation of Air Pre-heater or Waste Heat Boiler for recovering heat from flue gas, 3) Increase and optimum rearrangement of pre heat exchangers for increasing recovery heat from high temperature side oil 4) Improvement of distribution control for distillation tower middle and top reflux in order to increase heat recovery to pre heat train exchangers

A field survey consisted of collection/measurement of operating data, confirmation of operating conditions, collection of the specifications, etc. of the units concerned, based on which a feasibility study regarding energy saving was conducted. The modification policy for energy saving was decided to be based on improvement in energy efficiency through the best use of existing units rather than based on partial replacement of those units. As a result of the feasibility study for energy saving, returns on investment when displayed in the number of simple return years are approximately less 2 years for flue gas 02 control and 4 -7 years for other modifications. On the other hand, these payback years will be settled within 5 years in consideration of purchasing some parts of equipment in domestic market of Iran. The estimated total investment cost concerning the items of high realization amounts to approximately ¥2,000 million and the annual retrenchment in fuel cost amounts to about ¥660 million, and energy saving ratio is 13.5%. Regarding emission of carbon dioxide from the units concerned, the amount before practice of this project amounts to about 1,158 thousand tons as the baseline of fuel consumption for full capacity operation at the units concerned. After practice of this project, however, approximately 155.8 thousand tons (13.5%) of carbon dioxide is to be reduced.

-1- Toward realization of the energy saving projects, they strongly request Japanese technical and financial assistance comprehensively, meanwhile own funds are used for modifications in small-scale investment, application of Japanese financial assistance scheme as well as technical assistance is hoped for middle- to-large scale modifications.

Concerning financial support of Japanese Government for Iran projects, as the environmental improvement for both relationship has been extremely proceeded recently, we sincerely would like to endeavor efforts to realize the Energy Conservation Project based on this site survey and study as soon as possible. CHAPTER 1 FUNDAMENTAL MATTER RELEVANT TO PROJECT

This chapter describes current political/ economic/ social conditions of partner country in which has such background for implementation of this project. It is also considered concerning Significance/ Need/ Possible Outcome of Project in partner country and target industry.

-3 CHAPTER 1 Fundamental Matter Relevant to Project

1. Current Situations of Partner Country This chapter gives an outline of current political/economic/sodal/eneigy conditions of the Islamic Republic of Iran, the partner country in which joint project is to be implemented. It also describes an overview of the needs for introducing energy conservation technologies and significance/needs/possible outcome of the project.

1.1 Political/ Economic/ Social Conditions

Overview of Country (1) Official Name of Country : Islamic Republic of Iran

(2) Capital :

(3) Area : 1,648,000 Sq Km (4.4 times as large as Japan)

(4) Population 62,800 thousand (1999/by Iran )

(5) Ethnic Makeup : Persian(61%), Turk(25%), Kurd(9%), Arabic(4%) Others(l%) (6) Major Cities and Populations : Tehran (6,760 thousand), Meshed (1,890 thousand), Esfahan (1,270 thousand), Tabliz (l,190thousand), Shiraz (1,050 thousand) (7) Languages : Persian (official lang.), Kurdish, and others

(8) Religions : Mostly Shi'a Muslim. The others include Sunni, etc.

(9) Political System : The role of Supreme Leader exists as the nation's highest authority The president is elected every four years by the general public through direct election. The president, as the head of the administrative, appoints ministers. The legislature is based on the Islamic parliament of unicameral system which consists of 270members. All laws are subject to examination to confirm observance of the Islamic law and constitution.

4- 1.1.1 Political Conditions The which had started with seizure of the US embassy in 1979 eventually led to the exile of the Shah Pahlavi and returning, to hold position of Supreme Leader, of Khomeini from France where he had been staying as an exile. The country broke diplomatic relations with the US and, at the same time, drastically converted its course from the pro- American modernization into the governmental system which combined religion and politics under the state religion of Muslim. Later years, during the Iran-Iraq war, the country fought persistently under the leadership of Supreme Leader Khomeini and his successor Kamenei, while many other nations including, especially, middle eastern countries supported Iraq. Finally it succeeded to end the war in a draw because of damage and exhaustion on both sides. Also, during the Gulf War that broke up during the time of Rafsanjani presidency, the country played hard-nosed role in diplomacy, winning a favorable international reputation.

Over these periods, however, nation's strength in economic development could not be nurtured due to successions of the revolution and the wars. The rapid economic expansion undertaken at the beginning of 1990's aiming to recover from exhaustion from the Iran-Iraq war could not obtain large supports from developed nations, for which the nation was compelled to take retrenchment policies. Meanwhile, social evolution of the younger generation which had started after the Revolution showed a rapid increase in the middle of 1990's on, often causing problematic political issues.

In the presidential election of 1997, Khatami (moderate leftist/coalition of practical-line groups) hammered out policy changeover into liberal direction and gain an overwhelming victory based on support of younger generations and the majority of people. In opposition to this movement, the conservative wing (Supreme Leader Kamenei and others) which intends to maintain traditional policies has been emphasizing traditional Islamic values and has activated movements toward rollback of initiative by squeezing, based on its judicatory power, free speeches of mass media, etc., by purging the Khatami group which included impeachment of the former city mayor of Tehran. Hostility between the both groups has become enhanced.

Toward the outside world, on the other hand, President Khatami's policy lines which focus on "dialogue with different civilizations" and "detent" have appeared to be very effective, resulting in rapid improvement in foreign relations with European and Middle Eastern countries.

Reconciliation policy with the Middle Eastern countries went into full swing, started with the heads of state summit of the Organization of Islamic Conference held under the sponsorship of

-5- Iran in 1997. Encouraged by Iran's policy of openness, European countries actively started to enter Iranian markets with an eye to oil resources. U.S. president Clinton announced, in April, 1999, to exclude export of agricultural products and pharmaceuticals from the items subject to the economic sanction toward Iran. Being associated with the improving relations with the U.S., relations with and Egypt having been discontinued since the Iranian Revolution and the peace treaty with Israel which Egypt separately made are now advancing toward normalization.

Relationship with Japan, influenced by these changes, has also improved rapidly in comparison with the former state in which Japan kept distance from Iran after the Iranian Revolution out of consideration to the U.S. At the time of President Khatami's visit in November, 2000, it was decided that the Japanese Government offer, as advance payment for crude oil, in total $3,000 million for three years starting in 2001 to be used in development of Azadegan oil field, etc. It was also decided that application of trade insurance and lending from the Japan Bank for International Cooperation be realized concerning construction of four plants, etc.

President Khatami visited and, then, in June, 2000 and March, 2001 respectively, having using diplomacies to obtain economic aid including, also, trading of weapons, while keeping, in check, the U.S. movements relating to rich oil/natural gas resources in the Caspian Sea area.

The DAmato Law which prohibited the U.S. commercial transaction with Iran, although being partially released in April, 1999, still remains effective until August, 2001. It is worthy of note if the new Bush Administration having close connections with the U.S. oil industry which has been requesting improved relations with Iran finally decides cancellation of the D' Amato Law.

Another issue to be noted is Iran's presidential election scheduled in June, 2001. Khatami, if he runs, is most likely to be reelected. On the other hand, his running is thought still uncertain because of possible rollback of the conservatives, and the situations are left still unpredictable.

-6 1.12 Economic Conditions

(1) Overall Conditions The Central Bank, in order to clear off the debt which was created during the rapid economic expansion undertaken at the beginning of 1990's, took a strict foreign exchange control system. The system, even after completion of repayment, is still maintained today. During that period, the Khatami administration, in order to overcome intensified and unemployment problems of Iranian economy, introduced industrial policies such as buy-back system aiming to facilitate inflow of foreign capitals. As a result of this policy, foreign investment has been accelerated starting in the latter half of 1990's especially in the field of oil development and petrochemical industry.

The framework of the Third Five Year Development Plan from FY2000 to FY2004 is featured by a series of economic targets including economic growth equal to 6% per annum, creation of new employment for 3.8 million people in five years, an inflation rate of 15.9% or below, lowering of unemployment from 10.5% to 12.5%, etc. The above high-level targets are basically intended to be attained through various market- liberalizing policies which include, for example, economic structural reform, partial privatization of major industries, curtailment in subsidies, and relaxation of terms of trade.

The curtailment in subsidies on and foods, however, was later on rejected following a discussion for fear of a possible rash of complaints from people that might be brought about by resultant economic difficulties. Privatization of state enterprises, also, was rejected by the Constitution Protection Council on the ground of its nor ervance of the constitution. A series of such corrections have already raised some doubt as to feasibility of this Third Five Year Development Plan., however, income brought to Iran by high crude oil price or economic aid from overseas in recent years may support the plan from another aspect.

(2) National Budget FY1999 revenue and expenditure are as follows:

(a) Revenue 92,469,800 million rials (b) Expenditure : 95,210,700 million rials (c) Balance : - 2,740,900 million rials (deficit)

(3) Gross Domestic Product

— 7 — FY1999 GDP showed a rise of 25% over the preceding year

(a) GDP : 416,696,700 million rials (b) GDP per capita : 6.6 million rials/person

(4) Foreign Trade Since the start of the Khatami administration in 1997, relations with European and Arab states have been greatly improved. Especially, France and England among other European forces have shown noticeable expansion in trade with the country. During President Khatami's visit to France in October 1999, the two countries reached a large-scale agreement on die business concerning purchase of air buses and locomotives. In addition to the above, Iran has increased import of wheat to compensate extensive dan u rges in its agricultural production caused by die drought and French Government is discussing to raise the upper limit in the line guide for trade insurance. British Government, also in hope of expanding trade with Iran, is discussing to loosen trade insurance regulations and is moving toward settlement of die debt carried over from the pre-revolution times. The U S. Government lift the ban and started to export foodVpharmaceuticalVmedical equipment manufactured in the U S. to Iran, Libya, and Sudan in July 1999. It issued a permission in November 1999 which allowed U S. exporters to carry out transactions directly with the banks in these three countries. However, any public financing of import payment to Iran is not yet scheduled and is left for future assignment including the final decision of cancellation of the D’Amato Law which remains effective until August 2001. Japanese Government has decided to offer total $3,000 million for three years starting in 2001 to be used in development of Azadegan oil field, etc., as advance payment for crude oil. It has also been decided that application of trade insurance and lending from the Japan Bank for International Cooperation be realized concerning construction of four petrochemical plants, etc. Russia and China is offering economic aid to Iran while keeping, in check, the movements relating to rich oil/natural gas resources in the Caspian Sea area.

1) Foreign Trade Balance FY1999 trade balance has improved remarkably thanks to high price of crude oil.

[Table 1.12-1 Import/Export Balance] (US$100million) 1996 1997 1998 1999 Export amount 224 184 130 228 Import amount 151 142 143 139 Balance 73 42 -13 89

-8 Source: "BULLETIN Volume 38", Central Bank of Iran

2) Major Export Items (FY1999)

(a) Fuel energy (oil, etc.) : 86% (b) Others (caipets, pistachio, etc.) : 14%

(5) Financial/ Exchange Systems

1) Financial System Although the nation's financial sector has substantially been monopolized by the government, the Parliament recently decided on semi-privatizing state banks (maximum by 49%) and establishing insurance companies operated by private/cooperative associations based on the policies to shift the financial sector into a competitive market as stated in the Third Five Year Development Plan. The Constitution Protection Council, however, judged privatization of major economic sectors not conforming to the laws and refer the case back to the Parliament Privatization issue has thus encountered with great difficulties.

2) Stock Market The stock market, after a decline that started in 1997, began to take a recovery turn in the latter half of 1999. Favorable factors behind this are said to include a rise in oil price and resultant prospective recovery of business as well as prospective foreign investment which has taken on a realizable shape by President Khatami's visit to Europe. On the other hand, to overcome distrustfullness toward Tehran Stock Excahnge regarding speculative transactions and insider trading, introduction of new regulations are awaited to strengthen control over such transactions and to increase transparency of transactions.

3) Exchange Market The Islamic Republic of Iran adopts the multiple exchange rate structure which applies to oil and non-oil export/import as follows:

(a) Oil-notional export rate: Fixed (1,750 rials/US$) ~* Applied to imports of essential goods (b) Export rate : Fixed (3,000 rials/US$) Applied to imports of 30 designated items (c) Commercial : Floating (approx. 8,000 rials/US$)

-9- 1.13 Social Conditions Social conditions of Iran is subject to changes under influence of not only international price of oil on which the majority of its national revenue depends but also government subsidies regarding food/oil products which are used as basic political/economic strategies. On the other hand, unlike other Persian Gulf countries, it is given blessing of nature by having four distinctive seasons and vast land that extends over from the Caspian Sea on the north and the Persian Gulf on the south. In the daily living for people, vegetables and fruits are seen at shop all year round, staple foods such as nan (a kind of bread) and rice are freely purchasable, and food rationing exists for needy people. People's living can be said relatively stable.

(1) Civil Life/ Wage Level Under influence of domestic inflation caused by devaluation of rials started in 1990's and influence of delay in employment creation for younger generations, a rate of consumer price increase has exceeded that of actual wage increase, gradually developing feeling of poverty among the general public.

1) Consumer Price Index Increase Rate : 32.0% (simple average for FY1995-1999) [Details] (a) Goods : 30.0% (b) Services : 33.2%

2) Wholesale Price Index Increase Rate 27.6% (simple average for FY1995-1999) [Details] (a) Domestically manufactured products : 29.6% (b) Exported goods : 24.1% (c) Imported goods : 25.1%

3) Manufacturer's Price Index Increase Rate : 21.7% (FY1999)

[Details] (a) Agriculture 27.1%

(b) Industry 20.8% (c) Mining 29.6% (d) Electricity/gaVwatcr 26.4% (e) Service 25.3%

-10- (2) Labor Market

1) Labor Population Active population as of the end of 1992 amounted to 14,740 thousand which equaled 26% of the total population. The employed population out of this amounted to 13,100 thousand. Ratios between administrators/employment income earners and individual proprietors/family employees are approximately fifty-fifty.

2) Unemployment Rate Although the unemployment rate for the same year was 12.5%, the actual rate could exceed this level by far. This is because actual employment rates in agricultural areas are hard to grasp and state of employment/unemployment is ambiguous especially for family-operated businesses and small scale offices in large cities.

(3) Population Dynamics

1) Population Growth Rate The population growth rate for five years from 1991 to 1996 was equal to 1.47% which showed a decrease of 2.46% against the rate for the preceding period (1986/1991).

2) Tendency Considering that the population of 25 years old and under amounts to 60% of the total population, this tendency of decreases in growth rates is expected to continue in future.

11- 12 Energy Conditions

12.1 General Conditions of Energy Energy supply in Iran depends on oil and natural gas. Production ratios for 1994 were 83% for oil and 17% for natural gas. Power fuels for electricity include oil, natural gas, and water power in this order whose shares were 70% for oil, 20% for natural gas and 10% for water power in 1994. This was followed, however, by a plan to expand use of natural gas, based on which the number of power stations was increased, resulting in a shift in the above shares into 66% for oil, 29% for natural gas and 5 % for water power in 1999. Although oil will remain as the main energy source in future, the promotion policy regarding use of natural gas will also be held effective.

122 Production and Consumption of Oil Known amount of deposits of oil in Iran is estimated to be approximately 93 billion barrels. When calculated based on the current OPEC’s production volume that is 3.36 million B/D, reserve production ratio will be equal to about 70 years. The crude oil production which had been set at 3.6 million B/D before as in Table 1.2.2-1 was changed into the current volume in April 1999 according to the OPEC's agreement on cutback production. Crude oil supplied for domestic refining amounts to 1.1 million- 1.3 million B/D. In view of the country's population composition and increase rate, domestic demands for products are expected to continuously grow. The demand composition, however, mostly consists of white oil, whereas black oil is used for export Therefore, the future supply system will focus not on reinforcement of refining capacity, but on regulation of demand and supply where, in the meantime, the amount of oil exported will remain at the same level.

{Table 122-1 Production of Crude Oil and Exported Amount] (thousand B/D) 1996 1997 1998 1999 Production volume 3,610 3,623 3,666 3273 Exported amount 2.551 2,496 2.333 2206 Domestic refining, etc. 1,061 1,127 1.333 1,167 Source: Ministry of of Iran

-12- 123 Production and Consumption of Natural Gas Known amount of deposits of oil in Iran is estimated to be approximately 21,000billion cubic meters. When calculated based on the current production volume that is approximately 70 billion cubic meters, reserve production ratio will be equal to about 300 years. Various projects have been put into practice to utilize this rich resource of natural gas including a (KjAT) plan to build pipelines to Turkey and Europe, LNG plan for East Asia, etc. Further, it is recently discussed to try to expand its domestic consumption and use as petrochemical feedstock, to supply it via pipelines to neighboring countries, etc. The domestic consumption between 1994 and 1997, as shown in Table 1.2.3-1, has increased to 108% and high growth is expected to continue in future.

[Table 123-1 Production and Consumption of Natural Gas] (100 million cubic meters) 1996 1997 1998 1999 Production volume 642 695 728 803 Domestic consumption 424 476 515 588 Source: Ministry of Petroleum of Iran

12.4 Electric Power Production The domestic demand of electric power has indicated sharp growth attended by economic expansion policy recently, and has increased to 10% growth rate between 1996 and 1998. Major fuel for electric power production is shared by petroleum, however, the volume of fuel consumption is flatten as well as hydraulic power production. Therefore, the share ratio of petroleum fuel to total fuel volume has decreased relatively On the other hand, natural gas consumption for electric production has indicated 20% growth per every year, as shown in Table 1.2.4-1, and is expected to large expansion of utilization in The third five-year plan.

(Table 12.4-1 Fuel source and Production of Electric Power] (Million kwh) 1996 1997 1998 1999 Petroleum 62,974 66.103 64.362 71.049 Natural gas 15,475 19,299 26.487 31.156 Waterpower 7,376 6.908 7.014 4.943 Diesel 5,026 5,434 5350 5.670 Total electric power generation 85,825 97.944 103,413 112.818 Source: Ministry of Energy

-13- 13 Needs for CDM Project Needs for CDM projects for domestic industries especially concerning energy consumption related to oil/natural gas are considered very high in Iran. Iran-Iraq War which lasted 10 years following the Iranian Revolution of 1979 impoverished the Nation's domestic economy, totally stagnating its industrial development The breakup of diplomatic relations with the U S. after the Iranian Revolution has closed the door to advanced technologies and licenses being introduced from the West As the income brought about from export of large quantities of oil produced in the country is spent for government subsidies to afford domestic supply of foods and petrochemical products, state-owned oil refineries, power stations, and other plants have been left out behind in respect of efficiency promotion and modernization.

The energy-saving investigation in Tabriz Refinery has revealed scarcity of technical incentive/economical capacity enough to remodel and modernize oil refineries for energy efficiency and quality improvement There was even a case in which a furnace designed and built in 1977 without any heat recovery device was still in operation in the original state only with a slight remodeling for capacity increase and energy saving in Grade Distillation Unit

In addition to improved diplomatic relations in recent years with other nations, the high crude oil pice since 2nd half of 1999 has brought national income in Iran as well as economic feasibility of energy saving due to high energy price.

On the other hand, due to increased demands for gasoline/light oil, needs for corrective measures for serious environmental pollution especially in large cities, and other reasons, it has become an urgent issue to improve productivity of oil refineries/plants, quality improvement of oil products such as desulfurization and their energy consumption efficiencies. Based on the nation's economic environments, overall conditions of the nation, and our perception about the current state obtained from the field investigation, we consider that needs for a CDM project to increase efficiency and remodel oil refineries in Iran is of great importance.

14- 2. Needs for Introducing Energy-Saving Technology into Industries Concerned

2.1 Current Conditions of Oil Refineries In Iran And Needs for Introduction of Energy- Saving Technology The Iranian Government, in late 1990's, has passed a parliamentary resolution to enact a law concerning energy-saving promotion as a part of domestic measures against energy problems. The law concerns factories/plants with energy consumption rates of more than the specified volume and imposes severe penalties if their energy-saving measures are found inappropriate. Oil refineries are one of the major targets under the law. NIORDC, quickly responding to the government's policy, established Energy-Saving Committees both in the head office and each of its oil refineries to discuss specific energy-saving measures. However, because of delay in developing energy-saving technology and current severe economic environments without sufficient budgets, it will still take some more time until the refineries/plants, by themselves, can deal with the problems.

Iran, today, has nine oil refineries among which two large-scale refineries were completed after 1990 to meet increasing domestic demands, while the rest were built before or during the Iranian Revolution. Due to the economic adversity which followed the Revolution, the country, other than building the two refineries, has not had capacity enough to work toward improved efficiency and modernization of the existing oil refineries.

Except those two which were built in recent years, all the oil refineries in Iran were designed by U S. engineering companies, therefore, being based on highly rational concepts regarding construction and equipment flow. On the other hand, however, probably because of such cheap fiiel cost at the time of construction that was almost negligible co pared with the construction cost for a major oil producing country like Iran, some refineries were not equipped with any waste heat recovery system or not heat recovery type by having many emission-type air coolers. These situations, in view of return on energy-saving investment, indicate a high potential and needs for energy-saving of Iran's oil refineries and urgent implementation of energy-saving measures is thus required.

The oil refineries in Iran are all located adjacent to large cities, bringing about serious environmental problems caused by burning high sulfur fuel oil. Air pollution especially in wintertime at highland and inland places such as Tehran and Tabriz is quite severe against which some fundamental measures arc urgently required. In operation of oil refineries in general, improvements in technologies regarding production, quality, energy-saving, and environmental protection can not each independently exist but are mutually combined toward efficiency improvement and modernization of the refineries. In this regard, energy-saving

-15 technologies which can simultaneously serve also as environmental measures are strongly requested.

22 Progress and Current Situation of Iran's Oil Refining Industry Oil refineries of Iran are largely divided into the following four according to history of their establishment. Category 1: Abadan Refinery (1913) having the longest history and being the largest in size which was constructed by Anglo Iranian Company (BP Amoco at present) for the purpose of product export. Category 2: Tehran Refinery (1968) and Shiraz Refinery (1973) built for domestic use to satisfy increases in population and oil demands brought about by rapid growth (late in 1960's ~ early in 1970's) in Pahlavi Shah's Dynasty. Category 3: Tabriz Refinery (1978) and Refinery (1980) planned in the same line with Category 2 and established by NIOC by itself. Category 4: State-of-the-art Arak Refinery (1993) and Bandar Abbas Refinery (1998) constructed by Japanese engineering firms under the First Five Year Development Plan after the Iran-Iraq War.

The refineries under Categories 2 and 3 have already been designed to cater for possible expansion in future. Therefore, we infer that expansion of 20%-30% to the nominal capacity could rather easily be achieved through small-scale modifications. Changes in capacity are mentioned below:

1986 1989 1992 1993 1995 200x Iran Refinery result result result result result plan Abadan (1913) 0 117 297 297 320 375 Tehran (1968) 220 220 220 212 225 228 Isfahan (1980) 240 234 243 265 281 281 Tabriz (1978) 80 99 99 112 112 120 Shiraz (1973) 40 40 40 40 40 60 Kermanshah (1971) 15 27 27 27 27 27 Lavan (1968) 20 20 20 20 20 25

Arak (1993) — — — 150 150 150

Bandar Abbas (1998) — — — — — 232 Condensate Ref (200x1 — — — — — 70 Total 615 766 946 1123 1175 1565 (Source: Quoted from a report of the Downstream Attitude Survey Committee for JCCP Oil Producing Countries, etc.)

Oil refineries in Iran has been increasing their capacities to meet growing needs for oil created by increases in population and cars. In spite of establishment of large-scale oil refineries after the Iran-Iraqu War including Arak (150 thousand BD) and Bandar Abbas (230 thousand BD), all of them are now at their fullest operation with the current throughput at the maximum

-16 - designed levels or even above. Meanwhile, the country has still been suffering from economic adversity caused by the war, which has not been able to afford modemization/improvement of existing refineries.

NIORDC, the refining division of the state owned oil enterprise, now plans "scrap and build" of its Abadan Refinery due to its obsolescence. The Refinery; therefore, is not included in the list for energy saving and modemizafion/modification. Refineries subject to improvement/modemization are those in Categories 2 and 3. Tehran Refinery among them is one of the typical refineries for which modemization/improvement measures are most urgently needed in order to meet increasing demand for oil, to improve air pollution, and to enhance energy efficiency of the capital city of Tehran.

23 Current Situations and Future Assignments for Oil Refineries of Iran The major assignments currently held by NIORDC concerning improved efficiency/ modernization of oil refineries are as follows:

(1) Increase in Throughput Demands for petroleum products especially including gasoline and light oil is expected to increase in future, toward which efforts are currently made by each oil refinery to attain the maximum throughput and debottle-necking

(2) Upgrading (Production increase of gasoline through decomposition of heavy crude oil) Oil refineries in Iran generally treat Iranian light crude oil which is light crude oil, while heavy crude oil such as Iranian heavy crude oil is mostly subject to export due to unavailability of domestic treatment Crude oil having been discovered in succession lately in nearshores of the Caspian Sea (a part of which is exported to China on swap basis) mostly consists of heavy oil, suggesting needs for introduction of heavy oil decomposition equipment.

As for current supply/demands of petroleum products in Iran, heavy oil remains excessive and light oil balanced, while gasoline is insufficient. Iran, having the world's second largest amount of deposits of natural gas, is now under establishment of the natural gas pipelines. As a rapid increase in conversion from heavy oil into natural gas is expected, amount of excess heavy oil will further increase in future. On the other hand, demands for gasoline will continue to increase due to the nation's increasing number of cars and production increase of gasoline through decomposition of heavy oil has become an urgent issue in view of supply/demand relationship.

(3) Energy-Saving Measures Energy-saving awareness has increased worldwide represented especially by the movement

-17 ~ toward reduction of greenhouse gases. The most of Iran's oil refineries were built during 1950's ~ 1980's when fuel cost in comparison with building cost had negligibly been low for Iran, a large oil producing country. The refineries, therefore, have lacked consideration regarding energy-saving, still remaining highly potential for energy-saving improvement. Further, the recent higher price of crude oil leads to increased fuel cost, where addition/ modification of equipment for energy recovery are expected to bring about economic effects which are even higher than before.

(4) Environmental Measures Due to rapid increases in demands for gasoline/ light oil, Iran and, especially, its city areas now face serious problems of environmental pollution. Thinking of the fact that leaded gasoline is still being produced and the majority of its light oil is not desulfurized through use of desulphurization equipment, quality upgrading facilities are needed so that product quality standards as high as those of developed countries be realized in future. Further, waste water/gas from oil refineries are discharged often without sufficient treatment, concerning which urgent corrective measures are requested.

-18- 3. Significance/ Needs/ Possible Outcome of This Project and Possible Influence over Similar Industries, etc.

3.1 Significance/Needs/Possible Outcome of Project Tabriz Refinery, located in the suburb of Tabriz which is the country's fourth largest city, was built in 1977 before the outbreak of the Iranian Revolution. Although remaining as one of the nation's medium-sized refineries with its refining capacity of 115 thousand BPSD, it is located in a strategically important place. One of the reasons is because Tabriz is surrounded by other nations such as Azerbaijan, Armenia, Turkey, and Iraq and a part of its products are subject to export. Secondly, Tabriz is situated close to the Caspian Sea with rich oil/natural gas resources and it is now being planned that the oil/natural gas pipelines be extended to these areas. In this respect, treatment plans of crude oil from the Caspian Sea as well as introduction of heavy oil decomposition equipment which is needed as the power stations change use of heavy oil into gas has become an urgent issue for Tabriz Refinery.

Due to the nation's economic adversity, the process flow and equipment setup in Tabriz Refinery have been left almost unchanged from the time of construction. Just like the other oil refineries, there have been hardly any remodeling executed in its system and equipment for energy saving and yield improvement

On the other hand, political and technological problems concerning refineries currently lie in a heap, including, for example, increased demands for gasoline especially in large cities, environmental measures against serious air pollution and related quality improvement, and energy-saving measures of equipment in conformity with the Law conce og the Rational Use of Energy. In order to deal with these problems, we believe that the energy-saving project under discussion is highly feasible based on the energy-saving investigation of this time as the improvements are expected to be realized through small-to-middle investment, as the return on investment can be clearly shown, and as staff engineers of the refinery can also participate it with cooperative relations in the same way they have done in this feasibility study. Finally, we consider that realization of an appropriate financial support scheme will play one of the decisive factors.

32 Possible Influence over Similar Industries, etc. The energy-saving investigation of this time was conducted with regard to Tabriz Refinery. The possible outcome from the project will most likely to influence refineries within the country.

Each of the refineries, according to NIORDC's policy was established as each independent

19 corporation in 1999, starting to run its own oil refinery each independently. Unlike the conventional system in which all instructions were given by NIORDC, this new system is now creating atmosphere in which each refinery works competitively toward improving production capacity and efficiency. This, we believe, will help accelerating diffusion of outcome from one refinery to the others.

On the other hand, however, the NIORDC head office still has authority over approval and appropriation of budgets and allocate the budgets in consideration of necessary balance.

From the technological point of view, as above-mentioned, all the Iranian refineries, except those two that were built in 1990's and Abadan Refinery, were build based on very similar concepts regarding their equipment construction, equipment flow, and facility/machinery. This fact will greatly facilitate application of outcome from one refinery to the others.

-20- CHAPTER 2 SPECIFIC DETAILS OF PROJECT PLAN

This chapter describes outline of project Area, competence of work site (target corporation) , outline of work site plants & equipment, energy saving studies and content of project & specification of modification work in order to specify the project plan. It is also considered scope of service, problems and fund plan in implementation.

-21- CHPTER 2 Specific Details of Project Plan

1. Project Plan Specific plans and their discussions of projects for Iran's oil refineries are dealt with separately by each oil refinery in accordance with the principles of the head office of National Iranian Oil Refining and Distribution Company (NIORDC). NIORDC head office, however, always plays a leading role in budgeting. As for an energy-saving project, detailed discussions are under way from technological and economic viewpoints within the organization of Tabriz Refinery, which are to be realized through budgeting and approval of the head office for execution of the project

1.1 Outline of Project Area The province of Azarbaijan in which this project takes place is medium in size of about 105,952 km2 but with relatively a large population of about 2.5 million people. Tabriz, the capital city, is the largest economic center in the northern area of Iran. Its northern border sharing with Armenia and Azerbaijan, the province is situated at high elevations with the above sea level of 1,000m and above. Across the adjacent Urmia Province on the west side, it is also closely situated to Turkey and many people in Tabriz speak Turkish and Azerbaijani in addition to Persian. Climate of the province of Azarbaijan, although varying among the city, highland, and mountain regions, is generally featured by cold winters with snowfall in the mountain region which lasts for an extended period and by intense heat of summers. Heavy rainfall during wintertime flows into Lake Urmia.

1.1.1 Location of Object Region (1) Outline Tabriz Refinery is located in a western industrial district on the outskirts of the city of Tabriz, taking about 20 minutes by car from the city of Tabriz. Tabriz is the capital city of tire province, which served historically as the key spot in traffic connecting then Persian Empire and European nations. The city is about 300km2 large, forming a moderate incline which is higher in the east and lower in the west surrounded by plateau type mountains.

(2) Map As per attached "Maps of the city of Tabriz and whole country Iran".

(3) Transportation Facility Around Tehran Entrance into Iran starts with Mehrabad International Airport of Tehran, the capital city. Domestic flight is used from Tehran to Tabriz, whose required time is one hour and 10 minutes. The number of flights between Tehran and Tabriz, although used to be only two flights a

-22- day before, has increased to maximum four due to increase of passengers. It takes about 20 minutes from Tabriz Airport to the downtown. Although public buses are available from the airport, less people use them. Local people rather seem to choose using friends' cars or taxis.

1.12 Geography / Climate City of Tabriz is situated at 38° North Latitude on a plateau which is 1,100-1,500m above the sea. Being on a plateau, the climate exhibits highland features as well as desert characteristics. There are four definite seasons whose temperatures being very similar to that of Tokyo. The average temperature for July to August is 27°C. Winter can be very cold with the lowest temperature of -16°C and the average temperature of February is -2°C. With the annual average rainfall of only 263mm, there is hardly any rainfall throughout a year as shown in Table 1.1.2-1:

Table 1.1.2-1 Annual Average Temperature & Rainfall of Tabriz Month 1 2 3 4 5 6 7 8 9 10 11 12

Ave.Temp. 1 -2 6 12 19 27 26 28 21 15 6 3 fC) Rainfall 20 17 35 51 80 7 1 2 9 9 16 16 (mm)

1.13 History/ Population/ People A variety of ethnic groups have emerged in the course of Iranian history, whose cultures have been intncatedly combined to form the present Iranian culture. Traces of people's living there date back to 7000 BC. The first distinct people who formed the country of Iran were Indo- Europeans having migrated from the steppe zone of the southern Russ'; in the second millennium BC. The country name "Iran" means "Aryans' nation" .

In the 7th century BC, the Achaemenian Dynasty was formed. Following the invasion by Alexander the Great in the 4th century BC, the Arsacid Dynasty was established in the 3rd century BC and East-West trade via Silk Road started. The Sassanian Dynasty which started in the 3rd century AD diffused Zoroastrianism.

In the 7th century, was brought in by the Arabs' invasion, accelerating the nation's Islamization in the following centuries.

After the Turkish invasion and the conquering/rule of (13th century), the started in the 16th century, during which Shiah was set as their established religion and the f oundation of the present national character today was built.

-23- Disturbances of wars continued and the Iran's last dynasty, Pahlav, was established in 1925 in the middle of threat from the Western powers and Russia. Despite the urgent efforts toward Westernization, dissatisfaction with inequality in the distribution of wealth pulled the trigger to the Iranian Revolution of 1979, bringing down the dynasty.

The name of Tabriz first appeared in the history when Mongolian Holaku Khan came to built the flkhan Dynasty in 1256 and founded the capital in this place. The city became to flourish as one of the then largest trading towns with commercial products from various parts of the world. Ibn Battuta who visited this place in 1334 wrote that he had been stunned by the scenes of bazaars overflowing with expensive spices and jewelries.

After the Ilkhan Dynasty had lost its cohesive power in the early 14th century and through the age of rival warlords which had lasted about 50 years, Tabriz was occupied by Timur and Turkmenistan for a brief period. Later years in 1502, the Safavid Dynasty which had once again unified Iran placed its capital in Tabriz for a while, which, however, had to transfer the capital to Esfahan to recede from the Turkish border which was looming and from its continuing attacks. Tabriz, furthermore, was then suffered from earthquakes and epidemics, which graduaBy foUowed a course of decline.

In 1823 during the Kajar Dynasty, Tabriz was occupied by Russia. Tabriz, from this time on, has once again appeared before the footlights as an important traffic as well as military basis in the inland area between the Caspian Sea and the Black Sea and a railway was built, connecting this area with Russia.

During the First World War, Ottoman Empire established its puppet government in this area, exposing the area to a stage of a substitute war between the Allies and the opposing powers. After Russians left because of Bolshevik revolution and Ottoman Empire went to ruin simultaneously with allied Germany's defeat, the entire land of Iran including, also, this area, became a British colony.

Tabriz, although being exposed to a Russian invasion during the Second World War, remained on the British side in accordance with the UN draft btil on the Azerbaijan issue. In 1950 after the war, Iran became independent and Tabriz, in the circumstances that relations with neighboring countries are subject to constant changes, has become spotlighted once again as a border town.

24 1.1.4 Natural Resources Tabriz, although not having any outstanding natural resources, should be noted as being blessed with good quality water which comes from rainfall during wintertime and snowfall in mountain regions because of its geographical location in the northern Iran.

1.15 Industries Cities of Iran originally emerged at and around any water resource to which people gathered, where factories were built and industries developed. Oil refineries, power plants, and other factories were located in the vicinity of each city.

Tabriz, like other cities, used to be an agricultural place having bazaars and local shopping areas only with some small brickyards, car/machinery assembly shops, and small factories to make carpets which are the regional specialty being scattered about.

The city of Tabriz, having flourished historically in commerce as the center city in the northern Iran and the key place in traffic, opened a new history as the center industrial city in the northern Iran when the oil refinery was built in 1978 which was designed by the U S. UOP Company. It should especially be noted that the rapidly increased population after Iran-Iraq War could no more be absorbed by agriculture alone. People out of work flowed into Tabriz, the center city in the northern part of the country, seeking for their living.

The Iranian Government, in 1990's, through inviting power plants and small to medium businesses to urban city suburbs, has been making efforts to effectuate measures to cope with the population increase. Industrialization of Tabriz, also, was rapidly enhanced and the industrial structure that had centered on agriculture and commerce has eventually been shifted to an industry/economy- oriented one centering on oil and petrochemical industries. In this regard, it is noteworthy that Tabriz University has contributed much by educating good quality engineers to support industrial development

Inflow of foreign capitals into the fields of car/ oil development/ petrochemical industries, etc. has been increasing lately especially from Europe, , and China. Thus, Tabriz has been expanding its function as the central basis of industry/commerce in the northern Iran.

-25 12 Description of Project The most preferential project themes embraced by NIORDC headquarters which owns nine oil plants in Iran and by Tabriz Oil Refinery are as follows. (1) To create a master plan to modernize and upgrade the whole refinery plants. (2) To upgrade the quality of heavy oil (to increase production of gasoline by decomposing heavy oil). (3) To upgrade the quality of overall products (desulfurization of kerosene and light oil, production of lead-free gasoline). (4) To improve energy saving and operation of equipment within the oil plant (improvement of energy consumption efficiency of equipment).

Concerning the energy saving, which we tackled as a basic research to promote the joint implementation by NEDO in the year of 2000, and the summary of the project is described below. Meanwhile, concerning upgrading of the heavy oil, as there were strong requests from NIORDC headquarters and Tabriz, we executed research and study as of pre-FS phase in parallel with above mentioned FS research. In the section 6 of this report, where we address other effects, we will also take up the results of the pre-FS research and its impacts to the environmental and economic aspects.

12.1 Units Concerned and Capacity of Units The energy saving study of this time was carried out for 10 units including all of refining units and utility facilities at Tabriz Oil Refinery (1) Crude Distillation Unit: 115,000BPSD (including SRG Gasoline Distillation Unit) (2) Vacuum Distillation Unit: 47,500BPSD (3) Visbreaker Unit: 16,500BPSD (4) Naphtha HDS Unit; 13,500BPSD (5) Naphtha Reforming Unit: 12,100BPSD (6) Vacuum Gas Oil Hydro-Cracking Unit: 15,000BPSD (7) Hydrogen Production Unit: 34MMSCFD (8) LPG Recovery/Amine Treating Unit: 11MMSCFD (9) Asphalt Unit: 5,000x2BPSD (10) Boiler & Utilities: lOOTon/Hr x 5 Units

122 Description of Energy Saving Project to be implemented In the energy saving project, main contents which are implemented commonly to each unit are as follows.

26 1) Heating furnace: (a) Organization of equipment related to the heating furnace (burner, damper) and introduction of control instruments to reduce and control the combustion excessive air ratio (exhausted gas 02%) of the heating furnace. (b) Installation of the combustion air pre-heater, waste heat boiler or economizer to recover the heat from the flue gas exhausted from the heating furnace. 2) Heat exchanger: (a) Additional installation of the heat exchanger to recover the heat from the product oil and return it to the crude oil. (b) Rearrangement of placement of the crude oil pre heat train exchanger system to raise the heat recovery amount. 3) Distillation tower. (a) Enhancement of heat recovery to be restored to the crude oil by optimizing the middle and top reflux of the distillation tower. (b) Reduction of the heat source of the re-boiler by optimizing the reflux of the distillation tower, including the stabilizer and stripper. (c) Reduction of the heat source of the heating furnace by improving the low pressure operation of the distillation tower (future issue).

Meanwhile, the contents of facility modification and operation improvement to be implemented for each unit in the energy saving project are as follows.

(1) Crude distillation unit: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace. (b) Installation of the air pre-heater to recover the heat from (he flue gas exhuisted from the heating furnace. (c) Additional installation of the heat exchanger to raise the heat recovery amount collected from the product oil and returned to the erode oil. (d) Rearrangement of placement of the crude oil pre heat train exchanger system to raise the heat recovery amount. (e) Heat recovery by optimizing the allocation of middle and top reflux of the distilling tower. (f) Reduction of the heat source by optimizing the reflux of the stabilizer. (g) Reduction of the heat source of the heating furnace by improving the low pressure operation of the distilling tower (future issue).

(2) Vacuum distillation unit: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace.

27- (b) Installation of the air pre-heater to collect heat from the flue gas exhausted from the heating furnace.

(3) Visbreaker: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace.

(4) Naphtha HDS unit: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace. (b) Reduction of heat source by optimizing the stripper reflux.

(5) Naphtha reforming unit: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace. (b) Reduction of heat source by optimizing the stabilizer reflux.

(6) Hydro-cracking unit: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace. (b) Heat recovery by optimizing the allocation between middle and top reflux of the distillation tower. (c) Reduction of the heat source by optimizing the reflux of the (debutanizer).

(7) Hydrogen production unit: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace.

(8) LPG recovery unit: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace. (b) Reduction of the heat source by optimizing the reflux of the stabilizer.

(9) Boiler & Utility: (a) Control improvement to reduce the excessive air ratio (flue gas 02%) of the heating furnace. (b) Installation of the economizer to recover heat from the gas exhausted from the boiler.

-28- 13 Green house effect gas, etc as an object

The green house effect gas which is the object of this energy saving project is carbon dioxide. The green house effect gas which is constantly exhausted from oil plants is carbon dioxide gas which is generated by the combustion of fuel oil or fuel gas in the refinement process of the heating furnace or steam boiler. However, the exhaustion amount of the carbon dioxide can be reduced by implementing the energy saving project which is intended to reduces the fuel consumption of the heating furnace or steam boiler in the refinement process.

29 2. Overview of implementation site (Company)

The official name of Tabriz Oil Plant is Tabriz Oil Refining Company, which is operating as an independent company since 2 years ago. Company's operation is entirely entrusted to Mr. A. Mikaeili, Managing Director. The crude oil it processes is supplied by NIORDC and the product it produces are taken by the Distribution/Sales Division of NIORDC. Such being the case, the facility investment budget for new installation and modification is, among others, still under the control of NIORDC headquarters.

2.1 Consciousness of the implementation site (company)

Tabriz Oil Plant is deeply concerned about this energy saving project and asking us to establish the basic engineering for improving the energy saving as the next step after the FS research, which is deemed to be the consignment work of NEDO in the year of 2000. However, as such engineering work is done for a consideration, it will be the project competing with others for the price and technologies.

Tabriz Oil Plant intends to implement early some of the projects which are expected to have a big effect with a small investment such as modification of the excessive air control system for the heating furnace, within the budget of NIORDC itself. As for the investment of a medium scale, including installation of the heating furnace air pre­ heater, the waste heat boiler and the heat exchanger, since payment in foreign for the equipment and engineering is involved, in the status quo of Iran, it will take quite a long time to arrange the finance such as yen loan and to get approval or make decision to use the foreign currency to purchase equipment. In any case, the results of the FS study for the oil plant need to be incorporated into the budget plan of the headquarters. Therefore, after the 1st and 2nd local research conducted for Tabriz Oil Plant and consultation of the results of the 3rd FS, our FS research team visited NIORDC headquarters to report the progress of the research and the results of the energy saving FS, for which Tabriz Oil Plant arranged to create an environment where those results would be accepted to be incorporated into the budget of NIORDC headquarters.

The proposal of the energy saving project for Tabriz Oil Plant is drafted by Process Engineering Section of Engineering Service Department and, after organizing the form of the project, it is taken over by Project Engineering Department. Then, after going through the process of internal approval, budgeting, quotation of contractors, selection of contractors to order, etc, the project comes to implementation.

-30- In the energy saving FS research of this time, we could work with full cooperation of some staff from Process Engineering Sect, and Project Engineering Dept

22 Current state of equipment at the implementation site (company) Followings are the overview of NIORDC and equipment of Tabriz Oil Plant, as the object of the energy saving FS.

22.1 Overview of NIORDC NIORDC (National Iranian Oil Refining & Distribution Company) was originally Oil Refining Department and Distribution/Sales Department of NIOC (National Iranian Oil Co.). In the 1990s, when some drastic innovation was made to the organization, each department became an independent company and then they were integrated into one company. In the end of the 1990s, when the oil plant was separated from NIORDC and became an independent company, the operation of the oil plant was easily shifted to the self-supporting system. However, as far as its business planning and budget function are concerned, it is still undo* the control of NIORDC. There is a vice minister in the Ministry of Petroleum who governs NIORDC and the oil plant and he is fully responsible for supervising the operation of the organization. It is said that, in the future, the oil plant will procure and supply the oil on its own and optimize the running cost, etc by its own judgement. Figure 2.2.1-1 shows the organizations of NIORDC and each oil refinery.

-31- Minister of Petroleum (Minister of Oil: H.E.BJ.Zanganeh)

NIOC (National Iranian Oil) : [ Five Production Companies]

NIORDC, Managing Director Corporate Planning Director H.E. Mohammad Aghai Mr. S. K.. Kasaei Zadeh

NIGC(N.L Gas Co) Refining Affairs Director MrjM.Zali NPC(N. Petrochemical Co.) Refineries Develop. Affairs

[Nine Oil Refining Co. f Tehran Oil Refining Co. Isfahan Oil Refining Co. Tabriz Oil Refining Co.

Shiraz Oil Refining Co. Kermansharh Refining Co Lavan Refining Co.

Bandar Abbas Refining C< >. Arak Oil Refining Co. Abadan Oil Refining Co.

22.1-1 Figure 22.1-1: Organizations of NIORDC and each oil refinery

32- 222 Outline of Tabriz Refinery

(a) Capacity of the units Tabriz Refinery was designed by UOP(Universal Oil Product, USA), and constructed by Snamprogetti(Itary) and started with the initial capacity of 80,000BPSD in 1977. In 1992, it was revamped to the capacity of 115,000BPSD by Engineering Dept in Tabriz Refinery. The major unit capacities are shown in Table 2.2.2-1 as follows.

Table 222-1 Unit Capacity of Tabriz Refinery Initial Design Capacity Current Capacity after Unit in 1977 (BPSD) revamping in 1992(BPSD) 115, 000 Crude Distillation Unit 80, 000 (Furnace from GO-HDS) Vacuum Distillation Unit 37, 700 47, 500 16, 500 Visbreaking Unit 16, 500 (Max feed: 18, 000) 13, 500 Naphtha HDS Unit 13, 500 (Reactor Sect From GO-HDS) Catalytic Reforming Unit 9, 700 12, 100 Gas Oil HDS Unit 13, 500 Hydro-cracking Unit 18, 000 15, 000 (ISOMAX) (Design Capacity) (Catalyst Restriction) H2 Production Unit 34MMSCFD 34MMSCFD LPG Recovery Unit 6, 000 8, 500 Asphalt Production Unit 1, 000 5000 x 2 Sulfur Recovery Unit SOTon/D SOTon/D Amine Treating Unit 11MMSCFD 11MMSCFD Sour Water Stripper 40M3/H 40M3/H 100 x 4jon/D 100 X 5Ton/D Boiler & Utility Unit 27 MW 27 MW

33- (b) Processing Crude Oil The Processing crude oil at Tabriz Refinery is sent by pumping-up from Ahwaz and Maroon Oil Field in Khozestan province and the properties is as shown in following Table 2.2.1-2. Table 22.1-2 Properties of Ahwaz Crude Items Properties

API Gravity CO Specific Gravity 0. 865 Salt 15 PTB Total Sulfur 1. 4 wt% Ni 10. 4 Metal V 40 Na 5 Vapor Pressure 9 PSIA Pour Point -30°C Wax Content 3. Owt%

The crude oil pipeline and modification plan for relevant refineries are carrying out between NIORDC and SINOPEC-China in order to send Crude Oil from Caspian Sea Area to Tehran and Tabriz Refineries and process Caspian Crude Oils at the refineries. Caspian Sea Crude Project is so called “Swap Crude Project ” as Caspian Sea Crude is processed at Iranian Refineries and Iranian Crude is exported to China to some extent which is swapped with Caspian Sea Crude by Chinese right for production.

To minimize the deviation of properties between conventional Iranian crude of Ahwaz and Caspian Sea Crude, the following four blend case is planned between NIORDC and SINOPEC. 1) Case-1: Kalankas(50%) + Tengiz(50%) : (=Kazakh 100%Caspian) 2) Case-2: Kazakh(50%) + Cheleken(50%) : (=100% Caspian) 3) Case-3: Chelken(50%) + Ahwaz(50%) : (= 50%Caspian/50% Iranian) 4) Case-4: Azetbaijan(100%)

(c) Tank Yard Facilities The number of crude oil storage tanks is five and total capacity is 1,000,000BBL. The each capacity and number are 220,000 x 4 BBL and 250,000 x 1BBL. The total capacity of finished product and intermediate product tank is beyond 2,000,000BBL and located at boundary area of Tabriz Refinery.

-34- (d) Boiler and Utility Facilities Among five Boilers which have each nominal capacity of lOOTon/Hour, four boilers are used to operate for steam supply to the refining units.

The nominal total capacity of turbo type generator is 27 MW for supplying necessary electricity to refining units. The breakdown of capacities are 10MWx2units and TMWxl unit.

The water treating system for boiler is adopted by Hot lime Reactor.

As for the cooling water system, two series of cooling tower supply cooled water of 28-29 ’C.

The waste water treating facility for whole refinery has capacity of 12Qm3/hr and plan to revamp to capacity of 200m3/hr.

-35- 223 Overview and status of units as objects of energy saving (1) Overview (general) As a result of the local research conducted for the object Tabriz refining plant, we came to understand the current state as follows. 1) Equipment aspect: (a) The crude/vacuum distillation units and the gasoline production unit are integrated as an independent equipment in the viewpoint of heat recovery. (b) The visbreaker is being used to produce naphtha and heavy oil for the boiler fuel and not being used to process the crude oil (request is being made to enhance the crude oil processing capacity in the future). (c) Heat recovery from the heating furnace exhaust flue gas is scarcely being executed. There are some heating furnaces that are trying to increase the heat recovery by adding a tube to its convection section, but they are rare in the whole. (d) There are not enough instruments and some of them are broken. (e) Leakage is found at many places on the piping flange of the heat exchangers, especially on the piping around the heating furnace of the CDU unit. (f) The analyzers introduced to the whole of the refining plant are not working at all. However, the items that require analysis are separately being analyzed in the analyzing room to be reflected on the operation. (g) The layout of each unit is being organized like a square shape around the instrument room as a center, and the route to patrol the site is being maintained. (h) The pump is being placed under the pipe rack, which causes no barrier for the maintenance. (i) The oxygen density meters of the heating furnace smoke tunnel have been all removed, which means neither constant measurement nor control is being implemented. (j) The flow meters for the fuel of each heating furnace are not functioning at all and the measurement is not implemented either. However, the flow amount is being grasped by block of the unit.

2) Operation aspect: (a) Although operating instruments are not many, the crude oil is constant (Iranian light oil). (b) As the load is constant throughout the maximum running, the operation seems stable. (d) Concerning the operation data, board men are collecting main data three times a day. (e) Priority is on the product maximum operation, rather than on the optimal, energy saving operation. (f) The instruments are all electrical, capable of 1 loop control, but optimal system using DCS has not been introduced. (g) Control of main refinery units is centralized in one instrument room.

36 (1) Atmospheric distillation unit: CDU

(a) Operation Started: Year 1977. (b) Original Capacity: 80.000 BD. (c) Actual Capacity: 115.000 BD (Capacity was increased in 1992). (d) Design: UOP. (e) Actual Operation: 110.000 to 120,000 BD.(Av.:117,800 BD) (f) Crude Oil: Iranian light crude oil and a little Caspian Sea Crude (g) Products: Off gas (to refinery fuel) LPG(to LPG recovery unit) Naphtha (to Naphtha HDS) Kerosene (to product tank). Diesel oil (to product tank). Atmospheric residue (to Vacuum distillation unit). (h) Characteristics of the unit The plant is equipped with a pre-flashed drum, this drum bottom oil of which passes through the heating furnace and is mixed with the drum overhead gas of the pre-flashed drum, being fed to the main fractionator. When enhancing the processing capacity, the heating furnace (TH-402) of distillate desulfurization unit which is not currently being used is appropriated for the purpose of increasing the temperature at the entrance of the fractionator heater. For the purpose of increasing the thermal recovery based on the (Pinch Analysis), relocation and enhancement of the heat exchanger is implemented to this unit, where energy saving is relatively high, but we can see that there is still room left to recover the heat, especially in case of Kerosene and H.V.G.O.

(2) Vacuum distillation unit: VAC

(a) Operation Started: Year 19677 (b) Original Capacity: 37,700 BD. (c) Actual Capacity: 47,500 BD (Capacity was increased in 1992). (d) Design: UOP. (e) Actual Operation: 45,000 to 50,000 BD(Av.: 47,500 BD) (f) Feedstock: Atmospheric residue of Iranian Light Crude (g) Products: Offgas Light slop recycle (to slop tank). Heavy Diesel oil (to AGO tank). ISOMAX feed(LVGO, HVGO). Slop Wax (to fuel oil tank).

-37- Lube Base Oil Distillate(Future plan). Vacuum Residue(Visbreaker feed, Power Station fuel).

(3) Visbreaking unit: VB

(a) Operation Started: Year 1977. (b) Original Capacity: 16,500 BD. (c) Actual Capacity: 18.000 BD (Increased in 1992, Normal: 16,500BD). (d) Design: UOP. (e) Actual Operation: 15.000 BD. (f) Feed stock: Vacuum Bottoms of Iranian light crude. (g) Products: Offgas (to TH-301). Visbreaker Naphtha (to Boiler fuel). Residue TAR(to Power Plant fuel blend)

(4) Naphtha Hydro-desulfurization unit: Unifiner

(a) Operation Started: Year 1977. (b) Original Capacity: 13,500 BD. (c) Actual Capacity: 13,500 BD (d) Design: UOP. (e) Actual Operation: 14,000 BD. (f) Feedstock: Heavy naphtha(from SRG splitter). (g) Products: Off gas (to amine treating unit). Desulfurized Heavy naphtha(to Platformer)

(5) Naphtha Reforming unit: Platformer

(a) Operation Started: Year 1977. (b) Original Capacity: 9,700 BD. (c) Actual Capacity: 12,100 BD (Increased in 1992). (d) Design: UOR(Platfbrmer) (e) Actual Operation: 12,250 BD. (f) Feedstock: Desulfurized Heavy naphtha(ffom Unifiner). ISOMAX naphtha(a few) (g) Products: Stabilizer Off gas (to fuel gas). Separator Off gas (to Hydrogen production unit) LPG (to product tank) Reformate gasoline (Gasoline tank)

-38- (6) LPG Recovery Unit

(a) Actual Capacity: 8,500 BD (b) Actual Operation: 8,500 BD (c) Feed Stock: LPG from CDU, Light Naphtha (d) Products: LPG(including PC feed stock) Light Naphtha

(7) Vacuum Gas Oil Hydro-Cracking unit: (ISOMAX)

(a) Operation Started: Year (b) Original Capacity: 18.000 BD. (c) Actual Capacity: 15.000 BD (depend on severity). (d) Design: TOP (e) Actual Operation: 14.000 BD. (f) Feedstock: Vacuum Gas Oil (from VAC unit). ISOM AX Recycle feed (g) Products: Off gas (to amine treating). LPG (to LPG unit) Light ISOMAX gasoline (to Gasoline tank) Heavy ISOMAX naphtha (to Gasoline tank) ISOMAX Kerosene (to Kerosene tank) ISOMAX Diesel(to Diesel tank) Recycle Bottom Residue: Off Test(to fuel tank)

-39 (8) Hydrogen production unit

(a) Operation Started: Year 1977. (b) Original Capacity: 34 MM SCFPD. (c) Actual Capacity: 34MMSCFPD. (d) Design: UOP (e) Actual Operation: 27 MM SCFPD. (f) Feedstock: Platformer separater gas Refinery Off-gas Propane (g)Products: Hydrogen (97% purity to ISOMAX).

(9) Boiler & Utility unit

(a) Operation Started: Year 1977. (b) Original Capacity: MCR 102 t/h (x 5 units). (c) Actual Operation: 60 - 70 t/h per 1 unit (d) Design: FRANCO-TOSI(x 4 units), Mitsubishi HI(x 1 unit) (e) Production: Steam Pressure: 650 Psig Temperature: 390 ‘C Steam Header 600/ 450/ 150/ 50 Psig (f) Boiler Fuel: Fuel Oil Fuel Gas Visbreaker Gasoline

(10) Asphalt Production unit

(a) Operation Started: Year 1977. (b) Design: UOP (c) Original Capacity: 1.000 BD(Roofing/Paving) (d) Actual Capacity: 5.000 BD(Roofing/Paving) x 2 Units (e) Actual Operation: 4.000 BD (f) Feedstock: Vacuum Residue (from Vacuum unit). (g) Products: Penetration: 85-100 Asphalt

-40 22.4 Concept of energy saving, setting of target value The oil refinement process of Tabriz Oil Plant was designed by UOP of U S A. and constructed using the flow and equipment which were typical in 1977, which was not specifically intended to make the facility of energy saving type. In 1992, trying to raise its capacity a convection section coil was additionally installed to the heating furnace of the crude distillation unit and the crude oil heat exchanger was enhanced, but other energy saving modification measures have not been implemented. Although the instrumentation control equipment is electrical, the optimized control is not implemented, since DCS has not been introduced yet. The exhaust gas oxygen meter for the heating furnace had been installed, but it is not used after a failure occurred, due to the difficulty to obtain the parts. In this regard, there is much room to improve the energy saving.

In the oil refinement plant, thermal energy is given to the heating furnace to heat the crude oil up to the temperature required for evaporation and reaction. Therefore, it is critical for the energy saving to improve the efficiency of the heating furnace. It is also required to recover the heat by using the high temperature heat energy of the product flowing out of the evaporation tower and reaction tower to heat the crude oil and, thus, reducing the energy escaping out of the system. For this purpose, number of heat exchanges are installed within the plant. If the type of flow diversified, as the case of the crude distillation unit, the heat exchanges are allocated as if a complex network. By optimizing the thermal recovery of this heat exchanger network and adding more heat exchangers, we can reduce fuel consumption of the heating furnace and achieve the energy saving. Meanwhile, we can also achieve the energy saving by improving instrumentation and control of equipment (including on-site instruments, on-line analyzers and DCS establishment) and controlling the operation at the maximum level of the equipment performance and product standard.

(1) Concept of energy saving common to all heating furnaces and setting of target value There are two types to the pipe type heating furnace used in the oil plant, which are the all radiation type heating furnace (thermal efficiency is as low as 60%) and the heating furnace with a convection section having convection-wise thermal conductivity. To achieve the energy saving of such heating furnaces by improving the thermal efficiency or thermal recovery, following measures are commonly taken. 1) To reduce the excessive air ratio in the heating furnace (reduction of excessive oxygen density in the combustion exhaust gas) The air used for the combustion is inhaled at the normal temperature, but the exhaust gas after combustion is exhaled at least at the temperature of oxygen condensation point (usually around 150°C)orover.

— 41 — The air excessively inhaled does not contribute to the combustion and is only exhausted with the temperature raised by excessive fuel. Therefore, reducing this excessive air amount makes the energy saving of the heating furnace. Ideally the excessive air ratio is zero. However, as a matter of fact, the zero excessive rate causes incomplete combustion, so it is necessary to supply the excessive air more or less. Therefore, the optimization of the combustion air control system that contains the excessive air ratio as low as possible monitoring the status of the combustion becomes critical. The excessive air ratio can be calculated by measuring the oxygen density in the exhaust gas. Currently, the most highly organized heating furnace is operating with the oxygen density in the combustion exhaust gas being around 1%. To achieve this, following steps are taken.

(a) Operation adhering to detailed target values, strengthening the routine operation control. (b) Repair the place where the air leaks into the furnace. (c) Optimization of the combustion control system. (Adjustment of the air register, draft control damper and monitor of excessive air ratio are the imperative check items)

Figure 2.2.4-1 shows the typical places where the air leaks into the furnace. We can reduce the leaking-in using Kaoru or seals to stuff or close the place.

Figure 2.2.4-2 shows the combustion control system.

The outline of the control is that; in order to make the air amount for the combustion just the amount needed, always monitor the oxygen density remaining in the furnace and automatically adjust the air supply for the combustion to be the oxygen density set as the target. There are two ways to do this, i.e. the way to adjust the opening of the exhaust gas exit damper of the heating furnace and that of the origin air register of the burner and the way to adjust the air supply adjustment valve if there is an air thrusting fan or a fan ventilator to conduct the air. And, at the same time, always monitor and automatically adjust the furnace internal pressure to keep it at certain negative pressure. (Damper, discharging fan, etc)

-42- Air Intake Air Adjuster

Figure 22.4-1 Air Leakage Points at Heating Furnace

actuator 4... controller

ho O2 analyzer V Pressure gauge TE

-e-r Controller / RATIO setter a>j e-sFE FUEL O t $}J FUEL GAS

Figure 22.4-2: Combustion Control System Target 02% in Flue Gas: 2.5 % (lor Fuel Gas), 3.0% (for Fuel Oil)

43- 2) Heat recovery from exhaust flue gas The higher the temperature of the exhaust gas becomes, the more the heat is exhausted out of the system. In the ordinary process, the temperature of the process fluid at the entrance of the heating furnace is relatively high, because, to lessen the load to the heating furnace as low as possible, the process fluid is pre heated by the heat recovery using a heat exchanger, etc. Also within the heating furnace, heat exchange is executed between the combustion exhaust flue gas and the process fluid at the convection section, so the temperature at the exit of the convection section never becomes lower than the entrance temperature of the process fluid. In general, the temperature at the exit of the convection section is as high as 400~500°C. Therefore, if we discharge the combustion exhaust gas out of the system as it is, we are going to lose at least about 20% of the calorie generated by the combustion. There are two measures available to efficiently recover the heat.

(a) To use Waste Heat Boiler (called WHB hereafter) • WHB recovers the heat of the combustion exhaust gas by generating steam in the boiler. However, it is not associated with the fuel saving of the heating furnace itself. • This is most often applied to the heating furnace of full radiation type the exhaust gas temperature of which is very high. • Figure 2.2.4-3 shows a typical WHB system.

(b) To use Air Pre-Heater (Called APH hereafter) • APH is intended to recover the heat of the combustion exhaust gas with the pre heat of the combustion air. • It is possible to improve the heat efficiency up to around 90%. • This is frequently installed to the heating furnace with a convection section the exhaust gas temperature of which is relatively high. " Figure 2.2.4-4 shows a typical APH system.

The combustion exhaust gas of relatively high temperature which is exhausted from the convection section of the heating furnace goes through the exhaust gas duct and introduced into the air pre-heater. Meanwhile, the combustion air is introduced into the air pre-heater after being increased its pressure by the forced draft fan. In the air pre-heater, heat exchange is executed between the exhausted gas and the air, the combustion air is pre heated and introduced into the air register of the heating furnace burner to bum the fuel. The combustion exhaust gas at the temperature of which has been lowered by the heat exchange is sent out through the discharging fan and discharged from the stack. < Target value for the temperature of combustion exhaust gas >: Acid gas condensation temperature of exhausted gas + ol (Normally 150°C + a)

-44 3) Reduction of heat discharge from the external wall of the furnace Inside the furnace wall is covered by fire-proof bricks as the furnace wall material for insulation and reinforcement Therefore, the thermal discharge from the external wall of the furnace is relatively low. (Approximately 1 ~2% of total combustion heat amount) However, if the surface temperature of the external wall is as high as over 200°C due to stripping of bricks, etc, the thermal discharge rapidly increases, so repairing measures are required. For the repair, light Castable and ceramic fiber with high insulation performance are used as the furnace wall material. When lining the wall with ceramic fiber, it should not be stripped off.

(2) Concept of energy saving common to heat exchanger, establishment of target value The main thermal energy discharged from the process out of the system is as follows.

(a) Energy discharged to the refrigerant by the cooling water of the product and reflux. (b) Energy discharged to the air by the air cooler (AFC) of the product and reflux.

The process of Tabriz Oil Refinery was designed by UOP, U.S.A. using then typical energy saving specifications, but it is characterized by its high temperature at the entrance of the product cooler and ubiquitous use of the air cooler (AFC) due to the characteristics of the area, compared with the units currently available in Japan. From the view point of energy saving, the fuel consumption can be reduced by adding more heat exchangers, increasing the heat recovery amount collected from the heat of each product oil and reflux oil and entering it into the crude oil, thus recovering overall thermal energy and increasing the entrance temperature to the crude oil heating furnace.

The target value for the heat recovery at the crude distillation unit and vacuum distillation unit should be the erode oil temperature + 40°C for naphtha, kerosene and light oil. However, it should be 150°C~200°C for other heavy oil taking the separation of wax and its solidification prevention into consideration. Above two units are integrated, so the thermal amount of the vacuum residual oil with high temperature is recovered by the highest temperature section of the crude oil side, where it is possible to increase the heat recovery amount by optimizing the placement of the heat exchangers.

Also, it should be studied to bypass the product water cooler and hot-charge the product to the down-stream unit, thus achieving the energy saving.

At the boiler of Tabriz Oil Refinery there is a blow-down of water which is 20ton/h. It is possible

-45 to recover the heat of the blow-down water as pre-heat for the boiler water supply (BFW).

(3) Concept of energy saving common to instrumentation and control, Establishment of target value In the field of instrumentation and control (common to each unit), issues to be improved based on the status of the equipment are described below step by step.

[Step 1] Implement the maintenance for the equipment at the field site (detector, operation terminal) to prevent leakage from the ground or flange of control valves and make the operation values of each instrument visible. This should be the base for achieving careful operation that leads to the energy saving.

[Step 2] By installing analyzers and recorders and continually controlling the operation values, we can raise the operation frequency of the control valves, etc and implement more careful control. Using 1 loop controller introduced to each equipment such as heating furnace 02 control and outlet temperature control (of process fluid) for the heating furnace, we introduce a practical control system to raise the efficiency of the heating furnace.

[Step 3] Introducing the distributed control system (DCS), we should not only centrally control the data of every unit but also stabilize the controllability by applying optimal control (advanced control). By doing so, we should achieve the eneigy saving applying careful control to the change of conditions such as adjusting the control target value (maximization or minimization of set values, or targeted operation, etc) or adjusting the re-boiler according to file change of charge rate.

Also the safety and eneigy saving should be achieved by increasing production of high-value added products by introducing various optimization control, establishing automated routine operation (start-up/shut-down, remote control, etc) and building an alarm function and interlock system.

Meanwhile, in Tabriz Oil Refinery, the DCS is treated as a system to be introduced in the future. Therefore, the target of the improvement should be the effect to be achieved by introducing the 02 control for the heating furnace using the 1 loop control, without mentioning about the improvement target for various optimal control using DCS.

1) Introduction of heating furnace 02 control 02 control for the heating furnace is one of the controls having the largest investment effect in the energy saving improvement items. This control is intended to appropriately adjust the opening of the damper to maintain the least oxygen content required for complete combustion so that the

46 heat of the heating furnace can be relieved directly to the atomosphere. Generally, 02 control for the heating furnace basically assumes that DCS has been introduced (i.e. electric signals between instrument room ~ units, display and alarm monitoring for each operation are possible), but in the case of Tabriz Oil Refinery, as DCS has not been introduced, lloop controller should be used.

2) Procedures to introduce 02 control for heating furnace To introduce the heating furnace 02 control, it is necessary first of all to overhaul the furnace itself and peripheral instruments of the fuel control valve, etc, then install the 02 meter and implement a test-run and acquire current data to analyze. Then, based on the result of the test-run, fuel consumption reduction effect and investment effect should be analyzed on the basis of actual implementation, necessity of introduction of the damper automatic control be studied and modification construction for the clamper, etc should be implemented as necessary.

(a) Selection of heating furnace to be modified :Data acquisition including flue gas oxygen content %, furnace draft pressure, fuel consumption, and specific fuel consumption per feed rate, etc. ^Calculate average values of each measurement point using trend data, etc and estimate the energy saving effect again in detail. (b) Energy saving by repairing heating furnace peripheral :Prevent the leaking-in from the sight glass, tube header box, etc. *fii the case of the heating furnace with natural draft, even if the damper is fully closed, there may be air leaking in, preventing the flue gas oxygen content % from dropping, so Tube Inlet, T hermo-Couple, Sight Glass should be overhauled. [Maintenance of the fuel flow meter (executing disassemble cleaning, replacement, etc, grasp exact operation values).

(c) Energy saving by installing 02 meter and manually adjusting the opening of the damper [Installation of 02 meter (check necessity to modify the nozzle). [Installation of a draft meter (check necessity to modify the nozzle). [Test-run manually adjusting the damper (measure flue gas oxygen % and fuel consumption). [Modification of the panel in the instrument room (placement of adjustment instruments for flue gas oxygen %, furnace internal draft pressure, etc, keep the power source) * If there is no external turbulence such as change in the feed properties or flow rate and variation of load does not occur in the heating furnace, merits due to the automatic control of the damper are few, and it is expected that manual control for the damper continually monitoring the flue gas 02 % can achieve sufficient effect.

(d) Energy saving by installing damper automatic controller [Modification of the damper, installation of GO motor, installation of operation support

-47 : Installation of 1 loop controller Modification of the control room panel (allocation of various control instruments, keep the power source). * Install the actuator to adjust the damper opening, the furnace internal draft gauge, and 1 loop controller as the damper control unit, and achieve automation of 02 control.

(e) Setting and adjustment of parameters (to improve controllability)

:For reference, after introduction of DCS ([Step 3]) 1) Introduction of control system for the heating furnace peripheral After introducing DCS, using input values from various detectors, build a control system for the heating furnace. Main control items are as follows.

2) Damper opening control Control the damper to maintain the least flue gas oxygen contents necessary to execute complete combustion so that the heat of the heating furnace can be reduced directly to the atmosphere. For the damper open-close signals to control 02, the signals of the furnace internal draft pressure indicator are additionally considered to stabilize the furnace internal pressure.

3) Heating furnace outlet temperature control (for process fluid) Control the fuel flow rate to control the outlet temperature of the process fluid. If several heating pipes have been installed, additionally using coil balance control, efficiently use the heat of the high temperature section to improve the thermal efficiency. And, by applying the feed forward control according to the fluctuation of the entrance temperature and flow rate of the process fluid, improve the controllability of the exit temperature.

4) Control of fuel flow rate For 2 kinds of the fuel group (Oil and Gas) to control the heating furnace exit temperature, apply RATIO control additionally considering the fuel calorie. And it should be able to easily cope with change between single combustion control and mixed combustion control. The fuel flow rate is controlled according to the target exit temperature of the process fluid.

5) Control of combustion air amount This is to control the air flow rate needed for the combustion, which is proportionally controlled according to the fuel flow rate. The ratio should be adjusted by the input from the oxygen density meter to make the appropriate air excessive ratio.

6) Control of furnace internal draft pressure

-48- This is the control to keep certain pressure in the furnace. In the case of forced draft by PDF (Forced Draft Fan), it is controlled by an exhausting flue gas draft damper. Further, by applying the feed forward control from the operation output of the combustion air flow rate, the control should be improved.

Figure: 22.4-3 Waste Heat Boiler (WHB) system

Figure: 22.4-4 Air Pre-Heater(APH) System

-49 225 Current status of operation and study of energy saving Based on the flow sheet of each unit in Tabriz Oil Refinery, we looked into the current operation status and studied issues and potentials to improve energy saving. Although the exhaust flue gas oxygen content analyzers had originally been installed to the heating furnace, they were all out of operation due to the lack of repairing parts. Therefore, we appointed a staff who was supposed to be exclusively engaged in the heating furnace 02 measurement and made it a rule for him to periodically measure (about twice a week) using a portable measurement instrument (02 %, N02, exhaust gas temperature, C 02 and others) The results are controlled by a combustion related engineer, but, since it is not the continual measurement, the operation which drops the oxygen content to the limit is not conducted and there is still some room remaining in the current status. As for the fuel flow meters for the heating furnace, although they had been installed at first, after they went out of order, they have all been left as it is without being repaired, so the fuel consumption of all heating furnaces (for both oil and gas) is not currently measured. Therefore, it seems very difficult to grasp the transition and original unit of the fuel consumption, which makes the base of the energy saving control, and propose improvement effects to the operation staff. In the local research of this time, we decided to determine the fuel consumption amount based on the operational conditions (flow rate, temperature, pressure, characteristics) of the process side and operational conditions (02 %, exhaust gas temperature) of the heating furnace and using our fuel consumption calculation program.

(1) Table 2.2.5-1 shows the survey results of the current operation, (it is almost 100% running) From the results, we can see issues to improve as follows. (a) There are no control to reduce the oxygen content in the exhaust flue gas, so there are many heating furnaces which significantly exceed the level of 2.5^3% which is typical oxygen density in Japan. (b) Except for Boiler-E where an economizer has been installed, thermal recovery from the exhaust gas is not implemented and the exhaust gas temperature is as high as 400^800°C o

(2) Study of energy saving As the issues to study to achieve the improved energy saving operation and equipment modification for each unit including the heating furnace, we can think of following issues. (a) Operation improvement and equipment modification to control the excessive air ratio (02% of exhausted flue gas) of the heating furnace. (b) Installation of the air pre-heater or waste heat boiler to conduct heat recovery from the exhaust gas of the heating furnace. (g) Increasing the heat recovery amount through improvements of erode oil pre-heating by means of additional installation and re placement of heat exchangers.

-50 Figure: 225-1 Survey Results of Current Operations (Furnaces) Current Operation (@ Oct. 1999) Furnace Through-put Unit 02% Flue Gas Fuel-Consump. No. BPSD Temp( ‘C) Kl/D CDU TH-101 117, 800 7.0 400 188.9

TH402 117, 800 8.7 427 8.6

VAC TH-151 47,500 10.3 450 55. 6

Vis-breaker Tf 1-301 14 945 10.3 490 49.8

Naphtha TH401 13, 590 4.5 470 16. 1 HDS TH-202 13, 590 10.2 630 13.8

Catalytic TH-251 12, 250 4. 1 720 33.7 Reformer Tl 1-252 12, 250 5. 0 560 31.2

TH-253 12,250 10.0 750 19. 1

TH-254 12, 250 10.8 640 40.7

TH-255 12, 250 12.0 600 4.5 LPG TH-501 8,448 6. 1 520 23. 3 Recovery 1 ISOMAX TH-601A 13, 679 2.9 415 19. 6 I TH-601B 13, 679 6.4 415 25.6

TH-602 13, 679 8. 9 400 28.1 1 TH-603 13, 679 7.6 438 24.6 i ! TH-604 13,679 12.1 690 5. 1

H2 Plant TH-701 24. SMMscfd 11.0 280 138.3

1 Boiler/ TB-2201A 60MIb/h 5. 5 303 120.9 1 Utibty TB-2201B 60Mlb/h 5. 5 303 120.9

TB-2201C 60Mlb/h 5.5 303 120.9 i TB-2201D — — — —

TB-2201E 70Mlb/h 2.0 195 129.8

Total 1,219.3

51 23 Project performance capability of implementation site (company)

23.1 Technical capability

The ability of Tabriz Oil Refinery to perform the project is very high, which is deemed most likely to be the highest in 9 Iranian Oil Plants. Its process engineering group in the engineering service department corresponds to the staff of operation department and is engaged in the proposal of modification and new installment. After preliminary study the proposal which has obtained an internal approval as a project is taken up to the project engineering department, then, after obtaining an approval for its budget in NIORDC headquarters, quotation as a project to be implemented, selection of contractors, ordering and supervising of construction are implemented in order. Having Mr. Karim Rahimi (experienced oil refinement in U S A. for 9 years) of the project engineering department on the top, Tabriz Oil Refinery has produced excellent staff engineers and sent them out to NIORDC headquarters. However, since its foundation before fran-Iraq War, it has not experienced major equipment modification due to political and economic reasons, to do so, it has to procure equipment necessary for the modification from foreign countries, so it is still using old control equipment. Under the circumstances, to implement the modification project, it needs to have technical and financial aid from foreign countries including Japan and Europe. As for the modification construction, since it could not rely on foreign countries as mentioned above, ironically competent domestic construction companies grew up, who are capable of working technically and procuring things.

232 Control organization

Tabriz Oil Refinery is capable of covering the project with its existing organization if the project is to modify the existing units for energy saving. There is already an organizational responsibility system to perform a series of the project tasks such as preparing a modification plan, internal approval, acquisition of headquarters budget, procurement of equipment, control of construction, test running inspection, handing over to the operation department, which is capable enough of meeting the project requirements. Figure 2.3.2-1 shows the organizational control system which performs the project.

-52- Directing Managec(Refinery General Manager)

Project Engineering Dept Operation Manager Procurement Dept Accounting Dept

Enrineerhn [ Service Deni Operat on Dept MaintenanceDept

General Engineering Sect Inspection^ ± Process Engine ring Sect

Utility CDU.Visb.LPG _CRU Storage Planning Hydro-eraking

Figure: 232-1 Control Organization related to Project Management

233 Management base, management policies

Tabriz Oil Refinery is an independent company which operates on its own. However, the oil and product it processes are owned by NIORDC, which means it is engaged in the maximum through-oil processing based on the request of the headquarters. Therefore, its management base and management policies are based on the basic policy of NIORDC headquarters and their specific operations are entrusted to the Oil Plant. A new investment budged associated with an extensive modification or new installation of the Oil Plant equipment is under control of headquarters NIORDC, parent company NIOC and the government. Tabriz Oil Refinery, except for two oil plants built in the 1990s, has always been positioned among top three major oil plants and is playing an important role to supply for the domestic demand in north-west part of Iran. And the technical level of its Oil Refinery has traditionally been high in Iran and an orderly operation has been handed down from one plant manager to next plant manager, so its management base and management policies are headed toward the target which is very close to that of Japanese, European and American oil plants. In other words, for the purpose of rationalizing the oil plant and strengthening its competitiveness, tackling the issues such as energy saving, increase of white oil production by decomposing the heavy oil (upgrading) and upgrading of quality, Tabriz Oil Plant is trying to promote the project on its own with the support from foreign countries.

-53- 23.4 Financial capability

Tabriz Oil Refinery is operated with the domestic currency Riyal. Since the foreign currency is completely controlled by the government, it is inevitable to acquire the government's foreign currency budget through NIORDC headquarters in order to procure equipment and basic design from overseas, which is impossible for the Oil Plant to handle alone. Therefore, as far as its financial capability which involves the foreign currency is concerned, its capability to overcome other 9 Iranian oil plants when applying for a project to NIORDC headquarters and obtain its approval for the budget counts very much. To achieve this, the significance of the Oil Plant, influence of the Plant Manager within NIORDC and his competence of management are the critical factors. In this regard, Tabriz Oil Plant Manager Mr. Mikaeili is regarded as one of the most influential persons. If financial support such as a low interest loan is given to a certain project from overseas, it makes easier to acquire foreign currency bom by Iran.

235 Personnel capability

To execute the energy saving project, the capability of Tabriz Oil Refinery to assign engineers is sure to be sufficient. Not only the organization to implement the project has already been established, but also excellent personnel can be assigned as staff engineers of the project engineering department. However, since they don't have the experience of installation, even if it is a control system which is common in Japan, such as 02 control for the heating furnace exhaust gas, it is strongly desired that there be support from Japan and energy saving practical training to be provided in Japan, including basic design of the control system, adjustment of the analyzer, etc. Usually, a project is implemented by construction companies in Iran based on the specifications of equipment which is procured from overseas, so it seems important to have personnel who can control technologies throughout the modification construction including performance check of the test running.

23.6 Organization to implement

Tabriz Oil Refinery owns the engineering service department, project engineering department and maintenance department in addition to the operation department, so if it is a small scale modification construction, it is able to carry out the construction within its organization, only if there is equipment to be installed and its specifications. In fact, they have implemented a number of installations so far. Therefore, for the energy saving project which is the subject of this research, it can be said that

-54 there is a well organized organization to implement if it is a small scale plan. It is no exaggeration to say that the only weak point in performing the project is the matter to procure equipment that requires foreign currency, make a budget for that foreign currency and time and work spent for that approval process.

2.4 Contents of the project at the implementation site (company) and specification after modification of relevant equipment

2.4.1 Specifications of each unit after modification

Table 2.4.1-1 summarizes the contents of modification. (Energy saving items achieved by improving the operation is excepted from the items below, as they don't require modification of the equipment.)

(1) Introduction of 02% control system for the heating furnace exhaust gas • Figure 2.4.1 -1 shows the system architecture to control the heating furnace.

(2) Thermal recovery for the heating furnace exhaust gas (installation of air pre-heaters, waste heat boilers or economizers) • Figure 2.4.1-2 shows the air pre-heater system • Figure 2.4.1-3 shows the waste heat boiler system.

-55- Table 2.4.1-1: Summary of Modification Contents is shown Modification UNIT Item No Modification Content Cost(1000US$) CDU Flue Gas 02% Control System installation(7.0 —>3.0%) 170 TH-101 APH(Air pie heater) installation (Efficiency up 79.4~>91 .1 %) 2,500 TH-402 Flue Gas 02% Control System installation (8.7->3.0%) 170 E-162C Heat Exchanger (Crude/Reflux) Additional 4 900 etc (Total heat conductive areas: 890 m2) VAC Flue Gas 02% Control System installation (10.3—>3.0%) 170 TH-151 APH installation (Efficiency up 78 —>91 %) 1,500 Vis-breaker TH-301 Flue Gas 02% Control System installation (10.3—>3.0%) 170 Naphtha HDS TH-201 Flue Gas 02% Control System installation (10.2—>3.0%) 170

TH-202 Flue Gas 02% Control System installation (4.5 —>3.0%) 170 Catalytic former TH-251 Flue Gas 02% Control System installation (4.1—>3.0%) 170

TH-252 Flue Gas 02% Control System installation (5.0—>3.0%) 170

IH-253 Flue Gas 02% Control System installation (10.0—>3.0%) 170

IH-254 Flue Gas 02% Control System installation (10.8 —>2.5%) 170 TH-255 Flue Gas 02% Control System installation (12.0—>2.5%) 170 Install WHB at Common Duct of IH-251,252,253 WHB 254,255. TH40U201).TH-202 5,000 LPG Recovery TH-501 Flue Gas 02% Control System installation (6.1—>2.5%) 170 ISOMAX TH-601A H430 02% Control System installation (2.9 —>2.5%) 170

TH-601B H43102% Control System installation (6.4—>25%) 170

TH-602 H432 02% Control System installation (8.9 —>2.5%) 170

TH-603 H433 02% Control System installation (7.6—>2.5%) 170

TH-604 Flue Gas 02% Control System installation (12.1">2.5%) 170 Hydrogen Plant TH-701 Flue Gas 02% Control System installation (11.0—>3.0%) 170 BOILER TB2201A Flue Gas 02% Control System installation (5.5—>2.5%) 170

TB2201B Flue Gas 02% Control System installation (5.5—>2.5%) 170

TB2201C Flue Gas 02% Control System installation (5.5—>2.5%) 170 TB2201D Flue Gas 02% Control System installation (5.5->2.5%) 170 TB2201E Flue Gas 02% Control System installation (2.0—>2.0%) 170 ECO Install Economizer at Flue Gas duct for A,B,CJD Boilers 3,200 TOTAL Remarks: l)Gulf Coast Cost, 2) 1US$= 120Yen 17,010

-56- J______2L O

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Figure: 2.41-1 System Architecture to control Heating Furnace

-57 © ©

Figure: 2.41-2 Air Pre-heater System (APH)

-58- Figure: 2.4.1-3 Waste Heat Boiler System (WHB)

-59 2.42 Contents of energy saving modification for each unit, study of equipment specifications

(1) Crude Distillation Unit 1) Heating furnace facilities (a) Introduction of exhaust gas 02 control system The crude oil heating furnace (TH-101) is a box type, which installed a convection section coil in 1992 when enhancing its capacity. This moment, it is operated at the level close to its maximum combustion capacity. If the oil consumption is successfully reduced thanks to the energy saving improvement, it results in the solution of the bottle-necking. Meanwhile, as an auxiliary of crude oil pre-heating, the re-boiler heating furnace (TH-40), which is originally a kerosene/Gas oil desulfurization unit but currently in no use, is appropriated. However, as its heating capacity is not so big, it is possible to end such appropriation by additionally adding the crude oil heat exchangers and thus increasing thermal recovery in the future. The 02 level in the exhaust flue gas of the heating furnaces (TH-101/TH-402) is as high as 7.0%, 8.7% respectively and the exhaust flue gas temperature also is as high as over 400°C, so there is much room to improve the energy saving.

As for the status of the heating furnace facilities, the ceramic fiber lined during the previous energy saving modification is partially stripped off and the temperature of the external wall is partially over 200°C, so repairing is under planning. And there is leaking-in of air from the sight glass, tube header box, etc, requiring repair.

As a first step, it is recommended to mend these inconvenience, introduce a system to control the exhaust gas 02 by means of damper control and reduce loss of the thermal energy. The specific target value for the 02% in the gas should be around 3.0% since both TH-101 and TH-402 are the heating furnace of heavy oil single combustion or mixed combustion.

(b) Installation of air pre-heater (APH) As the second step, in order to recover heat from high temperature gas, air pre-heaters (APH) should be installed to TH-101 the fuel consumption of which is larger to reduce the exhaust gas temperature to 170°C. For this purpose, APH of plate type (thermal conductive area is approximately 3000m2: 1500 X 2 units), thrusting fan, air duct, discharging fax and exhaust gas duct are to be installed. The installation area can be reserved in the space right beside TH-101. Figure 2.4.2-1 shows its overview and lateral view. By doing this, it is expected that the efficiency of the heating furnace is improved from 75% to 91% and the fuel consumption is reduced by 12.5 %

-60 The effect of energy saving modification for each heating furnace is shown in Figure 2.4.2-1 & Figure: 2.4.2-2.

Table: 2.42-1 Effect of Energy Saving Modification for Furnace TH-101 Item Actual 02% APH Reduction Installation Furnace Absorption Duty 56.35 56.35 56.35 (MM Kcal/h) Fired Duty 74.28 70.02 61.39 (MMKcalyh) Heater Efficiency (%) 74.6 79.4 90.0 02% 7.0 3.0 3.0 Flue Gas Temp (°C) 400 400 170 Fuel Consumption Fuel Oil (Kg-Fuel/h) 7,375 6,962 6,095 Fuel Gas (Kg-Fuel/h) Fuel Consumption Reduction By Actual Energy Saving Base A 413 A 867 Modification (Fuel Oil Base) (Kg-Fuel/h) Annual Fuel Reduction A 3,491 A 7,329 By Modification(Fuel Oil Base) (KIVYear) (KIVYear)

Table: 2.42-2 Effect of Energy Saving Modification for Furnace TH-402 Item Actual 02% Reduction Furnace Absorption Duty 2.42 2.42 (MM Kcal/h) Fired Duty 3.38 3.03 (MM Kcal/h) Heater Efficiency (%) 70.8 79.0 02% 8.7 3.0 Flue Gas Temp (°C) 427 427 Fuel Consumption Fuel Oil (Kg-Fuel/h) 200 180 Fuel Gas (Kg-Fuel/h) 112 100 Fuel Consumption Reduction By Actual Energy Saving Base A 35 Modification (Fuel Oil Base) (Kg-Fuel/h) Annual Fuel Reduction A 292 By Modification(Fuel Oil Base) (KIVYear)

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Figure: 2.42-1 (2/2) Location of Air Pre-Heater for Fumace(Upper View) 2) Heat Exchanger (a) Increase of heat exchangers for Crude Pre-heat network at CDU As energy saving method, it is conceivable to maximize heat recovery from each product to the crude oil preheat system. The heat recovery target temperature from the products is the crude oil temperature + 30 0, from a viewpoint of heat efficiency, as to naphtha, kerosene, and A G O. which are heat- exchanged in the crude oil at initial stage, and 150 °C to 250 °C depending on the product as to the other products, because heat transfer performance is likely to be extremely worsened due to precipitation and hardening of wax. Table 2.4.2-3 shows the product cooler inlet temperature and heat recovery target temperature for each product at the Tabliz Refinery. This unit has a heat exchanger rearranged and enhanced in order to improve heat recovery through a pinch analysis, relatively being advanced in terms of energy saving, but you can see that there is still a possibility of improving heat recovery particularly as to kerosene and H.V.G.O. (L.V.G.O., ATMs, residue, and slop wax are excluded from the heat recovery targets, because their flow rates are low.)

Table 2.42-3 Operating and Target Temperatures

Product Name Actual fC) Target (°C)

Blending Naphtha 54 56

Kerosene 121 107

AGO 127 123 L.V.G.O 177 150

H.V.G.O 183 150

ATMs. Residue 218 150

Slop Wax 213 200

Vacuum Bottom 211 250

Table 2.42-4 Product Flow Rates

Product Name Flow Rate (BPSD)

Blending Naphtha 2,508

Kerosene 18,743

AGO 19,636

L.V.G.O 4,500

H.V.G.O 12,500

AIMs. Residue 5,587

Slop Wax 4,044

Vacuum Bottom 22,733

64- Next, it is conceivable to recover the heat from the parts through which it is discharged outside by means of air fins cooler, etc. in the reflux at the distillation tower. Table 1.3 shows where to eliminate the heat in each reflux. With a design concept of energy saving taken into account, only the overhead reflux contains the heat to be discharged outside. (No heat shall be recovered from the overhead reflux because of complicated piping layout and low temperature level.)

Table 2.42-5 Reflux Names and Item Numbers

Reflux Name Item No. Item Name

Over Head E-108A-H Air fin cooler

E-109 C.W. cooler

Naphtha Ref. E-101A/B Crude exchanger

Kerosene Ref. E-104 Crude exchanger

AG O Ref E-184 Spritter Reboiler

Erll6 B.N Strip. Reboiler

E-117 Kerosene Strip. Reboiler

E-105A/B Crude exchanger

Finally, it is conceivable to optimize the load of reflux at the distillation tower and produce a high-temperature level heat source to improve the heat efficiency of each heat exchanger. Fig. 2.42-2 shows each reflux ratio in the design and current operation of the distillation tower. You can see that the B.N. load has grown greater than the original design. As the B.N. reflux exchanges the heat with the crude oil in the initial crude charge, it is believed that the heat efficiency of the subsequent heat exchangers will be improved by shifting this load to the A G O. reflux.

Reflux Rate / Feed Rate 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

Figure: 2.42-2 Reflux Ratio of Crude Column (b) Result of studies for increasing exchangers Based on the policy mentioned in Section 1, we have decided to carry out the following items to optimize the crude preheat system. * Changing the B.N. reflux flow rate close to the design ratio. (Reflux ratio: 1.3 -> 0.7) * Eliminating the heat gain in the A G O. reflux, which is equivalent to that eliminated at the distillation tower, lowered due to the reduced B.N. reflux. Newly installing the heat exchangers(E170, E171) for that purpose. (They are to be installed after E163 and E106, respectively, considering the temperature level of the A G O. reflux.) * Newly installing the heat exchangers(E102B, E162C) in order to recover the heat from the kerosene and H.V.G.O. Table 2.4.2-6 shows the heat duty of each heat exchanger, before and after modification. A post-modification flow shows Attachment-1.

Table 2.42-6 Heat Duty of Each Heat Exchanger (Actual Operation & After Modification) After Actual Operation AQ Item No. Hot Fluid Name Modification MMkcal/h MMkcal/h MMkcal/h

Charge Pump ~ Desalter

E120 BJSf 1.72 1.72 0.00

E101A/B B.N reflux 15.41 1021 -520

E1Q2 Kerosene 5.16 236 -2.60 E102B Kerosene (New) - 4.37 4.37

E103 AGO 10.44 10.97 033

E162C H.V.G.0 (New) - 5.30 5.30

Desalter ~ Preflash Drum

E104 Kerosene Reflux 930 8.43 -1.07

#1 E162A/B H.V.G.O 5.41 5.12 -0.29

#2 E1Q5A/B AG.O Reflux 5.75 5.47 -0.28

Preflash Drum ~ Distillation Tower

#1 E165 Atm Residue 2.46 2.65 0.19

E163 S.W 237 2.75 0.19

El 70 A GO Reflux (New) 2.50 230 E164A/B/OD Vac. Bottom 6.40 5.83 -037

E119A/B Atm Residue 5.12 4.45 -0.66

#2 E106A/B/C H.V.G.0 11.96 1131 -0.66

E171 AG O Reflux (New) - 2.70 2.70

E160 S.W 251 225 -0.31

E107A/B Vac. Bottom 6.81 6.16 -0.65

Total 91.27 94.76 3.49

66 2) of

(1 (Existing)

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Exchanger

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Figure: 2A2.-3 Heat Exchanger Network before Modification Heat Exchanger Network (after Revamp) (2 of 2)

E

OS OO I I I I Dei. Crude- s

nsn I rnn I nsn (c) Modification Items (Newly installed Heat Exchangers) Upon newly installing the heat exchangers, a required heat transfer area was calculated on the following assumptions: * A temperature difference between the hot and cold processes should be about 20 °C .(Because further heat recovery requires a considerable increase in the heat transfer area) * The U-value used upon calculating the heat transfer area should be the same as the value for the existing heat exchanger where the same fluid is used.

Table 24.2-7(1/2) shows the required heat transfer area for the heat exchanger, heat exchange rate, and U-value used for calculating the heat transfer area. Four new heat exchangers require an additional heat transfer area of 890 m2. Table 2.4.2-7(2/2)shows estimated costs of new heat exchangers in Japan.(only equipment costs)

Table 2.42-7(1/2) Required Area of New Heat Exchanger

Area U value Duty Hot Fluid Temp. Cold Fluid Temp. (m2) (kcaMrnf’t) (kcal/h) E102B 120 360 4.37 226.0 138.3 68.6 82.4 E162C 440 240 5.29 188.0 160.9 115.6 130.9 E170 140 360 2.50 292.0 237.0 206.0 217.4 E171 190 360 2.70 292.0 263.4 231.7 243.4

Table 2.42-7(2/2) Estimated costs of New Heat Exchanger

Costs (US$) E102B 37,000 E162C 85,000 E170 39,000 E171 42,000

-69- (d) Other studies for energy saving modification • Checking the Capabilities of the A G O. Reflux Pump(TP104) In order to increase and supply the A G O. reflux as the heat source for the E170 and E171, we have confirmed the capabilities of the A G O. reflux pump(TP104) to check whether or not a modification is required. Figure 24.2-5 shows the pump capacity at design, current operation, and after modification, as the post-modification capacity is smaller than the design value, it is not necessary to replace the pump.

80

Capacity (m3/h)

Figure 2.42-5 Performance Curve of AG O. Reflux Pump(TP104)

-70- (e) Reflux Ratio of Distillation Tower after Modification

Table 2.42-6 shows a reflux flow rate and reflux ratio after implementation of this modification.

Reflux Rate / Feed Rate 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

Figure 2.42-6 Reflux Ratio of Crude Column (After Modification)

Tabriz refinery operate Reflux pumps as actual figure in order to prevent coloring 1 GO product, however, by means of checking tray load for each fraction step, the excess flow of Reflux will shift to AGO Reflux tray

-71- Table 2.42-8 Reflux Rate and Reflux Ratio

Design Condition Operation Condition After Modification Remarks BPSD Ratio BPSD Ratio BPSD Ratio CDUFeed 80,000 112,710 112,710

O/HRef. 2,000 3,510 3300 to #1tray 14,880 20347 20,000 to Splitter Total 16,880 0.21 23,857 0.21 23300 0.21

B.N Ref. 36,000 112,000 63,000 to #1tray 23,000 37,000 20,000 to #4 tray Total 59,000 0.74 149,000 1.32 83,000 0.74

Kano. Ref. 23,000 30,000 30,000 to #23 tray 17,000 26,000 26,000 to #25 tray Total 40,000 030 56,000 0.50 56,000 0.50 18,000 8,000 8,000 to #40 tray 2,000 3,000 3,000 to #37 tray 1,000 5,000 5,000 to B.N. Reboiler AG O Ref. 12,000 9,000 9,000 to Kerosene Reboiler 22,000 15,000 15,000 to Spl. Reboiler 10,000 to E170 (New Line) 19,000 toE171 (New Line) Total 55,000 0.69 40,000 0.35 69,000 0.61

(f) Consideration Heat duty of H401 becomes decrease 2.31MMkcal/h of 3.49MMkcal/h by this revamping (The inlet temperature improves +11°C). Heat duty of H101 (in the downstream of H401) is 34.8MMkcal/h and is larger than that of H401. Therefore, it is also possible to stop H401 and to move the load to H101 if it is such a load.

In this examination, we have decided to shift the load of the distillation tower to the A G O. distillate in order to save the energy. In addition to saving the every, the following effects are expected: • Prevention of flooding, particularly at the top of the tower owing to the reduced vapor load.(An increased treatment rate is also expected, if flooding has been a bottleneck in improving the treatment rate.) • Reduction of COT owing to a suppressed steam generation rate in the tower. As the above-mentioned effects should be also judged from a viewpoint of the product specifications, etc., they have not been considered in this examination. But an increase in a further conservation of energy and throughput can be expected by a detailed examination. (This examination is to estimate a potential of heat recovery and does not include a calculation of distillation.)

-72- (2) Vacuum distillation unit 1) Heating furnace facilities (a) Introduction of exhaust gas 02 control system The crude oil heating furnace (TH-151) is a box type and the design specification of the oil burner is a general type the excessive air ratio of which is 30%. It is operated with combustion load close to designed combustion capacity so if the fuel consumption is reduced thanks to the improvement of energy saving, it leads to the solution of the bottle ­ necking due to the heating furnace load. 02in the exhaust flue gas of the heating furnace (TH-151) is currently as high as 10.3% and the gas temperature is also as high as 450°C indicating that there is much room to improve the energy saving. The state of the heating furnace facilities is, the same as the crude distillation unit, that there is leaking-in of air from the sight glass, tube header box, etc, requiring repair. As the first step, in addition to the correction of these inconvenience, the system that controls the exhaust gas 02 by means of damper control should be introduced to cut the loss of thermal energy. The specific target value for 02% in the gas should be around 3.0% taking into consideration the fact that TH-151 is the heating furnace of heavy oil single and mixed combustion.

(b) Installation of air pre-heater As the second step, the air pre-heater (APH) should be installed as a means to recover heat from the high temperature exhaust gas so that the exhaust gas temperature is reduced to 170°C. The thermal conductive area of APH is approximately 750m2. By installing this, the heating furnace efficiency is improved from current 65% to 92% and the fuel consumption is cut by 28%. Table 24.2-9 shows the effect of energy saving modification implemented to TH-151.

73- Table 2.42-9 Energy Saving Effect at TH-151 TH-151 Item Actual 02% APH Reduction Installation Furnace Absorbed Duty 14.49 14.49 14.49 (MMKcal/h) Fired Duty 21.87 18.39 15.79 (MMBTU/h) Heater Efficiency (%) 65.0 78.0 91.0 02% 10.3 3.0 3.0 Flue Gas Temp. (°C) 450 450 170 Fuel Consumption Fuel Oil (Kg-Fuel/h) 2,171 1,826 1,568 Fuel Gas (Kg-Fuel/h) Reduction of Fuel Consumption By Actual Modification Base A 345 A 258 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 2,916 A 2,181 (Fuel Oil Equivalent) (KIVYear) (KL/Year)

2) Heat exchanger (a) Hot charge of ISOMAX feed (MVGO): (issue of future) MVGO, which is the feed to ISOMAX unit, is cooled by a run-down cooler. By making it hot charge, thermal recovery can be achieved. However, it forces the crude oil to be directly connected between units, which requires Tabriz Oil Plant to change its concept of operation, therefore it is the issue to be discussed in the future.

(3) Visbreaker 1) Heating furnace facilities (a) This unit is designed as a visbreaker and producing heavy oil (to be fuel for the adjacent power plants) and visbreaker gasoline (fuel for the house power generation boilers) from Vacuum Residue (VR). However, when the capacity of the crude distillation unit is enhanced in the future, it is planed to be used as a distillation unit. 02 in the exhaust gas of the heating furnace (TH-301) currently indicates as much as 10.3% and is losing a great deal of thermal energy. By correcting these inconvenience and introducing a system to control exhaust gas 02 by means of damper control, the thermal loss can be reduced. The specific target value for o2% in the gas should be around 3.0% considering that TH- 301 is the heating furnace of both heavy oil single and mixed burning.

-74- Since the exhaust gas flow rate is less, APH is not installed. The effect of energy saving modification at TH-301 is shown in Table 2.4.2-10.

Table 2.42-10 Energy Saving Effect at TH-301 TH-301 Item Actual 02% APH Reduction Installation Furnace Absorbed Duty 12.36 12.36 — (MMKcal/h) Fired Duty 19.57 16.07 — (MMBTU/h) Heater Efficiency (%) 62.0 76.0 — 02% 10.3 3.0 —

Flue Gas Temp. (°C) 490 490 — Fuel Consumption

Fuel Oil (Kg-Fuel/h) 1,943 1,596 — Fuel Gas (Kg-Fuel/h) Reduction of Fuel Consumption

By Actual Modification Base A 347 — (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 2,933 (Fuel Oil Equivalent) (KIVYear)

(4) Naphtha HDS unit 1) Heating furnace facilities (a) Introduction of exhaust gas 02 control system As a result of modification made during enhancement of processing amount of the Naphtha HDS unit, the reaction tower and crude oil heating furnace are appro rely using the equipment of the kerosene, light gas oil desulfurization unit now in no use. All the heating furnaces are cylindrical type and the 02% in the exhaust flue gas of the crude oil heating furnace (TH-401) 4.5% but that of the stripper re-boiler indicates the value as high as 10.2% showing a great deal of thermal loss. The state of the heating furnace facilities is that there is leaking-in of air from the sight glass, tube header box, etc, indicating the necessity of repair. As the first step, in addition to correction of these inconvenience, a system to control the exhaust gas 02by means of damper control should be introduced to cut the loss of thermal energy. Specifically, the target value should be around 3.0% for the heating furnace of heavy oil single and mixed burning. As the second step, the exhaust gas of this heating furnace should be induced to the waste heat boiler (WHB) generating 600# steam, which is planed to be installed to the adjacent

-75- Naphtha reforming unit and achieve thermal recovery. Table 2.4.2-11 and 2.4.2-12 show the effects on each heating furnace due to the improvement in energy saving. Table 2.42-11 Energy Saving Effect at Naphtha HDS Furnace TH-401 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 4.80 4.80 4.80 (MMKcal/h) Fired Duty 6.33 6.21 5.74 (MMBTU/h) Heater Efficiency (%) 75.0 77.0 822 02% 4.5 3.0 3.0 Flue Gas Temp. (°C) 470 470 350 Fuel Consumption Fuel Oil (Kg-Fuel/h) 313 306 285 Fuel Gas (Kg-Fuel/h) 262 256 237 Reduction of Fuel Consumption By Actual Modification Base A14 A 44 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 121 A 372 (Fuel Oil Equivalent) (KITYear) (KITYear) * Heat recovery by WHB does not reduce fuel consumption at process furnace, but reduce fuel consumption at steam boiler.

Table 2.42-12 Energy Saving Effect at Naphtha HDS Fumce TH-202 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 2.82 2.82 2.82 (MMKcal/h) Fired Duty 5.43 4.05 3.58 (MMBTU/h) Heater Efficiency (%) 51.0 69.0 82.7 02% 10.2 3.0 3.0 Flue Gas Temp. (°C) 630 630 350 Fuel Consumption Fuel Oil (Kg-Fuel/h) 428 320 286 Fuel Gas (Kg-Fuel/h) 91 67 56 Reduction of Fuel Consumption By Actual Modification Base A137 A47 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 1,158 A 400 (Fuel Oil Equivalent) (KITYear) (KITYear)

-76- * Heat recovery by WHB does not reduce fuel consumption at process furnace, but reduce fuel consumption at steam boiler.

2) Improvement of operation (a) Effective use of PLAT hydrogen: (issue in the future) Currently Platformer hydrogen (hydrogen purity = approx. 70%) is fed as hydrogen plant material, losing thermal energy. Therefore, it can be conceived that the fuel reduction and effective use of hydrogen are achieved at the hydrogen plant by raising the hydrogen purity via the unifiner and feeding it directly to ISOMAX. However, there are number of problems including catalyzer life time of the hydrogen plant and ISOMAX, capacity of compressor, etc, therefore, this is the issue to be studied in the future.

(5) Catalytic reforming unit 1) Heating furnace facilities (a) Introduction of exhaust gas 02 control system Current 02% in the exhaust flue gas indicates value as high as 4.1% ^12% leaving much room for energy saving. The state of the heating furnace facilities is that there is leaking-in of air from the sight glass, tube header box, etc, indicating the necessity of repair. As the first step, a system to control the exhaust flue gas 02 by means of damper control should be introduced to cut the loss of thermal energy. The specific target value for the 02% in the exhaust flue gas should be around 3.0%, since TH-251/252/253 are all the heating furnace of heavy oil single burning or mixed burning. Meanwhile, the target value for TH-254/255 which are fuel gas single burning type should be around 2.5%. By doing this, fuel reduction of approx. 23.3 FOE-KL/d can be achieved.

(b) Installation of waste heat boiler to the heating furnace exhaust gas collection duct For the reactor feed heating furnace (TH-251,252,253), coils are additionally installed to its convection section, but the exhaust gas temperature is still currently as high as 560^750°C, indicating the possibility of heat recovery. Therefore, as the second step, collect the exhaust ducts of all of the heating furnaces (7 units) for the Naphtha reforming unit and Naphtha HDS unit, introduce them into the waste heat boiler, generate 600# steam and recover that waste heat energy. Additionally, a discharging fan and collective chimney are installed. (Tube thermal conductive area: 650m2) After reducing 02%, the feasible calorie to be recovered from the exhaust gas should be 10 MM kcal/h and the generation amount of 600# steam is 14.7Vh. By doing this, the fuel consumption of the boiler facilities generating 600#steam in the Oil Plant can be reduced. (The fuel consumption of PLAT side won't change)

-77~ Table 2.4.2-13,2.4.2-14, 2.4.2-15,2.4.2-16 and 2.4.2-17 show the effects of energy saving modification at each heating furnace. Figure 2.4.2-V (1/3,2/3,3/3) shows the planed drawing of the waste boiler.

2) Installation of heat exchanger of BFW pre heating A boiler in the service area does can water blow down always at 20t/h and its waste heat is discharged without being recovered. This heat should be recovered to pre-heat the water supply for the waste heat boiler to be installed in PLAT area. A heat exchanger of 35m2 should be installed. (Installation place is a service area) The installation cost including the waste heat boiler facilities and heat exchanger is estimated as approx. 5 million .

Table 2.42-13 Energy Saving Effect at Catalytic Reformer Furnace 1H-251 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 8.35 8.35 8.35 (MMKcal/h) Fired Duty 13.25 12.86 10.03 (MMBTU/h) Heater Efficiency (%) 62.4 64.4 82.7 02% 4.1 3.0 3.0 Flue Gas Temp. (°C) 720 720 350 Fuel Consumption Fuel Oil (Kg-Fuel/h) 848 823 645 Fuel Gas (Kg-Fuel/h) 386 374 289 Reduction of Fuel Consumption By Actual Modification Base A40 A281 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 334 A 2374 (Fuel Oil Equivalent) (KIVYear) (KIVYear) * Heat recovery by WHB does not reduce fuel consumption at process furnace, but reduce fuel consumption at steam boiler.

-78 Table 2.42-14 Energy Saving Effect at Catalytic Reformer Furnace TH-252 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 8.60 8.60 8.60 (MMKcal/h) Fired Duty 12.27 11.70 10.30 (MMBTU/h) Heater Efficiency (%) 69.5 72.5 82.7 02% 5.0 3.0 3.0 Flue Gas Temp. (°C) 560 560 350 Fuel Consumption Fuel Oil (Kg-Fuel/h) 787 755 664 Fuel Gas (Kg-Fuel/h) 356 341 298 Reduction of Fuel Consumption By Actual Modification Base A50 A143 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 424 A 1,209 (Fuel Oil Equivalent) (KL/Year) (KL/Year) * Heat recovery by WHB does not reduce fuel consumption at process furnace, but reduce fuel consumption at steam boiler.

Table 2.42-15 Energy Saving Effect at Catalytic Reformer Furnace TH-253 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 320 3.20 3.20 (MMKcal/h) Fired Duty 7.51 5.07 3.85 (MMBTU/h) Heater Efficiency (%) 42.1 62.8 82.7 02% 10.0 3.0 3.0 Flue Gas Temp. (°C) 750 750 350 Fuel Consumption Fuel Oil (Kg-Fuel/h) 364 249 190 Fuel Gas (Kg-Fuel/h) 317 210 158 Reduction of Fuel Consumption By Actual Modification Base A244 A122 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 2,066 A 1,030 (Fuel Oil Equivalent) (KIVYear) (KL/Year) * Heat recovery by WHB does not reduce fuel consumption at process furnace, but reduce fuel consumption at steam boiler.

-79- Table 2.42-16 Energy Saving Effect at Catalytic Reformer Furnace TH-254 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 7.52 7.52 7.52 (MMKcal/h) Fired Duty 16.00 10.85 9.04 (MMBTU/h) Heater Efficiencv (%) 45.0 682 82.5 02% 10.8 2.5 2.5 Flue Gas Temp. (°C) 640 640 350 Fuel Consumption Fuel Oil (Kg-Fuel/h) Fuel Gas (Kg-Fuel/h) 1,314 892 741 Reduction of Fuel Consumption By Actual Modification Base A510 A183 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 4,314 A 1,544 (Fuel Oil Equivalent) (KlVYearl (KlVYearl * Heat recovery by WHB does not reduce fuel consumption at process furnace, but reduce fuel consumption at steam boiler.

Table 2.42-17 Energy Saving Effect at Catalytic Reformer Furnace 1H-255 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 0.79 0.79 0.79 (MMKcal/h) Fired Duty 1.77 1.10 0.94 (MMBTU/h) Heater Efficiency (%) 42.0 70.2 825 02% 12.0 2.5 2.5 Hue Gas Temp. (°C) 600 600 350 Fuel Consumption Fuel Oil (Kg-Fuel/h) Fuel Gas (Kg-Fuel/h) 146 91 77 Reduction of Fuel Consumption By Actual Modification Base A67 A17 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 562 A 143 (Fuel Oil Equivalent) (KlVYearl (KlVYearl * Heat recovery by WHB does not reduce fuel consumption at process furnace, but reduce fuel consumption at steam boiler.

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Figure: 2.42-7(3/3) Planned drawing of Waste Heat Boiler (6) LPG recovery unit 1) Heating furnace facilities (a) Introduction of exhaust gas 02 control system 02% in the exhaust flue gas of the heating furnace (TH-501) currently indicates the value as high as 6.1%, losing a great deal of thermal energy. The state of the heating furnace facilities is that there is leaking-in of air from the sight glass, tube header box, etc, indicating the necessity or repair. In addition to correction of these inconvenience, the loss of thermal energy should be cut by introducing a system to control the exhaust gas 02 by means of damper control. The specific target value for the 02% in the exhaust gas should be around 2.5% since TH-501 is the fuel gas single burning type. By doing this, fuel reduction of approx. 1.6 FOE-KL/d can be achieved.

Table 2.4.2-18 shows the energy saving modification effects of TH-501 heating furnace.

Table 2.42-18 Energy Saving Effect at LPG Recovery Furnace TH-501 Item Actual 02% WHB Reduction Installation Furnace Absented Duty 6.42 6.42 — (MMKcal/h) Fired Duty 9.16 8.53 — (MMBTU/h) Heater Efficiency (%) 69.0 74.2 — 02% 6.1 2.5 —

Flue Gas Temp. (°C) 520 520 — Fuel Consumption

Fuel Oil (Kg-Fuel/h) — Fuel Gas (Kg-Fuel/h) 753 702 Reduction of Fuel Consumption

By Actual Modification Base A 62 — (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel

Consumption A 521 — (Fuel Oil Equivalent) (KIVYear)

-84- (7) Hydro-cracking Unit for Vacuum Gas Oil (ISOMAX) 1) Heating furnace facilities (a) Introduction of exhaust gas 02 control system As for 02% in the exhaust flue gas of the heating furnaces (TH-601 A, 601B, 602,603 & 604), although there is one heating furnace 02% of which is as low as 2.9%, others show values as high as 6^ 12%, losing a great deal of thermal energy. The state of the heating furnace facilities is that there is leaking-in of air from the sight glass, tube header box, etc, indicating the necessity of repair. As the first step, in addition to correction of these inconvenience, a system to control the exhaust flue gas 02 by means of damper control should be introduced to cut the loss of thermal energy. Specifically, the target value for the heating furnace of heavy oil single burning, mixed burning should be around 0.3% and 2.5% for the fuel gas single burning type. By doing this, fuel reduction of approx. 9 FOE-KL/d can be achieved.

Table 2.4.2-19,2.4.2-20,2.4.2-21,2.4.2-22 and 2.4.2-23 show the energy saving modification effects of each heating furnace.

Table 2.42-19 Energy Saving Effect at Hydrocracking Furnace TH-601A Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 6.17 6.17 — (MMKcal/h) Fired Duty 7.71 7.67 — (MMBTU/h) Heater Efficiency (%) 79.0 79.4 — 02% 2.9 2.5 —

Flue Gas Temp. (°C) 415 415 — Fuel Consumption Fuel Oil (Kg-Fuel/h) — Fuel Gas (Kg-Fuel/h) 634 630 Reduction of Fuel Consumption

By Actual Modification Base A4 — (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 31 — (Fuel Oil Equivalent) (KIVYear)

-85- Table 2.42-20 Energy Saving Effect at Hydro-cracking Furnace TH-601B Item Actual 02% WEB Reduction Installation Furnace Absorbed Duty 7.60 7.60 — (MMKcal/h) Fired Duty 10.07 9.48 — (MMBTU/h) Heater Efficiency (%) 74.6 79.4 — 02% 6.4 2.5 —

Flue Gas Temp. (°C) 415 415 -— Fuel Consumption

Fuel Oil (Kg-Fuel/h) — Fuel Gas (Kg-Fuel/h) 825 778 Reduction of Fuel Consumption

By Actual Modification Base A 57 — (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel

Consumption A 481 — (Fuel Oil Equivalent) (KIVYear)

Table 2.42-21 Energy Saving Effect at Hydro-cracking Furnace TH-602 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 8.00 8.00 — (MMKcal/h) Fired Duty 11.05 9.91 — (MMBTU/h) Heater Efficiency (%) 71.0 80.1 ...... 02% 8.9 2.5 —

Hue Gas Temp. (°C) 400 400 — Fuel Consumption

Fuel Oil (Kg-Fuel/h) — Fuel Gas (Kg-Fuel/h) 908 812 Reduction of Fuel Consumption

By Actual Modification Base A116 — (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel

Consumption A 981 — (Fuel Oil Equivalent) (KIVYear)

-86- Table 2.42-22 Energy Saving Effect at Hydro-cracking Furnace TH-603 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 7.0 7.0 — (MMKcal/h) Fired Duty 9.67 9.67 — (MMBTU/h) Heater Efficiency (%) 71.0 78.3 — 02% 7.6 2.5 —— ■ Flue Gas Temp. (°C) 438 438 — Fuel Consumption

Fuel Oil (Kg-Fuel/h) — Fuel Gas (Kg-Fuel/h) 795 726 Reduction of Fuel Consumption By Actual Modification Base A 83 — (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 705 — (Fuel Oil Equivalent) (KIVYear)

Table 2.42-23 Energy Saving Effect at Hydrocracking Furnace TH-604 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 0.70 0.70 — (MMKcal/h) Fired Duty 2.01 1.06 — (MMBTU/h) Heater Efficiency (%) 33.0 65.6 — 02% 12.1 2.5 —

Flue Gas Temp. (°C) 690 690 — Fuel Consumption

Fuel Oil (Kg-Fuel/h) — Fuel Gas (Kg-Fuel/h) 164 86 Reduction of Fuel Consumption

By Actual Modification Base A94 — (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel

Consumption A 797 — (Fuel Oil Equivalent) (KIVYear)

87- (8) Hydrogen production unit 1) Heating furnace (a) Introduction of exhaust gas 02 control system 02% in the exhaust flue gas of the heating furnace (TH-701) is currently 11.0%, higher than designed 1.8%, leaving room for energy saving. As the number of the hydrogen reforming furnace burners is a lot, we begin with improvements such as adjustment of air registers and stuffing of the place where air is leaking in, etc. Besides, a system to control the exhaust gas 02 % by means of damper control should be introduced to cut the loss of thermal energy. The specific target value for 02% in the exhaust gas should be around 3.0% since TH-701 is the heating furnace burning kerosene and fuel gas mixed. By doing this, fuel reduction of approx. 24.3 FOE-KL/d can be achieved. Table 2.4.2-24 shows the energy saving modification effects of TH-701.

Table 2.42-24 Energy Saving Effect at Hydrogen Plant Furnace TH-701 Item Actual 02% WHB Reduction Installation Furnace Absorbed Duty 41.70 41.70 — (MMKcal/h) Fired Duty 54.38 48.76 — (MMBTU/h) Heater Effidencv (%) 75.5 84.6 — 02% 11.0 3.0 ------

Flue Gas Temp. (°C) 280 280 — Fuel Consumption

Fuel Oil (Kg-Fuel/h) 2,642 2J72 — Fuel Gas (Kg-Fuel/h) 2237 2.004 Reduction of Fuel Consumption

By Actual Modification Base A 557 — (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel

Consumption A 4,709 — (Fuel Oil Equivalent) (KIVYear)

2) Heat exchanger (a) Since this unit self-consumes the steam for its reaction, the waste heat boiler and heat exchanger have already been installed as a heat recovery system, so there isn't much room left to study.

-88- (9) Boiler and utility 1) Boiler facilities (a) Introduction of exhaust flue gas 02 control system There are 4 boilers supplied by FRANCO-TOSI, all starting operation in 1977 having the same capacity (102 Vh) and 1 boiler supplied by Mitsubishi Industry; having an economizer installed, and usually 4 of them are running. Having forwarding fans (FDF), 02% in the exhaust gas, which was designed to be 2.5%, is currently running at 2.0^ 2.5%. Although the oxygen density meter was originally installed, it is periodically analyzed and adjusted for operation, because it is operated off-line at present. They use heavy oil, surplus visbreaker gasoline and fuel gas as its fuel, i.e. they are the 3 kinds mixed burning boilers. At the boiler facilities the fuel consumption of which is larger, continual air combustion control is performed to reduce the loss of thermal energy. The target value for the exhaust gas 02% should be originally designed 2.5%.

(b) Installation of economizer to each boiler exhaust gas section (4 units supplied by FRANCO- TOSI) Except for Mitsubishi boiler, the exhaust gas temperature of currently running 3 units is as much as 303°C, which is extremely high. Therefore, as Mitsubishi boiler does, an economizer (ECO) should be installed to the space of chimney connection section of the exhaust gas duct to recover its waste heat and pre heat the boiler water supply (110°C). By doing this, the fuel consumption of the boiler can be reduced. The exhaust gas temperature should be dropped to 170°C. (However, in the case of Mitsubishi boiler, 02% is 2.0% and it is equipped with a economizer, and the exhaust gas temperature is 195°C. Therefore, the modification should be applied only to exhaust gas 02 control system.

Table 2.4.2-25 and 2.4.2-26 show the fuel reduction amount of each boiler.

-89- Table 2.42-25 Energy Saving Effect at Boiler Furnace Boiler: TB-2201A/2201B/2201C/2201D (Steam: 650psig/ 390 ’C): Maximum Steam Generation Capacity: 102 Ton/h Item Actual 02% ECO Reduction Installation Steam Generation Rate 60.0 60.0 60.0 (Normal Operation): (Ton/h) Fired Duty 47.54 46.32 43.29 (MMBTU/h) Boiler Heater Efficiency (%) 83.5 86.0 92.0 02% 5.5 2.5 2.5 Hue Gas Temp. (°C) 303 303 170 Fuel Consumption Fuel Oil (Kg-Fuel/h) 3,741 3,645 3,408 Fuel Gas (Kg-Fuel/h) 785 764 713 Reduction of Fuel Consumption By Actual Modification Base A122 A301 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 1,033 A 2^42 (Fuel Oil Equivalent) (KIVYear) (KIVYear)

Table 2.42-26 Energy Saving Effect at Boiler Furnace Boiler TB-2201E (Mitsubishi Heavy Industry) (Steam: 650psig/ 390 ’Q: Maximum Steam Generation Capacity: 102 Ton/h Item Actual 02% WHB Reduction Installation Steam Generation Rate 70.0 70.0 70.0 (Normal Operation): (Ton/h) Fired Duty 51.04 51.04 51.04 (MMBTU/h) Boiler Heater Efficiency (%) 91.3 91.3 91.3 02% 2.0 2.0 2.0 Hue Gas Temp. (°C) 195 195 195 Fuel Consumption Fuel Oil (Kg-Fuel/h) 4,017 4,017 4,017 Fuel Gas (Kg-Fuel/h) 841 841 841 Reduction of Fuel Consumption By Actual Modification Base A0 A0 (Fuel Oil Equivalent) (Kg-Fuel/h) Annual reduction of Fuel Consumption A 0 A 0 (Fuel Oil Equivalent) (KIVYear) (KIVYear)

— 90— 2.43 Potential of Energy Saving in each unit Modification (1) Feasibility Study Results of each unit and Potential of Energy Saving In this study, effect of heat recovery from flue gas and product oil is evaluated by saving of fuel consumption. Increasing of steam generation amount from heat recovery with Waste Heat Boiler can be converted to fuel consumption for producing same steam generation on independent power generation boiler.

(a) Atmospheric Crude Distillation Unit (CDU) (b) Vacuum Distillation Unit (VAC) (c) Visbreaker Unit (V B) (d) Naphtha Hydro-desulfurization Unit (Unifiner) (e) Catalytic Reforming Unit (Platformer ) (f) LPG Recovery Unit (LPG) (g) Vacuum Gas Oil Hydro-Cracking Unit (ISOMAX) (h) Hydrogen Production Unit (H2 Plant) (i) Boiler & Utility unit

Potential of Energy Saving for each unit Modification are shown the following tables. Table 2.4.3-1:02% Reduction case with modification Table 2.4.3-2: APH, WHB installation case

-91- Table 2.43-1 Potential of Energy Saving for each unit Modification: (02 % Reduction case)

After 02% Potential of Unit Actual Furnace Reduction Energy Saving UNIT Capacity No. 02% Fuel consum. 02% Fuel consum Fuel Saving (BPSD) (KL/D) (KL/D) (A KL/D)

TH-I01 117,800 7.0 188.9 3.0 178.3 10.6 CDU TH-402 117,800 8.7 8.6 3.0 7.7 0.9

VAC TH-151 47,500 10.3 55.6 3.0 46.8 8.8

Visbreaker TH-301 14,945 10.3 49.8 3.0 40.9 8.9

TH-401 13,590 43 16.1 3.0 15.8 0.3 Naphtha HDS TH-202 13390 10.2 13.8 3.0 10.3 3.5

TH-251 12,250 4.1 33.7 3.0 32.7 1.0

TH-252 12250 5.0 31.2 3.0 29.9 1.3 Catalytic TH-253 12y250 10.0 19.1 3.0 12.9 6.2 Reformer TH-254 12,250 10.8 40.7 25 27.6 13.1

TH-255 12,250 12.0 45 25 28 1.7

LPGRec. TH-501 8,448 6.1 23.3 25 21.7 1.6

TH-601A 13,679 2.9 19.6 2.5 21.7 0.1

TH-601B 13,679 6.4 25.6 2.5 19.5 15 Hydro- Cracking TH-602 13,679 8.9 28.1 2.5 24.1 2.9 (ISOMAX TH-603 13,679 7.6 24.6 25 252 2.1

TH-604 13,679 12.1 5.1 2.5 225 2.4 24.8 H2 Plant TH-701 11.0 138.3 3.0 124.0 14.3 MMscfd TB2201A lOOTon/h 55 120.9 2.5 117.8 3.1

TB2201B lOOTon/h 55 120.9 2.5 117.8 3.1

BOILER TB2201C lOOTon/h 55 120.9 2.5 117.8 3.1

TB2201D lOOToiVh Stop — 2.5 — 0.0

TB2201E llOTon/h 2.0 129.8 2.5 129.8 0.0

TOTAL 1,219.1 1,128.6 90.5

-92 Table 2.43-2 Potential of Energy Saving for each unit Modification: (APH, WHB case)

Energy After After Installation of Actual Saving Furnace Reduction of 02% APH, WHB UNIT Potential No. 02% Fuel Con 02% Fuel Con 02% Fuel Con Fuel Saving (KL/D) (KL/D) (KL/D) (A KL/D)

TH-101 7.0 188.9 2.5 178.3 25 156.1 328 CDU TH-402 8.7 8.6 2.5 7.7 25 7.7 0.9

VAC TH-151 10.3 55.6 3.0 46.8 3.0 40.2 15.4

Visbreaker TH-301 10.3 49.8 3.0 40.9 3.0 40.9 8.9

TH-401 43 16.1 25 15.8 25 14.6 15 Naphtha HDS TH-202 10.2 13.8 25 10.3 25 9.1 4.7

TH-251 4.1 33.7 2.3 32.7 2.3 255 82

TH-252 5.0 31.2 25 29.9 25 26.2 5.0 Catalytic IH-253 10.0 19.1 25 12.9 25 9.8 93 Reformer TH-254 10.8 40.7 25 27.6 25 23.0 17.7

TH-255 12.0 45 25 2.8 25 2.4 2.1

LPGRec. TH-501 6.1 23.3 25 21.7 25 21.7 1.6

TH-601A 2.9 19.6 25 195 2.5 19.5 0.1

TH-601B 6.4 25.6 2.5 24.1 2.5 24.1 1.5 Hydro- Cracking TH-602 8.9 28.1 25 253 25 25.2 2.9 (ISOMAX TH-603 7.6 24.6 25 225 25 225 2.1

TH-604 12.1 5.1 2.5 2.7 25 2.7 2.4

H2 Plant TH-701 11.0 1383 3.0 124.0 3.0 124.0 14.3

TB2201A 55 120.9 2.6 117.8 2.6 110.1 10.8

TB2201B 5.5 120.9 2.6 117.8 2.6 110.1 10.8

BOILER TB2201C 5.5 120.9 2.6 117.8 2.6 110.1 10.8

TB2201D Stop — — — — — —

TB2201E 2.0 129.8 2.0 129.8 2.0 129.8 0.0

TOTAL 1,219.1 1,128.6 1,055.3 163.8

93 25 Scope of Fund/ Equipment/ Service, etc. To be Bom by Each Party in Implementation of This Project

(1) Scope of Responsibility of Japanese Side (a) A feasibility study into details based on this investigation (b) Preparation of a basic implementation plan of the energy-saving project (c) Basic as well as detailed designs concerning facility/equipment to be introduced (d) Instruction for purchase of equipment/ materials necessary for this energy-saving project (e) Instruction for purchase of spare parts of the facility/equipment introduced enough for supply for one year (f) Assistance for Supervision of Customer inspection prior to shipment of the facility/ equipment introduced (g) Assistance for marine transportation/ customs at harbors/ unloading/inland transport of the facility/equipment introduced (h) Instruction for preparation of detailed work schedules for work site installation (i) Supervision and instruction for installation work and remodeling/connection of piping for the facility/equipment introduced (j) Supervision and instruction for Civil engineering/building/firaming work, instrumentation/ electrical work, thermal insulation/refractory coating/painter's work (k) Education/training of operating/maintenance staff of the facility/equipment introduced (l) Management/supervision of test runs and performance confirmation runs (m) Preparation of procedures to measure energy-saving effect and reduction in carbon dioxide emission

(2) Scope of Responsibility of Implementation Side (a) Leveling of ground/soil strength survey for the installation site of the facility/equipment introduced (b) Provision of basic design data such as meteorological conditions (c) All the necessary governmental applications/procedures concerning implementation of the project (d) Provision of design drawings/ specifications of the existing facility/equipment concerned (e) Purchase and inspection of the facility/equipment procured from overseas and domestic (f) Installation work, remodeling' connection of piping, works concerning civil engineering' building/ framing/ instrumentation/ electricity, etc. to be conducted by the Corporation (g) Provision of water/ electricity/ steam/ air, etc. for temporary equipment and other services for construction work (h) Operation of test runs and performance confirmation runs under management/guidance of the Japanese side

94- (j) Measurement/ recording of energy-saving effect and reduction in carbon dioxide emission based on the procedures prepared by the Japanese side

(3) Funds As this project is carried out at Tabriz refinery which is owned by a national enterprise, the necessary fund, in principle, is to be sufficed within the budgetary framework of Tabriz Oil Refinery and NIORDC. On the other hand, as the foreign currency accounts are controlled by the government authority, matters related to financing in foreign and government need to be appropriately structured.

(4) Facility/ Equipment Some facility equipment can be procured within Iran, but high-pressure or special heat exchangers, analyzing equipment and instrumentation equipment should be purchased from overseas. To secure the foreign currency to import such equipment, this project should be approved all together. Therefore, it is necessary to arrange things including negotiation of terms and conditions with equipment makers from the budgeting stage.

(5) Technical service Part of the technical matters related to equipment designing and construction can be solved by domestic engineering companies, but for the part where affluent experience is required such as creation of specifications and basic designing, it is necessary to introduce technologies of foreign companies. Even for the modification job for which Tabriz Oil Plant itself invests at small scale, overseas equipment procurement, technical guidance and support are inevitable.

2.6 Pre-conditions, problems, etc to implement this project

To implement this project, the most important but difficult work is to obtain an approval of NIORDC headquarters, the other party, for the budget, allocate necessary foreign currency within the project implementation party and import necessary equipment. As for the technical aspect, the energy saving FS results should be effective and associated with economic merits. Therefore, the pre-condition to implement this project should be to have strong initiative to reserve necessary foreign currency within the project implementation side and, as for the Tabriz side, to acquire necessary budget within NIORDC.

-95- 2.7 Project implementation schedule

It is anticipated to take at least half a year to establish project implementation scheme and acquire the budget, half a year to prepare ordering specifications and select contractors and another half a year to execute the facility modification construction.

Table 2.7-1 Implementation Schedule of Project ITEM 2001 2002 2003 Budgeting procedure

Fund provision

Order specification preparation Vendor selection —

Equipment remodeling work Equipment start-up —

-96 3. Specific financial plan

3.1 Financial plan to implement the project

The total fund required to implement this project is US$ lVmillion, based on Section 2, Table 2.4.1-1 showing summary of energy saving modification cost. The equipment which can be purchased within Iran is confined to general equipment such as heat exchangers, etc, so 60% of the total fund should be supplied by foreign currency and 50% should be by domestic currency. Most of the foreign currency is appropriated to importation of the equipment and the domestic currency is appropriated to the equipment and facility modification construction which can be procured within Iran. The most feasible means to secure the foreign currency is the Yen loan presuming the pay off for the imported oil by Japanese project implementers. Procurement of the domestic currency should be arranged by Tabriz Oil Plant in its efforts to acquire the budget for modification within NIORDC headquarters.

Table 3.1-1 Funding Schedule ITEM 2000 2001 2002 Budgeting procedure

Funds on hand (domestic currency) — cost Borrowed funds Finance (foreign currencies)

3 2 Anticipation of firnd procurement

Judging from Japanese economic corporation policy for Iran recently offered jointly by Japanese governmental and industrial delegates, which aims to obtain the priority negotiation right for the development of Azadegan oil, the Yen loan for Iran, which used to be said very difficult until last year, seems becoming probable. Especially, the possibility of financial support presuming the settlement of the cost of oil imported is increasingly becoming higher. As for the domestic currency, judging from the recent increase of the erode oil price and the anticipation that the price will still remain high from now on, it is expected that both NIORDC and its parent company NIOC will positively organize the budget. Iranian government seems to be worried about the situation that it falls behind the world standard and cannot meet the increasing demand for its domestic product unless, taking this opportunity, it implements the improvement of the energy efficiency of its oil plant and environmental

-97- measures. Therefore, as for the measures such as modification of the heating furnace to control its excessive air ratio which is expected to create a large energy saving effect with a small investment, Tabriz Oil Plant is planning to implement with its own design and fund. However, when it comes to 02 analyzer or control system, etc, since they have to be purchased overseas 100%, they are asking us for our full technical cooperation for the basic designing.

4. Issues related to CDM condition

4.1 To achieve CDM, issues to be adjusted with the other country, including establishment of project implementation conditions and sharing of work

To implement CDM project, following issues should be adjusted with the other country: (1) Ratio of financial allocation to implement the project (2) Evaluation of qualitative and quantitative contribution by each side for the technical cooperation and technical supply (3) Evaluation of estimated amount for the personnel cooperation from the start to completion of the project In other words, it is asked to grasp and agree with each other the degree of contribution throughout the implementation of the project. As a result of FS research of this time, we found out that they are classified into two categories, i.e. the energy saving measures requiring small scale investment which can be managed by the fund allocation of Iranian side with technical cooperation from Japan, and investment of medium scale which requires financial cooperation.

The contribution degree for the financial allocation is precisely expressed by the ratio of money amount, but the contribution degree of technical cooperation and personnel cooperation is very difficult to adjust when evaluating its qualitative and quantitative contribution.

As for the actual situation, the introduction of the system to control the heating furnace excessive air ratio which is expected to have a big energy saving effect with a small investment is being arranged presuming the fund allocation by Iranian side, and design drawing of the control system and technical cooperation for selecting the analyzer are provided free from our company as the follow-up cooperation after FS. Therefore, we are providing technical cooperation primarily thinking of achieving reduction of exhausted carbon dioxide at the moment, but to apply CDM in the future, we think it is necessary

-98 to have actual results concerning amount of task, amount of technical data provided, cooperation man-hour, etc, i.e. indirect cost to perform the project, in order to grasp the contribution degree of both parties at the time of completion.

42 Possibility to take up this project as CDM

The possibility that the national oil refinery company which is directly connected to Iranian government, i.e. Ministry of Oil, takes up this project as CDM is supposed to be very high. Because the project that is most attractive for Iranian side is the scheme where they can effectively modify and modernize the facilities with the foreign currency finance allocated by Japanese side. Even if the finance should be allocated by Iranian side, it is still attractive for them if they can achieve the energy saving of equipment with Japanese technical cooperation and technical supply. Meanwhile, Iranian government seems not very interested in the international consensus to reduce the exhaustion of carbon dioxide, but it shows keen interest in rationalization and modernization of its facilities. As for the results of the energy saving FS research of this time and our follow-up technical cooperation and technical information supplied, Tabriz side appreciated the value and expressed deep gratitude.

-99- CHAPTER 3 EFFECT OF PROJECT

This chapter describes technical background, baseline, clarified quantity, effective period and monitoring for energy saving as well as background of reduction quantity, accumulated quantity, baseline, clarified quantity and monitoring for green house effect gas. CHAPTER 3: EFFECT OF PROJECT

1. Effect of Saving Energy

1.1 Technical background to be caused effect of saving energy The technical background to be caused effect of saving energy is described for the contents of implementation in the energy saving project planned. (l)Heating Furnace (a) Facility modification for control of excess air rate for combustion(Flue gas 02%) As the extremely excess air is heated up to flue gas temperature without relation to combustion in furnace operation, the excess fuel is consumed for its heating, ft is achieved to save fuel consumption by modification of furnace for controlling appropriate excess air ratio for furnace operation. (b) Heat recovery from furnace flue gas by installing APH (air pre-heater) or WHB(waste heat boiler) The heat of high temperature flue gas is discharged to atmosphere without utilization. By recovering flue gas heat with combustion air or boiler feed water, it is achieved to save fuel consumption not only at refining plants but also utility plants comprehensively.

(2)Heat Exchanger (a)Increase of heat exchangers for recovering heat from product oil Product oil is usually cooled down the temperature by cooler and sent to product tank. By recovering heat of product oil by heat exchangers, it is achieved to save fuel consumption at charge heater. (^Rearrangement of pre-heating exchanger network or heat sources for improving heat recovery Feed oil which has high temperature and flow rate is heated up to the inlet temperature of heating furnace by repeating heat exchange with product oil. In the process of heating up, the most effective arrangement of exchangers for heating is achieved to save fuel consumption at heating furnace.

12 Baseline as basis for calculation of energy saving effect (Basic concept for calculation of energy consumption in case that the project is not carried out)

(1) Way of Thinking for baseline of energy saving effect The baseline for calculation of energy saving effect is fuel consumption of each unit in actual normal operating conditions(almost 100% capacity of operation). The effect of energy saving modification has both subjects changing in proportion with throughput flow rate and not changing with throughput In both cases, the maximum effect

101- of fuel consumption and energy saving is in the condition of operation of 100% capacity. Therefore, from the viewpoint of fuel consumption and C02 discharge, the standard operating condition means normal operation of 100% throughput and annual average throughput operation from the calculation of energy saving effect. In this study, as the subject to be gotten finally is quantity of C02 discharge, the baseline of energy saving and discharge of C02 is fuel consumption of each unit in normal operating condition before project implementation. To setting up the baseline, the operating conditions at the unit is stipulate as follows.

(a) Daily operation rate of each unit is set up as the present condition of the throughput. (b) Yearly operation days of each unit is set up as 330 day operation.. (c) Fuel consumption is described as standard fuel calorific value equivalent to usual C-Fuel as Follows. [Calorific value]: 9,300 KcalA (9,722 Kcal/Kg), Density: 0.937Kgd

In case of baseline from the operation rate during site survey, the effect of energy saving is available to adopt the calculation results of energy saving from the data during site survey. As the actual operating conditions during site survey is near 100% throughput, the annual accumulated effect of energy saving is also available for study results of energy saving effect during site survey.

(2) Calculation of baseline(Eneigy saving baseline) for fuel consumption in each unit Although fuel consumption is normally indicated based on figures of a fuel flow-meter fitted on a fuel line, the flow-meters are either not equipped with or, even if any, left broken for the devices of Tabriz Oil Refinery. It was, therefore, decided that the fuel consumption was calculated through use of the following computation program.

(a) To calculate a heating value absorbed by heated fluid (stock oil, etc.) from an operating temperature/pressure of each furnace (Absorbed Duty) (b) To calculate a furnace efficiency from exhaust gas temperature of the measured furnace and oxygen concentration in exhaust gas. (c) To obtain a necessary combustion heat from the absorbed duty and the furnace efficiency. (Fired Duty) (d) To calculate a fuel consumption of the furnace from the necessary combustion heat.

-102- (3) Subject Unit of Base line Calculation (Fuel Consumption) are as followed.

(a) Atmospheric Crude Distillation Unit (CDU) (b) Vacuum Distillation Unit (VAC) (c) Visbreaker Unit (VB) (d) Naphtha Hydro-desulfurization Unit(Naphtha HDS) (e) Naphtha Reforming Unit (Platformer ) (f) LPG Recovery Unit (g) Vacuum Gas Oil Hydro-Cracking Unit (ISOMAX) (h) Hydrogen Production Unit (H2 Plant) (i) Boiler & Utility unit

Fuel Consumption (Base Line) at present operation of above each Unit are shown following table 1.2-1.

-103- Table 12-1: Fuel Consumption (Base Line) at present operation

Unit Actual Operation Furnace UNIT Capacity 02% Fuel Consumption No. (BPSD) (KL/D) TH-101 117,800 7.0 188.9 CDU TH-402 117,800 8.7 8.6

VAC TH-151 47,500 10.3 55.6

Visbreaker IH-301 14,945 10.3 49.8

TH-401 13,590 16.1 Naphtha 45 HDS TH-202 13,590 10.2 13.8

TH-251 12250 4.1 33.7

TH-252 12250 5.0 31.2 Catalytic TH-253 12250 10.0 19.1 Reformer TH-254 12250 10.8 40.7

TH-255 12250 12.0 4.5

LPGRec. TH-501 8,448 6.1 23.3

TH-601A 13,679 2.9 19.6

TH-601B 13,679 6.4 25.6 Hydro- Cracking TH-602 13,679 8.9 28.1 (ISOMAX TH-603 13,679 7.6 24.6

TH-604 13,679 12.1 5.1 24.8 H2 Plant TH-701 11.0 138.3 MMscfd TB2201A lOOTorVh 5.5 120.9

TB2201B lOOTon/h 5.5 120.9

BOILER TB2201C lOOTon/h 5.5 120.9

TB2201D lOOTon/h Stop —

TB2201E llOTon/h 2.0 129.8

TOTAL 1219.1

-104- 13 Clarified quantity, period and accumulated volume brought by effect of energy saving

13.1 Modification Contents and Clarified quantity of energy saving effect

(1) Modification Contents and Fuel saving amount on each unit This subject is mentioned on Chapter 2. Clarified quantity of energy saving effect from energy saving project is shown on Table 13-1.

Table 13.1-1 Modification Contents of each unit & Clarified quantity of energy saving effect (1/2) Energy saving effect Subject UNIT Modification Contents Fuel Saving Fuel Saving Equipment (KL/D) (Ton/Y) Flue Gas 02% Control System 10.58 3,271 TH-101 (include repair sealing work) Installation of APH(Air pre heater) 31.09 9,611 CDU TH-402 Flue Gas 02% Control System 0.88 273

E-162C,ete Addition of 4 Exchangers(890m2) 8.88 2,744

Flue Gas 02% Control System 8.84 2,733 VAC TH-151 Install APH(Air pre heater) 6.61 2,043

Visbreaking TH-301 Flue Gas 02% Control System 8.89 2,748 1H-201 Flue Gas 02% Control System 0.37 113 Naphtha HDS TH-202 Flue Gas 02% Control System 3.51 1,085

TH-251 Flue Gas 02% Control System 1.01 313

TH-252 Flue Gas 02% Control System 1.28 397

TH-253 Hue Gas 02% Control System 6.26 1,936 Naphtha Reformer TH-254 Hue Gas 02% Control System 13.07 4,043

TH-255 Hue Gas 02% Control System 1.70 527 H251,H252,H253,H254,H255, WHB 21.42 6,628 H401(201)31202 Common Duct * Installation of Flue Gas 02% Control System include repair work of sealing on air leakage points of furnace wall and duct.

-105- Table 13.1-1 Modification Contents of each unit & Clarified quantity of energy saving effect (2/2) Energy saving effect Subject UNIT Modification Contents Fuel Saving Fuel Saving Equipment (KIVD) (Ton/Y) LPG TH-501 Flue Gas 02% Control System 1.58 489 Recovery TH-601A Flue Gas 02% Control System 0.09 29

TH-601B Flue Gas 02% Control System 1.46 450 ISOMAX IH-602 Flue Gas 02% Control System 2.97 920

TH-603 Flue Gas 02% Control System 2.14 661

IH-604 Flue Gas 02% Control System 2.42 747 Hydrogen IH-701 Flue Gas 02% Control System 14.27 4,412 Plant TB-2201A Flue Gas 02% Control System 3.13 968 TB-2201B Flue Gas 02% Control System 3.13 968 TB-2201C Flue Gas 02% Control System 3.13 968 Boiler/ Utility TB-2201D Flue Gas 02% Control System — —

TB-2201E Flue Gas 02% Control System — — Install Economizer at exhaust gas ECO 23.11 7,145 duct on each Boiler

TOTAL (Fuel Oil Saving Amount) 172.94 53,476

* Installation of Flue Gas 02% Control System include repair work of sealing on air leakage points of furnace wall and duct

132 Period and accumulated volume brought by effect of energy saving

Subject Units are almost constructed on 1977, and operated during 20 yeas, but those units are treated for good maintenance at Tabriz Refinery, so we estimate those units could be used after 10-15 years. And, Period and accumulated volume brought by effect of energy saving on this energy saving project is estimated to be continued during 15 years, because Tabriz Oil Refinery may not decide to demolish all units and to reconstruct new units within recent 20 years from economical condition of Iran The rate of operation (rate of crude processing) is most influence on continuance of energy saving effect. From the condition of petroleum demand and oil refining capacity in Iran, nearly

-106 100% operation of actual design capacity is estimated to be continued over 10 years. Therefore, accumulated volume brought by effect of energy saving is calculated with 15 times of 1 year’s effect, and is shown in Table 1.3-2:

Table 132-1: Modification Contents and accumulated volume brought by effect of energy saving (1/2) Energy saving effect Subject UNIT Modification Contents Fuel Saving Fuel Saving Equipment (Ton/Y) (Ton/15Ys) Flue Gas 02% Control System 3,271 49,065 TH-101 (include repair sealing work) Installation of APH( Air pre heater) 9,611 103,005 CDU TH402 Flue Gas 02% Control System 273 4,095

E-162C,etc Addition of 4 Exchangers(890m2) 2,744 41,160

Flue Gas 02% Control System 2,733 40,995 VAC TH-151 Install APH(Air pre heater) 2,043 30,645

Visbreaking TH-301 Flue Gas 02% Control System 2,748 41,220 TH-201 Hue Gas 02% Control System 113 1,695 Naphtha HDS IH-202 Hue Gas 02% Control System 1,085 16,275

TH-251 Hue Gas 02% Control System 313 4,695

TH-252 Hue Gas 02% Control System 397 5,955

TH-253 Hue Gas 02% Control System 1,936 29,040 Naphtha Reformer TH-254 Hue Gas 02% Control System 4,043 60,645

TH-255 Hue Gas 02% Control System 52" 7,905 H251,H252,H253,H254,H255, WEB 6,628 99,420 H40K201) J1202 Common Duct

107 Table 132-1: Modification Contents and accumulated volume brought by effect of energy saving (2/2) Energy saving effect Subject UNIT Modification Contents Fuel Saving Fuel Saving Equipment (TorVY) (Ton/15Y) LPG TH-501 Hue Gas 02% Control System 489 7,335 Recovery TH-601A Hue Gas 02% Control System 29 435

TH-601B Hue Gas 02% Control System 450 6,750 ISOMAX TH-602 Hue Gas 02% Control System 920 13,800

TH-603 Hue Gas 02% Control System 661 9,915

TH-604 Hue Gas 02% Control System 747 11,205 Hydrogen IH-701 Hue Gas 02% Control System 4,412 66,180 Plant TB-2201A Hue Gas 02% Control System 968 14,520 TB-2201B Hue Gas 02% Control System 968 14,520 TB-2201C Hue Gas 02% Control System 968 14,520 Boiler/ Utility TB-2201D Hue Gas 02% Control System — —

TB-2201E Hue Gas 02% Control System — — Install Economizer at exhaust gas ECO 7,145 107,175 duct on each Boiler

TOTAL (Fuel Oil Saving Amount) 53,476 802,170

1.4 How to Check Energy Saving Effect specifically (Monitoring Method)

When the energy saving project will be practiced as CDM, it is indispensable to confirming (monitoring) effect of energy saving and emission reduction of greenhouse effect gas continuously. The revamping work carried out in the project will divided into two categories, and one maintains energy saving effect automatically during normal operation of the unit and the other one needs to maintain energy saving effect by the efforts to adjust and keep the energy saving conditions of the unit

-108 The significant factor to influence effect of energy saving is operation ratio(throughput) of the unit However, as the throughput does not exceed 100% of the capacity, even if the effect of energy saving will be decreased by decrease of throughput, the emission quantity of greenhouse effect gas never increase than that of 100% throughput operation. Therefore, if the Baseline of fuel consumption is set up at near 100% operation, there is no problem to correct the energy saving effect by operation ratio for the purse of emission reduction of C02 in CDM Project Scheme. Here, on the premise that it is necessary to monitor reduced emission of greenhouse gas, the outline of the method and actual monitoring point is described.

(1) Party Responsible for Monitoring The party responsible for monitoring, in this case, will be Tehran Oil Refinery as the owner of the refinery. In case that the project is carried out under fund from Japan, the second candidate for the monitoring party will be a Japanese firm concerned with the project

(2) Monitoring Points Examples of the monitoring points at which data are collected and energy-saving effect is observed for the devices in operation are as follows:

: 02% in exhaust gas, exhaust gas temperature, steam yield from waste heater boilers, amount of fuel used, etc. : Stock oil furnace inlet temperature, product cooler inlet temperature, etc.

(3) How to Collect Data Both parties including the refinery owner and the project implementation corporations collect data at the Refinery according to the method agreed as to the collection points, collection intervals, etc., which are sent to the Japanese side.

(4) Monitoiing Intervals Data are normally collected daily at the monitoring points as agreed between both parties and are sent either monthly or once every second month. The Japanese side, based on data thus collected, makes comparisons with target energy-saving values based on its intention to improve energy-saving effect and, further, monitors fuel reduction actually attained through practice of the project based on its intention to reduce greenhouse effect gas.

-109- 2. Effect of Reduction of Greenhouse Gas

2.1 Technical background to be caused effect of reduction of Greenhouse Gas Greenhouse effect gas emitted from refinery is carbon dioxide which is generated by fuel combustion consumed at process furnace and regenerator of catalyst. By practicing energy saving project, emission of greenhouse gas(C02 in this case) is brought to reduction in compliance with reduction of fuel consumption in furnaces and boilers which is originated by improvement of their operation and/or revamping of the facilities for energy saving. Therefore, clarified quantity of saving fuel consumption by practicing project can be converted to emission reduction of greenhouse gas.

22 Baseline as basis for calculating emission reduction of greenhouse gas

(1) Way of thinking of baseline for calculating emission reduction of greenhouse gas Emission of carbon dioxide as greenhouse gas was calculated based on fuel consumption. Therefore, the baseline for calculating emission reduction of greenhouse gas is calculated as carbon dioxide calculated from fuel consumption in compliance with article 1.2[Baseline as basis for calculating effect of energy saving] as follows.

(2) Calculation method of greenhouse gas emission Based on consumption of fuel, the generation of C02 as greenhouse gas is calculated in accordance with following IPCC Guideline (IPCC Guideline for National Greenhouse Gas Inventories: Reference Manual/1.4.1 Approaches for Estimating CG2 Emission).

Based on ftiel consumption (Ton/Year) equivalent to C-Fuel oil at plants, it is converted to consumption (Ton/Year) equivalent to standard crude oil(Calorific value: 10,000Kcal/kg)

“a” X (Cmde Oil Net Calorific Value: 42.62 Tera-Joule/Kton) = “b” “b” X (Carbon Emission Factor 20ton of C/Tera-Jule) = c “c” X (Factor of Carbon Oxidized: 0.99) = “d” “d” X (Ratio of Molecular Weight of CG2 and C: 44/12) = CG2 Emission(ton/Y)

[Quantity of C02 gas generation] : (Fuel consumption equivalent to Cmde Oil(TorVYear)/ 1,000 X 42.62 X 20 X 0.99 X 44/12 = C02(Ton/Year))

-110 (3)Baseline of generation of greenhouse gas in each unit Baseline of generation of greenhouse gas is calculated in accordance with IPCC Guideline based on 1.2.1(1) Baseline for fuel consumption in each unit and shown in Table 2.2-1 as follows.

Table 22-1 Generation of Greenhouse Gas in each Unit (Baseline) Name of Unit Baseline of Crude Oil Baseline of C02 Generation Fuel Consumption Conversion of Fuel (Ton/Year) (Giga-gram/y) (Ton/Year) Saving (Ton/v)

CDU 61,067 60,611 187.529 187.53

VAC 17,194 17,066 52,802 52.80

Visbreaker 15,389 15,274 47,257 47.26

Naphtha 9,250 9,181 28,406 28.41 HDS

Naphtha 39,962 39,663 122,719 122,72 Reformer

LPG 7213 7,159 22,151 22.15 Recovery

ISOMAX 31,860 31,622 97,839 97.84

H2 Plant 42,758 42,439 131,306 131.31

Boiler 152,315 151,177 467,742 467.74

Total 377,008 374,192 1,157,751 1,157.76

-111- 23 Concrete quantity, period and accumulated volume brought by effect of reduction of greenhouse gas

(1 Calculation of concrete quantity brought by effect of reduction of greenhouse gas Concrete quantity brought by reduction of greenhouse gas is calculated in accordance with IPCC Guideline based on reduction of fuel mentioned in 1.3.1 Modification Contents and Clarified Quantity of Energy Saving Effect.

(2) Period and accumulated volume brought by effect of reduction of greenhouse gas It is roughly presumed that the life of old plant will be about 10 - 15 years and that of relatively new plant will be about 15 - 25. Therefore, the period brought by the effect of reduction of greenhouse gas by revamping each unit for energy saving would be set up for 15 years. Accordingly, the accumulated quantity brought by effect of reduction of C02 is set up by that of 15 years.

(3) Concrete quantity and accumulated volume of reduction of CG2 in each unit Concrete quantity and accumulated volume of reduction of CG2 in each unit is shown in Table 2.3-1.

-112 Table 23-1: Concrete quantity and accumulated volume of reduction of C02 in each unit

C02 Reduction Crude Oil Fuel Oil Saving Yearly Name of Unit Conversion of Fuel Accumulated (Ton/Year) Reduction Saving (Ton/Y) (Ton/15ys) (Ton/Year)

CDU 10,411 10,333 31,971 479,565

VAC 4,776 4,740 14,666 219,990

Visbreaker 2,748 2,728 8,440 126,600

Naphtha 1,921 1,907 5,900 88,500 HDS

Naphtha 13,118 13,020 40,283 604,245 Reformer

LPG 489 485 1,500 22,500 Recovery

ISOMAX 2,807 2,786 8,619 129,285

H2 Plant 4,412 4,379 13,548 203,220

Boiler 10,048 9,973 30,856 452,840

Total 50,729 50,350 155,782 2,336,745

-113- 2.4 How to Accurately Check Reduction of Greenhouse Effect Gas (Monitoring Method) Actual distribution ratios of the greenhouse effect gas emission right for CDM projects are subject to further discussion among the nations concerned with CDM. Precise prediction of the result is too difficult at this time. In consideration of the CDM's basic concept and its possible influence over the results, however, an issue concerning monitoring of reduction in greenhouse effect gas emission will become an indispensable issue to be discussed among all parties conducting a project. Based on an assumption thus drawn that monitoring of reduction in greenhouse effect gas emission is essential, outline of the monitoring method and examples of the specific monitoring points are described below:

(1) Party Responsible for Monitoring The party responsible for monitoring, in this case, will be Tehran Gil Refinery as the owner of the refinery. In case that the project is carried out under fund from Japan, the second candidate for the monitoring party will be a Japanese firm concerned with the project.

(2) Monitoring Points Examples of the monitoring points at which data are collected and energy-saving effect is observed for the devices in operation are as follows:

: 02% in exhaust gas, exhaust gas temperature, steam yield from waste heater boilers, amount of fuel used, etc. : Stock oil furnace inlet temperature, product cooler inlet temperature, etc.

(3) How to Collect Data Both parties including the refinery owner and the project implementation corporations collect data at the Refinery according to the method agreed as to the collection points, collection intervals, etc., which are sent to the Japanese side.

(4) Monitoring Intervals Data are normally collected daily at the monitoring points as agreed between both parties and are sent either monthly or once every second month. The Japanese side, based on data thus collected, makes comparisons with target energy-saving values based on its intention to improve energy-saving effect and, further, monitors fuel reduction actually attained through practice of the project based on its intention to reduce greenhouse effect gas.

-114- 3. Possible Influences over Productivity The energy-saving project for a refinery, if conducted, is expected to improve productivity of the Refinery thus greatly contributing to its overall operation. Especially in Tabriz Oil Refinery there are many cases in which high-temperature exhaust gas is emitted unrecovered because of the fact that fuel costs at the time of construction or late in 1960's were much less expensive and, therefore, recovery measures were not provided thus to save investment in construction. The potential of energy saving, therefore, is considered considerably high.

(1) Reduction in Production Cost Remodeling for energy saving of the target devices can reduce fuel consumption, thus lowering production cost of the products.

(2) Expansion of Maximum Throughput of Equipment lire maximum throughput of equipment, in most cases, is determined by the limit capacity of a furnace. Through addition of heat exchangers, product/reflux heat will be recovered and stock oil will be sufficiently preheated, where furnace load will be lowered and extra capacity added to the furnace (energy-saving effect). This leads to expansion of the maximum throughput of the equipment, bringing about an increase in production capacity.

(3) Improvement of Technical Capability For attainment of energy-saving operation, not only remodeling of equipment for energy ­ saving but also properly control/adjustment of the remodeled equipment by operators to assure energy-saving effect is essential. Operators' awareness of necessity of energy saving as well as their technical capability to control/maintain the equipment are required. The higher the technical level of energy-saving operation is improved, the more you ha ^ to deal with technology-related fields such as quality control, yield control, safety management, and facilities management. Based on actual results already obtained in various operation sites in Japan, it can be expected that implementation of the energy-saving project will bring about improvements in technical capabilities necessary for operation of the Refinery, involving its managers, engineers, as well as operators, contributing to improve overall productivity of the Refinery.

-115- CHAPTER 4 PROFITABILITY

This chapter describes calculation of saving fuel cost, modification cost and investment payback years by implementation of Energy Saving Project and considers of modification subjects. And it is also considered concerning calculation results of energy saving effect and greenhouse gas reduction effect versus investment cost.

116 CHAPTER 4 PROFITABILITY

1. Effect of Economic Return for investment

1.1 Amount of investment and return for energy saving modification

(1)Amount of return by energy saving modification Amount of return by energy saving modification is shown as amount of saving cost of fuel consumption. Recent average prices of each kind of fuel oil and utilities are shown in Table 1.1-1. As the crude price has increased from early 1999, the current price is not suitable for calculation of investment payback years.

Table 1.1-1: Average Prices of Crude and Product Oil

Average Price in 2000 Average Price for 3 Years Product Name (USVBBL) (US3ZBBL) Crude Oil 24.00 20.00 Natural Gas LPG 35.14 15.20 Gasoline 23.90 21.70 Petochenri-Naphtha 22.30 20.50 AW-402 33.00 22.00 Kerosene 32.65 20.30 Diesel Oil 27.96 18.30 Fuel Oil 19.70 13.24 Asphalt 7.20 7.20 Sulfur 35-45 (Svton) Industrial Water 0.20 ($/m3)

Therefore, the combined weighting price between average price of 2000 and past three year average price are applied for product and utility prices as following equation. (Average Price in 2000) x 1 + (Average Price of past 3 years) x 2 Product Price =------3

From the above results, C Fuel price is 95 USS/MT (=89US$/L) for equivalent fuel of [Fuel Oil Energy: 9,437 Kcal/L]. (As 1US$ = 120 Yen, 11,400 Yen/Ton (= 10,680 Yen/L))

-117- (2) Amount of investment for energy saving modification (a) As for the price of one set of equipment, Gulf Coast Price in USA is applied for cost estimation studies as there is no difference between Japanese and Gulf Coast Cost (b) As modification of this Energy Saving Project is not so large investment cost, the cost increase in Iran will be expected approximate 30% higher than Japanese at present. (c) The investment cost is written by US$ unit. (d) The payback year is shown by simplified payback year(Minimum returning year) not including interest and maintenance cost Payback Year = Investment/ Recovery Cost (e) The modification cost of furnace is applied revamping cost listed in Table 1.1-2.

Table 1.1-2: Modification Contents and its Cost for Furnace [Unit: 1000USS] Modification Item Cost l)Prevention of Improvement of sealing at furnace wall Air Leakage and duct Improvement of air register 20 2)Control of 02% 02% analyzer 30 in Flue Gas Fuel flow instrument 20 Draft gauge 20 Damper (Actuator ,GO motor) 10 VP converter controller 10 Instrumentation work 60 Total 150 3)Heat Recovery of Installation of APH Flue Gas (APH) (platetype 1,500 m2* 2) 1.000 Installation of IDF 200 Installation of FDF 150 Air duct 150 Flue gas duct 400 Control system 100 Structure 500 Total 2j00 4)Heat Recovery of 600# steam generation: 14.7 ton/h Flue Gas (WHB) (Tube areas: 650 m2) including Stack 5,000

-118- 12 Investment in modifications and payback year for energy saving in each unit Calculation Result in each unit is shown in Table 1.2-1

Table 12-1 Investment cost and Payback year in each unit 0/2) Fuel Saving Investment Payback Unit Modification Contents Saving Price Cost Year Name (KIVY) (Kussrn (KUS$) (Year) CDU TH-10102% Control system installation 3,491 338 170 0.5 TH-101 APH(Air pre heater) installation 7229 709 2,500 3.5

TH-402 02% Control system installation 292 28 170 6.0

Increase of pre-heat exchangers 2,929 284 900 3.2

(Unit Total) (14,040) (1,359) (3,740) (28)

VAC TH-151 02% Control system installation 2,916 282 170 0.6 TH-151 APH(Air pne heater) installation 2,181 211 1,500 7.1

(Unit Total) (5,097) (493) (1,670) (3.4) Vis- TH-30102% Control system installation 2^33 284 170 0.6 Breaker Naphtha TH-40102% Control System installation 121 12 170 14.6 HDS TH-202 02% Control System installation 1,158 112 170 1.5 (Unit Total) (1279) (124) (340) (2.7) Naphtha TH-251 02% Control system installation 334 32 170 5.3 Reformer TH-252 02% Control system installation 424 41 170 4.1

TH-253 02% Control system installation 2,066 200 170 0.9

TH-254 02% Control system installation 4,314 418 ±70 0.4 TH-255 02% Control system installation 562 54 170 3.1 TH-251255252 Common Duct 7,071 685 5,000 7.3 & WHB installation (Unit Total) (14,771) (1,430) (5,850) (4.1)

-119- Table 12-1 Investment cost and Payback year in each unit m Unit Fuel Saving Investment Payback Name Modification Contents Saving Price Cost Year (KIVY) (KUSS/Y) (KUS$) (Year) LPG TH-50102% Control system installation 521 50 170 3.4 Recovery ISOMAX TH601AO2% Control system installation 31 3 170 57.3 TH601BO2% Control system installation 481 47 170 3.7 TH-602 02% Control system installation 981 95 170 1.8

TH-603O2% Control system installation 705 68 170 2.5

TH-604O2% Control system installation 797 77 170 22

(Unit Total) (2^96) (290) (850) (29)

H2 Plant TH-701O2% Control system installation 4,709 456 170 0.4 BOILER TB-2201A 1,033 100 170 1.7 02% Control system installation TB-2201B 1,033 100 170 1.7 02% Control system installation TB-2201C 1,033 100 170 1.7 02% Control system installation TB-2201D 0 0 170 — 02% Control system installation TB-2201E 0 0 170 — 02% Control system installation Economizer installation 7,652 738 3200 9.8 TH-2201A B. C. D (Boiler Total) (10,724) (1,038) (4,050) (3.9)

Subject Unit Total 57,071 5,524 17,010 3.1

-120- 2. Effectiveness of project versus Modification Cost

2.1 Effect of energy saving versus Investment (1) Investment cost of energy saving modification and saving amount of money Investment cost, saving money, and payback year of each modification is shown in Table 2.1-1(172), Table 2.1-l(2/2).

Table 2.1-1: Investment cost, saving money, and payback year in each unit (172) Saving Cost Investment cost Modification Contents Payback year Unit Name of ftiel saving of Modification And Items (KUS$/Y) IK US$1 (year) CDU TH-10102% Control system installation 338 170 0.5 TH-101 APH(Air pre heater) installation 709 2,500 3.5

TH-402 02% Control system installation 28 170 6.0

Increase of pre-heat exchangers 284 900 32

(Unit Total) (1,359) (3,740) (2.8) VAC TH-151 02% Control system installation 282 170 0.6 TH-151 APH(Air pre heater) installation 211 1,500 7.1

(Unit Total) (493) (1,670) (3.4) Vis- TH-30102% Control system installation 284 170 0.6 Breaker Naphtha TH-40102% Control System installation 12 170 14.6 Unifiner TH-202 02% Control System installation 112 170 \5 (Unit Total) (124) (340) (2.7) PLAT TH-25102% Control system installation 32 170 5.3 former TH-252 02% Control system installation 41 170 4.1

TH-253 02% Control system installation 200 170 0.9

TH-254 02% Control system installation 418 170 0.4 TH-255 02% Control system installation 54 170 3.1 TH-251 255252 Common Duct 685 5,000 7.3 &WHB installation (Unit Total) (1,430) (5,850) (4.1)

-121- Table 2.1-1: Investment cost, saving money, and payback year in each unit (2/2)

Saving Cost Modification Contents Investment Cost Payback year of fiiel saving Unit Name And Items (KUS$) (Year) (KUSS/Y)

LPG TH-50102% Control system installation 50 170 3.4 Recovery ISOMAX TH601AO2% Control system installation 3 170 57.3

TH601BO2% Control system installation 47 170 3.7 TH-602 02% Control system installation 95 170 1.8 TH-60302% Control system installation 68 170 25

TH-604O2% Control system installation 77 170 22

(Unit Total) (290) (850) (29) Hydrogen TH-701O2% Control system installation 456 170 0.4 Plant BOILER TB-2201A 100 170 1.7 02% Control system installation TB-2201B 100 170 1.7 02% Control system installation TB-2201C 100 170 1.7 02% Control system installation TB-2201D 0 170 — 02% Control system installation TB-2201E 0 170 — 02% Control system installation Economizer installation 738 3,200 9.8 TH-2201A. B, C, D (Boiler Total) (1,038) (4,050) (3.9)

Subject Unit Total 5,524 17,010 3.1

—122— (2) Discussion of Energy-Saving Effect in Terms of Investment and Its Feasibility Economic efficiency of energy-saving effect in terms of investment cost is expressed based on the number of years of payback year. Feasibility is high especially for those with the expected payback time of three years or less. For others with the expected payback time of more than three years, it is also worth discussing various factors such as size of investment, possible financing, difficulty of works involved, and procurement of necessary devices. Feasibility concerning each of the subjects under this energy-saving project is discussed below:

(a) Control in 02% of all the furnaces should be put into practice, considering that the investment required is small and the expected return on investment is high. (b) Heat recovery through use of air pre-heaters for exhaust flue gas should be carried out because of a high return expected on investment. (c) Waste heat boilers should be installed on catalytic reformers as a high return on investment is expected. (d) Heat exchangers should be added not only to those mentioned on the list but also to others having high possible investment returns.

123 22 Effect of Carbon Dioxide Reduction in terms of Investment

(l)Basic Concept of Greenhouse Effect Gas Reduction in Terms of Investment Cost Degree of reduction of greenhouse effect gas in terms of investment required for remodeling under this energy-saving project is expressed as project's cost effectiveness regarding greenhouse effect gas.

Effect of reduction in greenhouse effect gas emission is expected to last as long as the device remodeled under the project continue operating. The cost effectiveness concerning reduction of greenhouse effect gas is calculated, therefore, with the valid period being set at 15 years for the effect having been described in "Energy-Saving Baseline".

(a) Atmospheric distillation unit (b) Vacuum distillation unit (c) Visbreaker unit (d) Naphtha hydro-desulfurization unit (e) Naphtha catalytic reformer unit (f) Vacuum gas oil hydro-cracking unit (g) Hydrogen producing unit (h) Boiler & utility unit

(2)Discussion of Reduction in Greenhouse Effect Gas Emission in Terms of Investment (a) Qn the assumption that effect of the energy-saving remodeling lasts 15 years, C02 reduction effect in terms of investment was computed and the result was 0.13Ton/US$ on average. This roughly corresponds to the average energy-saving payback of 3.1 years. (b) However, if the effective period of energy-saving effect is set to 10 years, C02 reduction as cost effectiveness is reduced to 1/1.5 of the above. If extended to 20 years, it is increased to 1.33 times. (c) The above-mentioned C02 reduction effect is assessed based on reduction attained in fuel consumption through energy-saving remodeling, which can also serve as the reference value in discussions for comparison of cost-wise reduction effects when different measures are applied including different types of fuel oils, C02 fixing methods, etc. (d) It is, therefore, necessary prior to the comparison to clearly state the assumptions and the bases for the calculation.

-124 Table 22-1 rEffect of Reduction in Greenhouse Gas Emission Versus Investment of Energy Saving Modification in each Unit

Reduction of Reduction of Investment Saving Greenhouse Gas Greenhouse Gas Unit Name Cost Cost/Year emission vs. (10^US$) (103 US$/Y) in 15 years Investment cost (Ton/15Yrs) (Ton/US$)

CDU 3.740 1,359 479,563 0.128

VAC 1,670 493 219,987 0.132

Visbreaker 170 284 126,593 0.745

Naphtha 340 124 88,495 0.260 HDS

Naphtha 5,850 1,430 604,244 0.103 Reformer

LPG 170 50 22^04 0.132 Recovery

ISOMAX 850 290 129,286 0.152

Hydrogen 170 456 203,220 1,195 Plant

Boiler/ 4,050 1,038 462,842 0.114 Utility

TOTAL 17,010 5,524 2,336,734 0.137

125 CHAPTER 5: CONFIRMATION OF SPREAD EFFECT

This chapter describe possibility of spread of technology which is introduced to The Energy Saving Project in practiced country and also described concerning the effect considering spread of technology. Chapter 5: Confirmation of spread effect

1. Potential spread of technology introduced in the project

NIORDC strongly intends to promote the energy saving modification at every oil plant in Iran following the energy saving modification project implemented at Tabriz Oil Refinery as a good model. The refinery department of NIORDC headquarters, having director Mr. M. Zali as a top management, is engaged in planning and controlling issues of refinery plants. The refinery development affairs department, which is the department supervised by the former, has many managers and staff recently came from Tabriz Oil Refinery. This is because, although Tehran or Isfahan oil Refineries are prevailing in view of the scale and logistic importance supplying products to the big consuming area, Tabriz Oil Refinery is regarded highest in view of refining technology and plant modification technologies. Therefore, the results of the energy saving project at Tabriz Oil Refinery has a significant meaning to the possibility that the technologies are spread to the whole of Iranian oil refineries.

1.1 Potential spread within the object company The spread of the energy saving technology within the company is likely to be effective to the energy saving achieved by small scale investment and operation rather than the energy saving issues to be implemented by medium scale investment for facility modification. To be more specific, installation of air pre-heaters or addition of heat exchangers which requires medium size investment does become effective immediately after those equipment is introduced. However, in the case of the system to control the excessive air (02% in the exhausted flue gas) in the heating furnace, the continuation of the energy saving effect after the syy m is introduced depends on the execution of operation control.

Therefore, while the effect of energy saving achieved by facility modification is confined to the equipment modified, the energy saving achieved by the improvement of operation including control of the heating furnace excessive air, distillation tower reflux is expected to spread its energy saving effect to the similar units and equipment within the company.

12 Potential spread to other territories and companies There were 9 oil refineries under NIORDC and they started to operate as independent companies one and half year ago. Meanwhile, NIORDC headquarters undertook a role to plan, adjust and distribute the oil plant modification project. After Iran-fraq war, because of the government's difficult financial situation, the number of oil refinery investment projects was poor and the role of planning, adjustment and distribution was

-127- low. However, the price of crude oil increased in recent years and various modification projects started to rise. Therefore, the role to follow the first successful modification program and spread its achievement to other oil plants becomes more and more important.

Meanwhile, as a result of independent operation of each oil refinery, it is supposed that they are competing with each other pursuing the rationalization and modernization of their facilities. And, since the budget for the modification or new investment is still controlled by the government through the headquarters, the motivation to spread the success of the first achievement to other plants must be much stronger. Under the circumstances, it is likely that the improvement of energy saving and facility modification technology spreads to other oil plants.

2. Effect considering the spread

Except for 2 oil refineries constructed by Japanese engineering companies in the 1990s, most of Iranian oil refineries were designed by UOP of U.S.A., so the configuration of units and the unit flow of each plant are very similar. Therefore, if the energy saving potential of Tabriz Oil Refinery is about 13.5% (reduction amount: 50,730 Ton/year), the potential of other plants is also deemed to be about 13.5%.

2.1 Energy saving effect

If the energy saving level of Tabriz Oil Refinery i.e. about 13.5%, is spread to others, the effect of about 13.5% is also expected to the total capacity of 6 oil refineries, except for 2 refineries, Arak and Bandar Abbas oil plants, constructed in the 1990s. The total capacity of the 6 oil refineries other than Tabriz Oil Plant is 1 million BD, while that of Tabriz Oil Refinery is 120 thousand BD, so the effect is expected to be 8.3 times. Fuel saving effect in Iran created by the spread of energy saving (assumption): 421,000 ton/year

Even at the Arak and Bandar Abbas oil refineries of the 1990s, it is imagined that there is much room left for the energy saving, operation improvement. Therefore, adding effects at those two oil refineries, the total energy saving caused by the spread effect should be more.

22 Reduction of green house effect gas

Reduction of fuel consumption by energy saving effect is directly linked with the reduction of exhausted amount of carbon dioxide which is green house effect gas.

128 If the carbon dioxide emission is cut by about 13.5%, which is the level achieved at Tabriz Oil Refinery and it is spread to other plants, the effect of about 13.5% is also expected to the total capacity of 6 oil refineries, except for 2 refineries, Arak and Bandar Abbas Oil Refineries, constructed in the 1990s. The total capacity of the 6 oil refineries other than Tabriz Oil Refinery is about 8.3 times of that of Tabriz Oil Refinery, so the total reduction of the green house effect gas emission due to the spread of the energy saving is estimated as follows.

Green house effect gas reduction due to the spread of energy saving (assumption): 1,293,140 ton/year

-129- CHAPTER 6: INFLUENCE TO OTHERS

This chapter describes that practicing the Energy Saving Project expects to give influence to other environmental, economic and social aspect. It is also evaluated by implementing pre-feasibility studies how Up-grading Project for heavy oil cracking gives the strongest impact on petroleum , economic and environmental issues to the refinery and local society.

130 CHAPTER 6: INFLUENCE TO OTHERS While effect of energy saving and emission reduction of greenhouse effect gas can be obtained by practicing the projects on the one hand, influence to other environmental, economic and social aspect is expected on the other hand.

1. Influence to others by implementation of the energy saving project

This paragraph describes that practicing energy saving project gives influence to others environmental, economic and social aspects, however, fundamental measures to prevent serious air pollution problems at present in Iran has to wait for the implementation of heavy oil Up-grading Project (Introduction of Heavy Oil De sulfurization & Cracking Process). Therefore, the results of Pre-feasibility Studies of Heavy Oil Up-grading which has practiced with energy saving FS, is described in next sections as the influence to others by Heavy Oil Up­ grading Project as well as Energy Saving Project

1.1 Influence to other environmental aspect Practice of the energy-saving project will bring reduction of fuel consumption, and accordingly reduce emission of air pollutants such as S02, NOx and particulate that are emitted into the air with being included in combustion effluent gas. In the case of the Tabriz Refinery, heavy oil is shipped to the power stations and factories outside the city after being treated in the visbreaker unit but without being desulfurized in a hydro­ desulfurization unit. The sulfur and ash content in in-house fuel of the refineries are very high, and thus a large quantity of S02, NOx and particulate included in the combustion flue gas from the boilers and heaters has brought about a serious problem of air pollution in T z City. Although reduction of fuel consumption due to energy saving will not provide fundamental solution of air pollution, the larger the effect of energy saving is, the greater its contribution is to the emission reduction of a greenhouse effect gas of carbon dioxide as well as air pollutants.

1.2 Influence to economic aspect Practice of the energy-saving project will bring reduction of fuel consumption, which will result in reduced production cost of the refinery. Improvement of productivity of a refinery can be pushed forward not only by energy saving but also by a broad range of activities including yield increase of white oil, quality improvement, reduction of maintenance cost and enhanced safety management. Therefore, it will be ultimately important to make effort to enhance overall productivity of the Tabriz Refinery by organizing a project to modify the refinery toward high efficiency with being triggered by the energy saving activity.

-131- 1.3 Influence to social aspect After Iran-Iraqi War, two large refineries have been constructed in Araq and Bandar-e’Abbas in Iran, but any substantial project has never started to modify the existing refineries due to the economic stagnation. A sign of improvement of Iran’s economic environment has begun to appear owing to recent price increase of crude oil. The modification project of the Tabriz Refinery is thought to have a prominent influence to the regional community around the refinery because the refinery is an important production base in the northwest of Iran. Thus it is expected that the nearby machine manufacturers and construction companies will increase their business opportunity and the regional commerce and economy will be activated.

-132- 2. Influence of heavy oil upgrading project to others

Implementation of the energy saving project will contribute to improvement of overall energy efficiency of the refinery and emission reduction of greenhouse effect gas, but does not solve any problem on the most important theme now for the refinery, which includes production adjustment to follow the demand change and control of product quality benign to the environment All the refineries in Iran, of course including the Tabriz Refinery, face now structural change of the inland demand, which consists of fuel conversion in power plants from heavy oil to natural gas as a measure for environmental protection and prominent increase of gasoline demand As a result, supply shortage of gasoline has surely been experienced. Iranian refineries are urged to cope with the structural change of the demand and requirement for less polluting products by modification of the facilities. Thus it is intended to involve the medium-scaled modification for energy saving in the fundamental project to the production of the refinery.

Thus being requested strongly by the Tabriz Refinery, Idemitsu has implemented the preliminary feasibility study for upgrading heavy oil, which is included in the overall feasibility study for energy saving and is a central theme concerning structural change of the demand and requirement for less polluting products. Background of the preliminary feasibility study, outline of the results of the study and the influence to environmental, economic and social aspect are described in the following.

2.1 Background of the preHmmary feasibility study for upgrading heavy oil The demand and supply of petroleum products in Iran are balanced by export of a large volume of surplus high sulfur heavy oil and import of gasoline to fill the inland shortage. The time is drawing near when the plan will be implemented to convert the high sulfur heavy oil consumed in the power plants to natural gas due to the serious air pollution in large cities. By the conversion to natural gas, a market of high sulfur heavy oil of about 20,000BD will disappear. Therefore, the first concern of the Tabriz Refinery is now introduction of the heavy oil-upgrading unit that produces gasoline by cracking heavy oil so as to reconstruct the production facilities of the refinery to cope with the structural change of demand and to supply less polluting products for the benefit of the regional community. Upgrading of heavy oil will be the fundamental measure for less polluting products because it not only meets the increased demand of gasoline but also removes a large quantity of S02 and fly ash that was emitted to the air in the past by combustion of high sulfur heavy oil. And almost all the metals included in the heavy oil are removed by treatment in the unit.

-133- 2.2 Outline of preliminary feasibility study for upgrading heavy oil The major theme of the preliminary feasibility study is to understand the oil balance change of the whole refinery after introduction of the upgrading unit through numerical simulation using a Linear Programming (hereinafter abbreviated as LP) model and to construct the most economically effective combination of processes. It also includes economic evaluation of typical cases through comparison of approximate investment cost and increased yield of white oil. Based on the result of the spot survey, the following constitutions of upgrading processes were selected. Delayed coker was excluded from the evaluation in spite of its low investment cost and its wide adoption in USA because it is very difficult to treat a large volume of coke that is produced in the process as a byproduct. (1) Case 1: HYVAHL process + RFCC process (2) Case 2: H-OIL process + FCC process (3) Case 3: H-OIL + ISOMAX (revamping) + Visbreaker

Firstly necessary data for construction of LP model was collected including operation data of the above processes, property of product stock materials, standards for final products and so on. Next, LP base models for the above cases were constructed based on those data, and the product balance and profitability of the above combination were examined. The results of the preliminary feasibility study showed that Case 1 will make utmost contribution to production increase of transport fuels and will be possible to increase production of gasoline and middle distillates by about 3 million BD (about 5 million BD in case of maximum production) and about 3 million BD, respectively. Annual profit of approximately 44 million US dollars is expected by production of the high-value added products in Case 1. Nevertheless, the case requires about 250 US dollars of investment to the equipment and nearly ten years are necessary to recover the investment (calculated based on an of 6.5%). These figures are not preferable. The above calculation was conducted using approximate investment cost in Japan converted to dollars based on the of yen, and thus the resulted cost was comparatively high. Furthermore, the average figure during the past two years was adopted for the price difference between gasoline and heavy oil, which does not reflect the increased price difference due to the current price rise of crude oil. These are thought to cause the high investment cost and long recovery duration. On the premise of the high crude oil price, the investment recovery could be realized within eight years, which is a criterion to judge feasibility of large investment in Japanese refineries.

134- 2.3 Influence to environmental aspect The crude oil treated in the Tabriz Refinery is Ahvaz crude oil (Iranian Light), a typical Iranian crude oil. The crude oil contains about 1.4wt% of sulfur, which means about 220 tons/day of sulfur are brought into the refinery being included in the crude oil. About 40 tons/day of sulfur are now recovered by the existing vacuum gas oil catalytic cracking unit (ISOMAX) and naphtha hydrodesulfurization unit. Thus the remaining around 180 tons/day are shipped included in the products and finally are emitted to the air as S02 after combustion. About 50-60 tons/day of sulfur will be recovered by introduction of the heavy oil-upgrading unit, and about 5 tons/day are burned in the refinery when the coke on the catalyst is fired in the cracking unit. Thus the sulfur shipped being included in the products will reduce to about 115- 125 tons/day. In the case that the capacity of the heavy oil desulfurization unit and cracking unit is maximized, the sulfur included in the products reduces further to about 90-100 tons/day. In addition, if a desulfurization unit for kerosene and gas oil is introduced, the above figure could be halved. Sulfur content of oil products separated by atmospheric distillation and vacuum distillation is higher in heavier products and the residue contains the highest sulfur. Therefore, introduction of desulfurization unit and cracking unit for the residual oil is most effective as an overall measure to remove sulfur from the products of the refinery. That is, it will play a central role in the measure of the refinery for less polluting products. Additionally the metal removal from heavy oil will amount to 200kg/y.

2.4 Influence to economic aspect Existence of those refineries, which cannot cope with the imbalanced demand structure characterized by a large volume of surplus heavy oil and supply shortage o r \soline, will be threatened in the liberal economy society. It will never happen that the Tabriz Refinery may be abandoned because the refinery is state- owned and located in the geologically preferable position of the northwest of the country, but in order to operate the refinery with fulfilling its economic and social mission for the whole Iran, introduction of the heavy oil-upgrading units will be indispensable in the future. However, judgment of profitability of the investment will be very difficult because a large equipment investment of 250 million US dollars is necessary and the duration for investment recovery ranges between 7 and 10 years, which is on the border of the criterion for judging feasibility of enterprise investment. As the profitability can be improved by increase of the price difference between heavy oil and white oil, which is currently brought by price rise of crude oil, it will also be necessary to consider timing of the investment focusing on the price trend of petroleum products and crude oil in the international market.

-135- Construction cost influences the period of investment recovery in general, but the influence will be limited to a small range because many feasibility studies for introduction of cracking unit (except for desuftnization unit) are currently being pushed forward and their actual construction is under way in the countries in the Middle East Profitability will be pursued in the first place in introduction of the heavy oil-upgrading unit that is accompanied with a large amount of investment, but the introduction should more significantly be evaluated because it satisfies the requested increase of production capacity to meet the demand change. Thus the Iranian State Oil Company is expected to carry out the project in the near future following the order of priority in the refinery as a part of the inland oil policy only if the fund can be raised.

2.5 Influence to social aspect Currently, the shortage of gasoline in inland Iran is filled by importation from the gulf coast countries of the Middle East. The difference between the import price and the inland market price is subsidized by the government from the state revenue of crude oil export Therefore, when the imbalance between demand and supply due to surplus of heavy oil and shortage of gasoline is improved by implementation of the project for upgrading heavy oil, the subsidy from the state revenue can be directed to activation of the social economy and enhancement of the life standard and thus will contribute to improvement of the society.

136- CLOSING COMENTS

Iran is the second largest oil producing country in the world with producing 5% of the world oil production. Iran is also one of the largest resources holding countries in the world and its oil and natural gas reserves amount to 9% and 15% of total of the world, respectively There are nine refineries in inland Iran and their oil-refining capacity is about 1.50 million BD, the second largest in the Middle East.

The Tabriz Refinery, which this feasibility study for energy saving was conducted for, was designed and constructed by UOP in 1977. After the start of operation, a small modification for energy saving was added to the atmospheric distillation unit by themselves, but the fundamental reexamination of the facilities has not been conducted. Thus there remains much potentiality untouched for revamping for energy saving. Although two large refineries were constructed in Iran after Iran-Iraqi War, it is supposed that the difficult economic situation has not allowed to conduct the modification of the facilities for energy saving that is accompanied with a substantial investment. Because the Tabriz Refinery was constructed as the second-generation facilities in Iran, the intention to save energy was incorporated into the design policy to some extent But the design seems to have aimed to reduce the construction cost by taking in the practices in the age of cheap fuel, which is illustrated by the eliminated installation of waste-heat boilers for heat recovery from the effluent gas.. This feasibility study for energy saving was conducted for ten units including refining and utility facilities in the refinery. Spot survey for energy saving for two weeks was conducted twice and a meeting of one week for reporting and discussion was held at the refinery. Every time, several engineers of the Tabriz Refinery joined and thus the effective survey was conducted in a friendly atmosphere. The proposal for revamping to save energy is divided into two steps to make the revamping in line with reality. The first step can be carried out by rather small investment and the second step needs medium-scaled investment. The period of investment recovery was calculated to be less than two years for the small investment and 4-7 years for the medium-scaled investment. The emission volume of greenhouse effect gas was 1,158,000 tons/year for the baseline case, and the reduction effect by implementation of the project will be 155,800 tons/year (13.5%). The propagation effect of the achievement of the Tabriz Refinery to inland Iran is expected to amount to eight times of the above figure.

The Tabriz Refinery assumes now two kinds of implementation programs based on the results of this feasibility study. One is the program for such revamping as control of excessive air of heating furnaces that can attain high energy saving effect with small investment and a short recovery period

-137- of the investment. The refinery intends to cany out the program as soon as possible with raising the funds by their own effort. The other is the program for medium-scaled modification such as heat recovery from effluent gas, which is placed at the second step expecting financial cooperation from Japan. As for the first step program, they also strongly hope cooperation of Idemitsu in basic design and provision of the related technical information because all the necessary analyzers and control systems should be procured from abroad through importation. It is anticipated that they intend to carry out the second step program at the same time with implementation of the urgently desired heavy oil upgrading project assuming that it will take much time to raise funds for the program. Idemitsu will provide full support for implementation of the energy saving project, of course, including the small revamping of the first step. Idemitsu will continue to pursue the possibility to obtain the financial cooperation from Japan in the future to realize the second step program, and cooperate totally in the urgently desired implementation of the preliminary feasibility study and the following detailed study of the heavy oil-upgrading project by the refinery’s people.

In conclusion, we would like to express our sincere appreciation to the people who cooperated in this feasibility study, and heartily wish that this project were realized at an early stage and contributes to prevention of global warming.

138- ATTACHMENT

Attachment-1: Process Flow Diagram of Target Units for FS Survey (1) Refinery Process Flow Diagram of Tabriz Refinery (2) Flow Diagram of Crude Distillation Unit (3) Flow Diagram of Vacuum Unit (4) Flow Diagram of Visbreaking Unit (5) Flow Diagram of Naphtha Hydro-desulfurization Unit (6) Flow Diagram of Catalytic Reforming Unit (7) Flow Diagram of IPG Recovery Unit (8) Flow Diagram of Hydro-cracking Unit

Attachment-2: Site Survey Records of FS for Energy Saving Project (1) Record of First Site Survey for Energy Saving FS (2) Record of Second Site Survey for Energy Saving FS (3) Record of Third Site Discussion for Energy Saving Project (4) Members of Energy Conservation Project in Iran

Attachment-3: Relevant Map of Iran for Energy Saving Project (1) Site Location Map of Tabriz Refinery (2) Surrounding Map of Tabriz Refinery (3) Country Map of Iran(Central and Northern Region) (4) Country Map of Iran(Central and Southern Region)

-139- Tabriz Refinery Flow Diagram

LPG 122 T/D (Unif.BPSD) TANKS CRUDE L.P.G. TANKS U-500 CRUDE STABILIZED LSRG 5,789

LIGHT GAS 21 T/D L.S.R.G. GAS TO HY C.R.U. 132 T/D PLATFORMATE 9,741 GASOLINE LSRG U-200&U-250 TANKS HSRG 14,498 TREATED NAPHTHA ATM. AW402 AW402 AW-402 TANKS

U-100 AGO UNIF. LIGHT GAS KEROSENE TANKS KERO. U-400 GAS OIL A.G.O. 19,636 TO U-700 LIGHT GAS » 150 T/D H.S.R.G. L.P.G. ISO FEED ISOMAX GAS OIL REDUCED CRUDE TANKS GAS OIL

OVHD GAS ISO.GfrS OIL HYDROGEN U-600 OFF TEST U-700 27.8 MM SCFD

FUELOIL 5.641 32 T/D TANKS LVGO .VISBREAKER FUEL OIL VISB. GASOLINEL V.D.U. HVGO U-300 U-150

SLOPS WAX FUME TO INCINERATOR ASPHALT A.O.U. TANKS ASPHALT REFINERY FUEL OIL BITUMEN U-1000

FUEL OIL TO » POWER PLANT Tabriz Refinery, IRAN

» SULFUR 27.4 T/D Tabriz Refinery Flow Diagram -140- ' SPLIT SECTION V-109 DESALTING WATER L0W Sl2.AL Sr.KTW .. ?iVt£L 2LLL0JKoySLyPiL SURGE DRUM C.JOI SPILL BACK PM LP • VH11A . V—111B DESALTER DESALTER cuo. __ P-113A/B *M. AMINE TREATIn Q UNIT to l p SRecovrr unit

CRUDE COLUMN 0/H RECEIVER ■04—* PW-oe P-11 V 104 ■ Y**1 03 - ——-—■—

NAPHTHA STRIPPER STRIPPER WATER TO WASTE WATER FLASH DRUM

V-190 WASTE WATCH PM SPLIT SECTION V-101 WASTE WATER PM VACUUM SECTION

TO SPLITTING SECTION

KEROSENE V-107 i STRIPPER P-106 A/B ’P-X52A/B V-105

LRCAHL-10S FLOATER FLUSH INP CRUDE COLUMN SLA HQ SEAL OIL TO ASPHALT PLANT,

V-102 PLANO SEAL OIL TO VACUUM UNIT V-108 PLANO SEAL OIL 10 CRUDE UNIT GAS OIL PLANO SEAL OIL PM. ASPH.PANT PLANO SEAL OIL P* VIS#. UNIT STRIPPER PLANO SEAL OIL PM. VAC-UNIT P-104 A/B V-106 SLAW? SEAL OIL FM-CRUOE UNIT H -101

CRUDE HEATER PAS OIL TO VtSBREAKINP UNIT AS CUTTER § jo IWl«i1

(tt je m s & s) Crude Distillation Unit

-141- FILLING FROM RAM PUMP

8. N- FM. ATMOSPHERIC SECTION

ISO. Oft FM- UNIT

ISO, ft ft FMST6E.

Y -132 SPLIT- 0 / H RECT AIR LEAKAGE METER

CR.WI LIQUID HC

I f TO P-112 DISCHARGE • r */\AFTER ( INTER ' J Vj1Th lIMX/CONOENSEI^ YI5rX/LONOewyER| ' ~~\1S7X7 CONDENSER to fuel qilivisb - POUR POINT ANAUZEI

TO HEAVY SLOPS.

E -153 TO FUEL SVSi.

V-152 .P-154 A/B

CONDENSATE TO HEAVY SLOP, HV00 T ACCUMULATOR

ISO FEED TO STOI

OILY CONO TO W W UNIT P-153A/B, P-181 A/B 0 SYSTEM TO P-101 SUCTION split- om ^;o *c wPfr unit P-157 A/B .CRD. TO FUEL SYS-

SIGNAL TO FRCAL-ISOA+H

SPLITTER 1IGNAL FM LRCAHL-IOS

Y-183 P-152 A/B V-151 TO ASPHALT PLANT, INHIBIT. INJECT. VACUUM COLUMN TANK H-151 TO E-309C REF ROL SS,

FRCAL-1S0 A*0 :al - iso e+H VAC. RESO. TO STGE- VIS £ FEED TANK VACUUM TO FUEL SYS- HEATER

V—153 MR STEAM

VENT GAS

E-16V VAC- ASFH. TO ASPHALT © TRC.tSOB P-182 A/B DRUM TIC-151

7 _ir_m_?nnni7 «

• MP STEAM SPLIT FEED FM. CRUDE UNIT Tabriz Refinery, IRAN REOUCEO CRUDE 33rff HEAVY NAPHTHA TO STORGE 0* s. m e & s) Vacuum Distillation Unit

-142- PRC-312 5.x< TRC-30B,

FEED SURGE DRUM V -301

V-307 |) P-307

STABILIZER RECEIVER FLASH FRACTIONATOR V— 310 RECEIVER ____ V— 303 2.SK8/CM*

CHARGE HEATER P-303 T H—301 V-309

rp-3io P-309 ®HJ

V—312 v-311

STAB. BOX. ID FUEL SYSTEM I I m»c P-312A/B RESD. STRIP V-304 FUEL OL TO STB. E-305 STRIPPER RECEIVER

A —

KERO. FM. CRUDE UNff

T.W. 1 t

G-O.FM.g.O.UNF. Tabriz Refinery, IRAN A.(LO.FM.C.D.U.

Visbreaker Unit

-143- CAS TO 6.U.U

-144- FROM P - 2 0 2 H H

- -252

251 HC-2S0 H H-

-253

254 i ---- 1 REAC REACTOR V-255 V-252 REAC .TO .S18NAL.TO V-257

CHEM- TANK H2

PLANT E

MC-2S4 -252 LOW

SONALSELECTOR,

V-258 AT COND. TANK

UWFWER V-253 REAC 5 |

I

CR-2S1 V REAC

254 E

- V-256

257 P-2 52 A/B — 145

— Naphtha E-255 (j~ Tabriz TtAHU DEBUTANIZER

277A Refinery, P-253 Plat

A/B forming

RECE- H IRAN

PtATFORMATE -255 CIWCU.

Unit

LINE TO

TO TO

VP

STORAOE. STORAGE^

0.

UNIT PLATFORMATE HYDROCARBON LSLR. LiR.

LSJR. CRUDE COL.Q/H 8 A S FROM C.O.U.

NAPHTHA NAPHTHA NAPHTHA GAS CRUDE V — SUCT. DRUM

FM.UNF.

LIQUID TO COMP TO TO 501

FUEL STORAGE O/H ISOMOX

BLOWDOWN TO

PLAT,

SYSTEM CJXU..V-103

FOB V

UMT —

BLgMDUB 515

DRUM C-502A/B FEED V DRUM COMP. COMP. SUCT. — LP.G. 502

P-501 GAS

A/B SPUTlO/H HIGH FI-S30

PRESSURE

FM.CJ-U- Y — 503

RECEIVER P-502A/B FW-S04 LRC-S03 TI-SOS STRAIGHT STABILIZER V — 504

RUN 20K0/CM' X.u FRCALSOSA-O

■

aa E-503 *0*0 X

SR. .

P-503A/B

STABILIZER V-505 H —

501 RECEIVER P-504

A/B P-508A/B ABSORBER V — 506 — 146

— HC-SOt A-507 Tabriz LPG P-506 cl

Refinery, p

Recovery g ABS Y-507 CCMR DRUM

GAS IRAN

Unit C-S03A/B Uy-Y5^l/3L/^L/y y~^Re.c/cUe. Gta<> ssov)

Sfttf^CFuel Qos)

TH6Q2 «y (HCN)

jsQV^O 5 c Vx fll(HCK)

TH6Q4

€>*>s4 0:9 g)6(HCG0)

Tabriz Refinery, IRAN ($E$$>a7k?E

-147- Attachment-2: Site Survey Records for Energy Saving FS

(1) The First Site Survey for Energy Saving FS (a) Period : October 12, 2000 ~ October 26, 2000 (b) Venue : Tabriz Oil Refinery (including Tehran City for Project formation) (c) Details: *To investigate operating/current conditions of the units concerned. *To obtain process flow charts/designed operating condition data of the units concerned. *To collect/measure operating data of the units concerned. *To confirm operating modes and background of setting of operating conditions of the units concerned. *To discuss/confirm energy saving potentialities of the units concerned. *To collect plant/operation data for Pre-FS of Heavy Oil Up-grading *To prepare a report of the first survey and to submit it to the other party. (d) Survey Members: *Chief investigator : TOKUDA Shohaci *Sub-chief investigator : NAKAYAMA Satoshi * Sub-chief investigator : MIURA Yasuhiko * Investigator : MORI Teruo * Investigator : YADA Naoki * Investigator : OOKUBO floio * Investigator: HURUK AWAZON O Ryudo

(2) The Second Site Survey for Energy Saving FS (a) Period : November 23, 2000 ~ December 7, 2000 (b) Venue : Tabriz Oil Refinery, (including Tehran City for Project formation) (c) Details: *In addition to the first survey, to investigate operating/current conditions of the units concerned. *In addition to the first survey, to collect/measure operating data of the units concerned. *In addition to the first survey, to confirm operating modes and background of setting of operating conditions of the units concerned. * Based on results of discussion following the first survey, to discuss/confirm energy saving potentialities of the units concerned *To discuss/confirm prerequisites for unit modifications/ specification after modifications, scope of services provided, etc. *To investigate/confirm local procurement capability, work execution

-148 capability, etc. regarding unit modifications. *To confirm the partner's interest levels in energy saving projects and CDM *To confirm premise conditions for Pre-FS of Heavy Oil Up-grading *To prepare a report of the second survey and to submit it to the other party. (d) Survey Members : * Project Manager: TANDA Hisayoshi ""Chief investigator : TOKUDA Shohachi * Sub-chief investigator: NAKAYAMA Satoshi * Sub-chief investigator: MIURA Yashuhiko * Investigator : YADA Naoki ""Investigator : ONO Shuhei ""Investigator: HURUKAWAZONO Ryuzo

(3) The Third Site Visit/Discussion for Energy Saving Project (a) Period : February 22 ~ March 1, 2001 (b) Venue: Tabriz Oil Refinery and NIORDC Head Office (including Tehran City for Project formation) (c) Details: *To report/discuss results of energy saving surveys. *To discuss feasibility, profitability, implementing conditions, etc. of the modification plans. *To discuss transfer of technology related to energy saving and pervasive effects to other oil refineries. *To discuss prerequisites for unit modifications/ specification after modifications, scope of services provided, etc. *To discuss feasibility, premise conditions, possibility of financing, etc. *To investigate/confirm local procurement capability, work execution capability, etc. regarding unit modifications. * Submission of a report of the energy saving survey results. ""Submission of a report of Heavy Oil Up-grading Pre-FS (d)Survey/Discussion Members : * Chief investigator : TOKUDA Shohachi ""Technical Manager: IZAWA Toshio * Sub-chief investigator: NAKAYAMA Satoshi ""Investigator: YADA Naoki ""Investigator: TAKAHASHI Hideto ""Investigator: HUJIWARA Yoshihiko

-149 Members of Energy Conservation Project in Iran Company Name Position Title NIORDC Mr. Mohammad Zali Refining Dept. Refining Director Head Office Mr. Amir Shaghaghi Refinery Development Director Affairs, Head Office Mr.Aref Refinery Development Senior Engineer Dowlatabadian Affairs, Head Office Energy conservation Tabriz Oil Mr. Assadollah Tabriz Refinery Managing Director Refining Mikaeili Company Mr. Karim Project Engineering Dept. Project Engineering Rahimi-KH Manager Mr. Mostafa Engineering Service D. Head Process Moiadadi Process Engineering Engineering Mr. Trabi Process Engineering D. Head Hydro-cracker ISOMAX & H2 Plant Engineering Mr. Samad Process Engineering D Senior Combustion Shahri Combustion Sect. Engineer Mr. Aydin Project Engineering Senior Project Abdollah Nezhad Dept. Engineer Mr. Hossein Gol Process Engineering D. Section Process Sanamlou ISOMAX & Distillation Engineer Mr. Samad Project Engineering D. Senior Project Noorghasemi Pinch Technology Engineer Mr. Farshid Process Engineering D. Senior Process Baghban SRU, Asphalt Engineer (Section Manager/ Refinery Operation Div Laboratory Expert Engineers) Laboratory Dept. Engineers (Section Manager/ Refinery Operation Div Maintenance Expert Engineers) Maintenance Dept. Engineers (Section Manager/ Refinery Operation Div. Unit Manager, Shift Supervisors) CDU/VAC, VIS, LPG, Shift Supervisors CRU, ISOMAX, SRU, SWS, Asphalt/ Utility

150 Iranian Map for Site Survey

(1) Location Map of Tabriz City

c/s: 3Uf Ut—I-X7 Vvf— Aisitt® ■Mtil.OOOB/D \ (7-tzVU/W y X X \ /* j'* (> ji' 3) MU . TU&K&Y TlARJCHBU

i 150 Banias 120 I BaijifN) u A120 Homs /Kemanshah^ ! A. Kirkuk 27 Z'/V SY mA^.'-^a b^s, A Khanaqin ’

„ Xx \ O' 7 ?) ▲ 100 Daura

Haifa-100 - Nashiriyah . 27A ‘x lofi&frd i.__ Basrah 126 S'Hinaal^maX28 l~^ Mina AdbuilaH’256^##'

Jubail 292 J_ RasTanura i SAUDI AeABl^i„(,^)25o^ApMU“,!,-‘ ^ G-«.nv,(M)A)£SL DuM- Yanbu 190 A Ummai-twr/CaBgE.i9nc/. ,

(2) Location Map of Tabriz Refinery X

WBW ftKi-n x " >. ?owev ‘ sto r»tU a i-pgvi~ v-yz-

-151- (3)Iran Map (Central—Northern Area)

SOkm SOkm 5Qkm SOkm A?

»* S.ydh

-&;.:,

■ f-n) vi I ■ ,<■ •K :S!d 4»£9. L

-152- (4)Iran Map (Central—Southern Area)

50km 50km 50km 50km

153- Any part or whole of the report shall not be disclosed without prior consent of International Cooperation Department, New Energy and Industrial Technologies Development Organization (NEDO).

Phone: 03(3987) 9466

Fax: 03(3987)5103