February 2018

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Connected Worker CONTENTS February 2018 Volume 23 Number 02 ISSN 1468-9340 03 Comment 57 In the firing line Phani Patchipulusu and Clark Dickson, Dickson Process 05 World News Systems LLC, USA, outline a catalytic combustion technique for natural gas purification. 12 Australia: seeking balance in fossil energy dependence 61 A continuous stream Dr Nancy Yamaguchi, Contributing Editor, considers the Julie Liberti, AirSep Corp., a Chart Industries Company, future of fossil energy developments in Australia. USA, outlines how non‑cryogenic air separation technologies offer economical, low maintenance, uninterrupted gas supply solutions for modern process 21 Integrating information plants. Jason Hoover, Siemens Process Industries and Drives, USA, explains how to optimise drive train availability and productivity to prevent costly downtime in hydrocarbon 66 Seeking harmony processing facilities. S. V. Seleznev, G. A. Derevyagin, A. M. Derevyagin and P. C. Lyon, Vympel, Russia, explore the problem of measuring the condensation temperature of hydrocarbons 26 The key to success in natural gas. Markus Iatropoulos, MAN Diesel & Turbo, Germany, outlines the collaborative approach that was taken at a major refinery turnaround project in Austria. 73 Laser detection Dr Lars Hildebrandt, nanoplus, Germany, provides an overview of gas sensing using semiconductor laser 32 Getting ahead spectroscopy. Michael Andrews and Tushar Patel, Atlas Copco Gas and Process, USA, explain how integrally-geared technology is making room for margin growth downstream. 77 A new generation Gijs van Heeringen and Jan Klok, Paqell, along with Peter Hauwert, Frames, the Netherlands, consider the 37 Fluid flows economic impact of next generation direct treat sulfur Yousef Jarrah and Motoyasu Ogawa, Nikkiso Cryo Inc., USA removal and recovery processes. and Japan, reveal the fluid dynamics of rotating stall in LNG pumps. 83 A collaborative success Marco van Son and Rien van Grinsven, Jacobs Comprimo® 41 Pump Q&A Sulfur Solutions, Canada and the Netherlands, and Hydrocarbon Engineering questions a number of pump Khalid S. Ghazal, Saudi Aramco ExxonMobil Refinery experts on efficiency, quality control, safety, maintenance (SAMREF Refinery), Saudi Arabia, recall a sulfur upgrade and the future of the pump market. project. 48 Innovation in gas treating 89 Filling the gap Joseph Priestley, Fahd Fathi and John Sarlis, Shell Global Innovative ceramic designs simplify field installation Solutions International B.V., the Netherlands, introduce a and address the critical manufacturing skills gap. new contacting technology for absorption columns. Heather Higgins, Will Russell and Uday Parekh, Blasch Precision Ceramics, USA, explain. 93 A root and branch approach Bahador Sadeghian, Zafaran Industrial Group Co., Iran, outlines the role that sulfur granulation drums play in the production of sulfur coated urea fertilizer.

The Shell Turbo Tray, a new contacting technology THIS based on innovative tray design, is presented. The technology is applied to the removal of contaminants from natural gas. It results in significant opportunities MONTH'S for greenfield CAPEX reduction and debottlenecking of existing facilities. Case studies are available at: FRONT [email protected] and www.shell.com/ COVER business-customers/global-solutions.html

2018 Member of ABC Audit Bureau of Circulations Copyright© Palladian Publications Ltd 2018. All rights reserved. No part of this publication may be reproduced, JOIN THE stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this follow connect like join journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither CONVERSATION @HydrocarbonEng Hydrocarbon Hydrocarbon Hydrocarbon do the publishers endorse any of the claims made in the articles or the advertisements. Printed in the UK. Engineering Engineering Engineering Uncaptioned images courtesy of www.shutterstock.com. FREE OWNER OPERATOR ATTENDANCE

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MANAGING EDITOR James Little [email protected] ack in 2012, shortly after I EDITOR Callum O'Reilly took on the role as Editor of [email protected] Hydrocarbon Engineering’s sister EDITORIAL ASSISTANT Anna Nicklin publication, LNG Industry magazine, [email protected] BShell began construction on a major new ADVERTISEMENT DIRECTOR Rod Hardy project that was (and still is) the talk of the [email protected] LNG sector. Five years later, the Prelude floating LNG (FLNG) facility arrived ADVERTISEMENT MANAGER Chris Atkin at its final location in the Browse Basin, Western Australia, last year. Mooring, [email protected] hook-up and commissioning activities are now underway before the project ADVERTISEMENT EXECUTIVE Sophie Barrett is expected to start operations later this year. Once up and running, the giant [email protected] Prelude FLNG facility – which is longer than four soccer fields – will have a PRODUCTION Ben Munro production capacity of at least 5.3 million tpy of liquids (3.6 million tpy of [email protected] LNG, 1.3 million tpy of condensate and 0.4 million tpy of LPG). WEB MANAGER Tom Fullerton Prelude FLNG is one of three remaining LNG projects currently under [email protected] construction in Australia that is set for completion this year, alongside DIGITAL EDITORIAL ASSISTANT Nicholas Woodroof Inpex’s Ichthys LNG project and the second train at Chevron’s Wheatstone [email protected] project. According to the latest ‘Resources and Energy Quarterly’ from the SUBSCRIPTIONS Laura White Department of Industry, Innovation and Science, these three projects are set [email protected] to bring Australia’s total nameplate capacity to 88 million t, as the country ADMINISTRATION Nicola Fuller readies itself to dethrone Qatar as the world’s largest LNG exporter. 1 The [email protected] report suggests that Australia’s LNG export volumes will reach 77 million t in CONTRIBUTING EDITORS 2018 – 2019, up from 52 million t in 2016 – 2017. Nancy Yamaguchi Gordon Cope All of this follows a “watershed year” for Australia’s LNG industry in 2017, as described by EnergyQuest’s CEO, Dr Graeme Bethune. 2 The energy consultancy recently reported that Australian LNG exports hit 56.8 million t in 2017, rising 26.3% from 2016, on the back of increased demand from China (up 40.5% from 12.4 million t to 17.5 million t). Higher oil prices and increased volumes pushed the country’s LNG export revenue up 44.1% to SUBSCRIPTION RATES Annual subscription £110 UK including postage AUS$25.8 billion last year. /£125 overseas (postage airmail). Despite the rosy outlook for the country’s LNG sector in the short-term, Two year discounted rate £176 UK including postage/£200 overseas (postage airmail). a number of uncertainties remain. The Department of Industry, Innovation and Science warns that as competition intensifies in global LNG markets SUBSCRIPTION CLAIMS Claims for non receipt of issues must be made within 3 months of (particularly from the US), the cost competitiveness of Australian LNG publication of the issue or they will not be honoured without charge. projects and the amount of flexibility in its contracts remain cause for APPLICABLE ONLY TO USA & CANADA concern: “LNG contracts often include clauses which allow buyers to reduce Hydrocarbon Engineering (ISSN No: 1468-9340, USPS No: 020-998) is published monthly by Palladian Publications Ltd GBR and distributed purchases to minimum ‘take-or-pay’ levels. It is possible buyers may utilise in the USA by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals postage paid New Brunswick, NJ and additional mailing these ‘take-or-pay’ provisions in their oil-linked contracts if oil prices are offices. POSTMASTER: send address changes to HYDROCARBON ENGINEERING, 701C Ashland Ave, Folcroft PA 19032. higher than spot prices, or if they become over-contracted for LNG.” The land down under is certainly going to be a fascinating market to watch in the years ahead. In this issue of Hydrocarbon Engineering, Dr Nancy Yamaguchi provides a detailed overview of the country’s energy 15 South Street, Farnham, Surrey sector, as it attempts to strike a balance between the economic security GU9 7QU, ENGLAND offered by its fossil energy industry and its growing desire to protect the Tel: +44 (0) 1252 718 999 environment and its heritage (p. 12). Fax: +44 (0) 1252 718 992

1. ‘Resources and Energy Quarterly’, Australian Government Department of Industry, Innovation and Science, (December 2017). 2. ‘Australian LNG industry riding high on China boom’, EnergyQuest, (21 January 2018). BREAKING DOWN BIG DIESEL

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USA | Hess Midstream and Targa Resources Worldwide | Industry announce JV confidence doubles

ess Midstream Partners LP has Hess TGP Operations LP, in which onfidence in growth in the oil and Hannounced a 50/50 joint venture Hess Midstream owns a 20% Cgas industry has risen globally from (JV) with Targa Resources Corp. to controlling economic interest, and 32% in 2017 to 63% this year, according construct a 200 million ft3/d gas Hess Infrastructure Partners LP (HIP) to a new report from DNV GL. processing plant. owns the remaining 80% interest. The report, entitled ‘Confidence The plant, called Little Missouri LM4 is expected to be completed and Control: the outlook for the oil and Four (LM4), will be located at Targa’s in 4Q18. Construction costs are gas industry in 2018’, forecasts an existing Little Missouri facility in anticipated to be approximately imminent turnaround in spending on McKenzie County, North Dakota. US$150 million (gross to the JV). R&D and innovation after three years of Targa will manage the Hess Midstream and HIP will also cuts and freezes. Of the 813 senior oil construction and operation of the invest approximately US$100 million and gas sector professionals surveyed, plant. Hess Midstream’s 50% interest for new pipeline infrastructure to 36% expect to increase spending on in the JV will be held through gather volumes to the LM4 plant. R&D and innovation in 2018, with digitalisation (37%) and cyber security (36%) forming the principal areas of R&D investment focus this year. Russia | Investment in innovations was Biological treatment plant cited as a key barrier to growth this inaugurated year by 19% of respondents, along with oversupply of oil and gas (19%), ashneft-Ufaneftekhim refinery, a long-term service contract to ensure operating costs (18%), reduced BRosneft-affiliated company, has reliable operation of equipment and exploration activity (19%) and inaugurated its biological treatment an uninterrupted guaranteed competitive pressure (22%). plant. replacement of membranes. Meanwhile, 50% of respondents The facility, located in Ufa, will As part of the long-term service remain steadfast in their efforts to treat up to 84 million litres of contract for the wastewater increase cost control measures in 2018, wastewater per day. treatment plant, SUEZ is providing consistent with 2017 (51%), suggesting SUEZ supplied its ZeeWeed advanced asset performance permanent new discipline in the membrane bioreactor (MBR) management with its InSight industry. Close to two-thirds (62%) membranes, electrodialysis reversal platform, which combines data and believe that these are permanent (EDR) and reverse osmosis (RO) analytics to maximise performance, changes, mirroring the results from last equipment to the biological minimise unplanned downtime, year’s survey (63%). This may suggest treatment plant and will provide lower operating costs and deliver that the industry is going through a services as part of a 15-year better business outcomes. sustainable period of change.

USA | UOP Russell to supply NGL recovery unit to Brazos Midstream

oneywell’s UOP Russell business UOP Russell will provide the levels of ethane and propane as prices Hwill provide a third cryogenic engineering, fabrication and supply of NGLs continue to rise. gas processing plant to Brazos of a modular cryogenic NGL Cryogenic gas processing plants Midstream. The 200 million ft3/d recovery unit. cool the gas in a demethaniser plant, set to be named Comanche By combining low capital and column until the more valuable NGLs III, will extract valuable natural gas operating expenses, and ultra-high precipitate into a liquid. The heavier liquids (NGLs) from natural gas that NGL recovery rates, the three plants components that are extracted from is produced in the Southern allow Brazos to offer gas producers the natural gas can be used as fuels, Delaware Basin, Texas, which is rich more favourable processing terms. This fuel blending components and other in NGLs. positions the company to recover high valuable petrochemicals.

HYDROCARBON 5 February 2018 ENGINEERING What Makes a Refi nery Refi ned? Reliability and effi ciency are everything. WORLD NEWS + Germany | 10,000 Hydrogen electrolysis plant to be MAN turbomachines are installed IN BRIEF built worldwide. That’s more than 50 in every country in the world saudi arabia hell and ITM Power will build the Detailed technical planning and 100,000+ world’s largest hydrogen the approval process will now begin. SABIC has acquired a 24.99% stake S continuous working hours of fl awless electrolysis plant at the Rhineland The plant, named ‘Refhyne’, is in Clariant. The acquisition of these operation: oil-free screw compressors refinery. scheduled to be in operation in stakes, which were previously held by from MAN Diesel & Turbo With a peak capacity of 10 MW, 2020 and will be the first industrial Corvex Management and 40 North, the hydrogen will be used for the scale test of the polymer makes SABIC the largest Clariant processing and upgrading of products electrolyte membrane technology shareholder. Clariant confirmed that + at the refinery’s Wesseling site, as well process. 250 it intends to engage with SABIC over as testing the technology and Currently, the Rhineland refinery, years of engineering experience the coming weeks in order to discuss exploring application in other sectors. Germany’s largest, requires makes innovation a MAN tradition the new situation and explore possible The European partner consortium approximately 180 000 tpy of ways to create value. of Shell, ITM Power, SINTEF, thinkstep hydrogen, which is produced by and Element Energy has now secured steam reforming from natural gas. usa €10 million in funding from the The new facility will be able to Cheniere Energy Inc.’s subsidiary, European ‘Fuel Cell Hydrogen Joint produce an additional 1300 tpy of Cheniere Marketing LLC, has entered Undertaking’. The project’s total hydrogen, which can be fully into an LNG sale and purchase investment, including integration into integrated into the refinery agreement (SPA) with Trafigura Pte Ltd, the refinery, is approximately processes, such as for the under which Trafigura has agreed to €20 million. desulfurisation of conventional fuels. purchase approximately 1 million tpy of LNG from Cheniere Marketing on a free on board basis for a term of 15 years, USA | CB&I signs crude development beginning in 2019. agreement with Saudi Aramco malaysia Abu Dhabi National Oil Co. (ADNOC) B&I has entered into a joint processes for the production of has announced that it has signed Cdevelopment agreement with high-value petrochemicals from a three-year agreement with Saudi Aramco for the development, crude oil. Lotte Chemical Titan to sell up to commercialisation and marketing of CB&I’s ethylene cracker 1 million tpy of naphtha. crude-to-chemical technologies. technology and CLG’s The agreement includes Chevron hydroprocessing technologies, usa Lummus Global (CLG), CB&I’s joint combined with Saudi Aramco’s Evoqua Water Technologies’ venture with Chevron U.S.A. Inc. proprietary Thermal Crude to Environmental Services business has Together, Saudi Aramco, CB&I and Chemicals (TC2CTM) technology will been recognised by Chevron Corp. for CLG will develop a unique provide the platform for this joint ‘Exceptional Site Support Performance’ integration of advanced technology development. from Chevron’s Pascagoula, Mississippi Compressors Steam Turbines Expanders Machinery Trains Gas Turbines Reactor & Apparatus After Sales facility. The Pascagoula refinery is the company’s largest US refinery. The USA | Utopia Pipeline commences delivery recognition comprises two parts: zero of ethane to petrochemical plants The more the global economy develops, the greater the need for effi ciency in supplying the energy sources the world reported accidents for the year and relies on. With their legendary reliability, MAN Diesel & Turbo machinery and components are used throughout the keeping Chevron-compliant regarding inder Morgan Inc. has announced can be expanded to more than refi nery and petrochemical industries. Applications range from hydrogen production and recovery to desulfurization, benzene waste operations NESHAPs Kthat the Utopia Pipeline has been 75 000 bpd. fl uid catalytic cracking (FCC), PTA, fertilizer and IGCC. Engineered to the most exacting standards, our axial, screw (BWON). Compliance with BWON placed into service and product The pipeline will connect with and centrifugal compressors, steam turbines and reactors are built to ensure maximum availability in even the rulings blends waste, air and water delivery of ethane from Harrison an existing Kinder Morgan pipeline toughest environments. Find out more at www.mandieselturbo.com quality management. County, Ohio, to Windsor, Ontario, and associated facilities in order to Canada, has commenced operation. transport ethane and The pipeline system extends ethane‑propane mixtures to approximately 270 miles and has an petrochemical companies operating initial capacity of 50 000 bpd, which in Ontario.

February 2018 6 HYDROCARBON ENGINEERING What Makes a Refi nery Refi ned? Reliability and effi ciency are everything.

10,000+ MAN turbomachines are installed worldwide. That’s more than 50 in every country in the world 100,000+ continuous working hours of fl awless operation: oil-free screw compressors from MAN Diesel & Turbo 250+ years of engineering experience makes innovation a MAN tradition

Compressors Steam Turbines Expanders Machinery Trains Gas Turbines Reactor & Apparatus After Sales

The more the global economy develops, the greater the need for effi ciency in supplying the energy sources the world relies on. With their legendary reliability, MAN Diesel & Turbo machinery and components are used throughout the refi nery and petrochemical industries. Applications range from hydrogen production and recovery to desulfurization, fl uid catalytic cracking (FCC), PTA, fertilizer and IGCC. Engineered to the most exacting standards, our axial, screw and centrifugal compressors, steam turbines and reactors are built to ensure maximum availability in even the toughest environments. Find out more at www.mandieselturbo.com WORLD NEWS China | KBC signs integration IN BRIEF agreement malaysia okogawa Electric Corp’s Engineering North Co. Ltd, a ABB’s single lift prefabricated electrical Ysubsidiary, KBC Advanced SINOMEC group company. structures (e-houses) for offshore use will Technologies, has signed a There are many small-scale oil be installed on Petronas’ second floating consultancy agreement with China refineries in Shandong Province. To LNG (FLNG) facility, PFLNG 2. PFLNG2 will Energy Engineering North Co. Ltd for improve efficiency and better meet be moored over the deepwater Rotan the integration of operations at market needs, SINOMEC has gas field, located off the Malaysian coast. six oil refineries in the Shandong decided to upgrade facilities and The fully engineered electrical system Province. integrate operations at these six oil contained within the e-houses will include These refineries are being refineries, which are located in transformers, switchboards, motor-control acquired and will be operated by Guangrao County. KBC will provide centres and ABB’s Process Power Manager China State Energy Engineering Corp. consulting services to assist that ensures reliable and stable electricity Ltd (SINOMEC), a state-owned SINOMEC in meeting these supply to the FLNG facility. The two company, and China Energy objectives. e-houses are currently en-route to Samsung Heavy Industries yard in Geoje, South Korea, for installation on the vessel. USA | Praxair expands hydrogen supply to usa refinery After 10 years as President and CEO of raxair Inc. has expanded its in 2016, and this agreement secures the American Institute (API), Plong-term hydrogen supply the additional hydrogen required to Jack Gerard has announced that he will step agreement with Motiva Enterprises support that expansion, as well as down when his current contract ends in LLC. the ongoing needs of the refinery. August 2018. Until then, he will continue to Under this new agreement, Praxair Praxair began delivering direct the association’s work and assist in will increase the amount of hydrogen hydrogen to the refinery in 1992 as the search for a new CEO. it supplies to Motiva’s refinery in one of the first customers on its gas Port Arthur, Texas. The refinery has a hydrogen pipeline system. Since Your valves are talking to you. russia capacity of approximately then, the company’s system and A working meeting between Alexey Miller 600 000 bpd. capabilities have grown significantly Are you listening? (Chairman of the Gazprom Management Motiva completed a and the refinery has undergone Committee) and Seung-Il Cheong (President hydrocracker and diesel several expansions. It is now Because details matter. and CEO of Kogas) has taken place in hydrotreater capacity expansion North America’s largest refinery. Moscow. The meeting addressed the status It’s not easy to keep every control valve and every instrument of LNG supplies to South Korea from the in your plant at it’s peak performance. Even a small problem Sakhalin II project, as well as the potential USA | for increasing exports. The prospects Vitol acquires Noble Americas Corp. in any one of them could result in major issues for the entire system. for further collaboration between the itol US Holding Co. has (which may be positive or negative) companies were also discussed. Vannounced that it has completed to be determined at a future date in Metso’s 24/7 ValveTriage Services focus on the details that the acquisition of Noble Americas accordance with the terms and improve reliability, safety and quality. With 24/7 real-time usa Corp. (NAC), a subsidiary of conditions of the proposed disposal. SNC-Lavalin has signed a Master Noble Group. The figure of US$400 million is metrics and diagnostics, issues are quickly identi ed Services Agreement, valued in excess of The sale is estimated at lower than the illustrative cash and prioritized. Anywhere. Anytime. US$100 million, with one of the world’s approximately US$400 million. proceeds of US$575 million largest plastics, chemical and refining Vitol has paid an initial determined in October, when the Learn more at metso.com/valves companies. The scope of work includes US$272 million to Noble Group, and acquisition agreement was originally #detailsmatter provision of all engineering support for the also deposited a further announced. The decrease is primarily client’s Gulf Coast facilities. US$122 million with an escrow agent; due to NAC’s operating losses in the the total to be paid out from the period between the announcement escrow account will be subject to and the completion of the adjustment based on an amount acquisition.

February 2018 8 HYDROCARBON ENGINEERING Your valves are talking to you. Are you listening?

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Learn more at metso.com/valves #detailsmatter HIGH STANDARD WORLD NEWS VALVES FOR DIARY DATES Australia | LNG exports jump ustralian LNG exports hit Dr Bethune said: “China is now 11 - 13 March 2018 A56.8 million t in 2017, jumping 26.3% Australia’s second-largest LNG market AFPM Annual Meeting from 44.9 million t in the year prior. and Australia is China’s biggest LNG New Orleans, Louisiana, USA www.afpm.org/conferences Combined with higher oil prices, supplier […] Increased Chinese the increase in volumes pushed up demand is not only good for Australia’s 2017 LNG export revenue by Australian LNG producers and our NON-STANDARD 13 - 15 March 2018 Asia Turbomachinery & Pump Symposium 44.1% to AUS$25.8 billion, according to export revenue, but has an emerging Singapore the December LNG report from positive impact for China’s atps.tamu.edu EnergyQuest. environment. China is making a EnergyQuest CEO, Dr Graeme massive switch from coal to gas to 20 - 22 March 2018 Bethune, described 2017 as a watershed reduce air pollution in major cities StocExpo Europe year for Australia’s LNG industry, with such as Beijing – and now Australian Rotterdam, the Netherlands growth in demand from China the LNG is playing a significant role in www.stocexpo.com CONDITIONS. stand-out success story. achieving this goal. 27 - 29 March 2018 Total Australian LNG exports to “LNG jumped from Australia’s fifth 20th Annual International Aboveground Storage China increased by 40.5%, from largest export in 2016 to third largest Tank Conference & Trade Show 12.4 million t to 17.5 million t over the export in 2017, overtaking gold and Orlando, Florida, USA period. education.” www.nistm.org

15 - 18 April 2018 GPA Midstream Convention Austin, Texas, USA www.gpamidstreamconvention.org Worldwide | Digitalisation key to operational 15 - 19 April 2018 excellence Corrosion 2018 Phoenix, Arizona, USA n the second installment of its prioritisation and planning (49%) are www.nacecorrosion.org I‘Operational Excellence Index’ the two areas where digital 23 - 25 April 2018 (OEI), Petrotechnics has revealed transformation is currently creating Sulphur World Symposium 2018 that companies in hazardous the biggest impact. Deriving insight Philadelphia, USA industries are embracing digital from data is also a key focus, with www.sulphurinstitute.org transformation as a means of 65% of respondents either currently achieving operational excellence deploying or planning to deploy 29 April - 3 May 2018 (OE), but the rapid pace of predictive analytics. SOGAT innovation and fear of change could However, the rate of Abu Dhabi, UAE pose barriers to widespread digitalisation has some respondents www.sogat.org adoption. worried about whether the industry 31 May - 1 June 2018 Petrotechnics surveyed oil, gas can keep pace. Of the respondents, and petrochemical professionals to 51% recognise real challenges to Downstream Conference & Exhibition Galveston, Texas, USA gauge industry attitudes around OE embracing digitalisation, including www.downstreamevent.com and digitalisation. Over 73% of the steep learning curves (19%), too companies surveyed noted that much data (18%), and disengaged 11 - 15 June 2018 digitalisation is accelerating the workforces (14%). ACHEMA 2018 ability to deliver sustainable OE. Over 83% of organisations agree Frankfurt, Germany Respondents praised the benefits that digitalisation enables a single, TRI-CON TRI-CHECK TRI-BLOCK www.achema.de that digitalisation is bringing to shared view of operational reality operations, with early adopters – leading to greater levels of 18 - 20 September 2018 ramping up their use of cutting-edge transparency, efficiency, and Turbomachinery & Pump Symposia technologies. Enhanced key performance. 81% highlight real-time Houston, Texas, USA tps.tamu.edu performance indicators (KPIs) and visibility of asset risk as a significant metrics (51%) and improved benefit.

February 2018 10 HYDROCARBON ENGINEERING WWW.ZWICK-ARMATUREN.DE HIGH STANDARD VALVES FOR NON-STANDARD CONDITIONS.

TRI-CON TRI-CHECK TRI-BLOCK

WWW.ZWICK-ARMATUREN.DE Dr Nancy Yamaguchi, Contributing Editor, considers the future of fossil energy developments in Australia.

February 2018 12 HYDROCARBON ENGINEERING ustralia is walking a winding path between the extremely dry. Periods of drought and bushfires can development and use of its fossil energy quickly give way to localised flooding. Development resources and protection of its environment and projects must satisfy stringent environmental review, and heritage. The future of fossil energy some areas have declared moratoria on hydraulic Adevelopment and use is at the forefront of the collective fracturing projects until the impacts are better known. Australian mind. Unlike its Organisation for Economic There is also a fine line to be walked concerning Co-operation and Development (OECD) Pacific global climate change and the role of fossil energy. The neighbours, Australia is large, sparsely populated and rich vast majority of the population lives along coastal areas, in natural resources. The country has highly active and which could be at risk because of global climate change. experienced petroleum, coal and natural gas industries. The country is working on diversifying energy sources As traditional deposits play out, however, decisions and fostering a domestic biofuels industry. The must be made about whether (and where and when) government is committed to reducing carbon emissions. remote or unconventional resources will be developed. A carbon tax was launched in 2012, which was expected Developing deepwater hydrocarbons and shale resources to cut emissions significantly. But the issue was are by nature megaprojects, which require serious politically divisive, causing the tax to be repealed. Fossil commitment from both public and private sectors. energy plays such a large role in the economy that Environmental impacts are painstakingly studied. As a policies must find a middle ground between reducing wealth of data from the US establishes, for example, using emissions and providing low-cost energy. This article will hydraulic fracturing to produce light tight oils and gas discuss Australia’s fossil energy resources, the growth of from deep shale is water-intensive. Australia’s fresh water the LNG industry, energy and oil product demand, and supplies are limited, and many inland areas are the refining sector.

HYDROCARBON 13 February 2018 ENGINEERING Australia Primary Energy Use by Fuel Type, MTOE 160.0 coal use fell from 51.7 million toe in 2005 to 43.8 million toe in 2016. Between 2005 and 2016, oil 140.0 use grew at 1.8% per year, natural gas use grew at 120.0 5.6% per year, and coal use shrank by 1.5% per year. The country has made a concerted effort to reduce 100.0 coal use, particularly in electric power generation. 80.0 Looking more closely at coal, a peak of 54.9 million toe in consumption was seen in 2008, 60.0 which was a year of exceptionally high oil prices. It 40.0 declined to 42.6 million toe in 2014 and, in 2012, Australia enacted a carbon tax to be paid by the 20.0 largest emitters.

- This was a highly politicised issue. In 2014, the carbon tax was repealed to remove the financial 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Figure 5 tracks Australia’s active oil and gas rig count per Baker Hughes. Oil Gas Coal Hydro Solar Wind Geothermal, Biomass, Oth burden on the industry. The decline in coal use halted, climbing slightly to 44.1 million toe in 2015 Source: BP Figure 1. Australia's primary energy consumption by fuel type in and 43.8 million toe in 2016. Figure 1. Australia primary energy consumption by fuel type, MTOEmillion tonnes of oil equivalent (souce: BP). Australia has had some success in the adoption of alternative and renewable energy resources. Australia Active Oil and Gas Rigs While the use of solar and wind power has jumped Australian LNG exports by destination, BCM 14 over the past decade, the use of hydropower and 60.0 geothermal energy have been relatively stable. In 12 China India Japan South Korea 2005, the use of these renewables totalled 50.0 10 4.7 million toe. This doubled to 9.4 million toe in Taiwan Other Asia Americas Eur/ME/Afr 2016. In total, renewable and alternative energy use 40.0 8 has expanded at 6.5% per year from 2005 through 6 30.0 2016. The recent drop in coal use, flattening oil 4 20.0 consumption, and a rise in renewable energy use 2 Active Oil Rigs Active Gas Rigs have led to a noteworthy drop in the percentage share of fossil energy in the primary energy mix. This 10.0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* share climbed to nearly 97% in 2008 before being - brought down to 93.2% in 2016, according to BP. Source:Baker Hughes. 2017 average is January-November Figure1997 2.1998 Australia's1999 2000 2001 active2002 2003 oil 2004and2005 gas2006 rigs2007 (source:2008 2009 2010Baker2011 Hughes).2012 2013 2014 2015 2016Although this is a notable achievement,

Australia still consumes a major amount of coal, and Source: BP Figure 5. Australia active oil and gas rigs its carbon emissions are significant, particularly Fossil energy resources and production when viewed on a per-capita basis. China is the largest Figure 2. Australia LNG exports by destination, BCM consumer of coal globally and a major customer for Australian Structure of consumption coal exports. China’s coal consumption was over 43 times as

Australia’s energy sector has profited by the development and large as Australia’s in 2016, yet the country’s emissions per capita use of abundant high-quality fossil energy resources. Most of were approximately 2.7 times higher than China’s. the country’s oil and coal is produced in the Southeast, convenient to centres of population. The largest natural gas Recent oil price movements and the decline deposits are located in the remote Northwest area, including in oil production offshore areas in the Timor Sea. Australia’s LNG industry was The massive upsurge in oil prices in 2008 was accompanied by developed to capitalise on these resources. increased drilling in many places around the world. In Australia, Figure 1 shows the long-term trend in Australian primary the Baker Hughes Active Rig Count noted an average of 12 active energy demand. The country’s energy demand growth rates are oil rigs and 10 active natural gas rigs in 2008. The subsequent well above that of most other OECD countries. Between 2005 global economic recession and decline in oil prices then and 2016, its primary energy use increased from 116.2 million t of brought a decline in active oil rigs, but a relatively robust oil equivalent (toe) to 138 million toe, an average growth rate of presence in natural gas rigs. In 2009, on average, there were 1.6% per year. In comparison, primary energy use in the US seven active oil rigs and seven active natural gas rigs. The oil declined by 0.3% per year from 2005 to 2016, UK energy use fell price war caused prices to sag most noticeably in 2014 – 2016. In by 1.77% per year, and Japanese primary energy use fell by 1.42% Australia, the active oil rig count fell to an average of just three per year. in 2016 and two in January – November 2017. The active gas rig Australia’s dependence on fossil energy is immediately count, in contrast, was four in 2016, which jumped to 12 during apparent but, in recent years, the mix has begun to change. the January – November period of 2017. Australian oil demand increased from 39.5 million toe in 2005 to Figure 2 tracks Australia’s active oil and gas rig count per 47.8 million toe in 2016. Natural gas use grew from Baker Hughes. The 2017 average is for the 20.3 million toe in 2005 to 37 million toe in 2016. In contrast, January – November period.

February 2018 14 HYDROCARBON ENGINEERING Latest News 2018

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For further information go to: © 2018 Hexagon AB and/or its subsidiaries and affiliates. AutoCAD is a registered trademark of Autodesk, Inc. www.hydrocarbonengineering.com BricsCAD is a registered trademark of Bricsys. All rights reserved. Australia Primary Energy Use by Fuel Type, MTOE 160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

- 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Oil Gas Coal Hydro Solar Wind Geothermal, Biomass, Oth

Source: BP

Figure 1. Australia primary energy consumption by fuel type, MTOE

Australian LNG exports by destination, BCM 60.0 AUS$22.3 billion. In FY 2016 – 2017, Japan was the largest customer, importing China India Japan South Korea 50.0 24.79 million t, followed by China, which

Taiwan Other Asia Americas Eur/ME/Afr purchased 14.97 million t, and South Korea, 40.0 which imported 5.56 million t. Australia’s LNG exports have grown in 30.0 volume and are reaching a larger number of customers. Figure 3 shows the growth 20.0 and diversification of exports from 1997 through 2016. While Japan is, and remains, 10.0 the single-largest customer, exports to other Asian customers have grown - 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 significantly. In the early years, Japan took more than 95% of Australia’s output, with FigureSource: BP 3. Australia's LNG exports by destination in billion cubic metres occasional cargoes going to the US or (source: BP). Europe (Spain and the UK). South Korea

received its first cargo in 2000 and exports Figure 2. Australia LNG exports by destination, BCM 3 Australia Refinery Capacity, '000 bpd to the country totalled 6.1 billion m in 900 2016. Taiwan and India both started purchasing Australian 829 3 800 LNG in 2005. Taiwan imported 0.3 billion m in 2016, while India imported 1.2 billion m3. China received its first cargo of 700 Australian LNG in 2006 and has grown into a major 600 consumer. Exports to China grew from 1 billion m3 in 2006 3 500 to 15.6 billion m in 2016.

400 462 452 Australia’s oil sector 300 Australia’s domestic sales of petroleum products have 200 grown at a sedate average rate of 1.5% per year between

100 FY 2007 – 2008 and FY 2016 – 2017. Demand grew from 878 000 bpd in 2007 – 2008, to approximately 1 million bpd - in 2016 – 2017. The demand barrel is high in value, with the 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: BP percentage share of fuel oil and other products falling from

Figure 4. Australia's refinery capacity in ‘000 bpd 6.1% in 2007 – 2008 to just 2.9% in 2016 – 2017. Fuel oil Figure (source:3. Australia refinery capacity, ‘000 bpd BP). demand fell from 27 000 bpd in 2007 – 2008 to 12 400 bpd in 2012 – 2013, but it crept back up to 16.9 million bpd in Australia Refinery Output, '000 bpd 2016 – 2017. This may, in part, be explained by declining 800 As oil prices and drilling sag, conventional production of price of oil, the introduction of Australia’s carbon tax in in 2012 crude700 oil has fallen. According to the Australian Department of and its repeal in 2014, as noted above. the600 Environment and Energy, in FY 2001 – 2002, Australian Australia’s demand fell from 331 500 bpd in crude500 production was 499 000 bpd, which fell to 155 000 bpd 2007 – 2008 to 313 800 bpd in 2016 – 2017. The market is

in400 FY 2016 – 2017, a rate of decline averaging 7.5% per year. orienting towards diesel, demand for which grew from

Condensate300 production, buoyed by natural gas production, 314 800 bpd in 2007 – 2008 to 457 000 bpd in 2016 – 2017. remained flat at approximately 123 000 bpd. Production of Gasoline’s share of the demand barrel has fallen from 37.8% in 200 naturally occurring (not produced at refineries) LPG fell from 2007 – 2008 to 31.2% in 2016 – 2017, while diesel’s share has 100 80 000 bpd in FY 2001 – 2002 to 52 000 bpd in FY 2016 – 2017, risen from 35.9% in 2007 – 2008 to 45.5% in 2016 – 2017. Jet fuel 0 a rate2007- 08of decline2008-09 2009averaging-10 2010 2.8%-11 2011 per-12 year.2012 Total-13 2013 hydrocarbon-14 2014-15 2015-16 2016-demand17 has also grown quickly, from 108 600 bpd in

liquids fell from 702 000LPG bpdGasoline in FYJet Fuel 2001 –Diesel 2002 toFuel Oil 330 000Other bpd 2007 – 2008 to 155 000 bpd in 2016 – 2017. in FY 2016 – 2017. Although gasoline demand has been declining, the use of Source: Dept. of the Environment and Energy ethanol blends has grown. In 2006, ethanol-blended

Australian LNG exports of up to 10% ethanol by volume started being phased in. The Figure 4Although. Australia refinery output, ‘000 bpd oil prices have been relatively low in the past few State of was the first to institute a blending years, Australia has continued expanding its LNG mandate, and Queensland is following. But the mandates are infrastructure, including recently-completed projects using limited in scope and area, and biofuels have had to compete coalbed methane (CBM) as feedstock. The Queensland Curtis with inexpensive oil over the past few years. Sales of LNG project is the world’s first LNG project of this type. ethanol-blended gasoline jumped to 57 900 bpd in Following Qatar, Australia is now the second-largest exporter FY 2010 – 2011, but fell to 33 500 bpd in 2016 – 2017. An uptick of LNG in the world. in demand is expected for FY 2017 – 2018, as additional ethanol According to the Australian Department of the blended gasoline is required in Queensland, but a steady Environment and Energy, national LNG exports in upward trend would require additional blending mandates FY 2016 – 2017 totalled 52.15 million t, valued at over and/or more favourable economics.

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Australia Refinery Capacity, '000 bpd 900

829 800

700

600

500

400 462 452

300

200

100

- 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: BP

Figure 3. Australia refinery capacity, ‘000 bpd

Australia Refinery Output, '000 bpd 800 terminal in 2013, and Shell sold its Geelong refinery to Vitol

700 in 2014. Today, only four refineries remain in operation.

600 Australia depends on imports for most of its needs. Diesel sales in FY 2016 – 2017, for example, were 457 000 bpd. 500 Refinery production was only 149 000 bpd. 400 Australian crude production dropped from 300 499 000 bpd in FY 2001 – 2002 to 155 000 bpd in 200 FY 2016 – 2017. Refinery crude runs of both domestic and 100 imported feedstock fell. According to the Department of 0 the Environment and Energy, in FY 2010 – 2011, refinery input 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 averaged 688 000 bpd, which fell to 453 000 bpd in LPG Gasoline Jet Fuel Oil Other FY 2016 – 2017. Of this, only 17.6% was indigenous feedstock. Source: Dept. of the Environment and Energy Figure 5. Australia's refinery output in ‘000 bpd As capacity and throughput fell, domestic fuel

(source: Department of Environment and Energy). production also fell. Figure 5 shows the downward trend in Figure 4. Australia refinery output, ‘000 bpd production of refined petroleum products. Between Australian Refinery Output, '000 bpd, 2016-17 FY 2007 – 2008 and FY 2016 – 2017, refinery output 5.1 11.6 11.3 dropped by 252 000 bpd. Of this, gasoline output fell by 103 000 bpd, diesel output fell by 62 000 bpd, and jet fuel production fell by 30 000 bpd. Figure 6 displays the current pattern of refinery output by 149.3 190.3 product. Approximately 44% of the output was gasoline (190 000 bpd), diesel output was 149 000 bpd (34.8% of the output), followed by aviation fuels output at 62 000 bpd (14.4% 61.7 of the output). The remaining 6.5% was refinery LPG, fuel oil and other products. Australia has an active, two-way trade in crude and refinery LPG Gasoline Jet Fuel Diesel Fuel Oil Other feedstocks. It is a large country, and condensates from the Figure 6. Australian refinery output in ‘000 bpd for Northwest Shelf, for example, are closer to Asian refineries than Figure 5FY. Australian refinery output, ‘000 bpd, FY 2016 2016 – 2017. -2017 to Australian refineries. Australian crudes may also capture a quality premium vs some foreign crudes, though conventional crude production is in a period of decline. Some of the Australia’s refining sector replacement crudes are light and sweet, coming from Malaysia, Australia Refined Product Exports, '000 bpd For a time, Australian refining companies and potential new Vietnam, Papua New Guinea and West Africa. Refinery closures 90.0 entrants hoped to become competitive export refiners in the have reduced import requirements and allowed some exports 80.0 Asia-Pacific market.LPG ThereGasoline were a AvFuelsnumber Dieselof proposalsFuel Oil madeOther to to remain. Both imports and exports have been declining.

70.0 build large, grassroots refineries in the Northern Territory and Western Australia, the goal being to develop remote resources Refined product exports dwindle as 60.0 and create new hubs of economic activity closer to Asia. But imports grow 50.0 these proposals could not gain traction since so many Asian Given the reduction in refinery capacity, coupled with gently 40.0 countries were expanding their own refining industries. increasing demand, Australia’s refined product exports have Australia’s existing refineries were smaller and less competitive fallen, while imports have risen. As Figure 7 illustrates, Australian 30.0 than many new refineries that were built in Asia during the refiners have a dwindling supply of exportable fuels. In 20.0 ‘Asian Boom’ years. Australian grassroots refinery proposals were 2001 – 2002, product exports were 114 000 bpd. This fell to 10.0 postponed, with most being cancelled. Subsequently, some 62.5 million bpd in 2009 – 2010, and product exports have been

0.0 Australian downstream companies closed their refineries below 59 000 bpd ever since. This excludes international 2007entirely.-08 2008 -As09 a2009 result,-10 Australia2010-11 2011 not-12 only2012 failed-13 2013to become-14 2014 -a15 major2015- 16 2016-bunkering,17 which is significant in the case of aviation fuel. The export refining hub in the region, but its refining industry began Department of the Environment and Energy estimates jet fuel Source: Dept. of the Environment and Energy to shrink. Prospects for growth in the domestic market were bunkering at approximately 34 000 bpd. limited. Demand for gasoline was forecast to shrink. Moreover, Most of Australia’s product exports are LPG. In Figure 6crude. Australia refined product exports, ‘000 bpd oil production was waning in the long-established FY 2016 – 2017, LPG accounted for 66% of the 58 300 bpd oilfields near most of the existing refineries. Refiners were facing exported. Most of this is shipped to Asia-Pacific destinations a future of higher feedstock costs, a potentially shrinking such as Japan, South Korea, Indonesia and Singapore, but domestic market, and stringent environmental regulations. occasional cargoes may travel as far as Africa. Figure 4 traces how Australia’s crude refining capacity Gasoline and diesel exports are now quite small: in peaked at 829 000 bpd in 2002, dropped below 700 000 bpd in FY 2016 – 2017, gasoline exports were 3800 bpd while diesel 2006, and collapsed to 452 000 bpd in 2016. Caltex closed its exports were 1800 bpd. Kurnell refinery at the end of 2014, BP closed its Bulwer Island Although Australian refined product exports have dwindled, refinery in 2015, and Shell began to divest itself of refinery assets the country is a key supplier of fuel to some of the smaller in many parts of the globe, including Australia. Shell announced markets in the Pacific, including the Solomon Islands, that it planned to convert its Clyde refinery to a product New Caledonia, Papua New Guinea, Vanuatu, Fiji,

February 2018 18 HYDROCARBON ENGINEERING 180102_Hydrocarbon Engineering Ad_MSC.indd 1 12/20/2017 9:57:29 AM

Australian Refinery Output, '000 bpd, 2016-17 5.1 11.6 11.3

149.3 190.3

61.7

LPG Gasoline Jet Fuel Diesel Fuel Oil Other

Figure 5. Australian refinery output, ‘000 bpd, FY 2016-2017

Australia Refined Product Exports, '000 bpd 90.0 Conclusion

80.0 LPG Gasoline AvFuels Diesel Fuel Oil Other Oil, natural gas and coal have contributed enormously to the Australian economy, and reserves are ample. Theoretically, 70.0 anything is possible in terms of additional energy 60.0 development, but let us note with particular emphasis the 50.0 name ‘Department of the Environment and Energy’. This 40.0 department was formed in 2016, and many key

30.0 responsibilities were transferred to it. Some might say that it is just a name in a government re-organisation. However, it is 20.0 significant that the responsibility for Australian energy 10.0 development now rests largely under a newly-formed 0.0 department charged with balancing ‘environment’ and 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 ‘energy’. Australia is hugely dependent on fossil energy, but its FigureSource: 7. Dept. of the Environment and EnergyAustralia's refined product exports in ‘000 bpd goal is to reduce this dependence. This is an ambitious (source: Department of the Environment and Energy). undertaking, and one that will be a balancing act between Figure 6. Australia refined product exports, ‘000 bpd the needs of a long‑established fossil energy industry and the long-term needs of society and the environment. In the

petroleum sector, conventional crude oil production has been falling. This trend is expected to continue unless the country moves into deepwater exploration and production

and/or develops shale oil resources. But these are viewed as problematic and expensive. Development of shale gas is also stymied by opposition to hydraulic fracturing. The government in the Northern Territory, which is estimated to contain roughly 30% of Australia’s shale gas resources, has enacted a moratorium on hydraulic fracturing, citing a need for more research on its impacts on the region and its people, including indigenous communities. Australia’s refining industry has shrunk, and only four refineries remain. Refined product exports have dwindled, while imports have climbed steadily. Figure 8. Australia's refined product imports in ‘000 bpd The country is working to reduce coal use. The use of (source: Department of the Environment and Energy). alternative and renewable energy sources has grown at rates of 6 – 7% per year over the past decade. Natural gas use has also risen, though much of the developments are far from French Polynesia and Samoa. Although the amounts are small, in population centres and the output is liquefied for LNG export. many cases, Australia is the sole source of supply for these Australia made headlines by becoming the first country to use islands, and export avenues therefore have a greater significance CBM as a feedstock for LNG. than is apparent from the volumes involved. Australia remains committed to reducing greenhouse gas Australia’s fuel marketers are relying more on imported emissions. Its 2020 target was to reduce its 2000 emissions levels product. Figure 8 shows the significant growth in refined product by 5%. The Department of the Environment and Energy reported imports over the past decade. Looking back, in 2001 – 2002, that the country will beat this target, and is working on the next Australia imported only around 74 000 bpd of refined products. phase. In November 2016, Australia ratified the Paris Agreement This reached 318 400 bpd in 2009 – 2010 before the wave of and the Doha Amendment to the Kyoto Protocol. Under the refinery closures then brought a steady increase in imports. In Paris Agreement, Australia will reduce emissions by 26 – 28% FY 2016 – 2017, Australia relied upon product imports for below 2005 levels by 2030. This will cut per-capita emissions by 589 000 bpd of its fuel requirement. half, with a goal of reducing the national emissions intensity by Middle distillate imports have grown swiftly. In 65%. Within the developed world, Australia’s per-capita emission FY 2001 – 2002, middle distillate imports were only reduction goal is among the most ambitious. 26 000 bpd. In FY 2007 – 2008, this jumped to 160 700 bpd. Of Therefore, although Australia is energy-rich, it is in a period this, diesel imports averaged 128 800 bpd and jet fuel imports of contemplation concerning its energy future. Fossil fuels averaged 31 800 bpd. By 2016 – 2017, diesel imports had provide for most domestic energy needs and they have been a expanded to 319 100 bpd, equating to a growth rate of 10.6% major contributor to the country’s export wealth for decades. per year. Jet fuel imports had grown even more quickly, Reserves of oil, natural gas, and coal remain ample, and expanding at 13.7% per year on average. Gasoline imports have unconventional resources (such as oil shale, shale oil and shale also grown, rising from 24 800 bpd in 2001 – 2002 to gas) could be developed. But development has costs, and 119 800 bpd in 2016 – 2017. Australia is not planning an economic future based on resource In total, Australia’s imports of refined product have grown at extraction alone. There must be value added, which must exceed rates averaging 8.2% per year between 2007 – 2008 and the environmental and social costs. Australia’s goal is to find a 2016 – 2017. This has amounted to an increase of nearly balance that improves economic security and environmental 300 000 bpd of refined products. quality for all people across a wide land.

February 2018 20 HYDROCARBON ENGINEERING FEBRUARY ISSUE

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