Carrying on from last weeks comments on declining residual oil quantities.
The Globe and Mail published recently an article about the fact that heavy oil is gaining weight in energy markets, based on comments at the World Heavy Oil Congress in Edmonton, earlier this month. According to the experts, by 2030 heavy oil will make up 16 - 20% of the world total supply of oil, up from below 6% today.
Refineries, to process heavier oil, require to upgrade the refining process in order to get adequate quantities of refined product from the feedstock. The upgrade of the refining process results in lower quantities of residuals that are not suitable as base for marine fuel blending. They are too heavy and S-content is way too high to be used as base for IFO blending. As a rule of thumb, the S-content in the residual is typically more than twice the S-content of the feedstock.
The EIA charts show how residual declined, without a major shift towards heavier feedstock. Looking forward we'll need to factor in the increase in heavier feedstock as well as increased synthetic crude oil quantities.
Wednesday, March 30, 2011
Wednesday, March 23, 2011
Marine Fuel - 1
From time to time I look at the EIA website, mostly out of curiosity. The US Energy Information Agency publishes the US statistics on oil related matters every Wednesday.
The EIA's weekly supply estimates have in their right columns the links to graphs, showing historic trends to 2011 for specific products and groups. The ones I find of interest are the trends for crude oil refinery inputs, gasoline, distillate fuels and residual fuels. What these graphs indicate to me is that refinery yields have increased over the years. US refiners are producing more refined product from lower feedstock quantities, thereby leaving less residual oil for marine fuel blending. The EIA figures suggest that US refineries produce a lower percentage of residual oil than others.
If we take the US refining trend towards higher refinery yields as indicative for how global refining evolves, then it is reasonable to project that somewhere down the line there won't be enough residual fuel to satisfy the demand for industrial and marine fuel.
The EIA's weekly supply estimates have in their right columns the links to graphs, showing historic trends to 2011 for specific products and groups. The ones I find of interest are the trends for crude oil refinery inputs, gasoline, distillate fuels and residual fuels. What these graphs indicate to me is that refinery yields have increased over the years. US refiners are producing more refined product from lower feedstock quantities, thereby leaving less residual oil for marine fuel blending. The EIA figures suggest that US refineries produce a lower percentage of residual oil than others.
If we take the US refining trend towards higher refinery yields as indicative for how global refining evolves, then it is reasonable to project that somewhere down the line there won't be enough residual fuel to satisfy the demand for industrial and marine fuel.
Wednesday, November 17, 2010
Bilge Alarm Readings
The test procedures for the 15ppm Bilge Alarm are described in MEPC 49 Test Specifications. Basically, the accuracy of the Bilge Alarm is determined by comparing its readings against a known flow of Test Fluid injected into a known flow of water. The grab samples are analyzed in a laboratory to Standard ISO9377-2:2000, using solvent extraction and gas chromatography for the determination of the hydrocarbon oil index in water.
The methodology is clear and the oil content for the test effluent is known. Therefore, in the approval process, the Bilge Alarm is demonstrated under controlled, predictable and repeatable conditions. To get the Bilge Alarm approved, the instrument needs to correctly display the optical effect created by the known oily water mixture, as the equivalent parts per million of oil content. In other words, the instrument is calibrated for this purpose before the approval test, then shown to read oil content correctly.
As we all know, bilge water aboard a ship, or more accurately the effluent from the Bilge Separator is not the same mixture of oil and water as the one in the approval process. In the approval process the IMO Test Fluid "C" is used, which is a 1kg mixture of water, containing 25g of heavy fuel RMG 35, plus 25g of light fuel DMA , plus 0.5g surfactant and 1.7g of iron oxides. By comparison,the effluent coming out of the Bilge Separator contains typically more than 2 types of oils as it contains heavy fuel, light fuel lube oils as well as other oils; it contains probably more than 0.5g of surfactants as cleaners and detergents are present, from the cleaning of surfaces and as part of modern lube oils as well; solids content of the effluent most likely is quite different too. Then of course there is the color of the bilge water, also different than the test liquid. All this to say that the Bilge Alarm does not compare apples with apples; it is tested with "apples" but then required to read "oranges" aboard a ship.
The Bilge Alarm is approved by IMO for on-line, continuous measuring, using an optical value as a reference for oil content. The measuring system is at best an approximation, rather than a scientific measurement of hydrocarbon content in water. Port State Control procedures confirm that compliant bilge water effluent is determined by a calibrated Bilge Alarm and not a laboratory analysis.
Because the Bilge Alarm is calibrated to a specific oily water mixture, there will be a difference between the actual hydrocarbon content of compliant real life effluent and the test liquid. How big the difference will be is dependent on the complexity of the bilge water the Bilge Separator has to treat.
The methodology is clear and the oil content for the test effluent is known. Therefore, in the approval process, the Bilge Alarm is demonstrated under controlled, predictable and repeatable conditions. To get the Bilge Alarm approved, the instrument needs to correctly display the optical effect created by the known oily water mixture, as the equivalent parts per million of oil content. In other words, the instrument is calibrated for this purpose before the approval test, then shown to read oil content correctly.
As we all know, bilge water aboard a ship, or more accurately the effluent from the Bilge Separator is not the same mixture of oil and water as the one in the approval process. In the approval process the IMO Test Fluid "C" is used, which is a 1kg mixture of water, containing 25g of heavy fuel RMG 35, plus 25g of light fuel DMA , plus 0.5g surfactant and 1.7g of iron oxides. By comparison,the effluent coming out of the Bilge Separator contains typically more than 2 types of oils as it contains heavy fuel, light fuel lube oils as well as other oils; it contains probably more than 0.5g of surfactants as cleaners and detergents are present, from the cleaning of surfaces and as part of modern lube oils as well; solids content of the effluent most likely is quite different too. Then of course there is the color of the bilge water, also different than the test liquid. All this to say that the Bilge Alarm does not compare apples with apples; it is tested with "apples" but then required to read "oranges" aboard a ship.
The Bilge Alarm is approved by IMO for on-line, continuous measuring, using an optical value as a reference for oil content. The measuring system is at best an approximation, rather than a scientific measurement of hydrocarbon content in water. Port State Control procedures confirm that compliant bilge water effluent is determined by a calibrated Bilge Alarm and not a laboratory analysis.
Because the Bilge Alarm is calibrated to a specific oily water mixture, there will be a difference between the actual hydrocarbon content of compliant real life effluent and the test liquid. How big the difference will be is dependent on the complexity of the bilge water the Bilge Separator has to treat.
Thursday, October 21, 2010
World Oil Demand in 2011
In the October 2010 Monthly Oil Market Report OPEC provides data on the current global oil situation.
Total world oil demand is projected to grow by 1.05 million barrels per day, or 1.22%. Demand is driven primarily by growth in the developing economies, where demand is expected to grow by 2.05%, whereas demand in the OECD will only grow by 0.13%. Primary drivers for the growth in oil demand are the developing countries, lead by China and India.
What may be of interest to marine is how OPEC sees residual oil shrinking. According to to the forecast, the primary drivers for growth in oil demand are gasoline (+19%), other products (+19%) and gas/diesel oil (+26%), while residual fuel is projected to shrink by 10% in 2011.
What seems evident is that refined product demand growth impacts on residual fuel availability. This trend seems to have started with the oil crisis in the mid 70's and is now accelerating with the tremendous growth in the developing economies. Additional pressure on residual oil comes from slow growth on the oil supply side, which forces refiners to increase yield. In North America, the increased reliance on feedstock from the oil sands, shrinks residual oil supply from local sources.
Declining residual supply suggests deteriorating residual fuel quality, which is diagonally opposite to the tightening fuel quality requirements of IMO. This raises the question, by when will heavy fuel oil no longer meet the required fuel quality standards?
Total world oil demand is projected to grow by 1.05 million barrels per day, or 1.22%. Demand is driven primarily by growth in the developing economies, where demand is expected to grow by 2.05%, whereas demand in the OECD will only grow by 0.13%. Primary drivers for the growth in oil demand are the developing countries, lead by China and India.
What may be of interest to marine is how OPEC sees residual oil shrinking. According to to the forecast, the primary drivers for growth in oil demand are gasoline (+19%), other products (+19%) and gas/diesel oil (+26%), while residual fuel is projected to shrink by 10% in 2011.
What seems evident is that refined product demand growth impacts on residual fuel availability. This trend seems to have started with the oil crisis in the mid 70's and is now accelerating with the tremendous growth in the developing economies. Additional pressure on residual oil comes from slow growth on the oil supply side, which forces refiners to increase yield. In North America, the increased reliance on feedstock from the oil sands, shrinks residual oil supply from local sources.
Declining residual supply suggests deteriorating residual fuel quality, which is diagonally opposite to the tightening fuel quality requirements of IMO. This raises the question, by when will heavy fuel oil no longer meet the required fuel quality standards?
Wednesday, September 22, 2010
What can we learn from the Irika sentencing
The US DoJ posted their news release on the Sentencing of Irika Shipping S.A.
When the MV IORANA arrived in Baltimore in January 2010, crew members alerted the USCG port state control officer of illegal dumping of oil and garbage at sea. Granted, this was a blatant case of willful pollution, which no respectable company will tolerate, however, there are a few points in the press release worth noting, if a company operates into the USA.
From reading some of the USCG publications and comments by lawyers, it seems to me the following 2 things probably played a significant part why the fine for the offence was ultimately $ 4,000,000.
Irika pleaded guilty, by my count, to 8 felony charges, each carrying a maximum penalty of $ 500,000. While lawyers frown upon admitting guilt, it seems to me that cooperation by ship officers can significantly reduce the criminal penalty. My math suggests that the court imposed the maximum $500,000 per felony. Cooperation by the senior officers would have reduced the count by at least 2, or the fine by $ 1,000,000 or more!
What I suggest is that a company who's ships call on US ports, should have in place a vigorously implemented environmental policy and that their ship officers are aware on how to work with USCG officers during a port state control.
When the MV IORANA arrived in Baltimore in January 2010, crew members alerted the USCG port state control officer of illegal dumping of oil and garbage at sea. Granted, this was a blatant case of willful pollution, which no respectable company will tolerate, however, there are a few points in the press release worth noting, if a company operates into the USA.
From reading some of the USCG publications and comments by lawyers, it seems to me the following 2 things probably played a significant part why the fine for the offence was ultimately $ 4,000,000.
- Irika admitted the company had no budget for the vessel and no waste management plan, and crew members received little training regarding the company's environmental policies.
- Irika admitted obstructing justice in a couple of ways, including false statements by ship officers, destroying evidence, etc.
Irika pleaded guilty, by my count, to 8 felony charges, each carrying a maximum penalty of $ 500,000. While lawyers frown upon admitting guilt, it seems to me that cooperation by ship officers can significantly reduce the criminal penalty. My math suggests that the court imposed the maximum $500,000 per felony. Cooperation by the senior officers would have reduced the count by at least 2, or the fine by $ 1,000,000 or more!
What I suggest is that a company who's ships call on US ports, should have in place a vigorously implemented environmental policy and that their ship officers are aware on how to work with USCG officers during a port state control.
Thursday, September 9, 2010
Residual Fuel
As a follow up to last week, in the September issue of OPEC's monthly oil market report, on page 30 they show a pie chart of the projected demand growth for the various refinery products from 2010 to 2011. OPEC predicts a 1,0 million barrel/day increase in oil demand for 2011 and predicts all products to increase - except for residual fuel. OPEC predicts a decline in residual oil by 143,000 barrels/ day for the coming year.
In the previous blog I stated that according to data published by the IEA residual fuel represented 15.1% of global refinery output in 2008. Based on that figure the 143,000 barrel reduction in residual fuel, for the coming year, represents essentially a 1.1% drop in the supply of feed stock for heavy fuel blending. In other words, the quality of the blended fuel will continue to deteriorate and availability of IMO compliant HFO may become an issue, maybe not immediately but probably in the long term.
In the previous blog I stated that according to data published by the IEA residual fuel represented 15.1% of global refinery output in 2008. Based on that figure the 143,000 barrel reduction in residual fuel, for the coming year, represents essentially a 1.1% drop in the supply of feed stock for heavy fuel blending. In other words, the quality of the blended fuel will continue to deteriorate and availability of IMO compliant HFO may become an issue, maybe not immediately but probably in the long term.
Tuesday, August 31, 2010
International Energy Agency
The 2010 Key statistics by the IEA are rather interesting. Oil consumption keeps rising, residual fuel production is declining and we see a shift in the global refining picture. The developing economies of China, Asia and the Middle East are adding refinery capacity aggressively while in the developed world capacity is being consolidated.
In 1973 33.8% of refinery throughput ended up as residual fuel, by 2008 this shrank to 15.1% globally. In Canada refineries produce only about 7% residual oil from their feedstock, in the USA it is lower still. The fact that refiners today produce more light product per barrel of oil, suggests that the quality of the residual fuel is deteriorating.
Regulations are tightening, calling for cleaner stack emissions from ships, on the other hand residual fuel quality is declining. The question then is, how will ship owners comply with these tightening regulations? Will they be able to burn lower quality residual fuels forever with secondary treatment of the exhaust gases, or will they be forced to burn premium-priced light fuel, because marine fuel won't be available anymore; in part due to the increased refinery yield, in part due to the shift in refining to the emerging economies?
Is it possible that tightening oil supply will some day force ship owners to burn distilled product?
In 1973 33.8% of refinery throughput ended up as residual fuel, by 2008 this shrank to 15.1% globally. In Canada refineries produce only about 7% residual oil from their feedstock, in the USA it is lower still. The fact that refiners today produce more light product per barrel of oil, suggests that the quality of the residual fuel is deteriorating.
Regulations are tightening, calling for cleaner stack emissions from ships, on the other hand residual fuel quality is declining. The question then is, how will ship owners comply with these tightening regulations? Will they be able to burn lower quality residual fuels forever with secondary treatment of the exhaust gases, or will they be forced to burn premium-priced light fuel, because marine fuel won't be available anymore; in part due to the increased refinery yield, in part due to the shift in refining to the emerging economies?
Is it possible that tightening oil supply will some day force ship owners to burn distilled product?
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