T ECHNICAL P APER

Title: Improved Planning Can Optimize Solutions to Produce Clean Fuels

Author: Amos Avidan, Ralph Ragsdale, Ben Klein

Date: April 2001

Publication/Venue: Hydrocarbon Processing magazine

Copyright © 2001 Hydrocarbon Processing

Copyright © 2001 Gulf Publishing Company
CLEAN FUELS

Improved planning can optimize

solutions to produce clean fuels
Refiners may consider using alliances with contractors to shorten
design and construction time for environmentally driven projects
A. Avidan, B. Klein, and R. Ragsdale, Bechtel Corp., Petroleum and Chemicals Global
Business Unit, Houston

Due to worldwide environmental mandates, refiners will be considering how to cost-effectively

reconfigure their operations and process "cleaner fuels." The primary focus of these new
regulations is the reduction of sulfur in gasoline and diesel. Other rules mandate reduced levels of
aromatics, especially benzene, olefins and oxygenates. These changes will be phased in. With
some exceptions, clean-fuels projects will be implemented only to meet impending government
regulations. Yet, refiners must strive to increase profitability and achieve acceptable rates of
return on capital for these investments.

"Green fuel" projects. The main drivers for refiners who need to implement clean fuels projects
are:

Schedule – New gasoline sulfur regulations in the U.S. will start taking effect in January 2004,
and diesel regulations will start in 2006. These tight deadlines can present project planning and
execution challenges, and require more innovative approaches to project planning and execution.

Cost – Since most clean fuels projects are "stay-in-business" rather than revenue generating
ventures, the lowest life-cycle total installed cost (TIC) approach needs to be considered. With
proper optimization, however, profit opportunities may exist. The challenge is to identify them
within the tight schedule and capital constraints facing the refiner.

Synergy – There are opportunities for synergies that impact both schedule and cost for refiners
with multiple refinery plants, for ad hoc consortia of refiners (for example, using the same
licensed technologies) and for regional clustering of refinery projects.

Due to very tight compliance schedules, refiners will have limited time to do conceptual design,
develop project scope of work, bid on equipment and services, order critical equipment, apply for
environmental permits, and construct and/or retrofit processing units.

Accordingly, clean fuels projects will require a different approach to project planning and
execution than traditional refinery projects. A much closer integration, or perhaps an alliance, is
needed between the refiner and the engineering, procurement and construction (EPC) contractor.
The traditional balance of project risks and rewards need to be reevaluated as well. In some
cases, a more innovative approach to incentives will allow the refiner to meet their goals, while
optimizing schedules and lowering costs.

The following examples define the pending processing changes required for gasoline and diesel
worldwide. When planning clean fuel projects, owners may consider using an alliance with an
EPC contractor to reduce total capital investment and shorten construction time for these "stay-in-
business" jobs.

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Clean-fuels regulations. New regulations are being enacted worldwide, which require petroleum
refiners to process cleaner-burning transportation fuels. These regulations involve primarily
reductions in sulfur levels in gasoline and diesel fuels. Other regulations are aimed at reducing
aromatics levels, and particularly benzene, olefins levels, volatility and the use of oxygenates. In
most countries, the new regulations are phased in over several years.

United States – Gasoline. Table 1 summarizes the new U.S. gasoline requirements. By
Jan. 1, 2004, the "corporate average" sulfur level in gasoline cannot exceed 120 ppm (weight
basis), with no refinery shipment to exceed 300 ppm. For 2005 and beyond, individual refineries
(except exclusions listed in Table 1) must average 30 ppm or less. For 2006 and beyond, the
corporate pool average sulfur content disappears, while the per-gallon sulfur cap is reduced to
80 ppm.

Table 1. U. S. gasoline sulfur standards for refiners, importers and individual refineries
(Excluding small refiners and certain Rocky Mountain states)

Compliance as of: Jan. 1, 2004 Jan. 1, 2005 Jan. 1, 2006

Individual refinery — 30 30
a
average sulfur, ppm
Corporate pool average 120 90 —
b
sulfur, ppm
Per gallon (shipment) 300 300 80
c
cap sulfur, ppm

a The refinery average standard can be met through the use of sulfur credits or allotments from the sulfur
averaging/banking/trading program, as long as the applicable corporate pool average and per-gallon caps are not
exceeded.
b The corporate pool average standard can be met through the use of corporate allotments obtained from other refiners,
if necessary.
c In 2004, exceedances of up to 50 ppm beyond the 300 ppm cap are allowed. However, in 2005, the cap for all batches
will be reduced by the magnitude of the exceedance.

Special provisions allow small refiners and plants located in the Rocky Mountain states to have
more time to reach the mandated maximum plant annual average sulfur level of 30 ppm. A small
refiner is defined as a company consisting of no more than 1,500 corporate-wide employees
(average of all pay periods between Jan. 1, 1998 and Jan. 1, 1999) and corporate-wide crude oil
processing capacity of less than 155,000 bpcd as of 1998.

California regulations, including MTBE phase-out, represent a special situation, which is outside
the scope of this article. Gasoline sold in California is exempt from meeting these new Federal
standards, because the EPA believes that California gasoline already meets or exceeds these
requirements. Some refiners are already marketing gasoline with a maximum of 10-ppm sulfur in
California.

Diesel. Table 2 summarizes the newly adopted EPA regulation for sulfur limits in highway
diesel. This regulation again emphasizes sulfur reduction. A higher cetane number has not yet
been mandated, although the auto industry has promoted such increases.

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Table 2. U. S. motor diesel sulfur standards for refiners, importers and individual refineries
(Excluding small refiners and certain Rocky Mountain states)

Compliance as of: June 1, 2006

a,b
Per gallon (shipment) cap sulfur 15 ppm
Per gallon cetane and aromatics 40 Cetane index (min.) or 35-vol. %
aromatics (max.)

a Refiners can take advantage of a temporary compliance option, including an averaging, banking and trading
component, beginning in June 2006 and lasting through 2009, with credit given for early compliance before June 2006.
Under this option, up to 20% of highway diesel fuel may continue to be produced until June 2010 at the existing 500-
ppm sulfur maximum standard, though it must be segregated from 15 ppm fuel in the distribution system, and may only
be used in pre-2007 model year heavy-duty vehicles.
b There are hardship provisions for small refiners to minimize their economic burden in complying with the 15-ppm sulfur
standard, as well as provisions providing additional flexibility to refiners subject to the Geographic Phase-in Area (GPA)
provisions of the Tier 2 gasoline sulfur program, which will allow them the option of staggering their gasoline and diesel
investments. Also, a general hardship provision allows any refiner to apply for relief on a case-by-case basis under
certain conditions.

Canada. Canada also has launched a program to reduce sulfur levels in gasoline and diesel
fuel. Table 3 summarizes the new limits for gasoline. For diesel, the Jan. 1, 1998 regulation still
applies, limited to a maximum of 0.05% sulfur in on-road diesel fuel.

Table 3. Canadian gasoline sulfur standards

Compliance as of: Jan. 1, 2002 Jan. 1, 2005

Individual refinery average 150 30
sulfur, ppm

Europe. The European Commission has accelerated its implementation schedule for lowering
sulfur in gasoline and diesel. Table 4 lists the new gasoline regulations, while the new diesel
regulations are given in Table 5. The average cetane number in Europe is currently higher than in
the U.S., and the even higher level of 55 currently under consideration will be difficult to achieve.

Table 4. EU auto oil gasoline standards

Compliance as of: 2000 2005

Sulfur, ppm 150 50
Aromatics, vol% 45 35
Benzene, vol% 1 ?

Table 5. EU auto oil diesel standards

Compliance as of: 2000 2005

Sulfur, ppm 350 50
Polycyclic aromatics, vol% 11 ?
Cetane number, min 51 ?

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Low-sulfur gasoline technologies. Most of the sulfur in today’s gasoline is derived from the
FCC naphtha. Therefore, to achieve 30 ppm or lower sulfur in the gasoline blends, refiners are
focusing on treating either FCC feed or FCC naphtha. Some plants have existing FCC feed
hydrotreaters, and others do not. The options are:

• Combine FCC feed hydrotreating (pretreating) with FCC naphtha treating (post-treating)
• Increase the pretreater severity to mild hydrocracking, with no post-treating
• Utilize post-treating alone.

Many technologies for pretreating are commercially proven and widely used. Table 6 lists the
post-treating technologies either currently proven or in various stages of development. These
processes are categorized both by chemistry type and the extent to which they are commercially
proven. Chemical-processing approaches to post-treating vary and include:

• Conventional hydrotreating
• Hydrotreating plus octane recovery, such as isomerization
• Catalytic distillation
• Adsorption
• Olefin alkylation with distillation of heavy-sulfur compounds.

Table 6. Post-treating technologies for FCC naphtha

Approach Technology supplier Commercial status

Near-comm.
Comm. Comm. and
proven demo developing
Conventional hydrotreating Many X
Selective hydrotreating ExxonMobil X
Scanfining
IFP Prime G X
ExxonMobil X
Octgain 125
ExxonMobil X
Octgain 220
UOP ISAL X
Catalytic distillation CD Tech X
Adsorption Phillips S Zorb SRT X
Olefinic alkylation BP OATS X

Editor’s note: This listing may not be all-inclusive.

The degree to which each post-treatment technology is commercially proven varies from being
currently proven to a demonstration unit under construction. In some instances, new catalysts
have been loaded into existing units to demonstrate the ability to meet product quality and
acceptable catalyst life. In general, those technologies that were fully commercially proven
(including catalyst life) do not feature octane maintenance or recovery and high naphtha yield,
which are both important to some refineries. The timing of the demonstration activities is vital to
those refiners who need to be online by 2004.

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There is some discussion about future U.S. regulations requiring gasoline sulfur level below
10 ppm. To achieve such a target would require treating other gasoline blend streams such as
alkylate and straight-run naphtha. Presently, U.S. and Canadian refiners have selected at least
five of the post-treating technologies. Even if not yet commercially proven, those technologies
offering a reasonable combination of octane maintenance and low yield loss will be preferred by
refineries that are short on octane, particularly if MTBE is either removed or reduced in their
gasoline blends. Similarly, technologies that do not require hydrogen due to their unique
chemistry approach could have site specific advantages.

Low-sulfur diesel technologies. Straight-run distillate can be hydrotreated at moderate

pressure to 30-ppm sulfur or even lower. Streams from FCC and thermally cracked resids might
require hydrocracking to achieve specifications below 30 ppm. In many U.S. and Canadian
refineries, existing diesel hydrotreaters can be revamped, in some instances with an additional
reactor to remove the sulfur from polyaromatic sulfur compounds. Low-sulfur diesel also can be
produced directly from gasoil hydrocrackers.

The situation in Europe is quite different. Cetane quality is higher in Europe than in the U.S. The
new EU regulations are even more stringent, with a mandated minimum of 51 cetane number. A
competitive refinery must contain middle distillate and resid conversion technologies, and the
distillates from such units must be used in a revenue-generating manner. These distillates
(except from resid hydrocracking) have low cetane indexes.

To exacerbate the situation, European refineries with visbreakers are faced with declining
demand and low-sulfur requirements for heavy fuel oil. The use of visbreaking as the resid
conversion process is likely to decline as the demand for heavy fuel oil declines. Consequently,
FCC light cycle oil (LCO) will no longer be used as viscosity reduction in visbreaker bottoms, and
will instead be used in diesel fuel blending. This will require a cetane uplift for LCO, as well as
visbreaker or coker distillate of about 18 cetane numbers to achieve the mandated minimum
cetane number of 51 with cetane improver included. That result is obtainable only with
hydrocracking at 2,000 psig or higher. Sulfur removal to low levels will be incidental in the case of
these difficult streams. To treat straight-run distillate, moderate-pressure hydrotreating via
revamped existing units will suffice.

Any increase in severity of hydroprocessing reduces product yield. In some instances,

undercutting of difficult streams may be necessary to avoid opening the heavier polycyclic sulfur
compounds, thus further reducing yield. Table 7 lists the available hydrotreating technologies for
sulfur reduction in diesel fuel.

Table 7. Available diesel desulfurization technology

Hydroprocessing Adsorption
UOP Phillips
IFP
Akzo
Criterion
Haldor Topsøe

Planning for optimal solutions. The main drivers of clean fuels projects are:

Schedule – Tight deadlines can present project planning and execution challenges, and require
more innovative approaches.

5
 Cost – The lowest life-cycle cost approach needs to be considered. With proper optimization,
however, profit opportunities may exist. The challenge is to identify such opportunities within the
tight schedule and capital constraints facing the refiner.

Synergy – There are opportunities for synergies that impact both schedule and cost for refiners
with multiple sites, ad hoc associations of refiners using the same licensed technologies, and for
regional clusters of refinery clean fuels projects (centralized tolling facilities, exchanging sour fuel
streams, etc.).

Due to these drivers, clean fuels projects require a different approach. A much closer integration,
or perhaps an alliance, is needed between the refiner and EPC contractor. The traditional
balance of project risks and rewards needs to be reevaluated as well. In some cases, a more
innovative approach to incentives will allow the refiners to meet their goals, while optimizing
schedules and lowering costs.

Large refinery upgrade projects can be executed in many ways. In the "traditional" approach, the
owners select the technology internally, apply their engineering standards and bid out the front-
end loading (FEL) (or definition) phase. The FEL phase can last up to 12 months, including the
bidding period. The owners then bid the resulting package – a process that takes several
additional months and involves extra costs. They then can apply three main approaches to
project contracting (with many variations): cost reimbursable (CR), lump-sum turnkey (LSTK), or
an alliance.

Traditional approach. The traditional approach (Fig. 1) assumes that the chosen EPC
contractor cannot add value to the earlier phases, including the FEL. Many have assumed that
the traditional "bid every step" approach ensures the most competitive project, and the lowest
capital cost. Yet, this approach usually does not produce optimal results. It certainly does not
provide for the shortest schedule, and does not produce the lowest-cost or best-finished plant.
More innovative contracting strategies can actually improve competition. We have assumed that
the cost basis for the resulting project is 100, and the schedule (from bidding of the FEL) is 40
months.

Fig. 1. The traditional approach involves bidding the front end

definition (FEL) and the EPC phases. This approach always
leads to a longer schedule, and usually does not produce
lowest cost or optimal quality.

Experience has shown that a good front-end definition and early integration of the owner’s team
with the EPC contractor is crucial to project success. One alternative approach to project
execution (Fig. 2), which has been practiced on several recent large projects, is a FEL
competition. This approach can be especially useful in situations in which the technology
selection is not clear following the scoping phase. Project owners have found that the additional

6
expense of a second parallel FEL can be justified if the end result is lower total installed cost
(TIC) and shorter project schedule. The comparative cost can drop by 10% or more compared to
the traditional approach in our hypothetical example, and the schedule can be shortened by up to
six months since the project can be awarded to the winner at the end of the FEL. With design
competition, the EPC contractor can influence the critically important FEL step, ensure that only
value-added specifications are used and still ensure competition.

Fig. 2. A FEL competition can be useful, especially when the

choice of technology is not clear. The additional FEL costs are
usually offset by lower project TIC. Schedule is shorter
because the project is awarded to the FEL winner.

Innovative approach. A third, even more innovative approach is the integrated project team
concept, or an alliance approach (Fig. 3). The owners choose to work with an EPC partner early
in the scoping phase, or at its conclusion, and progressively negotiate a FEL and EPC. Some key
criteria to use when selecting the right EPC partner are:

Fig. 3. The alliance, or integrated team approach leads to the

shortest schedule, and usually the lowest TIC. The scoping and
FEL phases can be conducted under a reimbursable contract,
which is then rolled into a lump sum EPC contract with
incentives.

• Experience in executing successful refinery and clean fuels projects

• Ability to take on large LSTK projects (especially when the project involves several
refineries)
• Potential to assist with project financing, if needed
• Proven technology and process engineering skills

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 • Flexibility and innovation in project execution
• A track record of value engineering
• World-class front end tools
• The right cost (for value added).

The scoping and FEL phases are typically conducted under a reimbursable contract. The
resulting FEL is then converted into an LSTK contract, with the appropriate incentives and
penalties. The benefits to the owner are the ability to cut costs and schedule further, to 80% in
cost and 28 months for the schedule, respectively, in our generic example. Working with an
alliance partner also allows the refiner to optimize equipment selection and construction labor
sourcing.

This innovative approach requires more innovative and advanced contracting skills, but fair
competition and the lowest price can be ensured through proper contracts, which have the right
balance of incentives and penalties. If used properly, this approach leads to the lowest cost and
shortest schedules. One example of how schedules can be shortened is the ability to pre-order
critical equipment during the FEL phase. A more detailed description of an efficient clean fuels
1
project schedule is shown in a recent NPRA article.

Analysis of more than 2,000 projects by Independent Project Analysis, Inc. (IPA), has shown
many projects fail to meet one or more major objectives, and a large gap remains between
successful projects and less successful ones. In response, many owners have adopted versions
of this new approach to project planning and execution. One recent example is shown in Fig. 4,
2
adapted from a BP presentation. It shows that the Atlantic LNG project set new standards when
compared to the 1998 IPA best in class LNG standard both in schedule and cost. Capital costs
for ALNG train 1 are about 25% lower than best in class (1st quartile), and the schedule is 15%
shorter than best in class.

Fig. 4. An example of a successful project using innovative

technology and project execution. The Atlantic LNG (ALNG)
project has set new standards vs IPA best in class
benchmarks. The first phase of ALNG started as a FEL
competition, and it was rolled into an LSTK contract with
incentives. The expansion phase was negotiated as a new
LSTK contract.

Synergy. Refining companies with multiple sites, or an ad hoc consortium of refiners, may find
various cost and schedule saving opportunities by bundling several smaller projects. An ad hoc
consortium can be regional, thus taking advantage of physical proximity (e.g., a central
processing facility for some streams). A non-local consortium of refiners using the same licensed
technologies can still offer benefits by pooling resources and opportunities that are usually
reserved to large refiners with multiple sites. Some potential opportunities for synergy are:

8
 • Replication of engineering for similar or identical units. Value-engineering methods can
be applied to designing standard, lower-cost units that can have applications at more
than one site.
• Optimal phasing of engineering, procurement and construction of similar units using the
same equipment packages can offer savings in costs and schedule in each project
phase.
• Applying lessons learned can minimize technology risks.

The right EPC partner can play a pivotal role in an alliance, and in being able to transfer lessons
learned on clean fuels projects using the same, or similar technologies.

Literature Cited
1
Moncrief, P. R., and R. Ragsdale, "Can the U.S. E&C industry meet the EPA’s low sulfur
timetable?" NPRA Annual Meeting, March 26 – 28, 2000 San Antonio.
2
Welch, S. K., "New gas for Europe – The Atlantic Mediterranean Basin," The European Summer
Gas Conference, June 23, 2000, London.

The authors
Amos Avidan is the Director of Petroleum and Chemicals Technology, Bechtel Corp. Mr. Avidan
has 20 years of experience in the areas of petroleum and gas production, refining, lubes,
chemicals, LNG and synthetic fuels. Prior to joining Bechtel, he worked for Mobil Oil, where he
held positions that included manager of catalytic cracking, manager of modeling and control,
manager of surface engineering, and vice president of gas technology. Mr. Avidan has authored
more than 70 publications and patents, and developed and taught the AIChE fluidization course.
He holds a Ph.D in chemical engineering from the City University of New York.

Ralph Ragsdale is a Executive Technical Director, Bechtel Corp., and manages Bechtel's
refining technology. Mr. Ragsdale has over 45 years of experience in planning and evaluation,
design, and operation of petroleum refineries. He has also worked for M.W. Kellogg, Fluor Corp.,
and Stearns Catalytic Corp., as well as, two operating companies. Mr. Ragsdale was NPRA Q&A
Panelist in 1979 and 1988, and ERTC panelist in 1996. Recently, he participated in the NPC
study of new U.S. Clean Fuels Regulations.

Ben Klein is a Refining Technology Manager, Bechtel Corp. Mr. Klein has over 27 years
experience in conceptual process design and development, supervision, plant operations,
revamps, refinery planning, troubleshooting and startup. He has expertise in most refining
technologies and most recently has worked in the areas of delayed coking and clean fuels
technologies. Prior to his position with Bechtel, Mr. Klein has worked as the refining technology
manager for ABB Lummus Global Inc., and held positions with other companies.