Technical

Newsletter
#34 - November 2016

PETROLEUM REFINING AND INSURANCE

PART I
Crude Oil Refining - a constantly evolving industry

Introduction
Refining can be considered by many as a mature and stable industry but it has changed drastically since the 19th century,
adapting to its ever-changing and challenging environment. Insurers have had to follow this transformation and adapt
their way of underwriting these risks.

Part I of this Technical Newsletter takes us on the journey the refining industry has had to travel.

In the beginning was the crude oil

Of interest to refiners and insurers is that petroleum has been
known and used in various ways (adhesives, flaming projectiles,
boat coating, lighting...), since ancient times. The first users of
GET UP EARLY, WORK LATE - AND
petroleum were located in the Middle East (Egypt, Babylon, STRIKE OIL. JOHN D. ROCKEFELLERS
Mesopotamia, Persia...) and China. RECIPE FOR SUCCESS.
Many types of crude oils are produced around the world.
The main components, primarily hydrocarbons, can be Sulfur and TAN(1) are good indicators of potential corrosion
differentiated by their properties, the most important of which problems and are therefore of interest to insurers.
is the boiling temperature as it allows for the primary separation
by distillation (see figure2). Today oil is still the primary source of energy with 32% vs 30%
for coal and 24% for gas according to the BP statistical review
The price of a particular crude oil depends on its characteristics, 2015 (see figure 1).
two of the most important of which are density and sulfur
content. Density ranges from light to heavy, while sulfur Figure 1: World Energy Consumption
content goes from sweet (low sulfur) to sour (up to 6% sulfur).
Coal
The density and concentration of contaminants such as sulfur Coal
Renewables
Renewables 14000
are good indicators of how easy to process the crude is and of 14000
Million tonnes oil equivalent per year

Hydroelectricity
Hydroelectricity
its price. The most well-known references for crude oil prices are Nuclear
Nuclearenergy
energy 12000
12000
Brent (North Sea) and West Texas Intermediate (WTI) however Natural
Naturalgas
gas
Oil
Oil 10000
10000
over 150 crudes are traded.
8000
8000

Did you know? 6000

6000

Barrel comes from the French Baril. Before it became 4000

4000
standard in 1860 during the Pennsylvnia oil rush
2000
the 42 Gallon (159 liters) barrels were first used for 0
2000

petroleum in Pechelbronn, Alsace where the first 1989 91

89 1993 95
93 1997
97 99 2001
01 03 2005
05 07 2009
09 11 2013
13 0
oil sands were mined and refined from 1745.
Source: BP Statistical Review 2015

(1)
Total Acid Number which is a measurement of acidity

1
Refining 1.01
A petroleum refinery is an industrial process plant where TURNAROUNDS AND OTHER
crude oil is processed into more useful products such as (by
order of volumes produced): MAINTENANCE ACTIVITIES ARE
IMPORTANT FOR THE INTEGRITY OF THE
Transportation fuels (gasoline, kerosene, diesel) PLANT AND THEREFORE OF PARTICULAR
Heating fuels (fuel oil) INTEREST TO INSURERS.
Petrochemical industry feedstocks (naphtha, propylene)
Liquefied Petroleum Gas (butane, propane) Due to the evolution of technology and automation, the
number of employees has decreased from several thousands, for
Lubricants example the Whiting Refinery in the US employed 3000 people
Bitumen in the early 1900s, to a few hundred in developed countries
depending on the level of contracting. In some cases, the number
Coke of employees could be higher, as it can be used by governments
as a means of employment. The skills of the employees have
Sulfur
significantly changed and the level of knowledge has increased
considerably.
Figure 2: Distillation of crude oil, Gas
20C
first step of refining
150 C Finally, the complexity of refinery operations is such that they can
be fully optimised to produce the highest possible margins, only
Gasoline
200 C through the use of Linear Programming (LP) models to respond
Kerosene
to changes in market environment and to the introduction of
300 C new (usually more stringent) product specifications and new
Crude Oil Diesel
crude slates.
370 C

Fuel Oil Refineries are composed of three main areas:

400 C

P
 ROCESS UNITS: where crude oil is actually transformed into
Lubricating Oil, final products.
Paraffin Wax,
Asphalt UTILITIES: produce all the utilities required by the process
FURNACE
Source: SCOR units such as power, steam, hydrogen, nitrogen, air, water
Basically crude oil undergoes physical and chemical processes. S
 TORAGE (feedstocks and products): required to store the
Figure 3 shows a typical refinery process flow diagram with usual crude oil and final products before they are expedited.
process units and final products. By nature, hydrocarbons
are flammable products and they are processed at high
temperatures and pressures in the presence of hydrogen,
which exacerbates their flammability and explosivity.
Hence, the safe operation of refineries requires a broad
range of highly trained and specialised personnel
(instrumentation, electrical, mechanical, process, safety...).

Refinery capacity is defined by the crude throughput and is

generally expressed in barrels per day (bpd). Refineries operate
continuously, 24 hours a day, 365 days a year, except when they
are shut down for the general maintenance of the units known
as turnaround. These take place every 4 to 5 years, usually lasting
5 to 6 weeks, during which time maintenance activities that
cannot be performed during normal operations are carried out.

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Figure 3: Refinery process flow diagram

Crude Oil
Tanker Pipeline

Gas

Gas
Liquid Atmospheric
Distillation
Atmospheric Residue
Distillation
Gas

Kerosene
Function:
Separates the
different products

Sour Gas
Vacuum Gas Steam

Naphtha
based on boiling
Distillation Plant Reforming points
Examples:
H2 -Atmospheric

Butane / Propane

Fuel Gas
Vacuum Residue distillation
-Vacuum distillation

Sour Gas
HDS

Sour Gas
Distillates

Treatment

Visbroken Gasoline
Function:
Removes the
Delayed MEROX Amine contaminants such as
Visbreaking HDT Washing
Coker sulfur and nitrogen
Sour Gas

from the feeds

Sour Gas

H2
Prepares streams for
Distillates

additional processing
Examples:
Coke
Light Coker Gasoil
Heavy Coker Gasoil
Coker Gasoline

Visbroken Residue
Visbroken Gasoil
Visbroken Gasoline

-Distillate and

H2 rich gas
gasoline
hydrotreatments
(HDS, HDT)
HDS Naphtha Claus Unit/
HDS Splitter Tail Gas

Light Naphtha
Sour Gas

H2

Heavy Naphtha
Upgrading
Light FCC Gasoil

Function:
Rearranges the
molecules to
improve the
properties of the
Catalytic Hydrocraking Heavy Naphtha feed
Cracking FCC Examples:
-Catalytic reforming
-Alkylation
Heavy FCC Gasoil

FCC Gasoline

Butenes

Propylene

Gasoil
Kerosene

Light Naphtha

Catalytic -Isomerisation
Isomerisation
Reforming

Butane / Propane

Lube Oil
Plant Conversion
Function:
Breaks down the
Methanol / Ethanol

heavy crude
fractions into lighter
Isobutene

products, such as
Butane

middle distillate.
Sour Gas

Examples:
H2
-Fluid Catalytic
Cracking (FCC)
-Hydrocracker
-Coker

HDT MTBE-ETBE Alkylation

Blending
Vacuum Residue

Asphalt

Lube Oils / Parafins / Waxes

Visbroken Residue

Heavy FCC Gasoil

Gasoil

Gasoil

Kerosene

FCC Gasoline

MTBE / ETBE

Alkylate

Light Naphtha
Reformate
Isomerate

Propylene

Benzene

Naphtha

Commercial Butane / Propane

Fuel Gas

Sulfur
Coke

Function:
Mixes the various
hydrocarbon
components
manufactured in the
refinery to meet the
final product
specifications
Examples:
-Blending areas with
pumps and
intermediate storage
tanks.

Blending Lube Oil Blending / Blending / Blending / Blending /

Blending Tank Farm Tank Farm Tank Farm Tank Farm
Additives Additives Additives

Bitumen Waxes Coke Own Heavy Fuel Heating Diesel Kerosene Gasoline Petro- Liquefied Fuel Sulfur
Coke Parrafins Refinery /Bunker Oil chemicals Petroleum Gas
Lube Oils Fuel Gases
Source: SCOR

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The complexity of refining processes has been increasing
dramatically
The refinery process has been Table 1: From simple to complex refineries
improved over more than 100 years
with the addition of new, more
CONFIGURATION NELSON DESCRIPTION
complex units.
COMPLEXITY
INDEX
The Nelson Complexity Index
(NCI), which allows to measure the
conversion capacity in comparison to Topping <2 This type of refinery simply separates crude oil into
light gas, refinery fuel, naphtha and distillates (final
the primary distillation capacity of any products) by atmospheric distillation. There are no
refinery, is used to compare refineries. chemical reactions involved.
It is an indicator of the investment
intensity or cost index of the refinery Hydroskimming 2-6 Upgrades naphtha into gasoline with catalytic
reforming and removes sulfur with hydrotreating units.
but also the potential value added of a
refinery (see table 1).
Conversion 6-12 Converts heavy crude oil fractions (fuel oil, asphalt low
The trend of increasing conversion value product) into lighter products (such as gasoline
and diesel).
capability will pull up the complexity
index as the worlds demand for lighter
products increases. Deep Conversion >12 Converts the heaviest and least valuable crude oil
fractions (residual oil) into lighter more valuable
products.
The complexity index has increased
over the years (see figure 4).

A short history of the petroleum and refining industry

The modern history of petroleum started when James In 1870, the US were the largest oil exporter and J. D Rockefeller
Oakes discovered how to produce kerosene from coal in founded the Standard Oil Company which by 1879 controlled
1847 in England. 90% of US refining capacity.

In 1857, Michael Dietz invented a flat-wick kerosene lamp that The demand for petroleum was relatively stable until the early
replaced whale oil and created a new market for crude oil. 20th century. The invention of electricity progressively replaced
kerosene lamps. The invention of the automobile and its mass
The advancement of crude oil production began when Colonel production shifted the demand to gasoline and diesel.
Edwin L. Drake developed a new technology to extract oil from
the ground near Titusville, Pennsylvania, using drilling, with a
steam engine, through a pipe. The first drop of oil came out
from the ground when the well depth reached 69ft, on Monday
29th August 1858, later producing 30 barrels per day. This
Did you know?
marked the beginning of the Pennsylvania oil rush. Colonel Drake was to end
up as an impoverished man.
The conjunction of those events triggered the oil and then the Pennsylvania voted an annuity
refining industry boom. In 1860-1861, seven refineries were of $1,500 to the crazy
built in Pennsylvania and Arkansas. By the end of the 1860s, man whose determination
58 refineries were in operation in Pittsburgh, primarily to recover founded the oil industry.
kerosene.

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Figure 4: Worlwide refining since the middle of 19th century

Global Refining Capacity (mbpd) Number of vehicles (millions)

100 1000

1973
90 900

80 800
GLOBAL REFINING oil crisis
70 700
CAPACITY
60 600

50 1870 500
Rockefeller founds the
40 Standard Oil company 400

30 1880 1908 300

20 Thomas Edison Ford T mass car GLOBAL NUMBER OF 200

invents the production VEHICLES
10 incandescent bulb 100

0 0
1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Vacuum
1932 1942 1954 1975 Biofuels
distillation 1913
FCC HDS Resid
1856 Thermal Coking Alternative
hydrocracking
Worlds first cracking Fuels
1952 1961
refinery 1858 Cat reforming Hydrocracking
in Ploiesti, Colonel E. Drake 1889 Refinery
1937 complexity
Romania developed a new Invention of gasoline Cat cracking
technology to extract oil motor by Daimler 14
from the ground by DEEP CONVERSION

drilling 12
CONVERSION

10

8
HYDROSKIMMING

4
TOPPING

1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Source: SCOR

The geography of refining now and its eastward shift

Most countries have at least one refinery. Refineries are Due to market conditions, new (or expansions of) refineries
often located on the coast. There are around 700 operating in Europe and the US are very unlikely. They are more likely in
refineries(2) in the world, ranging from 10 to 1240 kbpd, with Asia and in emerging countries where there is more economic
a worldwide capacity of 96.5 mbpd (according to the BP growth (see figure 5 on the next page).
statistical review 2015). Asia has the largest refining capacity
of 33.1 mbpd. The US follows with 17.8 mbpd. In counting
refineries, idle refineries have not been taken into account
nor have refineries that have been converted into terminals.
REFINERIES IN THE US AND EUROPE ARE
There have been a few of these in the past years especially in AGEING AND NEED INVESTMENT:
Europe (Reichstett ex-Petroplus in France, Wilhelmshaven ex- A POTENTIAL CONCERN FOR INSURERS.
Conoco in Germany, Cremona Tamoil in Italy). The 10 largest
refineries in the world are indicated in table 2 on the next page.

(2)
Upgraders, especially in Canada, have been excluded from the refinery count although processes are similar to refineries.

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Table 2: Largest refineries in the world

Reliance SK Motiva Saudi Royal Dutch

COMPANY PDVSA GS Caltex S-Oil ExxonMobil ExxonMobil
Industries Energy Enterprises Aramco Shell

LOCATION Ulsan, Yeosu, Ulsan, Port Baytown, Ras Tanura Pernis,

Jamnagar, Paraguana,
South South South Arthur, Singapore TX, Saudi The
India Venezuela
Korea Korea Korea Texas, USA USA Arabia Netherlands

CAPACITY
1,240 940 850 775 669 600 592 560 550 416
(KBPD)

Source: SCOR

Europe has lost 20 refineries between 2007 and 2014 and the New and recent refineries are large and complex, mostly located
refining capacity has reduced by 20%. in Asia and Middle-East.

Figure 5: Global map of refineries (in 2016)

Refining capacity (BPD)

> 300 000 EUROPE
100 000 < crude < 300 000 Refineries: 98 NCI: 11
50 000 < crude < 100 000 Refining Capacity: 14.6m bpd
< 50 000

US GULF COAST
Refineries: 55 NCI: 12
Refining Capacity: 9.2m bpd

Refining
Complexity (NCI)
NCI> 10

8 < NCI < 10

6 < NCI < 8 RUSSIA & CENTRAL ASIA

Refineries: 98 NCI: 6
NCI< 6 Refining Capacity: 7.7m bpd

Refining capacity
(BPD)
> 1 000 000
500 000 < crude < 1 000 000
200 000 < crude < 500 000
< 200 000

NORTH AMERICA SOUTH & CENTRAL AMERICA AFRICA MIDDLE EAST ASIA-PACIFIC
Refineries: 157 NCI: 11 Refineries: 64 NCI: 6 Refineries: 47 NCI: 6 Refineries: 57 NCI: 5 Refineries: 246 NCI: 8
Refining Capacity: 21.2m bpd Refining Capacity: 6.3m bpd Refining Capacity: 6.3m bpd Refining Capacity: 9.8m bpd Refining Capacity: 33.1m bpd

Source: SCOR

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Refining has been evolving in recent decades due
to external constraints
Refining has had to adapt to 3 main external constraints on refineries themselves and on finished products.

Refineries have been increasing their conversion rates to adapt to heavier

crudes
In many manufacturing industries such as car, electronics, With the development of oil fields worldwide, the crude slate
chemicals... raw materials have tight specifications to has been changing over the past decades, becoming heavier and
produce very specific and identical products, whereas containing more contaminants, such as sulfur, as per figure7.
refineries adapt to different crudes and optimise
operating conditions to achieve varying product yields, as New sources of oil have also become available: shale oil and oil
per figure6. sands.

Figure 7: Sulfur up, API(3) down

HEAVY CRUDES HAVE PROPERTIES
DIFFERENT FROM CONVENTIONAL 35.0 1,45

CRUDES (CONTAMINANTS, DENSITY) 34.0 1,33

Sulfur Content, wt%

API(3) Gravity-Degrees

THAT BRING NEW CHALLENGES 33.0 1,21

INCLUDING CORROSION, TO REFINERS
AND THEIR INSURERS. 32.0 1,09

31.0 0,97

30.0 0,85
Figure 6: Crude yields vary considerably 1981 1984 1987 1990 1993 1996 1999 2002

Source: IEA
Market Sahara Brent Arabian Light Safaniyah Boscan
demand (Algeria) (North Sea) (Saudi Arabia) (Saudi Arabia) Heavy Oil
(World) (Venezuela)
0%
Gas
Consequently, refiners have had to invent new technologies to
increase conversion, to be able to produce the same volumes of
20%
Light refined products.
40%
Product demand has been changing, thus requiring
Middle
60% distillates refineries to adapt.

80% Generally speaking, the product slate (gasoline, diesel...)

Heavy
products obtained by simple distillation of any crude oil does not meet the
100%
market demand in terms of volume, nor in terms of properties.
Density 0,806 0,837 0,855 0,893 0,995
In order to meet the specifications required by the end users,
API(3) 44 37,5 34 27 10,7
refinery schemes have added new upgrading units, such as
Sulfur content 0,2 0,3 1,7 2,8 5,3 in the 60s-70s, reforming units to produce premium gasoline.
Wt %
Source: SCOR

(3)
API gravity is an inverse measure of density.

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The demand for finished products has evolved towards more In order to be able to process a wider range of crudes and to
diesel engines in Europe (see figure 8). This has been leading to adapt to the changing demand, refineries have to be more
a structural imbalance between gasoline and diesel. flexible, and need the construction of new conversion units such
as FCCs, hydrocrackers and cokers.
Figure 8: Road fuel demand in Europe
250 2.5
The hydrogen challenge
200 2
Million tonnes per year

The changes in the refinery configuration have led to new

technical challenges for refiners. One of the most important is
150 1.5
the increase in hydrogen consumption. Indeed, in the simple
refinery scheme, hydrogen is in surplus and is produced in the
100 1
reforming units. But with new conversion units, particularly
hydrocrackers and hydrotreatments, requiring hydrogen in
50 0.5 large quantities, new hydrogen production capacities have been
required and new units have had to be built.
0 0
2000 2002 2004 2006 2008 2010 2012 2014

GASOLINE DIESEL
Source: Fuels Europe

Environmental legislations have been increasingly constraining on refineries

and their products
Refineries generate a lot of emissions in the environment,
which have been increasingly controlled by a lot of new
regulations, adding new constraints on the production tool
(see figure 9).
In addition, finished products have had to become green(er)
adding another constraint on refineries.
Different legislations in the US (California Air Resources Board,
Environmental Protection Agency) and in Europe (European
Commission) were passed imposing new product specifications
to protect the environment (from acid rains, for example), to
improve the air quality, and public health. These continuous
regulation changes and emission control have led to significant
changes in the refinery configuration, as illustrated in table 3.

Figure 9: New regulations that affect refineries.

PLANT EMISSIONS
Flaring Metals
H2S CO2 (Green House effect) CLEAN AIR ACTS
CO SO2
VOC (Benzene, Butadiene) NOX
Particles

Neighbourhood
nuisances

Noise, Odours
Smoke, Flare PRODUCTS

CO2 SO2
CLIMATE LEGISLATION
NOX Particles
HC NOX
SO2
Particles
FUEL PRODUCTS LEGISLATION
MOTOR FUEL FUELS

Waste

WATER OR GROUND SOIL AND WATER LEGISLATION

Source: SCOR

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Table 3: Refinery responses to regulation changes

YEAR TITLE REGULATIONS AIM SPECIFICATIONS REFINERY RESPONSES

Lead Phase To remove lead additives from Lead, used as an octane booster, New reforming / isomerisation
1970s
Out gasoline due to their toxicity is prohibited in gasoline units to boost octane

To reduce air pollutants such as US: min 2 wt% oxygen content in gasoline Incorporation of alcohols (methanol,
Addition of ethanol) or ethers (MTBE, ETBE).
1990s CO, NOx, PM (particulates), VOCs EU: max 3.7 wt% oxygen
oxygenates
(volatile organic compounds) content in gasoline New MTBE or ETBE units

Benzene To reduce the benzene content in US: benzene content max 0,62 vol% New Benzene splitters or
2000s
reduction gasoline as benzene is carcinogenic EU: benzene content max 1 vol% Benzene hydrogenation units

Sulfur in gasoline (max) New hydrotreatment units to

Sulfur US: 2006: 30 ppm from 2017: 10 ppm
2000s To reduce SO2 emissions remove sulfur from gasoline and
reduction
EU: 2009: 10 ppm (EURO V) diesel, with specific levels

EU: max sulfur content 0.10% in bunker

Marine Fuel To reduce the emissions of Reduction of fuel oil production by
2010s fuel oil for ships in the Baltic,
Legislation ships in some EU areas addition of new conversion units
the North Sea and the English Channel

The impact of those regulations on car emissions have been South America have started to adopt legislations on emission
substantial. Similar legislation trends can be observed worldwide. standards. These specifications are likely to be even tighter in the
It started in the developed countries (Europe, Japan and the future. Refineries will have to continue to invest to meet these
USA) and now most of emerging countries in Asia, Africa and new requirements.

Greenhouse Gas (GHG) emission reduction

In the last 20 years, the effects of greenhouse gases (such as
CO2) on global warming have been demonstrated.
The United Nations has addressed it with the UNFCCC (United
Nations Framework Convention on Climate Change) which
is the parent treaty of the Kyoto Protocol signed in 1997.
It established a commitment for the 196 State Parties to reduce
their greenhouse gas (GHG) emissions.
The Conference of Parties (COP), which is composed of all state
parties, meets annually at world conferences and checks the
successful implementation of the objectives of the Convention.
Three of them are further developed in this newsletter:
Refineries have to increase their energy efficiency to
reduce GHG emissions
Refineries need to burn large quantities of fuel to generate heat
and power. To meet their requirements, refineries have many large
furnaces. They are important contributors to the GHG emissions.
So tighter regulations (on sulfur), and the need for conversion
units have actually increased CO2 emissions of refineries (red curve
of figure 10).

The main objective of COP21 (the 21st session) held in Paris
in December 2015 was to achieve an agreement on climate
in order to maintain global warming below 2C. To reach this
target, GHG emissions will need to be reduced by 40-70% by
2050.
Several options are available to achieve this through the use of
biofuels, lower GHG fuels (natural gas, LPG), energy efficiency,
carbon capture and storage (CCS)...
In order to meet their targets in terms of reduction of GHG
emissions, refineries have had to reduce the energy required (see
figure 10) to operate the units and several options are available:
H
 eat recovery improvement by installing more efficient heat
exchangers
O
 ptimisation of operating conditions through new advanced
process controls in order to reduce the energy consumption

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 Use of more efficient technologies:
Catalysts operating at lower temperatures,
hence reducing the energy consumption
Distillation columns with high efficiency trays
Several legislations have imposed the incorporation of biodiesel
and ethanol in fuels. As a result the addition of biofuels has
been increasing over the past 10 years (see figure 12).
Figure 12: Global biofuel production 1995-2015

High efficiency burners for fired heaters

Billion liters
Cogeneration plants 140

H
 ydrogen management (Hydrogen recovery in purges, new 120

dedicated hydrogen production units) 100

80
O
 ptimisation of utilities (steam production and recovery,
60
flaring reduction).
40

20

0
Figure 10: EU refineries energy intensity index
1995 2000 2005 2010 2015
Total Energy Consumption per tonne

115 EU biodiesel Brazil ethanol

Total Energy
110 Consumption EU, China, Canada ethanol USA ethanol
per tonne
105 Energy intensity Source: IEA
index (Ell)
and Ell relative to 1992

100 Note: the lower

the Ell, the higher As of today, most of the biofuels used are obtained from
95 the energy efficiency
of a refinery edible materials (i.e. vegetable oils and sugars) and are called
90 conventional biofuels.
85 However, this situation is not sustainable on a long term basis, as
1992 1996 2000 2004 2008 2012
it enters in competition with the use of land for food.
Source: Solomon associates To address this point, the European Parliament adopted an EU
Council text that limits the amount of food crop-generated
Renewable fuels production has to increase, to reduce biofuels by 2020, with a cap set at no more than 7% of
GHG emissions transports energy consumption.

Different studies have demonstrated that the use of renewable This binding legislation encourages the development of biofuels
fuels is an efficient way of reducing the carbon footprint (refer produced from non-edible materials (see page 11 for more
to figure 11). details), wich are called advanced biofuels.

Figure 11: Greenhouse Gas Emissions of transportation fuels by type of energy

Did you know?
19%
Reduction 28% In 2015 in most countries, the gasoline
Reduction used in cars contained up to 15% bio-
ethanol. In Brazil, this goes up to 25%
52% and most cars are equipped with flex
Reduction fuel engines able to run on 100% bio-
ethanol made mainly from sugar cane.
78%
Reduction 86% In the US, the Renewable Fuel Standard
Reduction
(RFS) requires that transportation fuel
contains a minimum volume of renewable
fuels to limit the GHG emissions. The
Gasoline Corn Ethanol Sugarcane Cellulosic volume of blended renewable fuels has to
Petroleum Current Natural Biomass Biomass Biomass be multiplied by 4 from 2008 to 2022; in
Average Gas other words an annual growth rate of 10%.
Source: Alternative fuel data centre, US department of Energy

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What are biofuels?

Biofuels (bioethanol in gasoline and biodiesel in diesel) technologies fall into three main categories depending on the raw materials
they use.

The 1st generation of biofuels uses edible materials obtained
from wheat, corn, sugar cane, palm oil also used for feeding
humans. These are called conventional biofuel technologies.
They are well proven and are producing biofuels on a
commercial scale, such as in Brazil, the USA
The 3rd generation of biofuels uses materials not obtained from
soils, such as algae. These technologies are very promising, as
the feedstock is available in very large quantities, but they are
under R&D stage and will not be available for several years.

T he 2nd generation of biofuels uses non edible materials,

obtained from dedicated rapid growth crops (jatropha, wood,
straw, dry agricultural residues) to produce bioethanol or
animal fat and vegetable oils to produce biodiesel. These BIO
technologies are under development (R&D or pilot stage), with
few exceptions at an early commercial stage.

Production of alternative fuels will have to increase to reduce GHGs.

Along with renewable fuels, the reduction of GHGs can

be achieved by developing alternative fuels that are less LIQUID FUELS OBTAINED FROM
carbon intensive.
BIOMASS OR GAS CAN SIGNIFICANTLY
Alternative liquid fuels can be produced from various sources: REDUCE CO2 EMISSIONS COMPARED TO
Gas or Biomass. In most cases, the first step is to produce syngas CONVENTIONAL LIQUID FUELS.
(hydrogen + carbon monoxide) by various processes, which is
then converted into liquid (mainly diesel) through the so-called
Fisher Tropsch (FT) process (refer to figure 13). These technologies have not been utilised on a wide-scale, as
only five gas-to-liquid (GTL) plants are currently in commercial
operation. GTL plants are located in countries where natural gas
Figure 13: X-to-liquid technologies - GTL, BTL.
is abundant such as Qatar and Nigeria.
X-TO-LIQUID TECHNOLOGIES - GTL, BTL

Pearl GTL, located in Qatar, is the worlds largest GTL plant. It has
GAS-TO-LIQUID (GTL)
a capacity of 140 kbpd and was started up in 2011.

Syngas
Syngas
FT
GTL Diesel
The diesel produced from biomass-to-liquid (BTL) generates
Generation + Upgrading
86% less CO2 emission per km, according to a study carried out
NATURAL GAS
by Concawe in 2006.

BIOMASS-TO-LIQUID (BTL)
No commercial-scale biomass-to-liquid (BTL) complex has been
Syngas FT installed yet.
Syngas BTL Diesel
Generation + Upgrading
BIOMASS

Source: Axens

SCOR GLOBAL P&C - TECHNICAL NEWSLETTER #34 - NOVEMBER 2016 11

In the top 4 for process innovation
According to data presented by the European Commission in
its annual competitive report, the refining industry was the
leading industrial sector in process innovation and among
the top 4 for product innovation. Research and Development
(R&D) is a key part of refining industry, it has allowed it to deal
with the challenges posed by new environmental legislations,
new product specifications and to improve refining margins...
One example is developed here below: catalysts.
Catalysts
Catalyst manufacturers have adressed refining contraints by
developing new formulas however this often requires intensive
R&D work, several years before a new catalyst is commercialised.
Catalysts are at the heart of the processes and key to the
refineries performance. As the catalyst is consumable, changing
the catalyst type is an easy way for refiners to increase the
performance of their operations.
Conclusion
By nature, the refining industry is very complex and has
constantly been evolving and adapting since the 19th century.
As a result, underwriters of petroleum refining have also
had to innovate as they need to consider new technologies,
changing crude oil quality and its consequences on issues such
as the ageing of refineries and corrosion. These points will be
further developed in Part II of this publication.
Forecasters predict an increase in global refining capacity in the
coming years, which means a potential growth of insurable assets.
However energy predictions are very difficult with lots of factors
and uncertainties, political, societal, technical, economic
Michel KRENZER
Onshore Energy Manager, EMEA Team
Global Onshore Energy Practice Leader
+ 44 203 207 8633
mkrenzer@scor.com
PLEASE FEEL FREE TO VISIT US AT SCOR.COM
SCOR Global P&C
5, avenue Klber - 75795 Paris Cedex 16
France
scorglobalpc@scor.com
There are 3 main R&D areas to improve refining performance:
activity (to process more difficult crudes, i.e. higher density and
higher contaminant content),
selectivity (to produce the right products while minimising the
unwanted ones),

stability (to increase the catalyst life and minimize the
number of days of unit shut-downs, with subsequent loss of
production).
Did you know?
Catalysts are made of a support, usually an
inert material (alumina) with a specific shape
on which the active component (platinum,
palladium, cobalt, nickel) is dispersed. The
metal / support combination is specific to
each catalyst and is part of the know-how
of the catalyst manufacturer.
Environmental constraints are currently aimed at moving
towards a low carbon world and developing renewable energies
as illustrated by the 2015 Paris agreement. This will put refineries
under further pressure to improve emissions and will impose
higher production levels of renewable fuels and alternatives to
traditional fuels.
We are confident that refiners will manage to further adapt to
tomorrows challenges and invent new technologies. Refining in
the future will be cleaner and more productive.
Jean-Christophe CANDELON
Onshore Energy Underwriter
+44 203 207 8698
jcandelon@scor.com
TO GET THE FULL RANGE OF TECHNICAL NEWSLETTERS, PLEASE CONTACT SCORGLOBALPC@SCOR.COM
Editor: SCOR Global P&C Strategy & Development
ISSN: 1967-2136
No part of this publication may be reproduced in any form without the prior permission
of the publisher. SCOR has made all reasonable efforts to ensure that information provided
through its publications is accurate at the time of inclusion and accepts no liability for inaccura-
cies or omissions.
November 2016 - Design and production: Periscope