› Investment Plan for Future Fuel Specifications

› Dr. Sachi N. Maiti, Global Director - Technology Taskforce

› Lark Chapin, Global Director - Refining

September 24, 2018

Our vision
We strive to be the premier engineering
solutions partner, committed to delivering
complex projects from vision to reality
for a sustainable lifespan.

2
Refineries in INDIA
Location Capacity, MMTPA (*)
IOCL 69.3
Barauni 6.0
Koyali 13.7
Haldia 7.5
Mathura 8.0
Panipat 15.0
Guwahati 1.0
Bathinda
Digboi 0.7 Panipat
Bongaigaon 2.4
Paradip 15.0
Mathura
HPCL 27.1 Digbol
Mumbai 7.5 Bongaigaon Numligarh
Visakh 8.3 Barmer Guwahati
Barauni
JV with HMEL Bhatinda 11.3
BPCL 33.5 Bina
Mumbai 12.0
Vadinar Jamnagar Haldia
Kochi 15.5
JV with BORL Bina 6.0 Koyali

CPCL 11.5 Paradip

Manali 10.5
Mumbai
Cauvery Basin 1.0
NRL Vishakhapatnam
Numaligarh 3.0 3.0
Tatipaka
ONGC Tatipaka 0.1 0.1
MRPL Mangalore 15.0 15.0
Reliance 68.2
Jamnagar DTA 33.0 Manali, Chennai
Mangaluru
Jamnagar SEZ 35.2
NEL 20.0 Nagapattinam
Vadinar 20.0 Kochi Refineries
Total 247.7
Refineries under construction
* As of July 2018

3
Refining Market Drivers
› Demand – Supply Imbalance
› Strong GDP growth rate, increasing population and urbanization of households demand for
transportation fuels; primarily gasoline and diesel fuels
› In addition, the integrated production of petrochemicals is also growing
› Environmental Regulation
› The increased demand for fuels and petrochemical feed stocks increases emissions…which
internationally governments are regulating with increasingly strict standards for “clean” fuels
› Legislation around the world has mandated and continues to mandate decreased emissions
and lower levels of airborne pollutants
› Higher Quality Products
› Rules for gasoline and diesel have led the way with tighter fuel quality specifications
› IMO 2020 now mandates the sulphur in marine fuels to be reduced to 0.5 wt% from 3.5 wt%
by January 2020

4
India Refining Demand
› Projected Demand by 2040
“Oil refining capacity in the country stands at over 247 MMTPA at present and demand …. will touch 600 MMTPA
by the year 2040”
- Mr. Dharmendra Pradhan, Minister of Petroleum and Natural Gas, 22nd Refining and Petrochemicals Technology Meet,
Bhubaneswar, January 2018 – The Economic Times

› New Grassroots Projects

9 MMTPA Barmer refinery in Rajasthan
and 60 MMTPA West Coast Refinery
and Petrochemicals (IOC, BPCL, HPCL JV)

5
Bharat Stage VI Fuel Standard
Fuel Type BS-IV BS-VI
Gasoline
Density @15°C 720 - 775

RON / MON , min 91 / 81

Sulphur, ppmw, max 50 10
RVP @ 37.8°C, kPa, max 60

Benzene, vol%, max 1

Olefins, vol%, max 21

Aromatics, vol%, max 35

Distillation E150, vol% min 75

Distillation FBP,°C max 210

Diesel
Density @15°C 820 - 845 820 – 860
Sulphur, ppmw, max 50 10
Cetane No., min 51

PAH, wt%, max 11

Distillation 95 vol%, °C max 360 370

6
IMO 2020 - Marine Fuel Sulfur
* IMO Marine Environment Protection Committee
revised Annex VI at 57th Meeting in 4/08
accepted 10/08 and effective 3/10

5.0 Study in 2018 determines availability of

LS fuel and start date for 0.5% S limit
4.0
Global

3.0 SECA
Sulfur, wt. %

2.0

1.0

0.0
2005 2010 2015 2020 2025 2030

7
Gasoline Sulfur – Worldwide
Maximum Sulfur Limits in Gasoline, 2017
Armenia, China, Georgia, Macau and the U.S. required 10 ppm since January 2017

Legend:
0 – 10 ppm
11 – 30 ppm
31 – 50 ppm
51 – 150 ppm
151 – 500 ppm
501 – 2500 ppm Countries may apply lower limits for different grades,
regions/cities, or based on average content. Detailed information
Not regulated/
on limits and regulations can be found at www.stratasadvisors.com
No information
Source : Stratas Advisors, May 2017

8
Diesel Fuel Sulfur – Worldwide
Diesel Fuel Sulphur Levels: Global Status, July 2018

Legend:
15 & Below
>15 – 50
>50 – 500
>500 – 2000
>2000 – 5000
>5000 & Above
Conflicting / Missing Data

* Information is in parts per million (ppm)

For additional details and comments per country visit unep.org/transport/

9
Typical Refinery Configuration (zero residue)
Buy Sell
Fuel Gas

Light Ends LPG

Gas Plant

Naphtha C5/C6
Naphtha Isomerisation
HDT Splitter

Naphtha Gasoline
Catalytic Benzene
Reforming Reduction
CDU

Crude Kerosene Kerosene

Oil KHDT

Gas Oil Diesel

GHDT

LVGO Alkylation
VDU

HVGO
Hydrocracker
FCC

Electricity, Steam & H2

for Refinery Use
Residue Coker
IGCC Electricity

10
Integrated Configuration
Buy Sell
Fuel Gas
(Refinery Use) LPG
Gas plant Sulphur

Crude Oil Benz. / Toluene

Isomerization & Aromatics
Reformer Complex
PTA

Atm. PET for Bottle

Hydrotreater
Dist MTA Unit PET Unit

Gasoline

Jet Kero /Diesel

Vac. Isodewaxing/ Lube Lube Oils

Hydrocracker
Dist. Hydrofinishing Blending

H2 for Refinery Use

Acrylic Acid

Syngas Methanol Acrylic Acrylates

MPG MTP
Unit Acid Unit

11
Blending Complexity
Gases to Fuel, LPG, Petrochemicals Plant etc.

Blending
Further
Processing

Intermediate Components

Finished Products
Crude/ Further
Vacuum Processing
Distillation
Unit

Crude Oil

Further
Processing

12
Refinery Products – Gasoline Blending

Gasoline
purchased Blend grade
N-Butane
Unleaded
LSR
Isomerate Mid-Grade
Reformate Unleaded
Cat Naphtha
Premium
Coker Naphtha
Unleaded
Hydrocrackate
Alkylate RBOB
Raffinate
PBOB
Additives

RBOB: Reformulated Blend stock for Oxygenate Blending

PBOB: Premium Blend stock for Oxygenate Blending

13
Evaluating the Options

14
Road Map for Identify, Evaluate, & Select

Evaluate
More Detailed
Review

Recommend
Agree Plant Economic &
Market Cost Estimates Configuration
Objective Configuration Financial
Analysis (Select)
(Identify) Study Analysis

Constructability Studies

Develop Offsites / Utilities /

Marine Facilities Concept

Site Selection
Env. Studies

From minor revamp to complex multi-billion dollar investement

15
Refinery Profitability – The Drivers

Refinery Profitability

Input Costs Refinery Reliability &

Product Value
Configuration Efficiency

Complexity Size Market

Crude Oil Demand
Crude Flexibility Uptime &
Intermediate Feed Utilization Location
Price
High Value Turndown Freq & Competition
Products Duration
Utility cost
Inventory
Catalyst & Liq Vol Gain & Yield Opex
Chemicals Cost Seasonal &
Capex Other Risk
Financial Cost Capacity Factors
Constraints

Refinery profitability is an extremely complex, multi-variable problem

16
Economic Feasibility with LP Modelling
› Data Interfacing at Different Steps ....

LP
Data Generation Cost Estimation Financial Analysis
Modelling

In-House Material
Data Bank IRR
Balance
Total Investment
Client Cost Sensitivity
Utilities
Market
Survey Optimum
Process Unit
Licensor Capacities
Profit Function
Engg.
Deptt. Configuration
Sensitivity
Analysis

17
Linear Programming Modelling ....
› LP Formulation

› Linear Objective Function : Y = F (x)

› Profit = Product Revenue - Feedstock - Operating Cost

› Linear Constraints
A.x = b Equality
G.x ≥ p Inequality
m≤x≤n Bounds

› Matrix Solution – Feasible Solution

18
Case Study
› 10 MMTPA Capacity
› 50/50 Arab Light & Heavy Crude Mix
› Price Basis Year : 2005 ; Project Life : 15 yrs.
› Product Spec. : Euro 4
Process Unit Configuration
Configuration #1
1 2 3
Buy Sell
CDU X X X
VDU X X X Fuel Gas
Light Ends LPG
VGO Recycle HCU X Gas Plant

VGO OT HCU X X Naphtha Naphtha C5/C6

NHDT X X X HDT Splitter Isomerisation

Naphtha Gasoline
GO HDT X X X Catalytic Benzene
Reforming Reduction
Cat Reformer X X X

CDU
Crude Kerosene
Kerosene
Oil KHDT
FCCU X X X
Gas Oil Diesel
Alkylation X X GHDT
Cat Poly X X
LVGO Alkylation
Delayed Coker
VRDS X X Cat Poly
VDU

HVGO
Hydrocracker
Deasphalting X FCC

Resid FCCU X Electricity, Steam &

H2 for Refinery Use
Gasification (IGCC) X X X Residue SDA
IGCC Electricity

* Source: Sachi N. Maiti et.al, Hydrocarbon Processing, June 2001

19
Results – Case Study
Configuration No. 1 2 3
Investment 1635 1801 1768
Products Sale 1338 1238 1183
Feedstocks Cost 699 739 732
Utility & Oper Cost 186 150 147
Maint, Tax, Ins etc. 90 96 99
Net Op Profit 363 253 205
Depreciation 109 120 118
Income before Tax 254 133 87
Income Tax @30% 76 40 26
Income after Tax 178 93 61
Cash Flow 287 213 179
Payback Period 5.7 8.4 9.9

All figures are in million USD and annual basis * Source: Sachi N. Maiti et.al, Hydrocarbon Processing, June 2001

20
Financial Analysis ....
› Time Value of Money 1500

› Cash-Flow – Before & After Tax 1000

Payback Period = 5.7 Yrs
› Pay-back Period
500

Cash Flow, Million US $

0
› Net Present Value (NPV ) > 0 ? -5 0 5 10 15
› Average Discount Rate -500
› NPV > 0 , Accept Proposal Year
-1000

-1500
› Internal Rate of Return (IRR)
› NPV = 0, What Rate ? Cumulative Cash Flow (after Tax)

21
 Financial Analysis ....

› Sensitivity Analysis
› Uncertainty & Risk
› Sales Revenue
40,0
› Operating Cost
30,0

R (% )
› Investment Cost

IRRIR(%)
20,0
10,0
0,0
-20 -15 -10 -5 0 5 10 15 20
Variation (%)
Variation (%)
Sales Revenue
Sales Revenue OP
OPCost
Cost Fixed assets
Fixed Assets

Sensitivity ofIRR
Sensitivity of IRR
* Source: Sachi N. Maiti et.al, Hydrocarbon Processing, June 2001

22
In Summary….
› Complexities of Clean fuel projects:
› Typically require a variety of process units
› Take place on revamping and expansion of existing refineries and/or new grassroots
project
› Are a “Stay in Business” project

› Linear Programming provides the evaluation tool needed to:

› Optimize configuration based on refinery profitability & required clean fuel specifications
› Objectively make technology & licensor selections
› Generate input for budgetary project cost estimation
› Support financial analysis
› Develop an Investment Plan
› Prepare bankable feasibility report

Investment Plan for Future Fuel Specifications

23
Our values are the essence of our company’s identity.
They represent how we act, speak and behave together,
and how we engage with our clients and stakeholders.

We put safety at the heart of

everything we do, to safeguard
people, assets and the environment.

We do the right thing,

no matter what, and are
accountable for our actions.

We work together and embrace

each other’s unique contribution
to deliver amazing results for all.

We redefine engineering
by thinking boldly, proudly
and differently.

24