My apologies for the slow follow up but I am afraid work must come first. My attention has been on how the EU chemical industry is going survive with the net zero demands of the politicians. Simple answer it will be nearly wiped out .

Today I want to discuss gasoline production which to many is a hot topic for those not buying into EV’s. All the briefings in the index can be discussed but I think that gasoline blending is probably the best follow on from basic refining.

Most refineries are primarily designed to produce transport fuels : gasoline , jet fuel, diesel. The other products are typically LPG, residual fuels (ship bunkers), bitumen and sulphur.

Some refineries are integrated into petrochemical plants that produce base petrochemicals and intermediates.

In the US gasoline makes up the main transport fuel, something like 45% of the crude barrel. In the EU it is about a quarter of the crude barrel. In terms of complexity and embedded energy gasoline is both complex and energy intensive compared with jet and diesel. In the past 20 years there has been pressure to reduce sulphur in gasoline and diesel down to 10 ppm in most developed countries. Low sulphur diesel is much more energy intensive for diesel that gasoline. The high energy cost of gasoline is due to the number of components that must go through some transformation processes. These include catalytic reforming, catalytic cracking, alkylation, and desulphurisation.

The first slide provides a definition of octane. There are two octane numbers.:

Research Octane Number - RON

Motor Octane Number – MON

The RON test method is less severe that the MON. The RON number is equivalent to a cruising constant speed whilst MON is equivalent to an engine under load or accelerating conditions.. In the EU to RON is posted on the pump, whereas in the US the Octane number is the antiknock index (AKI) which is the RON + MON/ 2. The EU EN228 gasoline specification is becoming the global norm. The US gasoline specs are similar but not exactly the same. The US reformulated gasoline spec varies the most. A 95 RON EU gasoline is equivalent to a 92 octane US gasoline. The octane number is related to the autoignition temperature. Gasoline has a much higher autoignition temperature compared with jet fuel and disesel.

To determine the octane number the component or fuel blend is run through a CFR engine which measures the RON and MON of the sample. The reference fuel is a mix of iso-octane and n-heptane

Blending gasoline is a black art. There are 3 main parameters that must be met:

1. Octane Number

2. Density

3. Vapour pressure

In addition, there are limits on some species such as aromatics and olefines both of which have high octane blending numbers, but cause smog. Other constraints include, volatility, sulphur, and oxygenates such as alcohols (ethanol) and ethers (MTBE, ETBE not in US. The is also a limit on the gasoline end boiling point

The second slide is a list of most gasoline components with the RON and MON numbers, density, and vapour pressure. The third slide is a table of the blending values of the components which is calculated by comparing the market value of gasoline, naphtha, and n-butane in terms of octane number, density, and vapour pressure. The parameters are typically:

RON 95

Density(SG) 0.744

Vapour Pressure 0.6 bar

The mathematic behind this calculation are beyond most people. The third slide show the price of n-butane, naphtha and gasoline which is used to calculate the blending values. N-butane and naphtha are always below that of finished gasoline. As you can see the finished gasoline has a value of $615 and 98 RON Reformate has a blend value of $616 which implies that the 98 Reformate could be used as a finished gasoline. Not quite. Reformate trades usually as a premium to the gasoline price, but though possible to be used in a gasoline engine, it would fail on density and aromatic content. The calculated blend values are not market prices. The name of the game is to produce a finished gasoline with the lowest cost of components that meet the specification. That must be below the market price for the refiner/ blender to make a margin.

The fourth slide is a simplified method of gasoline blending. Gasoline blending is down in volumetric units. In real life in the refinery the blending is don via a linear programme to produce the on-specification gasoline at the lowest possible price. In many cases the refinery will have either a deficit or surplus of gasoline components which are then traded between refiners and blenders. In the summer, the US tends to buy-in certain components from Europe when the gasoline demand peaks. Europe is structurally long on gasoline. Valero own a refinery in Wales in the UK which ships gasoline to the US east coast which is structurally short. The Jones Act makes shipping gasoline form the US Gulf more expensive than shipping from Europe.

 Typically, gasoline margins are lower than that of diesel and jet, at something like <$10 per barrel. In general gasoline, jet and diesel values exceed the cost of crude and naphtha, LPG and residue fuels sell below the cost of crude. Gross refining margins ate typically $<10 per barrel. That has a 250 kbd refinery making $10 per barrel margin on crude oil achieving a gross profit of $2.5 million per day or $900 million. That sounds like a lot but all the cost of running the refinery comes out of that margin. That includes purchased utilities, wages, consumables such as catalysts and treatment chemicals, taxes, and money for maintenance and upgrades. In my 47 years in the business, it has always been a low margin business. Which is why many refineries in the west are old, often decrepit, and are closing. California is a good example of not worth the effort and hassle.

Investing is a new refinery or even new refining units is expensive. A new build refinery will exceed $15 billion: A new FCC might cost $3-4 billion. More for a hydrocracker. In the west it is typically making do with what you have got with selective revamps of existing equipment. An old joke in a UK comedy show was the road sweeper who had a broom that had had 14 brushes and 5 handles in its life. An Exxon refinery in the UK has an Exxon Model 4 FCC that was built in the 1960’s. Each turnaround it has a revamp. The regenerator has had numerous top sections over the years. It still runs well and has been upgraded to maximize petrochemical feedstocks and run on residue. Many US refineries are in the same position. Some well-known names are divesting assets or closing them down. Europe is in an even worse position with ageing assets and looming high costs for Net Zero. Some will simply shut up shop. A reasonable sized refinery will generate around 1 million tonnes of carbon dioxide per year. The option for reduction are limited. It is either hydrogen firing of the furnaces, carbon capture or electric heating. If hydrogen is employed, it is either steam methane reforming or electrolysis. None is easy and carbon disposal will be a major issue.

Over time, about every 2-3 weeks I will post a topic. This might include one of the briefings. The next briefing will probably be fluid catalytic cracking(FCC). FCC units primarily produce gasoline, but new builds now produce a lot of petrochemicals feedstocks, and if there is interest I will also delve into this topic.

 Last but not least. I own the copyright for the slides. You are free to copy the slides as long as you acknowledge the source. I ask this as on one occasion that I know of a slide of mine was copied and used in a presentation that McKinsey sold to my employer. The best bit is that that they did not even understand it.