The oil refining sector is the foundation of people and business livelihoods all across the world. Aiming to become sustainable, networked and integrated with petrochemicals. Many refiners are driven by the never-ending desire to extract more value from every drop of oil, but the route they follow to get there is particular to each refinery and is established by incremental capital investments made over time.
The refinery of the future is evaluated at each level based on how effectively it utilizes six essential resources to seize progress. These six efficiencies assess a refinery’s ability to utilize, precious scarce water resources, carbon and hydrogen, the building blocks of hydrocarbons, as well as its level of emissions. The sixth efficiency, effective use of capital, is influenced by these five other efficiencies. In accordance with the refinery’s overarching business strategy, all six factors are balanced.
Utility effectiveness measures how effectively energy is used to run the refinery. Water efficiency, which is used to control temperatures in the refinery, is especially important because it is always scarce while we can no longer consider water to be a utility, as water is now a very precious product due to its limited availability and to balance society’s requirements for civic, industrial and agricultural purposes.
Due to increased regulations and environmental liabilities, refineries are bound to reduce emissions. To sustain high profitability and ensure funds for future investment, the plant’s capital must yield alluring returns. Future refineries must react fast to transforming market conditions, moving from one product to another when profit margins fluctuate, in order to preserve sustained profitability. For instance, the raw material used to make gasoline, naphtha, might be used to make petrochemical feedstock that sells for more money and then returned to producing gasoline when prices drop.
It is the need of time that our future refineries must be digitally connected to a degree that has never been imaginable, and this is perhaps the most important. A refinery may produce millions of data points, but up until now, this information has only been used to track the facility’s performance which requires quick transformation from data collection to data utilisation. In just the last three years, new cloud-based connected plant technologies have been developed that can compare plant performance data with a digital twin built using proprietary models and in-depth domain expertise. This effectively compares the refinery’s actual performance to how it should function. Performance gaps are examined in order to offer suggestions that might help identify the underlying reasons for underperformance.
The markets that refiners cater to are evolving as they look for new methods to increase efficiency. The demand for petrochemicals is rising globally and is expected to keep expanding at a rate of about 4 percent per year. It doesn’t matter if demand for fuels declines due to more efficient engines, electric or hybrid vehicles, ride-sharing, some new technology, or all of the above, all that matters is when this will happen and whether a refiner is ready for it.
A lot of oil producers in the developing world, need to change their expectations and their policy options since the future of the oil market look quite different from the experiences of the previous fifteen years. At the peak of the commodity super-cycle, lofty expectations of immense prosperity are no longer tenable. There are many reasons to think that oil may not necessarily be produced at the levels expected by many low- and middle-income countries and that, even if production does not disappoint, the consequent revenues to their governments may well prove illusory.
At the very least this will require them to re-think how to manage the expectations of their people, which had been inflated to unrealistic levels. Thus, a trend is requiring refineries to be modernized by adding high-tech equipment, which, in turn, requires significant investment in the oil-refining industry. This trend is aiming to reduce the sulphur content, introduce “clean” oil conversion systems, as well as minimize the negative impact on the environment.
Changes in consumer demand have a significant impact on how efficiently the oil refining sector operates. Thus, the COVID-19 pandemic has caused a decrease in global demand for petroleum products (gasoline, kerosene, diesel fuel, jet fuel, and other by-products used, like in the production of plastic), which has an impact on oil consumption, the OPEC+ agreement to reduce oil production, and finally the price of oil and oil products. The OPEC+ and the pandemic both contributed to losses and decreased efficiency in the oil-refining sector in 2020. The economics of a refinery are essentially straightforward: it survives on the price differential between crude oil and fuels. Experts predict that “the profit from oil refining in the next five years will be smaller than the average for the prior five years,” which is not encouraging so. In order to help the oil-refining industry, countries are trying hard to transform themselves from normal mal practices to sustainable practices which demand modernization of existing sectors for deepening oil refineries, enhancing environmental sustainability, and diversifying output in response to market conditions and geographic location.
Due to the refinery’s distance from key users, the issue of high transport costs for oil products must also be addressed. All of these elements demand hefty public expenditures and assistance but most nations are always struggling to finance the projects via public spending which requires a public-private partnership (PPP) format. A public-private partnership, which denotes effective collaboration between the government and the private sector, can facilitate efficient communication between the two. Regarding the PPP implementation’s efficiency and openness as a vehicle for sustainable growth of any sector, there were several contentious issues. Initially, the traditional PPP models (lease and concession agreements) are questioned, which eventually results in privatization where this tool is allegedly used to avoid financial restrictions. Some nations use a combination of these factors to explain why PPPs became popular in the energy and water sectors in the 1990s.
Developed nations are now working on the long-term energy strategy plan i.e. 2035-2040, where only effective and timely measures can reduce energy use and emissions, lessen waste production, optimize processes, increase operational dependability, and better use water. Also, it may fill experience shortages brought by staff turnover while significantly enhancing the ability of plant operators where, connectivity aims to give plant employees as much intelligence as possible and generate an edge and competitive advantage but unfortunately, no advanced plants to date are ready for the future because the information is not typically presented in a form that enables the most economic operation every minute of every day as most refiners don’t know and don’t have a way to determine in real time what are the best settings to achieve economic optimization.
The Author is MD IRP/ Faculty Dept. of H&SS, Bahria University Karachi