Does Refinery Energy Efficiency Currently Pay-Off? | RefinerLink

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Does Refinery Energy Efficiency Currently Pay-Off?

By Patrick the Process Engineer

Aug 05, 2012

Cheap natural gas prices and rising refining margins should be an indicator to reconsider refinery strategies around energy efficiency.            


The refining industry has always been a cyclical business.  Historically, the cycles occurred over a period of a decade or more.  Today these cycles are occurring over a period of years, and in some instances months. 


As these cycles occur at a more rapid pace, refiners are left with less time to adjust and re-optimize their business.


Paradigm shifts related to diesel recovery and LPG optimization have pushed U.S. refiners to refocus on fundamentals over the past several years.



The recent breakthrough of hydraulic fracking has created another fundamental shift in the oil industry for energy efficiency.  So far all of the discussions around U.S. shale oil has been concentrated on refinery crude economics.  It’s common knowledge now that U.S. refiners now have a significant competitive advantage due to the glut of North American crude made available. 


While most have focused on the COGS side of the equation, no one is talking about the OPEX side.  The fact is…energy in the form of natural gas is now very cheap.  The question that arises, is how can we take advantage of this in every way possible? 


The spread between Propane and Natural Gas prices over the last 3 months have sharply declined.   After enjoying a 2 year high margin run, the incentive for recovering LPG out of fuel gas is tightening.  The differential between gasoline prices and propane remain as high as ever.



Many believe that this structural shift will remain for quite some time.   How quickly can refiners adapt their energy efficiency program to this change?


Or is a change in how we view energy efficiency at a refinery even warranted?


Let me be clear that my challenge is not directed to

waste energy reduction.  Items such as heater stack excess O2 management and steam vent reduction should always have diligent focus.  On the other hand, heat exchanger cleaning, stripping steam optimization, and reboiler duty management are prime examples where energy efficiency zealots may need to rethink economics.


In today’s world energy doesn’t cost a lot, but incremental refinery yield recovery carries high worth.  A rational refiner would place more focus on maximizing margin during these times instead of pinching pennies around energy efficiency. 


The value of discipline ensures that business cycle swings do not catch lazy refiners off-guard when margin drivers change.  This may be the only reason why a refinery may not ease their focus on energy efficiency.  However, in these volatile times where astronomical margins reside specific area, one can’t help but wonder why a refiner would not make hay while the sun shines.

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  • :   not sure that i can entirely agree with all the points made above. the last comment I would whole-heartedly agree that discipline is very important to have, so i would not favor giving up that discipline even in strong economic conditions.

    Aug 06, 2012

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