Upgrading Options for Diesel Production

1. Upgrading Options for Diesel Production Nicolas Thevenot

2. Agenda • Market characteristics • Axens heavy ends technologies • Overview of the different options • Global analysis • Economic evaluation • European case Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

3. EU-25 Market Characteristics Source: IFP Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

4. Latin America Market Characteristics Source: IFP Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

5. Argentina Market Characteristics Source: IFP Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

6. Solvahl HyC-10 HyK FCC VGO & Resid Conversion Mapping Topping Unit Crude Oil LPG Naphtha Vacuum Distillation Unit Jet Fuel Hyvahl H-Oil RC HDHPLUS® R2R Diesel Fuel-oil H-Oil DC Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

7. Resid Conversion- Axens’ Offer - 1000 1000 800 H-OilRC Ni + V Content in Feed, ppm HDHPLUS 300 H-OilRC 200 Hyvahl + R2R 100 0 ... 30 40 50 60 70 80 90 Net VR Conversion,% Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

8. Resid Conversion Features • ARDS/VRDS TECHNOLOGY : HYVAHL • Fixed bed process for VR hydrodesulfurization • Can process feeds with high metals content using “PRS” technology • Low to Medium diesel production: 20-25% • Hydrotreated residue applications: • Ultra low sulfur (S< 0.3%) and stable fuel oil • Excellent feed for resid FCC unit (R2R) : low metal content reducing catalyst consumption + better products at R2R outlet Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

9. Resid Conversion Features • RESID FCC PROCESS : R2R • 1- or 2-Stage Regeneration (to reduce catalyst consumption from Va poisoning) • Technology: Feed injection, Mix Temperature Control, Riser Separator System RS2, Stripping with Structured Packing, Catalyst Coolers • New technology features and catalysts permit cracking of heavy feeds & high propylene yields. Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

10. Resid Conversion Features • RHCK PROCESS : H-OilRC • Ebullated bed process for VR Hydrocracking • On-line Addition/Withdrawal of Catalyst • Constant Conversion and Product Quality • Very long cycle length • VR Conversion range: 40 - 80% • Process VR feeds with high metals and CCR • Hydrocracked Residue application • Low sulfur (S< 1%) and stable Fuel oil • Feed for Coker or gasification units Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

11. Resid Conversion Features • RHCK PROCESS : HDHPLUS® • Slurry technology for deep hydrocracking of VR feeds • Alliance with PDVSA, Intevep and IFP for improvement and marketing of the process • Very high VR Conversion level, more than 85% of Vacuum Residue • Can process heavy refractory VR feeds regardless of sulfur, metals, asphaltene and CCR contents • Integrated scheme with Sequential Hydroprocessing of primary hydrocracked products Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

12. Overview of the Different Options:Case Study Base • Arabian Medium Crude: API= 30.6, S= 2.4 wt.% • Feedstock: 100,000 b/d (647.5 t/h) of Arabian Heavy/Arabian Light (50/50) atmospheric residue (S= 4 wt. %) • Investment : European location • Vacuum distillation, HDT, SMR, PPS, SRU Amines and alkylation units included Note: HDT = hydrotreating, SMR = steam methane reformer, SRU = sulfur recovery unit, PPS = propane-propylene splitter Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

13. Option 1: ARDS + RFCC FG HDT AT LPG C3= Naphtha AR ARDS Gasoline RFCC 647 t/h MD Fuel Oil LPG and C5+ throughput Total: 592 t/h Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

14. Option 2: RHCK + Mild HCK + RFCC FG HDT AT LPG C3= Naphtha AR FCC Mild HCK Gasoline VGO VT 647 t/h MD VR Fuel Oil RHCK LPG and C5+ throughput Total: 616 t/h Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

15. Option 3: RHCK + HP HCK FG HDT LPG AT Naphtha AR VGO 647 t/h VT MD HP-HCK HCK resid VR RHCK Fuel Oil LPG and C5+ throughput Total: 626 t/h Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

16. Option 4: Delayed Coker + HP HCK FG HDT LPG AT Naphtha AR VGO 647 t/h VT MD HP HCK VR HCK resid DC Coke LPG and C5+ throughput Total: 626 t/h Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

17. Option 5: RHCK + DC + HP HCK FG HDT LPG AT VGO AR Naphtha VT 647 t/h MD HP HCK VR RHCK HCK resid DC Coke LPG and C5+ throughput Total: 621 t/h Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

18. Option 6: HP HCK + VRDS + RFCC FG AT LPG C3= Naphtha AR Gasoline VT VGO 647 t/h HP HCK MD HCK resid VR VRDS RFCC Fuel Oil LPG and C5+ throughput Total: 611 t/h Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

19. Products • Propane and butanes sold as LPG • C3= from FCC and RFC is extracted (FCC/RFCC yield: ~ 5 wt%) in a PPS and sold as C3= polymer grade, C4= alkylated with iC4 • Naphtha, gasoline, kerosene & gasoil are hydrotreated when required • Hydrocracked residue (HCK residue), low BMCI* (high paraffinicity), used as a steam cracker feed, but could be also a very good base for oils • Fuel oils: • Hydrotreated LCO sold as domestic fuel oil (DFO) • LSFO and HSFO *BMCI = Bureau of Mines Correlation Index Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

20. AR Conversion AR Conversion, wt% N°2 RHCK + Mild HCK + FCC N°3 RHCK + HP HCK N°5 RHCK+DC + HP HCK N°1 ARDS + RFCC N°4 DC + HP HCK N°6 HP HCK + VRDS + RFCC with iC4 import with iC4 import Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

21. LPG and C5+ liquid Yield LPG & C5+ Yield, wt% N°6 HP HCK + VRDS + RFCC N°2 RHCK+ Mild HCK + FCC N°3 RHCK + HP HCK N°5 RHCK + DC + HP HCK N°1 ARDS + RFCC N°4 DC + HP HCK with iC4 import with iC4 import Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

22. LPG, C5+ and Coke Throughput Production Capacity, t/h N°1 ARDS + RFCC N°2 RHCK + Mild HCK + FCC N°3 RHCK + HP HCK N°4 DC + HP HCK N°5 RHCK + DC + HP HCK N°6 HP HCK + VRDS + RFCC with iC4 import with iC4 import Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

23. Objectives & Options         Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

24. Economic Assumptions & Methodology (1) • Economic evaluations based on: • Discounted Cash Flow (DCF) analysis • Profitability index comparisons (NPV, IRR, NPV/TCI, POT) • Net realization calculation ($/bbl of AR) = Total product sales – Total operating costs • Total operating costs = Exploitation costs (raw materials + utilities, catalyst, chemicals & manpower) + fixed costs (capital charge equal to ~ 20% of total capital investment + maintenance, taxes, insurance & overheads) • Discounted Cash Flow (DCF) analysis • Depreciation period: 10 years • Project duration: 30 years • Discount rate 12% • Tax Rate: 40% (construction duration 2 years) Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

25. Economic Assumptions & Methodology (2) • Capital investment • ISBL (Inside Battery Limit): European location • 10% contingencies • Total Capital Investment = ISBL + Off-sites + Engineering & Contractor fees + Interest on construction loan + Start-up cost + Working capital • NPV calculation based on European averaged values (between 2001 and 2006) for: • Investments, catalysts, utilities • Feedstock, products (NWE prices) Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

26. Total Capital Investments: 2006 Billion $ • TCI includes: • ISBL investments • Off sites • Engineering fees • Contractor fees • Interest on construction loan • Start-up costs • Working capital ~17% ~16% N°1 ARDS + RFCC N°2 RHCK + Mild HCK + FCC N°3 RHCK + HP HCK N°4 DC + HP HCK N°5 RHCK + DC + HP HCK N°6 HP HCK + VRDS + RFCC Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

27. Total OPEX Comparison: 2006 $/ bbl AR 12.3 11.5 10.6 10.2 8.9 8.0 N°1 ARDS + RFCC N°2 RHCK + Mild HCK+ FCC N°3 RHCK + HP HCK N°4 DC + HP HCK N°5 RHCK + DC + HP HCK N°6 HP HCK + VRDS + RFCC Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

28. Product Revenues: 2006 Europe Product Revenues ($/ bbl AR) *Other = Fuel Gas + Sulfur (+ Coke for n°4 & 5) N°1 ARDS + RFCC N°2 RHCK + Mild HCK+ FCC N°3 RHCK + HP HCK N°4 DC + HP HCK N°5 RHCK + DC + HP HCK N°6 HP HCK + VRDS + RFCC Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

29. Economic Results 2006 Europe n°5 n°2 n°3 n°4 n°1 n°6 Options Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

30. Economic Results Europe 2003-2006 Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

31. General Economic Considerations Europe Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

32. 2006 Main Changes… • AR-to-diesel price differential decrease has deteriorated the profitability of schemes producing the higher quantity of MD i.e. options 3, 4 and 5. • Schemes presenting a more well balanced production (between Gasoline/MD) while minimizing HFO production are in a better position (options 2 and 6). • Situation is worst for schemes (4 & 5) producing coke due to AR-to-Coke price differential increase • AR price increased from 254 $/t (2005) to 356 $/t (2006) Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

33. IRR Sensitivity Study to Petcoke Price2006 Situation Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

34. IRR Sensitivity Study to Natural Gas Price Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

35. Conclusion • In a diesel oriented market, conversion profitability is mainly dependent on the diesel-to-AR price differential • A diesel-AR differential around 160 $/t is required to exceed a minimum IRR of 15% • Currently, with price differentials around 260 $/t (2006), all studied options are profitable • Due to AR-to-Coke price differential increase in 2006 profitability has deteriorated for schemes producing coke • Natural Gas price has a significant impact on profitability • Optimum solution depends on refinery specific constraints Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

36. Upgrading Optionsfor Diesel Production

37. Atmospheric Residue Price Assessment Source: Platts, Axens NWE Prices ($/t) 398 $/t 400 AR (0.6%S) AR (4%S) LSFO (1%S) HSFO (3.5%S) 356 $/t 314 $/t 300 283 $/t 200 100 0 2001 2002 2003 2004 2005 2006 • From HSFO at 3.5%S(283 $/t in 2006) & LSFO at 1%S(314 $/t) quotations  Calculation of “Sulfur content adjustment” in $/t per %S (12.4 $/t/%S) • This “Sulfur content adjustment” is applied to AR at 0.6%S quotation (398 $/t) to estimate AR at 4%S(356 $/t) Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006

38. Main Prices $/t Upgrading Options for Diesel Production – Jornadas Latinoamericanas de refinacion – Mendoza 2006