Transcript Background and Approach

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Background and Approach
Swed Gov’t summary HRO/970211
Present situation

EU plans to implement new specifications for petrol and diesel for the years
2000 and 2005
Complication

The suggested sulphur contents for the year 2000, which are based on the
results of the tri-partite programme and Arthur D. Little’s refining costs estimates,
are higher than present Swedish and other European countries’ standards

Questions

In light of recent technological and other developments has the cost of removing
sulphur from petrol and diesel changed?

Are there additional benefits (i.e environmental improvement, external cost
savings and fuel efficient technologies) from a further reduction in sulphur levels
in petrol and diesel?
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Background and Approach
Swed Gov’t summary HRO/970211
We have updated and synthesised new data which may have a bearing on
future EU petrol and diesel specifications

Examined whether new techniques can reduce costs for sulphur reduction in petrol
and diesel

Update previous cost estimates by performing detailed refinery analyses for
regions and a range of typical refineries
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Co-ordinate and synthesise information from other stakeholders

Automotive industry
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Selected refineries
Technology suppliers
Swedish EPA
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lifetime of catalytic converters (including consumer costs)
new engine technologies
NOx improvement
Sulphur deposition costs
Sulphur deposition environmental effects
European Community
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Auto/oil 1
Community strategy to combat acidification
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Conclusions
Swed Gov’t summary HRO/970211
Subsequent to the Auto/Oil findings, we have identified five additional
factors which may have an impact on future specifications of petrol and
diesel

The units costs to remove sulphur from petrol and diesel are lower than in previous
estimates
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17% reduction in costs for 30 ppm sulphur content in petrol
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55% reduction in costs for 50 ppm sulphur content in diesel
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The proposed sulphur levels in petrol inhibit the introduction of new fuel efficient
engines (GDI) with lean NOx catalytic converters

The proposed sulphur levels in both petrol and diesel inhibit the introduction of new
pollution abatement devices
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The external cost benefits, mainly in the form of improved human health, if sulphur is
reduced to 50 ppm in both fuels, could be of the order of 400-700 million ECUs a year

There will be 2-3 times larger reductions in particle emissions from heavy duty vehicles
than was previously expected
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Summary of Results - Refinery Costs
Swed Gov’t summary HRO/970211
The scope of our refinery work was to re-examine our cost curves for
sulphur removal
Scope of Analysis
Examine costs of removing
sulphur from gasoline and
diesel in stepwise
approach from Auto-Oil
recommended levels
Revisit previous analysis
(which was EU 12) for
EU 15
Compare new cost curves
for EU 15 with old cost
curves for EU 12
Gasoline from 200 ppm
Perform refinery analysis
Assess significance of updated
analysis
Diesel from 350 ppm
Technology improvements
Comment on key sensitivities
Crude oil diet changes
Changes in industry demand trends
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Summary of Results - Refinery Costs
Swed Gov’t summary HRO/970211
The new cost curves indicate lower costs for sulphur removal than the
previous studies
Old and New Costs on a 1996 Cost Basis
Net Present Cost
Million Ecu
Net Present Cost
Million Ecu
Gasoline
6000
Diesel
20000
18000
5000
16000
14000
4000
12000
New
Old
3000
New
Old
10000
8000
2000
6000
4000
1000
2000
0
0
0 30 50
100
150
200
250
300
0
Sulphur ppm
•
30
100
150
Old
3340
1750
875
New
2940
1310
615
100 150 200 250 300 350
Sulphur ppm
50
100
200
Sulphur ppm
Capital Investment
Million Ecu
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Old
11570
9230
4560
New
5990
3520
820
Both the old and new cost curves have been developed on the same basis as used in auto-oil
–Assumes costs incurred from 1996 onwards
–All capital and operating costs are included and a fifteen year cashflow is discounted back to 1996 at 7% per annum
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Summary of Results - Refinery Costs
Swed Gov’t summary HRO/970211
We have compared the current estimates of the unit costs to remove
sulphur with those used in Auto/Oil
T ypical Refinery
Gate Value
Gasoline
Diesel
$/tonne
250
150
ECU/liter*
0.148
0.101
Costs to lower
sulphur levels from
Auto/Oil proposals
to target levels
Old Basis
New Basis
Old Basis
New Basis
(ECU/liter)
(ECU/liter)
(ECU/liter)
(ECU/liter)
0.0082
0.0014
0.017
0.0065
0.021
0.0098
200 ppm
150 ppm
0.0011
0.0007
100 ppm
0.0038
0.0027
50 ppm
30 ppm
0.0047
0.0039
*1 ECU =1.25 US$
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Summary of Results - Refinery Costs
Swed Gov’t summary HRO/970211
There are three major reasons why our assessments of costs to
remove sulphur are lower
Technology Improvements
Crude Oil Diet
Industry Trends
We have reduced our estimates of capital costs for the
construction of middle distillate desulphurisation units.
This reduces the capital costs required for removing
sulphur from diesel
Availabilities of sweet (low sulphur) crude oils are now
higher than previous expectations because north sea
production (predominantly low sulphur crude oil) is higher.
This reduces the amount of sulphur to be removed
particularly for diesel components
Industry demand trends indicate a greater proportion of Jet
fuel and diesel and a lesser proportion of gasoline than
previous expectations. This implies that the industry
would need to invest in significant new hydrocracking
capacity. This increases the availability of sulphur free
diesel components and reduces the cost of lowering diesel
sulphur levels
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Summary of Results - Refinery Costs
Swed Gov’t summary HRO/970211
Based on additional analyses and interpolation we identified the
following sensitivities
Level of
oil prices
Range of costs to
individual refiners
Synergies by reducing
both gasoline and diesel
sulphur sulphur
Availability of low
sulphur crude oils
Technical
Thresholds
Results are fairly insensitive to the level of oil prices. The
major portion of the costs are capital investment related
Although we have assessed aggregated costs for all EU
refineries the variation by individual refinery is significant.
The worst placed refiner could face costs up to four times
the average and the best placed face costs as low as one
quarter of the average
At the very low sulphur levels there are synergies if the
sulphur level of both products are reduced simultaneously
which would reduce total costs by around 15%
If North Sea crude oil availability declines to previous
expectations the costs will increase by around 20%. If
North Sea crude oil availability is the same in 2000 and
2005 the costs will be lower by around 15%
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Gasoline sulphur levels down to 30 ppm are achievable
Sour refiners may not be able to produce diesel below 70
ppm without reprocessing (and therefore additional
desulphurisation capacity and capital investment)
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Summary - Benefits
Swed Gov’t summary HRO/970211
The proposed levels of sulphur in EU petrol for 2000 will make it
difficult to further reduce automobile emissions with currently
available technologies
Sulphur has a negative effect on the performance of 3-way catalytic
converters and thereby increases the emissions of CO, HC
(hydrocarbons) and NOx from petrol driven automobiles - however,
the catalytic converter returns to full efficiency if sulphur content is
subsequently reduced
The proposed standard of 200 ppm sulphur in petrol will:
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inhibit the introduction of currently available gasoline direct injection (GDI)
engines with systems for lean NOx reduction
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it has been reported that GDI engines can reduce petrol
consumption by up to 35%
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GDI engines have already been introduced in Japan because
current market levels of sulphur in petrol are less than 50 ppm
significantly increase the emissions from vehicles which can meet
California low and ultra low emission standards (LEV and ULEV) and
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Summary - Benefits
Swed Gov’t summary HRO/970211
The proposed standard of 350 ppm sulphur in diesel will inhibit the
introduction of technologies to reduce emissions from diesel driven
road transport
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The retro-fit of trucks/automobiles with currently available oxidation catalysts and
filters can reduce CO and HC emissions by around 50-70% and Particle Matter
(PM) emissions by over 90% - however, diesel with a sulphur content less than
75 ppm is required
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The introduction of DeNOx catalysts under current development, which have the
potential of reducing NOx emissions by at least 30%, presently require a diesel
with a sulphur content less than 50ppm
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Summary - Benefits
Swed Gov’t summary HRO/970211
On the short term, there are environmental and human health benefits
which can be gained if there is a further reduction of sulphur levels in
road transport fuels
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Reducing sulphur limits in petrol from 200 to 50 ppm will further reduce CO, HC
and NOx emissions by around 3-5%
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Reducing sulphur limits in diesel from 350 to 50 ppm will further reduce PM
emissions by 5-8 %from Heavy Duty Vehicles (HDV)
According to estimates of unit economic damage(ECU per tonne
emitted) derived in other EU studies, the cost benefit in terms of
improved human health and reduced building damage are estimated
between 400 -700 million ECUs a year
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Sulphur in Transport Fuels - Executive Summary
Swed Gov’t summary HRO/970211
Table of contents
1
Background and Approach
2
Conclusions
3
Summary of Results - Refinery Costs
4
Summary of Results - Benefits
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Sulphur in Transport Fuels - Executive Summary
Swed Gov’t summary HRO/970211
Table of contents
1
Background and Approach
2
Conclusions
3
Summary of Results - Refinery Costs
4
Summary of Results - Benefits
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Sulphur in Transport Fuels - Executive Summary
Swed Gov’t summary HRO/970211
Table of contents
1
Background and Approach
2
Conclusion
3
Summary of Results - Refinery Costs
4
Summary of Results - Benefits
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Sulphur in Transport Fuels - Executive Summary
Swed Gov’t summary HRO/970211
Table of contents
1
Background and Approach
2
Conclusion
3
Summary of Results - Refinery Costs
4
Summary of Results - Benefits
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Swed Gov’t summary HRO/970211
Sulphur in Transport
Fuels Executive Summary
Final Report
February 12, 1997
Swedish and Finnish
Governments
Arthur D. Little AB
Box 70434
107 25 Stockholm
Telephone +46 8 698 30 00
Telefax +46 8 698 30 02
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