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Profit improvement, managing operating goals, production & yield accounting

Following IMO 2020, the cost per barrel of high sulfur bunker fuel is expected to drop significantly. A Mediterranean refinery approached KBC to perform a fuel oil production minimization study. This resulted in the refinery being able to reduce oil production by 5.3% and improve margins.

The challenge

Due to IMO 2020, the cost per barrel of high sulfur bunker fuel is expected to drop significantly. In anticipation of this price drop, a Mediterranean refinery approached KBC to perform a fuel oil production minimization study. Currently, (2019) they process high sulfur crude oil, and residue is sold as high sulfur fuel oil. The predicted cost drop puts the refinery net margin at risk. Their goal was to identify effective revamps or minor investment options through a no capital-intensive path.

Solution

KBC performed a fuel oil reduction study, focusing on middle distillates and heavier products to identify opportunities. The team held a qualitative ranking workshop focusing on ideas that reduce fuel oil production based on use of a constant high sulfur crude mix. KBC prioritized the list of options to the top six most relevant and easy to implement non-investment opportunities. Then evaluated them in detail to confirm the technical change that will provide benefits for each opportunity.

The results

The combination of these options provide the refinery with the opportunity to reduce fuel oil production by 5.3%. Based on the IMO 2020 price set, their margin would increase by $0.74/bbl or $52 million per year. Additionally, there were several profitable Capex options with the most attractive providing $14 million per year on a pay-out time of two years.

Opportunity to reduce

fuel oil production

by 5.3%

Margin would

increase by

$52m per year

Capex options of up to

$US 14m p/a

on a pay-out time of two years.

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