Petrotrin gears for peak oil and peak refining capacity

Mar 30, 2008 01:00 AM

With few prospects for striking big crude oil finds, Trinidad and Tobago's only option in the sector it made history 100 years ago-when a well at Aripero, drilled by Randolph Rust, yielded oil-is to upgrade and enhance its refining capacity.
Gas finds and revenues, currently exceeding anything oil has contributed over the past ten years or so, have put a damper on further exploration for "black gold".

Even though the Government-appointed Vision 2020 energy sub-committee's report spoke of the prospect of this country producing up to 1 mm bpd by 2020, reality is the sector is struggling to average 130,000 bpd, some 80,000 bpd short of the low-end projections for 2009 by the said sub-committee.
Data on crude oil available up to 2005 show an almost constant average of around 130,000 bpd over six years, with reserves pegged at 2 bn barrels. In contrast, gas production moved from 580 bn cfpy to 1 tn bn cf in 2004.

Recognising this stagnation in oil and stuck with an aging refinery that was designed to primarily to process low grade fuels as well as fuel oil for export to the USA, state-owned Petrotrin embarked on an upgrade programme as far back as in 1994 (Upgrade 1) which ended in 1997. By then, the refinery had reduced its dependence on fuel oil, improved its products' mix and quality, cut back on fuel oil, and was refining 160,000 bpd.
Bearing in mind that as far back as in 1948 the country's crude oil production stood at 82,000 bpd, and had, in 1978, reached 230,000 bpd (with three refineries processing 430 bpd), the downward trend in both production and refining had to be arrested. The second phase of the upgrade programme is currently underway.

According to a senior official at the company, the improved Cat Cracker plant will increase capacity by 35,000 bpd of gasoline with improved octane ratings. The new alkylation and prefactionation units will also boost Petrotrin's capacity to produce premium gasoline, which is used by most vehicles produced over the past ten years. These improvements are expected to come on stream by mid-2009.
In his last National Budget presentation, Prime Minister Patrick Manning announced that a new, $ 4 bn refinery would be built on Petrotrin's Pointe-a-Pierre compound. This project still resides with the Ministry of Energy since Petrotrin is yet to be informed of its details.

But for the biggest refinery in the Caribbean, it has been anything but smooth sailing. Although it posted product-sales revenue of $ 25.8 mm in 2006, Petrotrin's operating, marketing and administrative expenses (among other items) amounted to a whopping $ 22.6 mm. Its profit amounted to $ 1.314 bn.
Based on its assets and operations, though, the State-owned oil company looks good: While countries across the world are rushing to upgrade their existing refineries, or build new ones (in the USA, the last refinery built was in 1976), questions of "peak oil" and the inevitable shift from fossil fuels stalk those who are ploughing big money into increasingly costly plants.

Still, oil experts believe the proposed $ 4 bn new refinery can bring benefits to Petrotrin and the country. China, India, Iran, Venezuela and Saudi Arabia are among countries seeking to substantially increase their refining capacity. Trinidad and Tobago, however, located closer to the seemingly insatiable market that is the USA, would benefit from exports of both refined oil products, LNG and other downstream gas products.
Writing about challenges facing the refinery, the company said: "Petrotrin today, needs new sources of crude, a virtually new refinery, a significant injection of new capital and new markets. Petrotrin operates in a highly dynamic and competitive international environment and it must change constantly in order to respond to challenges in the global energy environment. World demand for refined products is expected to increase from current levels of 75 mm bpd to 115 mm bpd by 2030. It is projected that almost 75 % of this growth will be in the transport sector."

Elliott Gue, editor, The Energy Letter, summed up the demand for new refinery capacity this way: "What's often ignored is that we don't consume crude oil. You don't fill your car's tank with crude, nor is it used to power jet aircrafts, cruise ships or railway locomotives."
"Crude oil, in its natural state, often isn't even that flammable; one of the first uses of crude oil was as an alternative to whale blubber in oil lamps. The real global source of energy is refined products: gasoline (petrol), diesel and jet fuel. Crude oil is nothing more than a raw material -- the feedstock used to produce these refined products."

Crude oil production in Trinidad has had its peaks and troughs over the past five years. Of total local crude processed less than one-half comes from local production. The refinery has a capacity of 160,000 bpd, but only 45 % (or 72,000 bpd) comes from local crude, mostly from Petrotrin's own wells. The company has to import around 88,000 bpd of crude at market prices, which peaked at $ 103 per barrel.
"It does not mean we pay that price," said a company official. "The actual price we pay is based on the quality of the crude we import." On the sales side, 85 % of its products are exported. These include motor and aviation gasoline, diesel, LPG, kerosene/jet fuel, bitumen and fuel oil.

Kenneth Allum, the company's VP (Refinery and Marketing), said: "Our refinery upgrade objectives are deeper conversion, higher throughput (up from 160,000 bpd), and the production of more gasoline and diesel. When this upgrade is complete by August 2009, we expect to have much improved performance of the refinery, as well as greater profitability."
He alluded to Venezuela's PetroCaribe initiative eating into Petrotrin's traditional Caricom markets, but said there are many other markets for the company to tap into. The Gasoline Optimization programme will result in increase in octane barrels, see a reduction in benzene and aromatics, and sulphur content. Diesel quality will also be achieved through similar processes.

Total expenditure on Phase Two of the upgrade programme is $ 917 mm. Over the next three years, Allum said, TT$ 1.8 bn will also be spent on improving HSE, infrastructure upgrade, improving reliability and efficiency at the company nine-berth port facility, establishing a new industrial estate and distribution bond, as well as state of the art laboratory facilities. A gas-to-liquids (GTL) plant is another of Petrotrin's thrusts as it moves to become more diversified, profitable enterprise.
"Gas to Liquid plants would assume increasing prominence as the demand increases for clean liquid fuels," he said.

Meantime, on the production side, Petrotrin is engaged in a 20-mm barrel, major Enhanced Oil Recovery (EOR) thermal project within the Exploration and Production Division. Enhanced Oil Recovery refers to a series of methods applied to a reservoir to recover additional oil that cannot flow to the surface on its own. Electrical pumping, steam, carbon dioxide, microbes and water are sometimes introduced to power the oil to the surface.
The pilot project is fully commissioned and has been showing good response to steam injection. Oil production averaged 318 boepd in 2006.

"Petrotrin is positioning itself to be the best refinery in the region," said Allum.
"While we do not anticipate major oil discoveries here, and may remain dependent on usage of imported crude as feedstock. With all the upgrades and other measures we are taking, we can expect greater efficiency, bigger profits, as well as significant improvements in health and safety, and a very important, the environment."

Source / Trinidad Express
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