Refineries face shutdowns as fuel demand drops

[Elderberry]

Houston Chronicle by  James Osborne April 16, 2020

Oil refineries around the country are scaling back fuel production, amid a coronavirus pandemic that has caused a record drop-off in gasoline and diesel demand.

With engineering limits on how much they can throttle back their plants, some refineries might soon have to shut down all together, as motorists stay home in the weeks or months ahead and the limited storage capacity for transportation fuels nears capacity.

“There will be more (closures) coming at some point,” said Ryan Todd, an analyst with the Houston-based investment firm Simmons Energy. “But all the refineries we talked to in the last week or so, everyone is cutting down to operational lower limits, and that’s about as low as you can go before you have to shut the thing in.”-----

Design limits

Typically, the crackers, distillations units and other equipment used in modern refineries are not designed to operate at less than 60 to 70 percent capacity, Todd said. Though some larger refineries, such as those along the Gulf Coast, can operate at less than 50 percent.

As a whole, U.S. refineries have already reduced fuel production by about 30 percent, leaving little margin before facilities would begin stopping operations, said Marc Amons, an analyst at the research firm Wood Mackenzie.

More: https://www.houstonchronicle.com/business/energy/article/Refineries-face-shutdowns-as-fuel-demand-drops-15204768.php

[EdinVA]

How/Why do you design something to only run at 70% or more capacity?

Must have been written by Pelosi.
Economic Blackmail...

[catfish1957]

How/Why do you design something to only run at 70% or more capacity?

Must have been written by Pelosi.
Economic Blackmail...

Refineries nowadays have central control rooms, with advanced controls.  Not the pipe wrenched and filthy operator meme you remember from the past.  Towards the end of my career, I was absolutley amazed the level of "nimbleness" our plants had as far not only in product slates, but in rates.

The real quandary, that is being faced, in what I thought would never happens, is whether "how far" each plant can throttle down, and still remain operational.  Corporate offices (if demand doesn't return soon) has to decided is it ecomical to throttle down, and have capacity on ready stand by, or to actually "mothball" some.  If you expect demand to return pretty quickly, I am guessing they will go to option "1", If not, watch for some closures.

[EdinVA]

Refineries nowadays have central control rooms, with advanced controls.  Not the pipe wrenched and filthy operator meme you remember from the past.  Towards the end of my career, I was absolutley amazed the level of "nimbleness" our plants had as far not only in product slates, but in rates.

The real quandary, that is being faced, in what I thought would never happens, is whether "how far" each plant can throttle down, and still remain operational.  Corporate offices (if demand doesn't return soon) has to decided is it ecomical to throttle down, and have capacity on ready stand by, or to actually "mothball" some.  If you expect demand to return pretty quickly, I am guessing they will go to option "1", If not, watch for some closures.

Understand the economics, do not necessarily agree, but understand....
BUT the story states.... "With engineering limits on how much they can throttle back their plants"....
They cannot even be honest about why they want to cut back....

[catfish1957]

Understand the economics, do not necessarily agree, but understand....
BUT the story states.... "With engineering limits on how much they can throttle back their plants"....
They cannot even be honest about why they want to cut back....

Good questions.  It is all about margins.  In a large integrated company like I worked for, the whole food chain is looked at.  From the crude pulled from the ground, to the plastic pellet that is sold to a milk carton manufacturer. 

Simply put, those margins translate to money made at each feedstock level.  If things get bad enough, net losses can be seen if OPEX exceed revenues. Then at those loss, you minimize it by either throttling back production (rate of loss), or otherwise close or sell those assets.  Another factor in play in extraordinary similar times (like the early '80's) is some of the smaller less efficent players shake out, and they are either bought out, or expire.

The mother of all economic factors for these guys is ROCE.  Return on Captial Employed.  That is what most Capital based deciscions are made on.

[Elderberry]

I wonder if there is much Energy Used Reduction when a Refinery is Throttled.

       

[IsailedawayfromFR]

Good questions.  It is all about margins.  In a large integrated company like I worked for, the whole food chain is looked at.  From the crude pulled from the ground, to the plastic pellet that is sold to a milk carton manufacturer. 

Simply put, those margins translate to money made at each feedstock level.  If things get bad enough, net losses can be seen if OPEX exceed revenues. Then at those loss, you minimize it by either throttling back production (rate of loss), or otherwise close or sell those assets.  Another factor in play in extraordinary similar times (like the early '80's) is some of the smaller less efficent players shake out, and they are either bought out, or expire.

The mother of all economic factors for these guys is ROCE.  Return on Captial Employed.  That is what most Capital based deciscions are made on.

In theory that sounds fine, but in reality, at times the environmental restoration to close it down exceeds the worth of the plant and one cannot find a buyer.  Even if one did find a buyer, they would typically not absorb the environmental liability if it is excessive.

Happened to a major I worked for years ago when we were battling to rid ourselves of an old inefficient refinery.  Tried to upgrade it, but we wound up throwing away good money and still operated at a loss so after awhile a decision was made to close it.

When we estimated cleanup costs if shut down, we found out it exceeded the value of the plant plus negative opex. 

So we left it operating at a loss, hoping we would have the good fortune sometime in the future to turn a profit.

[Joe Wooten]

Shutting down or throttling back would be an ideal time to get rid of the maintenance backlogs and get some improvements made.

[Smokin Joe]

Shutting down or throttling back would be an ideal time to get rid of the maintenance backlogs and get some improvements made.

Yep. Pick and choose. I wish @thackney was here to weigh in on all this.

[Joe Wooten]

Yep. Pick and choose. I wish @thackney was here to weigh in on all this.

Is he out sick?

[catfish1957]

Is he out sick?

His expertise is in the utility and electrical areas.  He doesn't understand that much about the oil industry.  Still, would like to hear his perspective.

[catfish1957]

One upcoming point that comes out loud and clear.....

When we start seeing $.50 - $1.00 a gallon gas, I hope Joe Q Public realized that their purchases are seeing a 200-400+% tax mark up, and responds accordingly.

[Hoodat]

How/Why do you design something to only run at 70% or more capacity?

Distillation columns are designed and built to handle a specific flow range.  Inside the column, there is movement of vapor upward and liquid downward through a series of trays.  Too much upward vapor movement, and you get froth.  Too much downward liquid movement, and you get flooding.  At the bottom, there is a reboiler, and at the top there is a reflux condenser.  Both are built to handle a certain volume.

If the intake flow is decreased beyond a certain point, the column loses the ability to effectively separate.  It would be like using an industrial furnace to heat the contents of a test tube.

[Victoria33]

@mystery-ak
@Cyber Liberty

Bob is an earth scientist, retired from Exxon Mobile, and traveled the world looking for oil.  He follows oil every day.  He told me last night that oil was worth minus $30 a barrel.  He said that has never happened in his whole life of 85 years.

I worked as a Director of Services for handicapped students at a college in Texas City, Texas, where many oil refineries are on the coast of Texas City.   If you saw a picture of the oil refineries there, it is refineries mile after mile, starting at Houston, going south through Texas City and on to Corpus Christi.  You can't imagine the magnitude if you don't see it.  If those shut down, it will be hell to get them up running again.

I grew up in the East Texas oil field.  My father worked for Sun Oil Company all his adult life.  Oil derricks were common in that area.  As a child, I climbed oil derricks.
What we are going through now with oil shutdown and food plants shutdown has never happened in my 86 years.  The world changed starting three months ago.

[IsailedawayfromFR]

One upcoming point that comes out loud and clear.....

When we start seeing $.50 - $1.00 a gallon gas, I hope Joe Q Public realized that their purchases are seeing a 200-400+% tax mark up, and responds accordingly.

The bigger danger is that when gasoline gets so cheap, the state and federal governments look toward increasing gasoline taxes once again as a revenue source since
"Joe Q is used to paying more for it"

[catfish1957]

The bigger danger is that when gasoline gets so cheap, the state and federal governments look toward increasing gasoline taxes once again as a revenue source since
"Joe Q is used to paying more for it"

400%+ tax on refined pretroleum product would be beyond criminal, and warrant citizen action.