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Tampilkan postingan dengan label refinery sale. Tampilkan semua postingan
Tampilkan postingan dengan label refinery sale. Tampilkan semua postingan

Rabu, 12 September 2012

Jet Fuel from Trees (or Almost Anything Else)

Out of the dozens of press releases that hit my email inbox in the last week, one that caught my eye was for a gathering of a group called the Northwest Advanced Renewables Alliance (NARA) in Missoula, Montana this Thursday.  Their agenda is focused on "challenges to develop a residual woody biomass to jet fuel and valuable co-products industry in the Pacific Northwest."  Somewhat more snappily, their website calls this "from wood to wing."  With oil prices (UK Brent) persistently over $100 despite the weak global economy, the appeal of such an effort is not hard to understand.  Whether it's feasible at an acceptable price remains to be seen.

Making fuels from waste or non-food crops is an attractive idea, and aviation fuels look like an especially promising market for bio- and synthetic fuels, for several reasons.  Unlike the markets for motor fuels--gasoline and diesel--you wouldn't have to convince millions of customers of the efficacy of using a new fuel.  You'd only have to convince the fuel buyers and chief engineers of a handful of airlines and aircraft leasing companies, along with the even smaller universe of engine suppliers.  Certifying that your fuel meets all relevant specifications is a key step in that process, though in some respects that should also be easier than for gasoline and diesel engines. If you doubt that, just consider the current fuss over increasing the ethanol content of gasoline from 10 to 15%.  Of course, having your car engine fail on the interstate is a very different proposition than having both engines shut down at 40.000 ft--or during take-off.

Fortunately, turbine engines are very reliable and fairly flexible.  The best proof of the latter is that the turbine at the heart of a natural-gas-fired power plant is essentially just a bigger version of the ones hanging under the wings of a Boeing or Airbus aircraft, which burn a close cousin of kerosene, a simple distillate refined from a wide variety of crude oils. Turbines on ships burn a fuel similar to diesel. Many of the specifications that jet fuel must meet have more to do with the conditions under which aircraft operate than the specific sensitivities of jet engines.  One example of that is the temperature at which a jet fuel becomes difficult to flow, just before it freezes solid.  That's one reason that many oilseed-based biojet fuels require essentially oil-refinery levels of processing.  Stepping back from such details, however, I'm skeptical that crop-based biofuels are the long-term solution to the fuel-diversification needs of aviation, for many of the same reasons we see playing out with regard to corn ethanol during the current drought.

Supporters of various biojet efforts often focus on two main benefits of renewable jet fuel.  The first is the reduction of greenhouse gas emissions, since the principal alternative available to airlines or military aviation is further efficiency improvements, which face diminishing returns, or reduced operations.  The other benefit that I often see cited is potential cost savings versus petroleum, though I regard this as largely illusory, at least on the level of the fuel customer.  As I've described at length, the output of even a captive biojet facility is worth its price in the market--set by petroleum jet fuel--not its cost of production.  That argument should also hold true for airlines buying oil refineries.  However, to the extent that biojet could be scaled up enough to apply competitive pressure on the 6 million barrel per day global jet fuel market, or in  isolated regional markets, that would benefit both airlines and consumers. Production at that scale will require feedstocks that are readily available in large quantities.

Many companies and researchers are pursuing renewable jet fuel pathways that don't rely on food- or food-competitive crops.  The RenewableJetFuels.org website of the Carbon War Room provides a portal into some of these efforts, including fuels based on factory waste gases, algae, and various other approaches.  Some of these have progressed to demonstration-stage production and fleet certification, though as we've seen with cellulosic motor fuels, scaling up to truly commercial production represents a much higher hurdle that could shake out many of these contenders.  For that reason, it's encouraging to see the NARA effort, nor should they worry about being too late to the party.

Rabu, 28 September 2011

The East Coast Refinery Gap

I see that ConocoPhillips has announced it will idle its 185,000 barrel-per-day Philadelphia area refinery, as a prelude to selling it or closing it permanently. Combined with the recent announcement that Sunoco would exit the refining business and sell or close its two refineries in Philadelphia, this amounts to just under half of the operating refining capacity on the US east coast, and that's counting PBF Energy's Delaware refinery, which is apparently in the process of starting up again after having been sold last year by Valero. If none of these three facilities finds a buyer, the resulting closures would leave a large gap in the east coast petroleum product market that must be filled either by shipping more products via pipeline from the Gulf Coast, to the extent capacity permits, or by means of increased imports from Europe and Canada. East coast gasoline and diesel prices could be higher for years to come.

The story in Reuters gives a good overview of the circumstances leading to Conoco's decision, and you've read about most of these factors in previous postings here. Topping the list is the persistent divergence of crude oil prices between the US mid-continent and the global oil market, due to a bottleneck at Cushing, OK resulting from several factors. Last week the gross margin ("3:2:1 crack") for importing crude priced at the level of UK Brent and turning it into gasoline and diesel or heating oil for the northeast market stood at a breakeven, and it's only a few dollars a barrel in the black today, after yesterday's market recovery. That's not much of an inducement to hang onto massively complex, capital-intensive facilities and to continue investing in them to keep them in compliance with ever more stringent regulations. Sometimes it just makes more sense to take a write-down and sell to someone else, who then starts with a lower capital base and has a better chance of making a return--not unlike the restaurant business. The problem in this environment is that it's not obvious who would step into the shoes of Sunoco and Conoco in Philadelphia. A few years ago buying refineries from integrated companies that wanted to redeploy their capital was a thriving game, with lots of players. Not so much, now.

Conoco's timing on this move is interesting, too. If it were only a question of margins, I'd think they'd wait to see how much profitability improved after Sunoco's plants shut down. Instead, it appears they are focused on a bigger picture. Even if they don't find a buyer, closing a marginal or money-losing facility will improve their overall refinery portfolio as they prepare to spin off the refining and marketing business, while allowing them to use the capital expenditures they won't have to put into the Trainer refinery for more lucrative opportunities like shale gas, which the company has been touting in a series of ads. That probably makes sense for the company's shareholders, though it won't do much for consumers in my neck of the woods, especially if the company's larger New Jersey refinery meets the same fate.

Oil refining has always been a tough business, with its occasional good years normally more than offset by years or decades in the doldrums. But the combination of reduced demand from the recession-weakened economy and the increased supply of biofuel--mainly corn ethanol, so far--has increased the pressure. When I ponder all this it makes me wonder why so many startups are so eager to get into the fuels manufacturing business, even if it will be based on biomass rather than oil, when they will ultimately be exposed to similar market forces.