A Century of Innovation in the Oil and Gas Industry

© 2015 UOP LLC. All rights reserved. UOP 7081-1

Focus on Slurry Hydrocracking Uniflex Process Upgrade Bottom-of-the-Barrel to Improve Margins

Phil Hunt UOP LLC, A Honeywell Company

Russia & CIS BBTC 2015

April 22-24, 2015 Moscow

Market Opportunity, Russian Export Duties, Demand

UOP Residue Upgrading Technology Portfolio

UOP Uniflex Technology Update

Mendeleev Group Deep Processing Project

Summary

1

2

3

4

5

Agenda

UOP 7081-2

2

Global Refined Product Demand has Followed a Consistent Trend....

...with Distillate demand increasing and Fuel Oil demand declining

Global Oil Product Demand (Fuel Oil and Distillates)

Global HFO demand equaled each of Light and Middle Distillates in 1970

Distillates have now passed 70% of total demand globally

Globally HFO has declined to 10% of total product demand

In Asia, the Light Distillate demand is driven by Petrochem Feedstock end-uses

0

5000

10000

15000

20000

25000

30000

35000

40000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43

30 year trend

Middle Distillates

Light Distillates

Heavy Fuel Oil

Millio

n b

arr

els

Pe

r D

ay

40

20

0

Source: BP Statistical Review of World Energy 2013

1980 1990 2000 2010 1970

0

UOP 7081-3

3

80

Production

80

Demand

40

40 Bunkers

HFO

65

Exports

65

Imports

HFO

There are 3 Parts to the European Fuel Oil Market

1 2 3

3

Europe is very long in HFO (particularly HSFO)

European Fuel Oil demand is split between Marine Bunkers and HFO

Production currently aligns with demand

However, Europe also imports and then exports 65 million MTPA

Source: EIA Statistical Data

1

2

3

(Units presented are MTPA)

UOP 7081-4

4

Why do we also need to understand developments in Russia – and their impact on European HFO?

Russia has ...

– Third highest installed refining capacity (after U.S. and China)

– The largest production of Vacuum Residue that is not upgraded, the majority of which is exported to Europe

Russia recently introduced ...

– New export duties on crude oil and products (so-named “60-66”)

– These provide significant incentive to upgrade HFO into Distillate products

Russian refiners plan to invest $50 billion to minimize HFO exports

Most of Russia’s Fuel oil exports go to Europe

UOP 7081-5

5

Marine Bunker Fuels: EU and IMO Developments

IMO (MARPOL) Regulations

• ECAs: Sulphur reduces from 1.0% to 0.1 % (January 2015)

• EU: Sulphur reduces from 3.5% to 0.5% (January 2020)

• Rest of the World: Sulphur reduces from 3.5% to 0.5% (January 2020/2025)

UOP 7081-6

6

Sulphur content allowable in bunker fuel (pc by weight)

IMO reduction timing subject

to study re availability to be

undertaken in 2018

Global

Emission Control Areas

Jan

05

Mar

06

May

07

Jul

08

Sep

09

Nov

10

Jan

12

Mar

13

May

14

Jul

15

Sep

16

Nov

17

Jan

19

Mar

20

May

21

Jul

22

Sep

23

Nov

24

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Let’s Start with the Fundamentals...

What is residue and why convert it?

Characteristics: Heavy, dirty, low value, limited uses

Properties: High MW, stable and carbon rich, hydrogen deficient

Composition: Saturates, Aromatics, Resins, Asphaltenes

Impurities: Sulfur, nitrogen, heavy metals

Feedstock characterisation is a key parameter in residue processing –

with composition, properties and molecular structure all important factors UOP 7081-7

7

UOP Solutions for Residue Conversion (Low to Moderate Conversion Options)

UOP/FWUSA Visbreaking

UOP RCD Unionfining™Process

Limited conversion and feed flexibilty

LS fuel oil production

or RFCC feed prep

Emerging role again

Up to 30% conversion

Achieves reduction in cutter stock for fuel

Can be a partial fix, not a full solution

Fuel oil outlet needed

FWUSA SYDEC™

Delayed Coking Process

Higher conversion - up to 75%

Require further upgrading to meet final product specs

Need an outlet for the pet coke

UOP 7081-8

8

UOP / FWUSA Solvent Deasphalting......

De-Asphalted Oil (DAO) feed to:

Not a conversion process, but a solvent / gravity separation process

Separation also driven by the molecular type - paraffins vs aromatics

DAO yield (“lift”) is typically 40 - 60+%, limited by DAO quality and at high lifts by pitch quality

SDA Vacuum Residue

(VR)

Bitumen

Boiler / Power

SDA Pitch feed to:

FCC

HCU

DCU

Uniflex Unit

UOP 7081-9

9

The UOP Uniflex Technology Offering is......

UNIFLEX UNIT (Wt-%)

100

15

50-55

10-15

Vacuum

Residue Feed

Naphtha

Diesel

VGO

HDT

MHC & FCC

or HCU

90-95% Conversion

Maximum Diesel

Minimum VGO

Once through Catalyst

Products require further upgrading

Offered either as a “stand-alone-unit” or with integrated DHT

Catalyst H2

H2S, NH3

Gas, LPG

Pitch

UOP 7081-10 10

Uniflex Process Thermal Cracking of Asphaltenes

Archipelago Model of Asphaltenes, Carbon # = 313, MW = 4705

Source: M. Gray, Univ of Alberta

The process benefits from combination of:

1. Thermal cracking to shorter chain lengths

2. Inhibiting formation of coke through:

– Hydrogenation of free radicals from thermal cracking

– Catalyst physically hinders mesophase coalescence

UOP 7081-11

11

Uniflex Process Reactor Achieves High Conversion

• Optimal design for high conversion

– Upflow

– Near Isothermal

– Efficient utilization of reactor volume

• Effective Asphaltene management

– Inhibit formation of coke pre-cursors by hydrogen pressure, optimum temperature and catalyst

Feed, H2 and Catalyst

Products and Catalyst

Simple Commercially proven Reactor design for highly effective performance

UOP 7081-12

12

Catalyst (Additive) & Pitch

• UOP global supply

• Multiple manufacturing locations

• Simple logistics and storage

Catalyst (Additive) • Cement:

– Often the most attractive outlet option

• Boiler/Power: – Conventional power plants

– CFB or Rotary Kiln Furnace

• Gasification

• Solidification: – Proven technology (Pellets or Big Bags)

– Facilitates transportation and storage

Pitch

UOP 7081-13

13

1

2

3

20 40 60 0

Average Carbon Number (Atoms per Molecule)

Hyd

rog

en

to

Ca

rbo

n A

tom

ic R

ati

o

DIESEL

THERMAL CRACKING

Converting VR into Diesel Needs

− Thermal Cracking

and

− Hydrogenation

Uniflex Complex Achieves this

− In a single slurry bed reactor

− With Post treatment to meet finished product specifications

H2 addition maximises margin

Uniflex Process Attributes Summary

HYDROGENATION

VAC RESID

CRUDE

OIL

UOP 7081-14

14

UOP Uniflex Process - Licensed Units Update

Name Location

Capacity,

MMTA Start-up

Petro-Canada, Montreal Canada 0.3 1985

NRL, Pakistan Pakistan 0.6 2017

Undisclosed China 0.9 2016

Mendeleev Group Russia 0.4 2017

Undisclosed China 0.8 2017

Undisclosed China 0.9 2017

Undisclosed China 0.8 2017

UOP 7081-15

15

OGT Background

• Oil Gas Trade (OGT) was established in 2002

• Key Business is fuels (jet, diesel, gasoline) and lubricants supply

• Acquired Yaroslavl Mendeleev Refinery in 2012

100+ year old existing refinery, open to new innovation, planning new “Deep Processing Complex”

New Mendeleev Group Project / Complex

• Construction of a new 3 MMTA “Deep Processing Complex” (DPC)

• Robust economics with Russian export duty regime

• Zero residue production (via Uniflex & Unicracking)

• Maximum diesel production

• Captive Power, Steam & H2 production

UOP 7081-16

16

It is Essential to assess a Major Project’s “Rate-of-Return” Relative to “Risk”

It is important to evaluate and mitigate any major project risks – technical, operational or other – otherwise forecast financial

returns can be undermined through under-performance

RISK

RoR

Window of Opportunity

Timeline

• Reliability

• Availability

• Throughput

• The early years of a Project’s performance are always the most visible

• Lifetime performance covers a 20+ year period

Consequences of Pushing the Risk Envelope too Far

UOP 7081-17

17

Global Fuel Oil is now Entering the Final Stages of Decline, Trending to Zero...

It is realistic to assume further reduction via further switching to natural gas and tighter IMO MARPOL regulations for Bunker Fuels

Global Fuel Oil Demand

<10% of Total Demand

0

5000

10000

15000

20000

25000

30000

35000

40000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43

- 3 MBPD

-2 MBPD

-1.5 MBPD

VGO VR

40

20

Millio

n b

arr

els

Pe

r D

ay

0 1980 1990 2000 2010

Source: BP Statistical Review of World Energy 2012

0

UOP 7081-18

18

$250/t

$350/t

$450/t

MARGINAL

GOOD

EXCELLENT

Price spreads and project economics are the main driver of any major residue upgrading project:

Russian pricing offers attractive economic returns

Europe

Pre 2012

The Diesel minus HSFO Price Spread is the Key Economic Driver

Europe

2013/15 Russia

2014/15

UOP 7081-19

19

0

50

100

150

200

250

1900 1920 1940 1960 1980 2000 2020

Pro

du

ct

- F

ee

d U

plift

, $/M

T

Ongoing Innovation in Vacuum Residue Conversion

Demand for transportation fuels vs. fuel oil has driven a “seven times” increase in the “gasoline + diesel” yield

enabling alignment of production with demand

Dubbs

Conv 25%

Visbreaking

Conv 15%

Delayed Coking

Conv 70%

Ebullated Bed

Conv 70%

Slurry Hydrocracking

Conv 95%

today’s pricing Year

UOP 7081-20

20

21

Q&A

UOP 7081-21