PKN ORLEN’s investment in deep crude conversion in Mažeikiai will enhance the refinery’s profitability

PKN ORLEN is investing to expand its refinery in Mažeikiai. By the end of this year construction will start on a project to build deep crude conversion units enabling production of larger volumes of high-margin products. According to the agreement signed between PKN ORLEN and ORLEN Lietuva on the financing of the project, the Company is to invest EUR 641m. This will be the largest capex project carried out by the ORLEN Group in Lithuania in its operating history. The project will enhance the profitability of the refinery, contributing to strengthening energy security of the region. The project is slated for completion by the end of 2024, and it will add as much as ca. EUR 68m to annual EBITDA.

‘This is a historic day for ORLEN Lietuva and the Lithuanian economy. As announced earlier, our investment in deep crude conversion in Lithuania is entering the execution phase. In the agreement signed today PKN ORLEN has declared its intent to fund the project, which will help us to significantly enhance the competitiveness of the refinery in Mažeikiai, which is key to ensuring energy security for our region. Increased yields of high-margin products will also improve the stability of fuel supplies in the Baltic states as well as in Poland. In a parallel effort, we are holding discussions with the Lithuanian government on possible forms of support for the project. This reflects the warming of Polish-Lithuanian relations at the governmental and business levels seen in recent years,’ said Daniel Obajtek, President of the PKN ORLEN Management Board.

Deep conversion units built at the Mažeikiai refinery will increase the yield of high-margin products by 12%, to over 84%, from less than 72% today. The project will reduce crude oil throughput but not fuel production volumes, also enabling the company to further expand its business into new products and extend its value chain. This in turn will reduce the company’s sensitivity to changes in the macro environment.

The deep crude conversion project will help eliminate production of high-sulphur heavy fuel oils, enhancing the refinery’s profitability given ever more stringent environmental regulations on heavy fuels. PKN ORLEN has already purchased a licence and procured front-end engineering design for the project.

In July 2021, ORLEN Lietuva, an ORLEN Group company, signed a letter of intent with the Lithuanian Energy Ministry to pursue a deep crude conversion project. Closer cooperation between the Company and Lithuania is a result of an earlier meeting of Daniel Obajtek, President of the PKN ORLEN Management Board, with the Lithuanian Prime Minister Ingrida Šimonytė.

ORLEN Lietuva is a key ORLEN Group company, operating the sole refinery in the region, guaranteeing its security. PKN ORLEN is consistently investing in expanding its assets in Lithuania. The Mažeikiai refinery is important to the Polish and Lithuanian economies. It is Lithuania’s largest company, with about 1,500 employees, of whom over 90% are residents of Mažeikiai and neighbouring towns. Another 4,500 people are employees of external service providers and subcontractors. ORLEN Lietuva is also one of the largest exporters and taxpayers in Lithuania having paid EUR 566,495,374 in taxes to the Lithuanian government in 2020 alone.

Phillips 66 to Convert Alliance Refinery to Terminal Facility

 Phillips 66 (NYSE: PSX) announced today it plans to convert its Alliance Refinery in Belle Chasse, La., to a terminal facility. The conversion is expected to take place in 2022.

“We made this decision after exploring several options and considering the investment needed to repair the refinery following Hurricane Ida,” said Greg Garland, Chairman and CEO of Phillips 66. “Alliance’s existing infrastructure and Gulf Coast location make it an attractive midstream asset. Phillips 66 will continue to be a major refiner with 12 facilities in the U.S. and Europe.”

The Alliance Refinery employs approximately 500 employees and 400 contractors.

“Our decision was a difficult one, and we understand it has a profound impact on our employees, contractors and the broader Belle Chasse community,” Garland said. “We will work to help them through this transition and support them as Alliance takes on a new role in our portfolio.”

Preem's refinery in Lysekil begins producing renewable petrol

The first tests to produce renewable petrol from sawdust have just been carried out at Preem's refinery in Lysekil. Work has now started to process 50,000 tons of pyrolysis oil at the plant. The renewable raw material will be delivered from the Swedish company Pyrocell.

Extensive tests have now begun in Lysekil on the catalytic cracker, one of the refinery's largest plants, which primarily produces petrol.

The test consists of two parts, an initial smaller batch of 300 tons of pyrolysis oil, followed by a longer test operation that will process up to 50,000 tons of pyrolysis oil for two years. The raw material will be delivered from Pyrocell's new facility in Gävle. Pyrocell is jointly owned by Preem and Setra. At the plant, which will be ready during the autumn, sawdust will be processed into pyrolysis oil. The oil will then be further refined at Preem's refinery in Lysekil.

“Residual products from our Swedish forests have a unique potential to make Sweden self-sufficient in an increasing share of liquid renewable fuels in the long run instead of importing 85 percent, as we do today. This is an exciting step in our work to develop the fuel of the future,” says Peter Abrahamsson, Head of Sustainable Development.

At the beginning of 2022, the statutory mixing requirement for renewables in petrol, the so-called reduction obligation, for Sweden will increase to 7.8 percent. By 2030, carbon dioxide emissions from petrol will have decreased by 28 percent. “This means that Preem's production of renewable petrol is an important piece of the puzzle that Sweden must solve to achieve the climate goals. Our long-term goal is to produce approximately 5 million cubic meters of renewable fuels by 2030, which means that we can reduce carbon dioxide emissions by 12.5 million tons, corresponding to 20 percent of Sweden's total emissions,” concludes Peter Abrahamsson.

Haldor Topsoe and Preem achieve 85% co-processing of renewable feedstock

Together, Topsoe and Preem have concluded the revamp of Preem’s Gothenburg refinery, which is part of Preem’s endeavors to reduce Sweden’s total carbon emissions by 20%.

This is the second revamp of the hydrotreater, following a revamp in 2010 that upgraded the unit to co-process 30% renewable feedstock using Topsoe’s HydroFlex™ technology. The unit was one of the first in the world capable of processing renewable feedstock.

With the second revamp, Preem and Topsoe have achieved 85% co-processing of renewable feedstock and continue to advance the field of renewable fuel production. Preem uses tallow and raw tall diesel as main feedstocks.

The revamp of the refinery is a significant step in a long-term plan for Preem with the goal to produce five million cubic meters of renewable fuels by 2030. This means reducing carbon emissions by 12.5 million tons, corresponding to 20% of Sweden's total emissions.

“This second revamp with Preem demonstrates our leading capabilities to enable our customers to use renewable feedstocks to produce a cleaner diesel product. We are pleased to support Preem in their ambitious 2030 goal to produce even more renewable fuels in order to reduce carbon emissions,” says Amy Hebert, Chief Commercial Officer at Topsoe.

“The revamp means that Preem has increased Sweden’s domestic production of biofuels and thereby is contributing to the ongoing shift from fossil fuels to renewables. This takes us one more step towards our goal of producing five million cubic meters of renewable fuels by 2030”, says Aad van Bedaf, Executive Vice President Refining at Preem.

Preem and Topsoe also collaborates to revamp the Synsat unit at Preem’s Lysekil refinery. This unit will benefit from Topsoe’s HydroFlex™ technology to produce clean renewable diesel based on various renewable feedstocks, including rapeseed oil. The unit is scheduled to be fully rebuilt by 2024. The revamp will support Preem with 950,000 standard cubic meters per year of renewable diesel securing 40% co-processing. As part of the revamp, the unit will be prepared to process 100% renewable feedstock.

Gazprom Neft to collaborate with Spain’s Tecnicas Reunidas S.A. in building the deep refining complex at its Moscow Refinery

 Gazprom Neft has chosen Tecnicas Reunidas S.A. (Spain) to manage the construction of the delayed coking unuit (DCU) at its Moscow Refinery’s future deep refining complex. Tecnicas Reunidas S.A. specialists will be responsible for managing project design and equipment deliveries (including deliveries of Russian-manufactured equipment), as well as managing and overseeing construction and installation works and acceptance testing. The contract is worth more than ₽20 billion. Works are expected to be complete by 2025.

Delayed coking technologies expand scope in the final refining of heavy oil fractions. Thanks to advanced technologies, the Moscow Refinery will be able to increase output of automotive fuels for the Moscow and Moscow Oblast market, and commence production of petroleum coke, used in the metallurgy industry. This DCU unit, together with a hydrocracking facility (being managed by South Korea’s DL E&C Co., Ltd), will make up the Moscow Refinery’s deep refining complex. The launch of this complex in 2025 will allow refining depth (the “conversion rate”) to increase to almost 100%.

Tecnicas Reunidas S.A. has extensive experience in developing high-tech production facilities — the company’s engineers having successfully implemented a range of projects in Australia, Canada, Great Britain, Norway and the United States of America. Stringent adherence to environmental standards and requirements will be front of mind in all works at the Moscow Refinery.

Técnicas Reunidas gets a $240 million contract in Russia

 Técnicas Reunidas has been awarded by Gazprom Neft a $240 million contract for the development of a modern unit for treating a residual oil at Moscow Refinery.

The scope of works which will be implemented during approximately 40 months (37 calendar months from works commencement date and 3 calendar months from Ready for Start-Up Date), includes detail design of the Project, materials and equipment purchase, new unit construction management and start-up.

The Project development will have an important positive impact on the environmental compatibility of the unit.

Due to the capacity for treating 2.4 million of tons per year, the new unit will contribute to increase a conversion capacity of the plant, transforming residuals streams into high quality fuels which will be adapted to the most demanding environmental norms.

Therefore, the Project will optimize use of raw materials and improve an efficiency of the unit.

This new unit forms part of the strategic upgrading program of Moscow Refinery that Gazprom Neft is developing.

The primary goal of the program is to enhance the investment in the production of first quality environmental fuels.

Engen RTT to shape the future of RSA’s liquid fuels industry

 Engen, a proudly South African brand and a progressive energy and solutions partner committed to enriching lives for a sustainable future, announced today that it will be proceeding with its Refinery to Terminal (RTT) conversion initiative. This considered decision was not taken lightly and follows an extensive strategic evaluation of Engen’s refining business, in which every facet of the refinery was scrutinised and assessed against market demand, future growth potential and the ability to contribute sustainably. The substantive cost of investment for upgrades required to bring the refinery in line with evolving quality and emissions regulation, were also part of the strategic review considerations.

As a responsible business and a committed corporate citizen, Engen has engaged extensively with Government, particularly with the Department of Mineral Resources and Energy (DMRE) and the KwaZulu-Natal Provincial

Government, on the future of the refinery in its strategic review process. These engagements and the feedback received from Government have proven highly valuable and helped inform our terminal conversion proposal.

At the behest of the DMRE and as part of Engen’s commitment to thorough due diligence, the company also commissioned an independent refinery viability study and an independent socio-economic impact assessment. The reports confirmed that the refinery is not financially viable and indicated relatively minor impact on overall GDP and taxes, while identifying upside benefits such as better security of supply, trade balance improvements and positive environmental impact. Engen expects the RTT to also deliver other economic benefits over the long-term.

Yusa’ Hassan, Engen Managing Director and CEO, comments, “The conclusion of the strategic assessment is that the Engen refinery is unsustainable in the longer-term. This is primarily due to the challenging refining environment as a result of a global product supply surplus and depressed demand, resulting in low refining margins, and placing the Engen refinery in financial distress. Furthermore, unaffordable capital costs to meet future CF2 regulations compliance continues to be a challenge for the long-term sustainability of the refinery.

The RTT is part of a long-term business sustainability strategy to ensure Engen is resilient against future market threats and can respond with agility to new opportunities. It also has a knock-on benefit of a reduction in emissions and carbon footprint that will contribute towards Engen’s environmental stewardship commitments. The conversion will also deliver a significant drop in electricity and water consumption, which will mean more electricity and water would be available for under-served households.

The RTT is part of a long-term business sustainability strategy to ensure Engen is resilient against future market threats and can respond with agility to new opportunities. It also has a knock-on benefit of a reduction in emissions and carbon footprint that will contribute towards Engen’s environmental stewardship commitments. The conversion will also deliver a significant drop in electricity and water consumption, which will mean more electricity and water would be available for under-served households.

Hassan continues, “The investment in new infrastructure to create a world-class import terminal as well as repurposing of the refinery site, will generate much needed economic activity in KwaZulu-Natal. In the current economic climate, this should contribute not just in terms of capital, but also in terms of job creation and skills transfer, something that will support South Africa’s post Covid-19 economic recovery. The RTT will also strengthen South Africa’s long-term security of fuel supply and contribute to lower road transport emissions, with resultant health benefits, and assist the country meet its 2027 Green House Gas (GHG) targets.” The RTT commissioning date is anticipated to be in the 3rd Quarter of 2023, with significant capital investments under consideration. Being a Level 1 B-BBEE contributor, Engen is committed to contributing to meaningful and sustainable transformation in the liquid fuels sector. Strategically reviewing existing proposition The Engen refinery, located in the south of Durban and commissioned in 1954, is the oldest refinery in the country and is responsible for approximately 17% of the country’s fuel production. With a nameplate capacity of 120,000 barrels per day, it ranks as a low capacity, medium complexity facility with limited upgrading potential. An added consideration for any upgrades is that it sits on a restrictive plot size and is located within a residential area; of which both factors render a potential capacity modification unfeasible. The global refinery landscape has changed significantly in the past decade with the emergence of mega sized, integrated, and complex refineries, many of which operate in countries that are primary suppliers of crude, resulting in a prolonged period of ultra-low refinery margins that are forecasted to persist well into the future. This was exacerbated by the onset of the Covid-19 pandemic, which resulted in further contraction of demand.

Hassan adds, “After modelling multiple scenarios in consultation with external international sector specialists, it has become very clear that the Engen refinery is not commercially viable. In view of this, company leadership has recognised that the Engen refinery cannot move forward in its current structure. We must safeguard the long-term sustainability of the Engen business; therefore, we are proceeding with the conversion to a terminal.”

Throughout this review process, Engen prioritised regular communication with employees, keeping them abreast of all relevant developments. The company also engaged with employees and union representatives to contribute inputs to the development of a well-informed, collaborative decision for the refinery’s future.

“Our people are a priority during the RTT transition, and it is our firm intention to preserve as many roles as possible. We are initiating a re-skilling and retooling programme, as well as evaluating the potential for some employees to be redeployed to other parts of the Engen organisation. We also expect that the repurposing of the refinery site to develop new business opportunities (e.g. a training centre, renewable energy initiatives, shared services, industrial hub etc.) will ensure that we mitigate, as much as possible, the impact on existing roles,” says Hassan.

Securing the future for all

Security of supply remains an over-arching consideration as Engen looks to the future of its business. The company maintains a robust business continuity framework and, as such, through the institution of its enhanced Business Continuity Plan (BCP) following the unfortunate December 2020 fire incident and subsequent safe shutdown of the facility, has been able to continue to meet customers’ core petroleum product requirements. It remains committed to maintaining a stable and secure supply of petroleum products and to managing demand fluctuations effectively and efficiently. Furthermore, exercising

Engen’s option to import advanced Euro 5 specification fuels could also support the automotive industry and provide an expanded and improved mobility experience in the future.

Hassan concludes, “Engen is committed to playing a leading role in growing South Africa’s future economic prosperity. Securing a sustainable Engen business provides the platform for the future development of new investment opportunities in South Africa, whilst the repurposing of the Engen refinery will serve as a catalyst for economic growth in KwaZulu-Natal, support job creation and socio-economic growth, and ensure Engen continues to be a positive contributor to both the provincial and national economies.