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Refining

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Outline
 Refinery processes
 Refining Markets: Capacity, Cost, Investment
 Optimization of Refinery Operations

Based on
- Introduction. Chapter 1 of Petroleum Refining: Technology and Economics, 5th edition by J.H.
Gary, G.E. Handwerk and M.J. Kaiser 2007.
- Refining Process Handbook. Surinder Parkash. Published by Elsevier. 2003.
- A Guide to Oil and Gas Industry (GOGI). By Deutsche Bank Market Research, 163-187.
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Crude Oil  Gasoline, Fuels, LPG, Chemicals

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Molecules Wght %

Crude Oils
Alkanes 30 Inputs:
(Paraffins)
Cycloalkanes 49
(Naphthenes)
Aromatics 15
Onsite Facilities
Asphaltics 6
Refinery Complex

Final Products
Gasoline

Outputs
Offsite Facilities: Electric power distribution; Fuel oil and fuel gas
facilities; Water supply, treatment, disposal; Plant air systems; Fire Jet and Heating Fuels
protection systems; Flare, drain and waste containment systems; Plant Liquefied Petroleum Gas
communication systems; Roads and walks; Railroads; Buildings.
Chemicals
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Inland Refinery: Holly Frontier’s Tulsa

3
Arkansas River
105 miles

Interstate 44
Northwest of
Oklahoma City

2.Storage Tanks

HFC’s Tulsa Refinery

Holly Frontier Cooperation (HFC)
$8 Billion revenue, publicly traded,
Dallas headquartered.
HFC has refineries also in NM, KS, WY,
CO; all inland and complex refineries
Refinery capacity 443 K barrels/day
0. Refinery
0. Tulsa capacity 125 K barrels/day
1. Crude oil brought by railways
encircling the Tulsa refinery
2. Oil is offloaded to Storage Tanks
1. Railways
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Crude Oil Operations, Refining Operations,

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Final Product Storage
Crude Oil Operations
1. Railways or Pipeline Receive Crude Shipments
Continuous or in Parcels
II. Store Crude in Storage Tanks
Refining Hedge against crude unavailability risk
Oper. 15-day thruput storage often adequate
2. Storage
Tanks Use Staging Tanks
Mix different crudes
Crude Distillation Unit Remove Brine (Salts)
I. Hedge against input unavailability
Crude 3-4 day thruput storage often adequate
Oil
Oper. Other Refinery Units Pump Crude to the Distillation Unit
Crude oil operations are discrete processes
3. Staging if done in parcels
Tanks

Refining Operations
4 processes, to be detailed later
Refining is the process of converting crude
to usable products.
Refining operations are continuous processes

Final Product
Final Product Storage
Storage Tanks
Until train, tanker truck, tanker ship pick
up or pipeline shipments
Railways or Pipeline Capacity with 10 days of thruput
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Crude Distillation Unit (CDU)

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 Hydrocarbons in crude have different
boiling temperatures.
– At 20 oC boiling are few-carbon alkanes:
methane (1C), ethane (2C), propane
(3C), butane (4C)
– Around 70 oC boiling are cycloalkanes:
pentane (5C), hexane (6C),
– Around 120 oC boiling is heptane (7C).
Liquids are octane (8C), nonane (9C)

 Heated crude turns into vapor and rises

in the distillation tower.
 As rising, it cools & condenses on trays.
– At 20 oC, 1C-4C are in the gas phase and
exit from the top of the distillation
(fractioning) column.
– At 120 oC. Some of 5C-9C exit as gas, some
as gasoline.
– At 170 oC , Kerosene condenses &
flows out from its tray.
– At 600 oC , Fuel oil condenses & flows
out from its tray.
– Residue (bottom) is asphalt & liquid
when heated, but solidifies in room
temperature.
Source: www.energyinst.org.uk
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1. Distillation Process: Physical separation

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1.A. Atmospheric towers & 1.B.Vacuum towers
Intermediate Products Final Products

< 30 oC Refinery fuel gas, propane,

Butane C4 and lighter
Crude Oil NGL (Natural gas liquids)
Dehydration and Desalination

Further processing 2-4

30-150 oC Gasoline (low octane) Gasoline (high octane),
and Naphtha Jet fuel
Atmoshpheric Pressure
Distillation Tower

1. Distillation
150-230 oC Kerosene, Jet fuel,
Kerosene
Diesel, Fuel oil

Heating 230-340 oC Light Gas Oil Gasoline (high octane)

(No. 1-4 Fuel Oil) Diesel, Fuel oil

processing
o Gasoline (high octane),
Vacuum 340-430 C Heavy Gas Oil Further
(No. 5-6 Fuel Oil) Diesel, Fuel oil
Low pressure
Unit 2-4
Reduced > 430 oC Residual Fuel Oil Gasoline (high octane),
facilitates boiling Pressure Diesel, Fuel oil,
Asphalt Lubricants, Wax
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2. Conversion Processes:

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Decompose (Crack), Unify, Reform
Intermediate Final Products
Products
Vapor Recovery
Butane and lighter Capturing gasses Refinery fuel gas
physically
Propane
Gasoline (low octane) Isomerization NGL

3. Treating & 4. Blending

Regular Gasoline
Naphtha Reforming
Premium Gasoline
Kerosene Solvents
Alkylation Jet fuel
Diesel
Light Gas Oil Thermal
(No. 1-4 Fuel Oil) Cracking Heating/Fuel oil
Catalytic
Cracking Lubricants oils
Heavy Gas Oil
(No. 5-6 Fuel Oil) Cracking Processes Greases
Visbreaker Asphalt
Residual Fuel Oil
Asphalt Coking Coke: Similar to Coal
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2. Conversion Process Descriptions

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2.A. Cracking

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 Cracking: Breaking down heavier and larger HCs into lighter and smaller HCs.
 Thermal Cracking: Using heat to crack.
 Steam-cracking: Using steam to crack; sound-like steam flooding in EOG.
 Coking: Using extreme heat to crack residue to obtain coke and heavy oil.
 Visbreaking: Using moderate heat to crack with the purpose of reducing viscosity
 Catalytic cracking: Using a catalyst (facilitator) under high temperature.
 Fluid catalytic cracking (FCC): Using zeolites (aluminium + silicates) powder as catalyst
 Hydro cracking: Using water (hydrogen) as catalyst

Fluid Hydro

Based on Figure 240 on p.171 of GOGI.

Use zeolites ↑ gasoline yield
catalytic cracking
& hydrogen ↑ kerosene yield.
cracking
LPG 14% 6%
Gasoline 45% 4%
Kerosene 1% 40%
Diesel (Gasoil) 23% 38%
Other: gas, naphta, residue, coke 17% 12%
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2. Conversion Process Descriptions

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2. B. Reform and 2.C. Combine (Unify)

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 Higher Octane Level ⇒ Better combustion under pressure. 7
– Level indicates the amount of pressure a HC can withstand before self-ignition. 3
– Octane levels are defined relative to iso-octane. 2 5 6 8
1
– As there can be more pressure resistant HCs, octane levels >100 ok for them.
4
– E.g.: Methane has octane number 120.
Iso-octane

C
 Isomerization is changing the geometry of the molecule. C C C C
– This increase the octane level. C C C

C
C C
 Reforming is obtaining cyclic HCs from chains. C C C C C C
C C
C
 Alkylation is obtaining alkanes (saturated) HCs from non-saturated ones.
– This yields larger molecules with higher octane levels.
C C C C
C C
C C C C C C
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3. Treating
1. Distillation  2. Conversion 

3. Treatment: Preparation of HCs and finished products by using chemical / physical separation.
– Removing unwanted substances: Salt, Suplhur, nitrogen, oxygen, metals (lead, mercury)
» Desalting
» Hydrodesulfurization: Sulfur removal yields elemental sulfur that is used in agriculture (as
fertilizer) and in pharmaceuticals. Some sulfur can remain in fuel oil and coke.
– Dewaxing to avoid solidification under low temperature and to improve gasoline flow in winters.
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4. Blending
1. Distillation  2. Conversion  3. Treating 
4. Blending: Mixing of HCs in certain fractions to obtain finished products with specific properties.

Spark Plug Ignition

Intake Compression Power Exhaust

Four cycle engine: 4-step engine:

1. Intake (injection)
2. Compression
3. Power
4. Exhaust
Piston goes back to the same
Exhaust position twice to complete 4 steps Intake
Ignition
Spark
Plug

Power Compression
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4. Blending for Specific Properties
Ignition Properties:
 RVP (Reid Vapor Pressure) specifies evaporation characteristic of gasoline.
– RVP measures the surface pressure that keeps a liquid from vaporizing.
» High RVP ⇒ Liquid vaporizes easily
» Low RVP ⇒ Liquid does not vaporize easily
– Liquid gasoline does not burn easily. Spraying charcoal igniter liquid on your barbeque ok, if the liquid is cold.
– A fuel injector sprays gasoline & oxygen mix at the right mix and pressure into the engine block for combustion.
– Injector needs 6-12 psi RVP; Higher RVP for lower temperatures and lower RVP for higher temperatures
» Vapor vaporizes easily under high temperature
» RVP of 12 psi for Fargo, North Dakota in winters; less RVP, gasoline remains as liquid and does not burn.
» RVP of 6 psi for Dallas, TX in summers; more RVP, gasoline vaporizes while pumping or transferring to the injector
– EPA needs less RVP to reduce evaporative emissions. The limits are stricter during the summer ozone season.
 Octane level: Gasoline mostly has octane C8H18 and some heptane C7H16 & other molecules.
– Gasoline with octane number 90 has the same combustion properties as 90% iso-octane and 10% heptane.
– Similarly octane number 80 indicates the same combustion properties as 80% octane and 20% heptane.
– Knocking: Ignition of got gasoline in the engine block on its own before being ignited by a spark plug.
» Self-ignition is more likely if the pressure on the gasoline is high
» The pressure on the gasoline is high in engines with high compression ratio
» Compression ratio = Highest volume of an engine block / Lowest volume of the engine block
– High octane rating ⇒ smooth and sustained combustion without knocking
Corrosion Properties:
 Sulphur level: Crude with > 0.5% Sulphur is corrosive (sour).
 TAN (Total Acid Number) is the concentration of potassium hydroxide (KOH, a base) needed to
neutralize the acid in the crude. Crude with TAN > 1 mg KOH/g is corrosive.
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4. Blending Computations

4. Blending:

 Octane level:

 Gasoline with different octane levels can be blended

 50-50 Blending of 90 octane gasoline with 80 octane gasoline yields 85 octane gasoline.
 20-80 Blending of 90 octane gasoline with 80 octane gasoline yields 82 octane gasoline.
 82=(0.2)90+(0.8)80

 Suppose we are selling mid-grade gasoline with 88 octane. In what proportions should we
blend 90 octane gasoline and 80 octane gasoline to obtain 88 octane gasoline?
 88=90x+80(1-x) gives x=0.8.

 These blending computations are also valid for sulfur content, TAN & RVP.
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Blending then and now:

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Preference for Alcohol over Lead in the Engines
 Ethyl Cooperation (www.ethyl.com) founded in 1923 ran
ads like the one on left. This ad is from National
Geographic 1931 – 8 years after Ethyl’s founding.
 The “Ethyl Fluid” mentioned in the ad is to
– “deliver power … with a smoothly increasing pressure”
– rather than “sharp, irregular bursts (that cause power-waste,
harmful knock and overheating)”
 Ethyl component CH3 CH2 − [?]
has an open bond to connect with [?]
C C ?

 Lead Pb (Plumbum in latin) in “Ethyl Fluid” of then.

− Lead is toxic
Pb + But radiation shield

 Gasoline is lead-free now in most countries.

 Now Ethyl alcohol (octane number 108) is blended with
gasoline up to 25% in Brazil & 10 % in the USA.

Ethanol = Ethyl Alcohol O

C C
= CH3 CH2 OH
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Refinery Operations and Yields
I. Crude oil receipt and operations
1. Mix
2. Desalt
II. Refining operations
1. Distillation  Refinery yields in US in 2003:
a) Atmospheric – 46.9% Gasoline
b) Vacuum – 23.7% Distillate fuel oil (inc. Diesel)
2. Conversion – 4.2% Residual fuel oil (heating & ship fuel)
a) Cracking – 9.5% Jet Fuel
i. Thermal Cracking: Steam-cracking, – 5.1% Coke
Coking, Visbreaking – 3.2% Asphalt
ii. Catalytic cracking: Fluid catalytic – 4.2% Liquefied gas
cracking, Hydro cracking
b) Reforming  Refinery yields in Europe p.168 of GOGI:
i. Isomerization – 21% Gasoline + 6% Naphta
ii. Reforming – 36% Distillate fuel oil
c) Combining (Alkylation) – 19% Residual fuel oil
3. Treating – 6% Kerosene used in Jet Fuel
a) Desalt – 9% Residuals like Asphalt
b) Hydrodesulfurization – 3% Petroluem gas like Liquefied gas
c) Dewax
4. Blending More gasoline in US. More Diesel & Fuel oil in Europe.
III. Final product storage and shipment
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Refinery Markets:
Capacity, Cost, Investment
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Refinery Characteristics: Types and Products
Atmospheric distillation Vacuum distillation
Cracking

Topping
refinery
refinery

refinery
Coking

Pretreatment Catalytic cracking

Coking
Catalytic reforming Alkylation
Hydrodesulfurization Isomerization

 Simple refineries have low margins and are owned by small & niche companies.
 Complex refineries have higher margins.
– Their margins ↑ when the spread (light sweet crude price − heavy sour crude price) ↑
 Refinery outputs are commodities
– Gasoline (aviation, car and light distillates); Middle distillates (diesel fuel, jet fuel, heating oil);
Other products (lubricants, wax, solvents, machine oils)
– Output markets are more segmented by location, regulation, season, quality.
– Product prices are related to crude prices whose prices are volatile.
– Product prices are volatile as demand is inelastic in the short-term.
Study Product Short-term Long-term
elasticity elasticity
Dahl & Sterner 1991 Gasoline 0.26 0.86
Espey 1998 Gasoline 0.26 0.58
Graham & Glaister 2004 Gasoline 0.25 0.77
Brons et al. 2008 Gasoline 0.34 0.84
Dahl 1993 Oil 0.07 0.30
Cooper 2003 Oil 0.05 0.21
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Refining Characteristics: Margins
 Refineries, capital-intensive, long lifetime, very specific physical assets
– Cost of a refinery.
– High initial investment and exposure to financial risk: interest rate, investment cycle, crude cost.
– Gross margin = Revenues from product sales – Cost of crude was $8.68 per barrel in 2004.
– Net Margin = Gross margin – Cost of (marketing + internal energy + operating) was $3 per barrel in 2004.
– Booms and Busts: Profitability of refinery peaked in 1988 and 2001: 15%. It plunged to -1.7% in 2002.

Complexity US Capacity Gross Margin Net Margin

$/barrel $/barrel
Topping 5.6% 0.5 to 1.5 -0.5 to 1.5
Cracking 28.7% 3 to 4.5 0 to 2.5
Coking 65.7% 5 to 7 0.5 to 4
 Refining is energy intensive.
– US refining consumed 6.4 quads (1015) BTU in 2004. This is 28% of energy consumption in US manufacturing.
» US Department of Energy, Office of Industrial Technologies, Manufacturing Energy Consumption Survey, August 2004.
– 30-40% of refining energy is spent on distillation.
– 20% spent on hydrotreating (removal of sulfur, nitrogen, oxygen and metals).
– Close to 60% of operating expenses are for the energy.

 Crudes are becoming heavy and sour (high-sulfur).

• Recent capacity expansion of US refineries is to provide bottom-of-the-barrel processing to handle heavy crude.
• This is profitable and required by environmental regulations.
• Cracking refineries are becoming coking refineries over time with the capacity and process expansions.
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Refining Characteristics: Pollution
 Refineries create pollution
– Pollution gases emitted during refining operations: Particle matter (dust, dirt, smoke, soot), Sulfur dioxide, Carbon
monoxide, Nitric oxides, Volatile organic compounds (paints, adhesives). All of these are created by catalytic
cracking and coking units.
– Pollution created by refinery products such as gasoline. Reducing the pollution from burning gasoline?
– Refineries are subject to several regulations.
» Air Acts: Clean Air 1963, amendments 1967, 1970, 1975, 1977, 1990. Motor Vehicle Air Pollution 1965. Air Quality 1967.
» Water Act: River and Harbor, Refuse, Federal Water Pollution Control, Clean Water, Water Quality, Safe Drinking Water.

 Each refinery is unique and evolve with expansions over time.

– ConocoPhillips’ Borger Refinery is located in Borger, TX, in the TX Panhandle about 50 miles north of Amarillo
and includes an NGL fractionation facility. The refinery’s gross crude oil processing capacity is 146 MBD, and the
NGL fractionation capacity is 45 MBD.
» Facilities: coking, fluid catalytic cracking, hydrodesulfurization and naphtha reforming that enable it to produce a
high percentage of transportation fuels.
» Input: Primarily medium sour crude oil and natural gas liquids received through pipelines from West TX, the TX
Panhandle, WY and CA. It can receive foreign crude via company-owned and common-carrier pipelines.
» Output: A high percentage of transportation fuels (gasoline, diesel fuel and jet fuel), coke, NGL and solvents.

– ConocoPhillips’ Sweeney Refinery located in Old Ocean, TX, 65 miles southwest of Houston, has a crude oil
processing capacity of 247 MBD. It processes mainly heavy, high-sulfur crude oil, but also processes light, low-
sulfur crude oil.
» Facilities: fluid catalytic cracking, delayed coking, alkylation, a continuous regeneration reformer and
hydrodesulfurization units.
» Input: Domestic and foreign crude oil, received primarily through wholly and jointly owned terminals on the Gulf
Coast, including a deepwater terminal at Freeport, TX.
» Output: A high percentage of transportation fuels (such as gasoline, diesel fuel and jet fuel). Other products include
petrochemical feedstocks, home heating oil and coke.
» The refinery operates nearby terminals and storage facilities in Freeport, Jones Creek and on the San Bernard River, along with pipelines that connect
these facilities to the refinery.
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Investment Cost for a Refinery in 1994 by

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Major Equipment Estimates
 Onsite facilities of a refinery cost: $ 82,976 K: 360,00 gallons in 150 x 150 m2
– Desalter $1,800 K for 30,000 barrels per stream day

150 m
25 m
Barrel per stream day BPSD = max # of barrels of input a distillation unit can process) 9m
– Atmospheric distillation unit $27,000 K for 30,000 BPSD
– Vacuum distillation unit $14,500 K for 18,000 BPSD
– Naphtane desulfurization unit $6,600 K for 4,000 BPSD
– Reforming unit $11,000 K for 3,000 BPSD
– Catalytic reformation unit $600 K.
– Cold water system $824 K for 8,240 gallons per minute.
– Steam system $2,472 K for 30,900 pound per hour. 2290 m3=Volume of tank height 9 m, radius 9 m
– Storage $18,000 K for 12 days thruput 57,143 m3 = 25 tanks each with 2,290 m3
57,143 m3 ≤ 3 tanks with 20,000 m3
Storing 360,000=12*30,000 barrels at the cost of $50/bbl storage capacity 1 m3 = 6.3 barrels, 360,000 barrels = 57,143 m3
 Offsite facilities: Electric power distribution; Fuel oil and fuel gas facilities; Water supply, treatment,
disposal; Plant air systems; Fire protection systems; Flare, drain and waste containment systems; Plant
communication systems; Roads and walks; Railroads; Buildings.
– For a midsize refinery offsite costs are 30% of onsite facility cost.
– Offsite facilities cost: $ 24,839 K.
 Location factor: Location determines climate (affects design & construction costs), local rules & taxes.
– US Gulf coast refineries are relatively cheaper and have location factor of 1.0.
– St. Louis has a factor of 1.4. Alaska North Slope has a factor of 3.0.
 Contingencies: 15% allowance for major loopholes and inaccuracies.
 Cost of a midsize refinery in St. Louis in 1994 was about $174 million.
– (82,976) (1.3) (1.4) (1.15)=173,582
Source: Cost Estimation. Chapter 17. Petroleum Refining: Technology and Economics, 3rd ed. by J.H. Gary, and G.E. Handwerk 1994.
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Take Inflation Factor into Account
 We have found the cost of a simple refinery to be $174 million in 1994. To bring it to 2010 use:

Source: www.ogj.com January 9, 2012.

 Cost in year (t) = [Cost in year (s)] * [Index in year (t) / Index in year (s)]
 Cost in year 2010 = [Cost in year 1994] * [2,337.6 / 1,349.7] = 174 * 1.732 = $ 301.36 Million.
 If this refinery were to be built in Alaska North Slope, the cost would be
= 301.36*[(Location factor in North Slope)/(Location factor in St. Louise)]
= 301.36*(3/1.4)
= $ 646 Million.
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Cost of Capacity and Complexity
 Cost of a 30,000 BPSD refinery in Alaska in 2010 has been found to be $ 646 Million.
 The cost increases but does not double if we double the capacity. In particular,
Cost of capacity Q = Cost of capacity q * (Q/q)0.6.
 Doubling the capacity in Alaska, the cost of refinery increases to 646 (2) 0.6 = $ 979 Million.
 A rough estimate of refinery cost is $15,000 for each BPSD.
– Using this, the cost of a 60,000 BPSD refinery turns out to be $900 Million, similar to the detailed estimate
obtained for the same size refinery in Alaska.
– However, this rough estimate becomes $450 Million for a 30,000 BPSD refinery whose detailed cost estimate is
$ 646 Million. The rough cost estimate can be inaccurate by about 50%.

 Complexity of a refinery can be defined in terms of complexity of its units.

– Complexity of atmospheric distillation unit ← 1. This unit gives the most output (BPCD) per $ invested.
– If a 100,000 BPCD distillation unit costs $10 Million, the cost per BPCD is $100.
– If a 20,000 BPCD catalytic reforming unit costs $10 Million, the cost per BPCD is $500.
– Catalytic reforming is 500/100=5 times more complex than atmospheric distillation.
– Some examples of complexities: Catalytic Hydrocracking 6; Alkylation 10; Isomerisation 15; Lubricants 60.

 US Refinery complexity by company in 2003:

– Valero 13.4; Exxon 12.8; ChevronTexaco 12.3; BP 11.6; Citgo 11.4; Shell 11; Marathon 10.6; ConocoPhillips
10.3; Premcor 9.4; Sunoce 8.7; Tesore 8.5.
– “Higher complexity allows Valero to process cheaper higher sulfur crudes while maintaining a highly desirable
product slate. Higher complexity usually means more energy input per barrel of crude.”
 Source: Valero Energy Strategy. G. Faagau, Director, Energy Optimization, Valero Energy Corporation.
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When to Invest?
Fewer refineries
provide
more capacity

Investment
Window

Higher margin
Lower uncertainty

An increase in uncertainty decreases the probability a refinery adjusts its capacity.

Source: T. Dunne and X. Mu. 2008. Investment Spikes and Uncertainty in the Petroleum Refining Industry. Working paper, Fed. Reserve Bank of Cleveland.
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US Refining Capacity and Structure
 US refining capacity
– was 19.4 million BPCD (Barrels per calendar day) in 1981.
– is 17.7 million BPCD in 2011.
 This capacity number refers to the capacity of Atmospheric Oil Distillation column.
 Vacuum distillation capacity is 8.6 million BPCD. Thermal cracking capacity is 2.7 million
BPCD. Catalytic hydro-cracking capacity is 1.9 million BPCD.
 Although the number of refineries significantly dropped from 324 in 1981 to 148 in 2011,
the capacity did not.
– Existing refineries expanded their capacities.
– Expansion is more economic than a brand-new facility.
» Economies of scale
» Regulatory requirements are easier to overcome.
– Top 3 US refineries process 36% of the crude oil; top 10 process 77%.
– Concentrated ownership: There are fewer companies owning refineries now than before.
– Diverse ownership: Vertically integrated major companies used to own most of refining capacity.
Now midsize and independents are also involved in refining. Various ownership structures exist:
» Holly Frontier (2828 N Harwood St, Dallas, TX 75201) is on its own and public.
» Motiva enterprises (of Houston) 50-50 joint venture between Royal Dutch Shell and Saudi Refining.
» Koch industries is privately owned.
» ConocoPhillips is separating its production (upstream) from refining (downstream). Separation is
expected to be completed in the second quarter of 2012. Downstream company will be called Phillips 66.
– Regardless of ownership structure, refineries tend to be run as separate profit centers.
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US Refineries and PAD Districts

From\To I II III IV V
I 123 2

II 27 81 20

III 1185 410 17 14

IV 23 52 12

V
Shipments in Million Barrels in 2004
of petroleum products among PADDs

 PADDs (Petroleum Administration for Defense Districts) were established during WW II.
– PADD I: East: CT, ME, MA, NH, RI, VT, DE, DC, MD, NJ, NY, PA, FL, GA, NC, SC, VA, WV
– PADD II: Midwest: IL, IN, IA, KS, KY, MI, MN, MO, NE, ND, SD, OH, OK, TN, WI
– PADD III: South: AL, AR, LA, MS, NM, TX
– PADD IV: Rockies: CO, ID, MT, UT, WY
– PADD V: West: AK, AZ, CA, HI, NV, OR, WA
 US Capacities. PADD I 1.7; II 3.6; III 8.1; IV 0.6; V 3.2 million BPCD in 2005.
 Global Capacities. Africa 3.2; Asia 22.2; Eastern Europe 10.2; Middle East 7.0; North America 20.6;
South America 6.6; Western Europe 14.9 million BPCD in 2005.
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Optimization of Refinery Operations

 Optimization of Refining Operations

– Continuous processes  Continuous variables
 Optimization of Crude Oil Operations
– Continuous crude inflow from a pipeline  Continuous variables
– Discrete crude shipments as parcels  Discrete variables
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Optimization of a Refinery
 A simple refinery has a contract to receive 20,000 barrels of crude A and 30,000 barrels of crude B.
These crudes go through 4 processes: Distillation (light and middle), reforming, cracking (regular and
coking) and blending.
 Distillation separates Crude A and B into light, medium, heavy naphta (cycloalkanes), light, heavy oil
and residuum.
Output/ Light Medium Heavy Light Heavy Residuum
Input Naphta Naphta Naphta Oil Oil
Crude A 0.10 0.20 0.20 0.12 0.20 0.13
Crude B 0.15 0.25 0.18 0.08 0.19 0.12

 Light, medium and heavy naphtas have octane numbers 70, 80, 90. Light ignites faster.
 Naphtas can be blended to produce refined products or can go to reforming. Reforming’s output is
reformed gasoline with octane number 115. Yield of each barrel of naphta is below.
Light Naphta Medium Naphta Heavy Naphta
Reformed gasoline 0.60 barrels 0.52 barrels 0.45 barrels

 Oils can be blended to produce jet fuel/fuel oil or can go to cracker. Cracker’s output is cracked oil and
cracked gasoline with octane number 105. Yield of each barrel of oil is below.
 E.g., 1 barrel of light oil yields 0.68 barrel of cracked oil and 0.28 barrel of cracked gasoline.
Light oil Heavy Oil Used for blending
Cracked oil 0.68 0.75 Fuel oil and jet fuel
Cracked gasoline 0.28 0.20 Gasoline
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Processes Map and Yields Partial
Crude A Crude B
Premium
Distillation

Blending
Distillate
Gasoline

Light
Numbers not shown
Regular
Light Naphtha 0.60 Gasoline

Reforming
0.52 Reformed
Medium Naphtha
Gasoline
0.45
Heavy Naphtha 1 barrel of heavy naphta yields
0.45 barrel of reformed gasoline

0.28 Cracked
Cracking

Light Oil
0.20 Gasoline
0.68 Cracked
Heavy Oil Oil Jet Fuel
0.75
1 barrel of heavy oil yields

Blending
Distillate
Middle
0.20 barrel of cracked gasoline
0.75 barrel of cracked oil Fuel oil
Coking

Residuum Lube oil

Intermediate Final
Products Products
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Optimization of a Refinery
 Residuum can be used for producing lube oil or middle distillate blending in to jet fuel and fuel oil.
Yield of each barrel of residuum is below.
Residuum

Lube oil 0.50

 Regular and premium are two types of gasolines obtained by light distillate blending naphtas,
reformed gasoline and cracked gasoline. Their octane numbers must be at least
Regular gasoline Premium gasoline

Octane number ≥ 84 94

 Jet fuel is obtained by blending light, heavy, cracked oils and residuum. Its RVP (Reid Vapor
Pressure) must be less than 1 kg/cm2. The pressures of the inputs are as follows.
Light oil Heavy oil Cracked oil Residuum

RVP 1.0 0.6 1.5 0.05

 Fuel oil is obtained by blending cracked, light, heavy oil and residuum in the ratios of 3:10:4:1.
 E.g., blending 3 barrels of cracked oil, 10 barrels of light oil, 4 barrels of heavy oil and 1 barrel
of residuum results in 18 barrels of fuel oil.
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Processes Map and Yields Completed
Crude A Crude B
Premium

Blending
Distillate
Distillation Gasoline

Light
Octane≥ 94

Light Naphtha 0.60 Regular

Reforming
0.52 Reformed Gasoline
Medium Naphtha
Gasoline
Octane≥ 84

Heavy Naphtha 0.45

0.28 Cracked
Cracking

Light Oil
0.20 Gasoline
0.68 Cracked
Heavy Oil Oil Jet Fuel
0.75
RVP≤ 1

Blending
Distillate
3

Middle
10 Fuel oil
4
1
Coking

Residuum Lube oil

0.50
Intermediate Final
Products Products
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Process Capacities, Limits and Prices
Capacities:
 Distillation Capacity 45,000 barrels per day.
 Reforming capacity is 10,000 BPD.
 Cracking capacity is 8,000 BPD.

Limits on the final products:

 Daily lube oil production must be between 500 and 1000 BPD.
 Premium gasoline production must be at least 40% of regular gasoline production.

 Refined product prices in $/barrel

Premium Regular Jet Fuel Lube

gasoline gasoline fuel oil oil
140 120 80 70 30
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Processes with Decision Variables
Crude A CA Crude B CB
LNPG+LNRG
Premium
MNPG+MNRG

Blending
Distillate
Distillation Gasoline PG

Light
HNPG+HNRG Octane≥ 94
RGPG+RGRG
Low Naphtha LN LNR CGPG+CGRG
0.60 Regular

Reforming
Gasoline RG
Medium Naphtha MN MNR 0.52 Reformed
Octane≥ 84
Gasoline ReG

Heavy Naphtha HN HNR 0.45

LOC 0.28
Cracking

Light Oil LO Cracked

0.20 Gasoline CG
HOC 0.68 Cracked
Heavy Oil HO Jet Fuel JF
0.75 Oil CO
RVP≤ 1

Blending
Distillate
3

Middle
LOB
HOB 10 Fuel oil FO
4
RB 1
Coking

Residuum R RC Lube oil LuO

0.50
Intermediate Final
Products Products
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Constraints
 Contractual availability of crudes CA 20,000; CB  30,000.

 Process capacities CA  CB  45,000 at distillation,

LNR  MNR  HNR  10,000 at reforming,
LOC  HOC  8,000 at cracking.

 Daily lube oil production must be between 500 and 1000 BPD.

LuO  1,000; LuO  500.

 Premium gasoline production must be at least 40% of regular gasoline production.

PG  0.4 RG.
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Constraints: Distillation
 Distillation separates crudes into light, medium, heavy naphta, light, heavy oil and residuum.

Light Medium Heavy Light Heavy Residuum

Naphta Naphta Naphta Oil Oil
LN MN HN LO HO R
Crude A CA 0.10 0.20 0.20 0.12 0.20 0.13
Crude B CB 0.15 0.25 0.18 0.08 0.19 0.12

CA CB
LN 0.10 0.15 LN  0.10 CA  0.15 CB;
MN 0.20 0.25 MN  0.20 CA  0.25 CB,
HN 0.20 0.18 HN  0.20 CA  0.18 CB,
LO 0.12 0.08 LO  0.12 CA  0.08 CB,
HO 0.20 0.19 HO  0.20 CA  0.19 CB,
R 0.13 0.12 R  0.13 CA  0.12 CB.
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Naphta, Light, Heavy Oil, Residuum
 Naphta balance equation LNPG+LNRG
MNPG+MNRG
HNPG+HNRG

Low Naphtha LN LNR

LN  LNPG  LNRG  LNR,

Reforming
MNR
Medium Naphtha MN MN  MNPG  MNRG  MNR,
HNR HN  HNPG  HNRG  HNR.
Heavy Naphtha HN

 Light, Heavy Oil and Residuum balance equations

Light Oil LO
LOC Cracking
LO  LOC  LOB,
HOC HO  HOC  HOB.
Heavy Oil HO

LOB
HOB

RB
R  RC  RB.
Coking

RC
Residuum R
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Process Balance Equations
 Reforming balance equations

LNR
Reforming 0.60
MNR 0.52 Reformed
ReG  0.60 LNR  0.52 MNR  0.45 HNR.
Gasoline ReG

HNR 0.45

 Cracking balance equations

LOC 0.28 Cracked

Cracking

0.20 Gasoline CG CG  0.28 LOC  0.20 HOC,

HOC 0.68 Cracked
CO  0.68 LOC  0.75 HOC.
0.75 Oil CO

 Coking balance equations

Coking

RC LuO LuO  0.50 RC.

0.50
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Light Distillate Blending
 Reformed and Cracked Gasoline balance equations
RGPG+RGRG

CGPG+CGRG ReG  RGPG  RGRG,

Reformed
Gasoline ReG
CG  CGPG  CGRG.

Cracked
Gasoline CG

 Light Distillate Blending

LNPG+LNRG
MNPG+MNRG Premium Gasoline PG
Blending
Distillate
Light

HNPG+HNRG
RGPG+RGRG
Regular Gasoline RG
CGPG+CGRG

PG  LNPG  MNPG  HNPG  RGPG  CGPG,

RG  LNRG  MNRG  HNRG  RGRG  CGRG.
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Recipe for Fuel Oil
 Middle Distillate Blending
Jet Fuel
 To produce 180 barrels of FO, we blend JF
CO
30 barrels of CO,

Blending
Distillate
3

Middle
100 barrels of LOB, LOB
HOB 10 Fuel oil
40 barrels of HOB, 4 FO
10 barrels of RB. RB 1

 If we have,
70 barrels of CO, 40 barrels extra goes into JF,
110 barrels of LOB, 10 barrels extra goes into JF,
40 barrels of HOB, 0 barrels extra goes into JF,
60 barrels of RB, 50 barrels extra goes into JF.

 Eventually, we produce 180 barrels of FO and 100 barrels of JF.

CO  (3/18) FO; LOB  (10/18) FO; HOB  (4/18) FO; RB  (1/18) FO,
JF  CO - (3/18)FO  LOB - (10/18)FO  HOB - (4/18)FO  RB - (1/18)FO.
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Octane and Vapor Pressure
 Octane numbers
Regular Premium
Light, medium and heavy naphtas have octane numbers 70, 80, 90. gasoline gasoline
Reformed gasoline has octane number 115. Octane
Cracked gasoline has octane number 105. number ≥ 84 94

LNRG MNRG HNRG RGRG CGRG

70  80  90  115  105  84,
RG RG RG RG RG
LNPG MNPG HNPG RGPG CGPG
70  80  90  115  105  94.
PG PG PG PG PG

 Vapor pressure Light Heavy Cracked Residuum

Jet fuel RVP must be less than 1 kg/cm2. oil oil oil
RVP 1.0 0.6 1.5 0.05

LOB  (10/18)FO HOB  (4/18)FO CO  (3/18)FO RB  (1/18)FO

1 0.6  1.5  0.05  1.
JF JF JF JF
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Objective

 Maximize the revenue from final products whose prices are $/barrel

Premium Regular Jet Fuel Lube

gasoline gasoline fuel oil oil
140 120 80 70 30

Maximize 140 PG  120 RG  80 JF  70 FO  30 LuO.

 Inputs come through an existing contract. They are fixed and their costs are sunk.
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Alteration Exercise: Modifying Middle Distillate

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Recipe for Jet Fuel in addition to Fuel Oil
New
 Middle Distillate Blending CO requirement
 Suppose that JF needs to be produced now by blending cracked,

Blending
Distillate
2

Middle
light, heavy oil and residuum in the ratios of 2:4:1:1. This LOB Jet Fuel
4
modification is inspired by a question from Juan Vanegas Merit’14. HOB JF
1
 To produce 80 barrels of JF, we blend RB 1
20 barrels of CO,
40 barrels of LOB,
10 barrels of HOB, Existing
10 barrels of RB. CO requirement

Blending
Distillate
 If we want 80 barrels of JF and 180 barrels of FO, we need at least 3

Middle
LOB
20 and 30 barrels of CO respectively for JF and FO,
HOB 10 Fuel oil
40 and 100 barrels of LOB respectively for JF and FO, 4 FO
RB
10 and 40 barrels of HOB respectively for JF and FO, 1
10 and 10 barrels of RB respectively for JF and JO.

CO  (2/8) JF  (3/18) FO; LOB  (4/8) JF  (10/18) FO;

HOB  (1/8) JF  (4/18) FO; RB  (1/8) JF  (1/18) FO.

 Jet fuel RVP must be less than 1 kg/cm2. When CO, LOB, Light Heavy Cracked Residuum
HOB and RB are mixed at ratios of 2:4:1:1, the JF has oil oil oil
RVP of (2/8)1.5 +(4/8)1 +(1/8)0.6 +(1/8)0.05 = 7.65/8 < 1. RVP 1.0 0.6 1.5 0.05
No RVP constraint is necessary!
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Refinery Optimization in Practice
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Refinery Optimization in Class

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Texas Refinery Context
Texas refinery obtains 3 intermediate products (components) C1, C2, C3 after distillation/conversion and
plans to use these to produce 2 coatings: MightyPlate and Aluminum.
 The sales price of coatings are $1.15 / litre for MightyPlate and $ 1.30 / litre for Aluminum.
 Texas refinery has a contract to produce at least 10,000 liters of MightyPlate.
 The cost of producing 3 components (through purchasing crude, distillation, conversion) are $0.45 / litre for C1,
$0.55 / litre for C2 and $0.75 / litre for C3.
 With current processes & input, the refinery can produce 4000 liters of C1, 7000 liters of C2 and 8000 liters of C3.
 There are technological constraints while blending components to make the coatings
 MightyPlate can contain at most 55% C1 and at most 25% C3 and must contain at least 35% C2
 Aluminum can contain at most 45% C2 and must contain at least 15% C1 and 25 C3.
 The processing (including treating and blending) costs are given as ¢ / litre by the table below

C1 C2 C3
MightyPlate 12 15 10
Aluminum 18 13 20
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Texas Refinery Context Visualization

Cost $0.45/litre C1 Cost $0.12/litre

M Price $1.15/litre
𝐶1 ≤ 4,000 litre M ≥ 10,000 litre

Crudes

1. Distillation Cost $0.55/litre C2

𝐶2 ≤ 7,000 litre

2. Conversion

Out of context
Cost $0.20/litre A
Cost $0.75/litre C3 Price $1.30/litre
𝐶3 ≤ 8,000 litre
3. Treating & 4. Blending

Technological constraints
 M can contain ≤ 55% C1 and ≤ 25% C3 and must contain ≥ 35% C2.
 A can contain ≤ 45% C2 and must contain ≥ 15% C1 and ≥ 25% C3.

Context
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Ingredients of a Formulation
To formulate: Define decision variables for each arrow:
𝐶1𝑀, 𝐶2𝑀, 𝐶3𝑀, 𝐶1𝐴, 𝐶2𝐴, 𝐶3𝐴

Cost 0.45(𝐶1𝑀 + 𝐶1𝐴) Cost 0.12𝐶1𝑀 Revenue 1.15 𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀
C1 M
𝐶1𝑀 + 𝐶1𝐴 ≤ 4,000 𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀 ≥ 10,000

Cost 0.55(𝐶2𝑀 + 𝐶2𝐴)

C2
𝐶2𝑀 + 𝐶2𝐴 ≤ 7,000

Cost 0.75(𝐶3𝑀 + 𝐶3𝐴) Cost 0.20𝐶3𝐴

C3 A Revenue1.3(𝐶1𝐴 + 𝐶2𝐴 + 𝐶3𝐴)
𝐶3𝑀 + 𝐶3𝐴 ≤ 8,000

M can contain ≤ 55% C1 𝐶1𝑀 ≤ 0.55 𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀

M can contain ≤ 25% C3 𝐶3𝑀 ≤ 0.25 𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀
M must contain ≥ 35% C2 𝐶2𝑀 ≥ 0.35(𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀)

A must contain ≥ 15% C1 𝐶1𝐴 ≥ 0.15 𝐶1𝐴 + 𝐶2𝐴 + 𝐶3𝐴

A must contain ≥ 25% C3 𝐶3𝐴 ≥ 0.25(𝐶1𝐴 + 𝐶2𝐴 + 𝐶3𝐴)
A can contain ≤ 45% C2 𝐶2𝐴 ≤ 0.45 𝐶1𝐴 + 𝐶2𝐴 + 𝐶3𝐴
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Formulation: Objective Function and Constraints

Maximize 1.15 𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀 +1.3(𝐶1𝐴 + 𝐶2𝐴 + 𝐶3𝐴)

−0.45(𝐶1𝑀 + 𝐶1𝐴) −0.55(𝐶2𝑀 + 𝐶2𝐴) −0.75(𝐶3𝑀 + 𝐶3𝐴)
−0.12𝐶1𝑀 −0.15𝐶2𝑀 −0.10𝐶3𝑀 −0.18𝐶1𝐴 −0.13𝐶2𝐴 −0.20𝐶3𝐴

𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀 ≥ 10,000 MightyPlate Contract

𝐶1𝑀 + 𝐶1𝐴 ≤ 4,000

𝐶2𝑀 + 𝐶2𝐴 ≤ 7,000 Component Availability
𝐶3𝑀 + 𝐶3𝐴 ≤ 8,000

𝐶1𝑀 ≤ 0.55 𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀

𝐶3𝑀 ≤ 0.25 𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀 MightyPlate Technology
𝐶2𝑀 ≥ 0.35(𝐶1𝑀 + 𝐶2𝑀 + 𝐶3𝑀)

𝐶1𝐴 ≥ 0.15 𝐶1𝐴 + 𝐶2𝐴 + 𝐶3𝐴

𝐶3𝐴 ≥ 0.25(𝐶1𝐴 + 𝐶2𝐴 + 𝐶3𝐴) Aluminum Technology
𝐶2𝐴 ≤ 0.45 𝐶1𝐴 + 𝐶2𝐴 + 𝐶3𝐴

All variables are nonnegative For numerical solution

see texasRefinery.xlsx
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Summary

 Processes
 Markets
 Optimization
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Optimization of Crude Oil Operations
 See http://newton.cheme.cmu.edu/interfaces/crudeoil/main.html
 Read X. Chen, I. Grossmann, L. Zheng. 2012. A comparative study of continuous-time models
for scheduling of crude oil operations in inland refineries. Computers and Civil Engineering,
Vol.44:141-67. Articles by Modules/Refining/ChenComparingModelsSchedulingRefineries