REFINING
Refinery energy efficiency
and environmental goals
Cheaper fuels do not always reduce costs, say the authors, and an alternative is
cogeneration. It is argued that fuel saving programmes and cogeneration, applied
worldwide, could reduce world fuel consumption by some 26 million tons a year
Zoran Milosevic and Wade Cowart
S
tringent environmental limits
being imposed on the quality of
fuels that refineries can burn is
increasing the cost of refinery marginal
fuels, which prompts an additional
incentive to save energy. One way to
mitigate the effect of this increased pric-
ing is the adoption of cogeneration
which, through the resultant fuel sav-
ings, also significantly reduces CO2 and
other greenhouse gas emissions.
An examination of the cost effective-
ness of cogeneration in improving ener-
gy efficiency and reducing stationary
source emissions includes understand-
ing how environmental constraints and
fuel costs improve the viability of ener-
gy conservation (Encon) projects, as
well as the environmental improve-
ments that can result.
In the 1960s, energy conservation
was a relatively simple economic issue.
Refinery energy-efficiency was decided
primarily in the design phase, by
applying trade-off criteria of the day
and by optimising between energy and
investment costs of heat and power
recovery equipment. However, refinery
design guidelines changed as fuel
prices increased following the two oil
shocks in the 1970s and more energy-
efficient designs replaced older, less
efficient designs.
Then, as the period of variable eco-
nomics and depressed margins followed
in the 1990s, it became increasingly dif-
ficult to justify energy conservation pro-
jects. New technologies that matured in
the 1980s, such as the industrial gas tur-
bine and pinch technology, made signif-
icant impacts but had a relatively short
period of undisputed economic invest-
ment attractiveness due to changing
fuel and power prices and alternative
investment pressures.
For example, preheat trains were
designed for approach temperatures of
about 60°C in the 1960s. This optimum
then decreased to about 20°C in the
1970s and early 1980s. This decrease
offered large scope for improvement.
Today, the optimum approach is likely
KBC Process Technology
to be 35–40°C. Thus, revamping a pre-
heat train in the 1980s allowed three
times more energy savings than in the
1990s. The economics of installing fur-
nace air preheaters is just as illustrative
of the reduced energy saving incentives;
these projects offered two-year simple
paybacks in the 1980s, versus about
four-year paybacks in the late 1990s.
Subsequently, refineries that were
designed or revamped in the 1980s tend
to occupy high positions in the energy
efficiency league tables today, while
most refineries that missed the period of
favourable revamp economics of the
1980s remain relatively inefficient.
Less attractive economics was not the
only reason for the reduced energy con-
servation activity in the last decade.
New fuels specifications and new pro-
cessing requirements forced refineries to
invest scarce resources into upgrading
processing technology, rather than
improving the efficiency of utilities.
Today, however, environmental con-
cerns may reverse these trends, making
energy-saving investments more attrac-
tive as fuels become more expensive.
Energy efficiency
The refining industry as a whole can be
classified as energy inefficient. The
worldwide average refinery energy con-
sumption is about 95 per cent higher
than KBC’s best practice target. There-
fore, as the starting energy efficiency of
the average refinery is relatively low, it
follows that the scope for improvement
should be high.
Refinery energy performance can be
assessed in terms of the ‘best technolo-
gy’ (BT) index of the site. This index is
the ratio of the refinery total energy
consumption (including fuels, FCC
coke, and power import) to the sum of
BT energy consumption allowances
(standards) for each process unit and for
the off-sites.
The BT standards have been devel-
oped by fundamental analysis and
design studies on individual process
units. They take into consideration the
45
P T Q SUMMER 2002
w w w. e p t q . c o m
key process parameters affecting energy
consumption, such as actual feed quali-
ty, conversion and fractionation perfor-
mance. Based on more than 100
refineries that have been energy-sur-
veyed, KBC believes that an energy per-
formance of 100 per cent BT is
achievable in a grassroots unit built
today. Such a unit has an economically
justifiable level of energy efficiency and
is supported by a highly efficient steam
and power system.
Many European and American
refineries achieve BT indices better (less)
than 150 per cent. This means that even
a first quartile pace-setter consumes 50
per cent more energy than an optimised
refinery designed and built today. The
industry BT average is about 195 per
cent. Thus, it can be said that the refin-
ery industry as a whole is 95 per cent
energy inefficient. The reasons usually
cited for this condition are as follows:
— Units were designed when the cost of
energy was low
— Phased expansion – new units were
built stand-alone and not heat-integrated
with older units
— Utility systems were seldom modi-
fied/optimised when onsite expansions
were made
— Capital savings – units were designed
for minimum investment cost
— Refineries rely on power import and
have low inhouse power generation
efficiency.
Hand-in-hand with the refinery’s rel-
ative energy inefficiency goes an equally
inefficient environmental performance.
The average energy performance of 195
per cent BT means that, on average,
refineries consume 95 per cent more fuel
than would be the optimum today, and
consequently they emit 95 per cent
more CO2. In decades past, before the
current, more stringent, environmental
limits and fuel quality specifications
were introduced, this could have also
meant up to 95 per cent more sulphur
emission. Directionally, reduced energy
consumption results in reduced air emis-
sions. However, there is another link

between refinery energy and environ-
mental performances. Namely, air emis-
sion regulations may, and in some
countries already do, limit the total site
fuel consumption. If this is the case, the
refinery expansion potential and its
future depends on the ability to reduce
the fuel consumption of existing units.
This circle gives further incentives to
save energy and reduce emissions.
Project justification
On a worldwide basis, the average
potential for energy efficiency improve-
ments has been found to be about 30
per cent. For example, the combined
chart (Figure 1) shows the results of
energy surveys (European refineries)
with both the “before optimisation” and
the “after optimisation” BT indices. The
“after optimisation” indices are found
by calculating the fuel savings from
implementing all economically justifi-
able energy conservation projects identi-
fied at each individual site.
The graph shows improvement poten-
tial varying between 10 per cent and 4
per cent. This wide variation results from
different energy pricing at different sites
and from the different economic criteria
as to what payback is considered accept-
able. The average improvement poten-
tial (European refineries) is calculated at
30 per cent. As there is very little differ-
ence between the efficiency distribution
curves of European and worldwide
refineries, it can be concluded that 30
per cent may also be the worldwide sav-
ing potential (if the European saving
potential is applied worldwide, it is prob-
ably conservative).
KBC methodology is profit improve-
ment-driven and based on cost. There-
fore, the 30 per cent improvement
previously claimed represents the ener-
gy cost saving potential. Part of this
would be a result of fuel savings, direc-
tionally proportional to the cost savings.
However, a large part of it is the energy
cost reduction effect of cogeneration,
which is not proportional to refinery
fuel saving but rather represents the dif-
ference between the costs of in-house
generated power and purchased power.
It is estimated that of the 30 per cent
cost savings, 17 per cent is attributable
to cogeneration and 13 per cent to refin-
ery fuel savings. Therefore, the conclu-
sion is that on the average, excluding
cogeneration, refineries worldwide
should be able to economically justify
projects that could save about 13 per
cent of their fuel energy.
To put this into a CO2 reduction per-
spective, consider Table 1. World oil pro-
duction in 2001 was reported from
various sources to be over 63.5 million
bpd. If it is assumed that on the average
refineries consume (or burn) 4 per cent
REFINING
European energy surveys
350
300
250
200
BT, %
150
100
50
0
Sequence
Figure 1 European refineries, showing scope for improvement
(again conservative) of the total oil pro-
cessed, it follows that the total world
refinery fuel consumption is around 125
million t/year and that they produce
265 Million t/year of CO2. A 13 per cent
reduction would save 17 million t/year
of fuel, and reduce world CO2 emission
by 35 million t/year (a 0.14 per cent
reduction).
Further to this reduction is the effect
of cogeneration. For the purpose of the
present analysis, KBC estimated that
world refineries consume around 70
million megawatt-hours per year
(MWh/year) of electrical power. A fur-
ther assumption is that this power
would, on the margin, be generated at
an efficiency of 35 per cent (meaning
that the last MWh is produced in con-
densing steam cycle).
Upgrading 70 million MWh/year of
the condensing cycle to a 75 per cent
efficient cogeneration cycle would save
10 million t/year of fuel (assumed oil).
This reduction in consumed fuel would
result in 21 million t/year of avoided
CO2 emissions.
The cogeneration benefit estimate is
conservative. It assumes that refineries
only cogenerate power to meet their
own demand. This would, however, use
only a fraction of the available heat
sink. In cogeneration calculations, it is
usually assumed that the heat sink con-
sists of steam consumers, but additional
Global figures
World 2001 crude oil production:
World refinery fuel consumption, estimated by KBC at:
World refinery CO2 emission, calculated from above:
World fossil fuels CO2 emission:
Table 1
47
P T Q SUMMER 2002
Before optimisation
After optimisation
application of cogeneration to preheat
crude oil, or exhaust into refinery crude
oil furnaces, is also common. Therefore
the cogeneration potential is higher. To
fully realise this potential, power gener-
ated on site must be exported.
To conclude, pure refinery fuel saving
programmes and cogeneration, if
applied worldwide, would reduce the
world fuel consumption by about 26
million t/year, which is 21 per cent of
the total fuel that refineries worldwide
currently consume. This seems to com-
pare well with previous estimates.
The results of another study showed
that the average energy efficiency
improvement potential of refineries in
the European Union compared to best
practice is 15 per cent, while Jean-Paul
Vettier, Europia’s president and vice
president, refining, of TotalFinaElf,
asserted that, based on Solomon sur-
veys, European refineries had improved
their energy efficiency by 1 per cent
each year for the past 10 years. Saving
21 per cent of the total refinery fuel
would reduce CO2 emissions by 55 mil-
lion t/year (about 0.2 per cent of world’s
CO2 emission from fossil fuels).
The savings previously described are
economically justifiable from a purely
energy cost reduction point of view.
This is something that refineries have an
incentive to do, regardless of environ-
mental or any other issues. However,
64 million bpd
3150 million t/year
4% of total oil
125 million t/year
265 million t/year
25 000 million t/year

there may be other incentives:
— Certain energy projects may offer
some quantifiable yield and capacity
benefits, while some offer (not so quan-
tifiable) strategic advantages
— Marginal fuel cost increases with
environmental constraints, causing
some rejected energy projects to become
economically viable.
With these incentives in mind, it
would not be unrealistic to say that per-
haps 25 per cent reduction may be the
overall industry’s energy conservation
target.
Marginal fuel cost
The economic justifiability of an energy
conservation project is directly related
to the cost of fuel. Therefore, rigorous
marginal fuel costing is used in these
energy studies. It is obvious that the
environmental constraints push towards
burning cleaner fuels. What may not be
so obvious is that these constraints may
also increase the cost of refinery
marginal fuel beyond the value of the
most expensive fuel that is available.
This paradox is easily explained. For
simplicity, only sulphur emission con-
straints and their effect on marginal fuel
price will be considered.
The majority of world refineries still
burn fuel oil as the marginal fuel. In the
absence of a sulphur emission limit, the
marginal fuel is likely to be the relative-
ly cheap high sulphur fuel oil (HSFO).
When a sulphur emission limit is intro-
duced, the refinery will inevitably start
mixing HSFO with a more expensive
low sulphur material, eg low sulphur
fuel oil (LSFO), attempting to maximise
the use of HSFO within the limits of the
permitted sulphur emission level.
However, when the total sulphur
limit is reached, any additional
(marginal) fuel must not contain any
sulphur. Thus, as the refinery increases
its fuel consumption, it will have to
burn greater amounts of LSFO. As a
result, the “sulphur parity” cost of the
marginal LSFO/HSFO mixed fuel
becomes higher than the cost of LSFO
alone, and therefore higher than the
cost of the refinery’s highest cost fuel.
To illustrate this effect, consider the
following base case where a refinery is
operating at or just below the sulphur
emission limit, and the corresponding
‘new case’ where the fuel requirement is
increased by a marginal 1t/h (Table 2).
If the additional fuel requirement is
1t/h, HSFO consumption will have to be
reduced by 0.4t/h and LSFO increased
by 1.4t/h. If LSFO is priced at $139/t
($20/bbl) and HSFO at $117/t
($16.5/bbl), the fuel cost in the base case
is $2560/h and in the new case it is
$2708/h.
The resulting marginal “zero sulphur”
REFINING
Fuel
GT power
Fuel HP boiler
Fuel Powert1 Steam turbines
T-1
Gas Steam to
turbine T-2 Powert2 process
Steam to
Gas turbine process
T-3 Powert3
exhaust heat
is captured Steam to
Cond. return
process
by HRSG to
produce steam
Make-up
Deaer.
Figure 2 Combined cycle CHP: gas turbine, HRSG and steam turbines
fuel oil cost is 2708–2560 = $148/t refineries today, the most common com-
($21/bbl). Any additional fuel consump- ponents of an efficient cogeneration sys-
tion will effectively be valued at this tem have been identified as:
price. Thus, even though the refinery — The industrial gas turbine
marginal fuel is still fuel oil, its cost is — Heat recovery steam generators
likely to be higher than that of the low (HRSG)
sulphur fuel oil. — Back pressure and condensing steam
These real marginal fuel costs must be turbines.
considered when evaluating energy con- A configuration (Figure 2) comprised
servation projects as, clearly, they pro- of these components is said to be a com-
vide additional incentive to save fuel. In bined cycle cogeneration unit, or true
particular, one would like to reduce the CHP, and is highly efficient (efficiency
incurred cost associated with the high of >80 per cent). The CHP shown in Fig-
cost marginal fuel. In the presence of a ure 2 generates power in a topping
favourable economic climate, cogenera- cycle, which means that the power is
tion is one way to realise this fuel reduc- generated prior to the delivery of ther-
tion and associated cost savings. mal energy to process.
Cogeneration, as mentioned above, can The gas turbine burns natural gas to
also substantially reduce CO2 and other produce electricity (today’s gas turbines
greenhouse gas emissions. have efficiency >34 per cent) and expels
oxygen-rich hot exhaust to the HRSG.
Cogeneration benefits The HRSG then recovers the heat from
Combined heat and power (CHP), or the exhaust to make steam and may
cogeneration, is comprised of not one even fire additional fuel to enhance
technology but several combined tech- steam production. The portion of this
nologies, which, when employed steam that may be deemed superheated
together, generate electricity and heat is then let down through a steam turbine
energy in a single integrated system. In (T-1) to the highest-pressure header.
Further steam turbines (T-2, T-3) bal-
Sulphur emissions compared ance steam and produce power across
the remaining lower pressure headers.
Thus, one can see that the heat liberat-
Base case ed by the burned fuel in the gas turbine
FO consumption 20t/h t/h %S is effectively recovered by equipment
LSFO 10 1% placed downstream of the gas turbine.
HSFO 10 3.50% This high degree of heat recovery is the
Total 20 2.25% reason for the high overall efficiencies
S emission 0.45 t/h of CHP units.
The configuration illustrates that heat
New case
normally wasted in conventional power
FO consumption 21t/h
generation is recovered as useful energy
LSFO 11.4 1%
in a CHP. This recovered energy is used
HSFO 9.6 3.50%
Total 21 2.14% to satisfy an existing thermal (steam)
S emission 0.45 t/h demand, thus avoiding losses that
would otherwise be incurred from sepa-
Table 2 rate or conventional power generation.
48
P T Q SUMMER 2002
 REFINING

The refinery thermal demand, or heat

sink availability, is the key to refinery
cogeneration success. Because conven-
tional power producers lack this avail-
able heat sink to recover useful heat,
electricity generation efficiency has
remained stagnant at approximately 32
per cent for much of the past 30 years.
The end result of CHP applications is
that a greater amount of the available
energy from natural resources can be
extracted. This increased fuel efficiency
translates directly into reduced emis-
sions of greenhouse gases (GHG) and
other pollutants. Furthermore, reduced
fuel consumption allows the refinery to
avoid the increased marginal fuel costs
associated with the sulphur emission
constraints.
To illustrate in greater detail the eco-
nomic and environmental benefits asso-
ciated with CHP, consider the following
comparison (Figure 3) between conven-
tional power generation and CHP based
upon an actual cogeneration facility
recently evaluated. In the conventional
generation, separate heat and power
production requires 189 fuel units (heat-
ing value basis) to generate 35 units of
electricity and 50 units of heat. Genera-
tion losses and grid transmission losses
consume 96 units of fuel input.
However, the combined heat and
power unit produces the same quantity
of electricity and heat (35 and 50 units,
respectively) with a total fuel input of
100 units, which is 53 per cent less fuel
than is consumed in the conventional
generation scheme. Directionally, this
means, in this case, 53 per cent less CO2
is produced.
Cogeneration trends
Historically, the widespread use of
cogeneration has been limited. This is
somewhat surprising considering the
obvious advantages the technology
offers. In the not too distant past,
cogeneration adoption has been cur-
tailed by a variety of factors, including
organisational, fiscal, legislative and
thermodynamic.
As an example of organisational and
thermodynamic constraints, consider
electric utilities; regulated electric utili-
ties initially showed resistance to the
Grid losses and
generation losses
(96)
Power station Grid
fuel (132)
Electricity 35 Electricity
189 units total
Boiler fuel Boiler Heat
(57)
Losses
(8)
Conventional generation
(separate steam and power)
Figure 3 Energy flows in CHP system vs conventional power and steam generation
about 14 per cent of Europe’s power, and
this fraction is projected to increase to
30 per cent by 2010. The Netherlands
expects that over 60 per cent of its
power will be co-generated by 2010.
Similarly, since the introduction of
the 1978 Public Utility Regulatory Pol-
icy Act (PURPA) and the 1978 Nation-
al Energy Act (NEA) in the USA, power
supplied by cogeneration has grown
from zero to 12 per cent of entire US
installed power generation capacity,
supplying about 10 per cent of US
electric power.
Despite the 1978 legislation (PURPA)
adopted to foster power deregulation
and subsequent CHP investment in the
USA and similar CHP promotion mea-
sures taken worldwide, economic incen-
tives did not remain entirely favourable
for wide-spread cogeneration imple-
mentation during the time from 1978 to
the present. To illustrate this point, KBC
has often utilised an indicator of opti-
mal power purchasing vs. fuel purchas-
Nominal prices paid by US industrial
sector for Btu 1967–2001
16.00
PEE %
14.00 Electric power
12.00 Heavy fuel oil
Fuel gas
10.00
$/MMBtu
Losses
(15)
CHP
CHP
system
Heat fuel
50
100 units total
Combined heat and power
ing schemes. The economic indicator
for cogeneration viability as a function
of power and fuel pricing is the price
equivalent efficiency (PEE) of generating
power. By definition, this is the ratio of
fuel to power price or:
Cost of marginal fuel ($/MMBtu)
PEE = ————————————— *100(%)
Cost of marginal power ($/MMBtu)
Clearly, as the PEE increases, the cost
of marginal fuel increases relative to the
cost of marginal power. This is, in fact,
what happens when fuel oil and fuel gas
emission regulations are introduced. A
graph of PEE as a function of fuel and
power prices for the US industrial sector
from 1967–2001 is shown in Figure 4
(for convenience and to enable easy cal-
culation of the PEE, all prices, including
electricity, are shown as $/MMBtu). Data
from the USA is utilised because it offers
a more consistent pricing than from the
diverse European countries, but the
result is essentially the same.
Figure 4 captures the effect of fuel and
40
35
30
25

PEE, %

purchase of cogenerated power pro-

duced in refineries and other industrial 8.00 20
entities. Nonetheless, despite cogenera-
tion’s high efficiency, they were unable 6.00 15
to utilise the technology themselves 4.00 10
due to their inherent lack of heat sink
availability. 2.00 5
Significant change came with the
0.00 0
deregulation of the power sector, which
67

19 9
71

19 3
75

19 7
19 9
81

19 3
19 5
19 7
89

19 1
93

19 5
20 7
00
6

7
7

8
8
8

9
9

occurred first in Europe. This deregula-

19
19

19

19

19

19

19

tion made Europe the world leader in Period 1 Period 2 Period 3 Period 4
cogeneration. Combined heat and
power (CHP) units currently supply Figure 4 PEE vs price of power and fuel oil/fuel gas

51
P T Q SUMMER 2002
 REFINING

Year 2000 dollars/MMBtu Year 2000 cents/KWh

5
History Projections History Projections
Oil 10
4
8
3 Natural gas
6 Average price
11.3
2 (nominal cents)
4
Coal 1.7
1 2
Nuclear 1970 2020
0 0
1990 1995 2000 2005 2010 2015 2020 1970 1980 1990 2000 2010 2020

Figure 5 Projected fuel prices to electricity generators, Figure 6 Projected average retail US electricity prices,
2000–2020 2000–2020

power price changes upon PEE and, in
turn, the PEE gives an indication of
cogeneration investment viability as a
function of fuel and power price. To
illustrate this point, the period consid-
ered in the figure can be broken into
four distinct eras:
— 1967 to 1973
— 1973 to 1985
— 1985 to 1986
— 1988 to 2001.
In 1967, when the power price was
$2.93/MMBtu ($0.01/KWh) and the nat-
ural gas price $0.32/MMBtu, the PEE was
11 per cent. Thus, since the fuel price
was so low, any refinery device that
could generate power from fuel at an
efficiency higher than 11 per cent was
profitable to run, and the produced
power could replace purchased power
demand. However, the only technology
available to small industrial power pro-
ducers (refineries) at the time was the
steam turbine.
A small amount of power could be
produced in an efficient back pressure
cycle (say 80 per cent efficiency), but the
majority of the power could only be
generated in the condensing cycle
(about 25 per cent efficient). Thus, there
was not much incentive to invest in
order to move from 11 per cent of pur-
chased power PEE to 25 per cent effi-
cient inhouse generation, and the power
was relatively inexpensive anyway.
From 1973 to 1985, fuel gas/fuel oil
prices rose as did power prices. Fuel
prices increased more, however, as a
percentage of their original 1973 value
than did power prices. Thus, the PEE
increased dramatically to a local maxi-
mum of 29 per cent in 1985. This situa-
tion would have been ideal for
cogeneration as we know it today (high
efficiency gas turbine exhausting to
heat recovery equipment with efficien-
cy >80 per cent), but unfortunately the
gas turbine did not gain widespread use
during this time due to its relative new-
ness. Instead, cogeneration had to be
considered again in terms of condens-
ing steam turbines.
With a purchased power PEE of 29 per
cent, it was cheaper to buy electricity
than to produce it in condensing tur-
bines with 25 per cent efficiency. Thus,
the energy-aware managers embarking
on fuel saving programmes of this peri-
od did not see inhouse power produc-
tion as an attractive cost saving
measure. Therefore, the main wave of
refinery energy conservation
(1973–1985) eluded inhouse power gen-
eration and large scale cogeneration.
From 1985 to 1996, power prices and
fuel prices dropped initially and then
remained fairly stable, causing the PEE
to remain stable as well, in the range of
18.4 to 21.2 per cent. This time frame
also saw the advent of the highly effi-
cient, small industrial gas turbine,
which when combined with heat recov-
ery equipment and existing steam tur-
bine technology, yielded thermal
efficiencies of 75–80 per cent.
This new technology could substan-
tially reduce fuel cost and carbon emis-
sions, but it required high investment
and came in times of depressed margins,
severe competition, and clean fuels
specifications that drove the invest-
ments away from energy conservation.
Thus, very few refineries installed
cogeneration schemes.
During the past few years (1998 to the
present), the PEE has climbed to 35–40
per cent – its highest level yet in the
USA. Even though this reduced the
cogeneration attractiveness again, it still
remains viable, yielding thermal effi-
ciencies exceeding 80 per cent. Further-
more, as the cogeneration opportunity
has become more recognised in terms of
both cost reduction and the environ-
mental effect, and margins have
improved, cogeneration schemes have
been increasingly implemented.
However, there is substantial cogenera-
tion opportunity left to be realised.
Barriers
The barriers to cogeneration implemen-
tation are not based entirely upon fuel
and power pricing. Other factors have
hindered cogeneration expansion in the
recent past. These factors are:
— Complicated cogeneration permitting
systems that are complex, time-consum-
ing and varied
— Regulations that do not account accu-
rately for the overall system efficiency
of CHP, or do not adequately credit dis-
placed emissions and grid losses
— Difficult and frequently prohibitive
interconnection arrangements with
utilities
— Depreciation schedules that do not
reflect the true life of CHP assets.
However, steps are being taken to mit-
igate or reduce the effect of most of
these disincentives. Thus, fuel and
power pricing will continue to be an
influential factor in determining cogen-
eration viability. Rigorous marginal fuel
and power pricing, as utilised in current
cogeneration feasibility studies, will
remain key. In fact, as the other barriers
fall away, it will become one of the pri-
mary operators in determining cogener-
ation viability.
With this in mind, it is worthwhile to
consider what the future holds for the
expansion of cogeneration capacity.
Fuel and power pricing
Given the certainty of the influence of
fuel and power pricing upon the eco-
nomics of cogeneration viability now
and in the future, it is important to
consider fuel and power price projec-
tions. From the previous analysis, it
can be determined that at the current
PEE of 35–40 per cent, cogeneration
remains viable, since it operates in its

52
P T Q SUMMER 2002
 REFINING

most efficient form at efficiencies
greater than 80 per cent. But what if PEE
increases to the point where cogenera-
tion is not an attractive investment? For
instance, if the PEE were to increase in
the future to 70 per cent, this would cer-
tainly limit cogen viability. This is
because the capital costs and mainte-
nance costs of cogeneration are high and
will make power purchased at a PEE of
70 per cent effectively cheaper than
power produced in an 80 per cent effi-
cient CHP unit.
According to data supplied by the
most recent US Department of Energy
(DOE) Annual Energy Outlook (2002
with projections to 2020), the price of
power is anticipated to remain relatively
constant through 2020, while the price
of fuel gas is expected to increase. This is
in-line with the previous consideration
of increasing marginal fuel costs based
upon increasingly stringent emission
constraints.
The effect of the DOE-predicted
increase in fuel costs (fuel gas and fuel
oil) will be to drive the PEE up. The
question will be how high will it go.
Using Figures 5 and 6, the PEE value in
2020 can be guessed. If it exceeds 70 per
cent, then one might say cogeneration
expansion will be threatened.
According to the DOE projections
shown previously, the year 2000 based
fuel price in 2020 will be approximately
$4.00 per million Btu. In nominal dol-
lars (nominal dollars should be used as
decisions will be made in 2020 based on
“dollars of the day”), this equates to a
2020 fuel price of $10.00 per million
Btu. The power price, again in nominal
dollars, is anticipated to increase to
approximately 11.3 cents per KWh or,
equivalently, $33.00 per million Btu.
Thus, the year 2020 PEE will be
approximately 30 per cent. This PEE
value is a reduction from the current
PEE values of 35–40 per cent and the
result of this analysis is that cogenera-
tion, or combined heat and power, hav-
ing efficiencies greater than 80 per cent
(and expected higher efficiencies in the
future) will increase in economic viabil-
ity based upon fuel and power prices
during the course of the next 20 years.
Energy conservation projects
Clearly, it appears that the energy con-
servation in refineries remains an area
where profit improvement benefits are to
be sought, thereby resulting in negative
CO2 emission avoidance cost. All sites are
different, and it is difficult to generalise
as to where the energy savings can be
made. Table 3 shows the results of some
recent, selected energy studies, indicating
the benefits that were identified. The
examples are chosen to give a good
overview of European/Asian refineries.
The identified non/minor-investment
benefits ranged from US$0.04 to
US$0.15/barrel of crude processed, while
the total benefits including the justifi-
able capital investment projects, range
between US$0.05 and US$0.30/barrel.
The benefits can be further split into
three main areas:
— Process units energy improvement
(heat integrations, process optimisa-
tions, furnace upgrades and direct pro-
cess energy savings)
— Steam/power system improvements
(optimisation of steam/power system,
maximisation of the efficiency of power
generation, and cogeneration)
— Other energy savings (optimisation of
fuel systems, reducing flaring, minimis-
ing hydrogen loss to fuel, etc).
From Table 3, the weighted average
percentages of savings in each of the
areas are calculated as:
— Process units: 26 per cent
— Steam/power: 54 per cent
— Other: 21 per cent
It appears from this brief analysis that
more than half of the energy saving
benefits is to be found in the improve-
ments of the steam and power systems.
The benefits shown in Table 3 are based
on cost. Therefore, they are not neces-
sarily directly related to energy savings,
but rather to energy cost reduction. The
optimisation of the fuel systems illus-
trates the difference; burning cheaper
fuels does not save “energy” but reduces
fuel cost.
However, the process and
steam/power system energy improve-
ments are more or less directly associat-
ed with fuel savings (either in the
refinery or in a utility plant when
cogeneration is concerned). When only
these are considered, it appears that
steam and power system improvements
account on the average for about two-
thirds of the energy saving potential in a
refinery.
These systems tend to be the focal
points of energy efficiency programmes
and hence should play an important
role in any refinery environmental per-
formance and improvement study.
Energy best practices
Clearly, the identified pace setter
refineries do something better than the
average ones. One part of this “better”
performance is energy-efficient designs,
and a smaller part is due to the adopted
and implemented best practices. An effi-
cient preheat train is the example of the
former, while vigorous furnace excess air
control programme is of the latter.
While improving the original ineffi-
cient designs may be costly and often
uneconomic, the introduction of best
practices may require minor investment
only (such as instrumentation and

Results of recent energy studies, indicating benefits

Encon potential Encon potential Benefits by areas

Throughput $million/year US cents/bbl $million/year
Location Bbl/day Non/minor Non/minor Process Steam Other (fuels,
Investment Projects Total investment Projects Total units & power flare etc)

Southern Europe 140 000 5.0 9.2 14.2 9.8 18.2 28.0 0.4 10.8 2.74
Scandinavia 200 000 2.8 4.2 7.0 3.9 5.8 9.7 3.15 3.22 0.65
Far East 100,000 5.2 0 5.2 14.3 0.0 14.3 0.5 1.63 3.1
Southern Europe 130 000 3.6 0.45 4.0 7.6 1.0 8.6 0.57 2.7 0.77
Japan 225 000 6.7 1 7.7 8.2 1.2 9.4 1.5 4.3 1.9
Japan 103 000 1.85 0 1.9 5.0 0.0 5.0 0.42 1.3 0.13
Eastern Europe 238 000 13.0 0 13.0 15.1 0.0 15.1 6.1 5.3 1.6
Central Europe 137 000 3.4 0.7 4.1 7.0 1.4 8.4 0.70 1.9 1.5
Central Europe 112 000 1.5 0.4 1.9 3.7 1.1 4.8 1.06 0.22 0.6
UK 105 000 5.6 6.3 11.85 14.7 16.6 31.2 2.5 7.3 2.05
Middle East 130 000 2.95 2.7 5.65 6.3 5.7 12.0 0.25 4.9 0.5

Table 3

54
P T Q SUMMER 2002

monitoring tools), and many procedural
and organisational changes. While the
organisational structure of pace setter
refineries may differ, where energy effi-
ciency is concerned, they usually have
the following in common:
— Organisation and ownership
— Steam and power system
— Fuel system strategy
— Fired heaters
— Preheat trains.
Within the organisation and owner-
ship structure, a full-time energy man-
ager is in place with well-defined
responsibilities and authority to make
decisions that influence the energy
costs. Energy performance is reported
to management and actions are fol-
lowed-up. The energy performance is
not only reported as energy consump-
tion, but also as financial loss versus
the target energy efficiency.
The staff is aware of site energy tar-
gets and improvement plans and
involved in the efficiency improvement
process. Weekly meetings are held to
review energy performance of units to
maintain operator’s focus and to gain
feedback. Regular energy training pro-
grammes take place, and periodical
energy studies are carried out to identi-
fy the opportunities and develop the
implementation plan.
Within the steam and power system,
real time steam and power price calcu-
lations are used to set the operation tar-
gets for maintaining the optimum
steam and power balance, including
power generation, turbine/motor
switches, load shedding, and reactive
power control. Procedures and targets
are set to maintain the lowest cost
steam generation, distribution, and
backup.
A real time refinery steam balance is
created (closure >97 per cent), includ-
ing condensate recovery. A real time
refinery power balance is produced
detailing refinery import/export and
consumption/production breakdown.
Boilers are operated according to proce-
dures and targets that include optimum
blowdown, excess air, draught, soot
blowing frequency, burner set up and
cleaning.
Large process turbines, turbo alterna-
tors, gas turbines and engines have real
time efficiency monitoring. The opti-
mum load and cleaning frequency is
determined as part of this monitoring
activity. In terms of maintenance, side-
wide reviews of steam leaks, steam traps
performance and condensate recovery
are conducted regularly, resulting in a
repair schedule to track progress and to
prioritise the repairs. To maintain an
accurate steam balance, the flow meters
are zero and range checked routinely.
The fuel system strategy incorporates
REFINING
the use of real time marginal fuel price
calculations as input to steam and
power price calculations and operating
strategies. There would be a real time
monitoring of the fuel balance includ-
ing all gaseous and liquid fuels (with an
overall closure >97 per cent). Flare loss-
es are monitored as part of the refinery
fuel balance and also reported in terms
of revenue loss. As for the steam sys-
tem, the flow meters are zero and range
checked. The analysers are calibrated
routinely.
For fired heater energy efficiency,
furnace draught and excess-air use are
set at their targets. Burner set-up checks
and cleaning are carried out routinely.
The operators routinely search and
repair the air leaks, and they are all
trained in effective heater operation.
Real time furnace efficiency calcula-
tions are displayed live and reported
monthly, and deviations from the tar-
gets are reported as revenue loss. The
analysers are calibrated routinely.
The preheat trains are modelled and
monitored routinely to optimise any
flow splits and to monitor exchanger
fouling. The model is used to optimise
the cleaning cycle. The fractionation
effects are considered when setting the
optimum pumparound duties and
flows.
Future interest
Pure refinery fuel saving programmes
and cogeneration, if applied world-
wide, could reduce the world fuel con-
sumption by about 26 million t/year,
which is 21 per cent of the total fuel
that refineries worldwide currently con-
sume. Saving 21 per cent of the total
refinery fuel would reduce CO2 emis-
sions by 55 million t/year (about 0.2
per cent of world’s CO2 emission from
fossil fuels).
This article is based on a paper presented at
the ERTC Environmental Conference, Lon-
don, 8–10 April 2002.
Zoran Milosevic is a senior staff
consultant with KBC Process Technology,
Houston, Texas, USA, specialising in
energy optimisation and profit
improvement in oil refineries. He holds an
MS degree in chemial engineering from
Lehigh University, Bethlehem,
Pennsylvania, USA, and a PhD from the
University of Novi Sad, Yugoslavia.
Wade W Cowart is an energy services
consultant for KBC Advanced Technologies
at Houston, and specialises in
cogeneration, pinch analysis, and energy
efficiency in refineries. He holds a BS
degree in chemical engineering and
mathematics from Louisiana State
University.
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P T Q SUMMER 2002