Refining Demystified

As we learned from history, alchemists of the Middle Ages attempted to change base metals into gold by practicing wizardry. In a sense, refiners could be regarded as the modern day heirs apparent to these medieval sorcerers by transforming crude oil into a variety of useful and valuable products. Instead of using magic, however, refiners employ chemical science and processing technology to perform their unique brand of metamorphosis. Spread out over a number of acres, a refinery is a remarkable maze of metal, machinery and manpower. Towers, tanks, process vessels, pipelines, pumps, heat exchangers and compressors are just some of the components of a modern refinery. Operators, engineers, researchers, technicians, craftsmen and maintenance personnel are among those needed to keep a refinery running round-the-clock. A refinery consists of a number of different units, each with a specific purpose, integrated into a processing sequence. "The three major refining processes are separation, conversion and blending," said Charles Miller, group vice president of Manufacturing. Simply put, an oil refinery separates crude oil into its various fractions, converts these fractions into distinct components, and finally blends those components into finished products. "Crude oil is a mixture of thousands of different compounds of hydrogen and carbon, or hydrocarbons," Miller explained. "Each hydrocarbon compound in the mixture has a different boiling point. The lighter compounds boil and vaporize at lower temperatures, while the heavier ones do so at higher temperatures." This separation of petroleum into its various fractions takes place in a crude distillation tower. Crude oil is first heated in a furnace. The resulting mixture of hot vapors and liquid is pumped into the closed, vertical distillation tower, which is sometimes as high as 100 feet. As the vapors rise, they cool and condense at various levels where they are caught by a number of horizontal trays. The trays on the upper levels collect the lighter petroleum fractions such as naphtha (straight-run gasoline) and kerosene. Middle trays collect components such as light heating oil and diesel fuel. Heavy fuel oils, asphalt and pitch fractions settle on lower trays. Those vapors that do not condense in the distillation tower are removed from the top as light gases. At each condensation level, the separated fractions are removed from the trays through pipes known as side draws. The heaviest liquid residue is drawn off at the bottom of the tower as reduced crude.

The fractions obtained by this distillation process are known as straight-run products. All undergo further processing by various other refinery units before becoming marketable end products. "Conversion processes, which change the size and structure of the hydrocarbon molecule, convert some of the crude oil fractions into higher value products," Miller explained.

"This is accomplished by the application of heat, pressure and a catalyst." A catalyst is a substance that causes or accelerates chemical changes without itself undergoing change. The most common conversion processes are cracking, combining and rearranging. Catalytic cracking is the process of breaking down the larger, heavier and more complex hydrocarbon molecules into simpler and lighter molecules to produce higher value products. A fluid catalytic cracking (FCC) unit converts gas oil from the crude distillation tower into gasoline blending stocks and thus increases the yield of gasoline from crude oil. Ashland's RCC Process unit converts lower value residual oil into gasoline and other higher value transportation fuels. This allows Ashland to produce a given amount of gasoline from significantly less petroleum or from a heavier, high-sulfur, lower priced crude oil. The two combining processes, alkylatlon and polymerization, are in essence the opposite of cracking. They link smaller, lighter molecules to form larger, heavier ones. Alkylation and polymerization units produce high-octane gasoline blending stock from cracked gases. Some process units rearrange the structure of the molecules without changing their size or chemical composition. Reformers and isomerization units are examples of these. A reformer converts naphthas or low-octane gasoline fractions into higher octane stocks suitable for blending into gasoline. "The reforming process is extremely important," said Lloyd Busch, vice president of Engineering and Technical Services. "It is the principal tuning mechanism the refiner has for being sure he hits the octane target on his gasoline blends." Isomerization units rearrange the molecules from straight-chain, low-octane hydrocarbons to branched-chain, high-octane hydrocarbons known as isomers. The resulting isomerate is a superior gasoline blending stock. Many petroleum fractions have sulfur, nitrogen, heavy metals and other impurities in them. These contaminants can have detrimental effects on equipment, catalysts and the quality of the finished product. Hydrotreating is a conversion process which removes many of these impurities by mixing untreated fractions with hydrogen in the presence of a catalyst. Other nonconversion treatments are also used to remove impurities from petroleum fractions and products.

The last major refining process is blending. "Most final products are obtained by mixing two or more blending components as well as additives to improve product quality," said Richard Long, senior business analyst in Planning and Analysis. "All grades of motor gasoline are blends of various fractions including straight-run naphthas, reformate, cracked gasoline, isomerate and polygasoline." Other blended products include fuel oils, diesel fuels, jet fuels, lubricating oils and asphalts. As of January 1990, there were 205 operable refineries in the United States with a total capacity of 15.6 million barrels a day. The number of operable refineries has fallen by 37 percent through the past decade, and available capacity is now 16 percent below its early1980s peak. "The last grass-roots refinery built in this country was built 20 years ago, and it's not likely that another one will be built in the foreseeable future," said Miller. "Stringent environmental regulations are the primary reason for this." The latest in a long series of environmental regulations affecting the petroleum refining industry concern the manufacture of diesel fuel and gasoline. The Environmental Protection Agency is requiring refiners to cut the sulfur content of diesel fuel 90 percent by late 1993. It also has mandated an approximate 22 percent reduction in gasoline vapor pressure, a measure of fuel volatility, by 1992. Some refiners may be unwilling or unable to make the capital expenditures necessary to meet these new environmental regulations. Other factors also have played a role in the decline of the number and capacity of refineries in recent years. The cost of producing the higher octane, unleaded gasolines, now much in demand by motorists, has required many refineries to be substantially upgraded . Once again, some oil refiners did not have the capital necessary for such improvements. President Bush's clean air proposals unveiled last summer will probably result in the development of a reformulated gasoline to reduce auto emissions. Ashland Petroleum is one of 14 oil companies currently participating with three auto manufacturers in a unique joint research program in which reformulated gasolines and methanol blends will be tested in current and future automobiles. Once a new fuel is decided upon, it too will likely necessitate costly capital expenditures within the industry in order to produce in sufficient quantities. Consequently, both consumer preferences and environmental restrictions have hindered growth in the refining industry. They require such a level of capital investment as to not only impose significant barriers to entry into the business, but also make it unlikely that many of the 120 refineries shut down in the past decade will again become operable. In light of this, industry utilization rates have been climbing in recent years. In 1989, U.S. refinery utilization was 86.5 percent of industry capacity. Some observers estimate that 85 to 86 percent of capacity is the maximum utilization rate at which the refining industry can operate in today's environment.

As refinery capacity approaches its limit, Ashland Petroleum's Planning and Analysis Department estimates gasoline demand will continue rising about 0.3 percent a year throughout the next several years. With the 1990s looking like a period of tight capacity and virtually no emerging domestic competition, the future for refineries now in place is promising indeed. And as one of the nation's leading independent refiners, Ashland Petroleum is making the financial commitment necessary to benefit most from its economically enviable position.

Comparing Refineries
All refineries are not created equal. Nor, for that matter, are all refiners. There are small refineries and large ones. Some are quite complex, while others are relatively simple. A number are part of major, integrated oil companies. Still others are owned by independent refiners. Ashland Petroleum is one of the nation's largest independent refiners. It is an independent refiner because Ashland purchases most of its crude oil on the open market rather than producing it. Major, integrated oil companies, on the other hand, are engaged in all aspects of the petroleum industry--exploring for and producing crude oil, as well as refining, transporting and marketing petroleum products. Major oil companies dominate the refining industry. The top 10 U.S. refiners, all of them major, integrated oil companies, account for about 60 percent of the total domestic refinery operating capacity. "The majors can make money selling either crude oil or refined product," explained Charles Miller, group vice president of Manufacturing. "As an independent refiner, however, Ashland doesn't have that option. We earn our income solely on the 'downstream' side by manufacturing refined products. So we have to be the best at what we do." To understand a refinery, you must first simplify the complex. "Many refineries are only fuels refineries, some are lube stock refineries, and others are petrochemical refineries," explained Jim Cantrell, Catlettsburg refinery superintendent. "Our Catlettsburg refinery is all three of these in one and is among the most complex in the world." Industry analysts compare the capabilities of refineries based on two criteria -- complexity and capacity. "Refinery complexity is an effort to describe the investment cost of a refinery in terms of the process operations being conducted," said Richard Long, senior business analyst in Planning and Analysis.

A "complexity factor" is assigned to each process unit of a refinery based on its relative construction cost when compared with the crude distillation unit, which is assigned a value of one. For example, the cost of a fluidized catalytic cracker per barrel of capacity is six times greater than a crude distillation unit. Therefore, its unit complexity factor is six. All crude oil goes through the crude distillation unit during processing. But only parts or fractions of the crude oil go through the various downstream processing units. The overall complexity of a refinery is determined by adding the values obtained when the complexity factor for each process unit is multiplied by the capacity of that unit stated as a percentage of the crude distillation unit's capacity. "A refinery's complexity alone, however, does not give a complete representation of its capabilities," explained Craig Wallace, senior operations analyst in Planning and Analysis. "In terms of crude oil capacity, some small refineries are quite complex, while other larger refineries are relatively simple." To compensate for this seeming incongruity, a measurement known as equivalent distillation capacity (EDC) was developed. EDC is simply a refinery's complexity factor multiplied by its crude oil throughput per operating or "stream" day. When compared to other domestic refiners and refineries, Ashland Petroleum and its three refineries rank among the most complex and among those with the highest EDCs.

Simplified Flow Chart of Catlettsburg Refinery

A modern refinery is a large factory. Its purpose is to separate crude oil into its various fractions, to convert these fractions into distinct components, and finally to blend those components into finished products. To do this, a refinery is comprised of a nunlber of modules or units, each with a specific purpose, integrated into a processing sequence. The diagram at right is a simplified flow chart of Ashland's Catlettsburg refinery. As you can see, every end product manufactured at the plant begins its journey in the crude distillation tower. From there the various crude oil "fractions" are routed to any number of processing units for further refining and treatment. Among the most complicated in the world, the Catlettsburg refinery is capable of processing 220,000 barrels of crude oil every stream (operating) day into a wide variety of fuels, lubricating oils, petrochemicals and asphalts.

Crude Distillation Unit

The separation of crude oil into its various "fractions" takes place in the crude distillation unit. Heated crude oil is pumped into the distillation tower. The resulting hot vapors rise and cool at various levels of the tower, condensing on horizontal trays. The trays at the top of the unit collect the lighter petroleum fractions, while the heavier components settle on the lower trays. Fractions separated by this distillation process are known as straight-run products. All undergo further processing by other refinery units before becoming marketable end products.

Fluid Catalytic Cracking Unit

The fluid catalytic cracking (FCC) unit converts gas oil from the crude distillation unit into gasoline blending stocks and fuel oils. It does this through a conversion process known as cracking. Catalytic cracking breaks down larger, heavier and more complex hydrocarbon molecules into simpler and lighter molecules by applying heat, preasure and a catalyst. A catalyst is a substance that causes chemical changes without itself undergoing change.

Reduced Crude Conversion Unit

Ashland's RCC Process unit converts lower value residual oil (reduced crude) into gasoline and other higher value transportation fuels by changing the size and structure of the hydrocarbon molecules. As with other conversion processes, it does this through the use of heat, preasure and a catalyst.

Reformer
A reformer converts naphthas or low-octane gasoline fractions into higher octane stocks suitable for blending into gasoline. In the presence of heat, preasure and a catalyst, it rearranges the structure of the hydrocarbon molecules without changing their size or chemical composition.