Hydrocarbon Processing recently sat down with Dick Heusinkveld, Vice President of New Equipment at Dresser-Rand to discuss emerging trends in the downstream market, and the approach Dresser-Rand is taking in response.
Q: How did the downstream industry in general fare in 2011? Where is the industry heading?
A: The downstream market has not yet fully recovered from the global recession of 2008. Projects that were underway at that time have continued to be built, but at a slower pace. Many are only now nearing completion.
New projects in Brazil, India, China, and the Middle East have been delayed pending the startup of this backlog. Late in the year, we saw renewed activity in China. Refineries continue to be closed in Europe and the United States in the face of lower cost fuel imports, declining motor and jet fuel demand in those markets, and increasingly costly environmental compliance. The U.S. also saw ownership changes as integrated companies spun off their downstream assets into standalone companies or sold individual refineries to third parties.
Refining projects elsewhere, particularly in Latin America and Iraq, did not proceed due to the unavailability of financing, or of financing on reasonable terms. There is an expectation that many of these projects will proceed in 2012 and beyond, especially as Iraq alone has a goal to reach 12 million barrels per day of new refinery capacity within the next five years.
On the brighter side, the petrochemical and chemical markets were active. Middle East producers continue to seek to capture more of the value chain rather than merely exporting crude. China remains a net importer of primary petrochemicals and continues to build integrated refining/petrochem complexes to improve efficiency and reduce imports.
The explosion of production from shale formations has driven North American gas prices through the floor, and opened an enormous gap between the energy value of natural gas and crude oil. This appears likely to persist for some years, and has resulted in proposals to restart moth-balled fertilizer plants, build new fertilizer plants, build new gas-liquids based petrochemical facilities, and convert LNG receiving terminals into liquefaction facilities to export LNG, all enabled by the seismic impact of shale development over the past 2-3 years. While no substantial projects broke ground in 2011, prospects are good for 2012 and beyond.
Q: What are some specific advances in technology and in the industry that you are seeing in the refining segment?
A: In general, process runtimes between turnarounds are increasing, which results in greater demands on equipment suppliers to design products that can operate without scheduled or unscheduled outages for these longer periods. To some extent, this is facilitated by improvements in condition monitoring technology, which allows operators to better evaluate the health of their machinery and predict whether it can survive to the scheduled turnaround date.
Pollution concerns in Asia, and the desire of Russian and Middle East refiners to export low sulfur gasoline and diesel to Europe, are driving investment in hydro treating capacity in those regions. Concurrently, the increasing spread between the prices of light, sweet crude oil and heavy sour, are driving investments in cokers, hydrocrackers and hydro treaters. Other than cokers, these all require massive volumes of hydrogen, which is driving the industry to produce ever larger compressors.
Focus continues on health, safety and environmental improvements from noise reduction and efficiency improvement to waste energy recovery and utilization.
Q: What is Dresser-Rand doing to meet those key trends/challenges in the refining segment? What products have been developed to meet these challenges?
A: We continue to extend the upper range of our reciprocating product line to meet the needs of the larger hydrogen plants. As machine size has grown, the energy loss associated with the traditional 3- or 5-step capacity control has also increased. Dresser-Rand has responded with its full suite of control technology including infinite step capacity control (ISC) that was originally developed for the midstream gas transmission market. This allows the compressor to follow load requirements with much less energy waste.
We have also invested in reciprocating compressor valve and wear part technology and application improvement to extend run times between overhauls. At some facilities, operators can routinely achieve three years of uninterrupted operation of these machines, and now no longer specify a standby unit. Unspared operation of turbo compressors has been the norm for decades, but now it is coming to reciprocating compressors too.
Our Dresser-Rand DATUM® line of centrifugal compressors leads the industry in efficiency and operating range, making them the ideal solution for clients focused on maximizing their operating efficiency. We continue to invest in product development to maintain our lead in this area.
In refineries, turbo compressors are often driven by steam turbines. Here too, investments are being made to reduce flow path leakage and improve turbine efficiency, reducing overall steam consumption per unit of load.
Turbocompressors are among the noisiest pieces of equipment in a refinery. Dresser-Rand has developed proprietary technology, marketed as D-R Array, which reduces noise emanating from the compressor by 10dBA or more. The technology can also be applied to suction and discharge piping.
Our investment in Echogen provides a platform to recover waste heat from a variety of low quality sources prevalent in refineries, and convert it into rotating power to drive generators.
Investments that have been made in technologies to support subsea compression will eventually come to be applied in downstream as well. The urgency in downstream is less, but as the technology becomes proven and costs come down, the value of high-speed motors and drives, oil-free systems, and elimination of gearboxes will become evident in that market as well.
Q: What are some specific advances in technology/industry that you are seeing in the distribution segment?
A: We are going to start to see some dramatic changes in the retail and distribution segment, especially in the United States. The substantial difference between the prices of natural gas and gasoline or diesel is driving plans for a massive build-out of natural gas fueling capacity along Americas interstate highways and in fleet hubs. It is unclear whether this will be in the form of CNG or LNG, or both. Much of Asia already has a CNG infrastructure for heavy truck fleets, so essentially what is going to happen in the United States has been done in Asia and other places already.
The recent focus on natural gas fueling has taken attention away from another trend, which is the increasing potential of diesel fuel instead of gasoline in North America. This is driven by the superior fuel economy of diesel engines, and by the substitution of light crude slates by lower-priced heavy ones at the refineries. Heavy crudes produce proportionately less gasoline and more distillate. As with CNG, the preference for diesel due to fuel economy is well-established in the rest of the world.
Q: What is Dresser-Rand doing to meet those key trends/challenges in the distribution segment?
A: Dresser-Rand is currently evaluating CNG and LNG technologies to determine whether we want to participate in what is essentially a retail market. Our interest is primarily in the installation and servicing of the equipment in this space; similar to what we already do in India.
Q: What is Dresser-Rand specifically doing for energy efficiency in the downstream market?
A: Our value proposition to the market has always included leading edge efficiency, and we continue to invest in product improvements to maintain our position across our entire portfolio of reciprocating, centrifugal, and axial compressors, steam and gas turbines, and hot gas power recovery units for refinery FCC units and nitric acid plants. In many cases, these technologies can also be retrofitted into our legacy machines, or into machines of other OEMs, to improve their performance. Efficiency improvements of 10 percent or more are not uncommon.
In addition to improving rated operating point efficiency, we have also developed or applied technologies to permit more efficient load following by our equipment. Examples include our infinite step capacity technology for reciprocating compressors, and the application of variable speed systems to turbo and reciprocating compressors.
And finally, our investment in Echogen technologies provides a strong foundation to capture the energy in waste heat streams prevalent throughout the downstream market, and convert it into electrical power. This reduces the need for purchased power, improving overall plant efficiency.
Q: Anything else youd like to add?
A: Downstream market activity will continue to increase in the developing world, as GDP growth remains strong. In the developed world, there will be further shrinkage and consolidation. The big game changer in North America will be the long term availability of vast volumes of natural gas at very low prices. This will impact the motor fuels market and shift investment in fertilizer and petrochemicals to North America that would once have gone elsewhere.