Title: OSBL Considerations for Refinery Expansion Projects
Authors: Mr. Dominic M. Varraveto, Manager, Burns & McDonnell Date: March 18-20, 2007 Presented at: National Petrochemical & Refiners Association Annual Meeting
ABSTRACT
As demand for transportation fuel has remained strong despite rising prices and as refinery utilization hovers near maximum sustainability interest in refinery expansion projects has increased. Refinery expansion projects can be divided into two major parts distinguished by the industry as ISBL, Inside Battery Limit and OSBL, Outside Battery Limit. The ISBL portion of an expansion project typically focuses on the addition of new or additional process units to the existing refinery configuration.
The OSBL portion of that same project generally consists of all the other necessary supporting elements including utility systems, interconnecting process and utility piping, feed and product handling and storage etc. In some cases OSBL may also include an entire unit for production of a key process reactant such as hydrogen and for safe handling and disposal of waste streams and byproducts like sour water and sulfur. Many projects include revamp of existing process units as part of OSBL.
This paper will focus on the OSBL portion of three example refinery expansion projects consisting of 1) replacing an existing vacuum distillation unit, 2) adding a new vacuumdistillation unit and a new delayed coker and 3) adding and integrating a new crude distillation unit, a new delayed coker and a new hydrocracker to a typical FCC based gasoline refinery. The intent will be to identify and compare the various OSBL requirements for each example expansion project and to discuss guidelines for improving the accuracy of the OSBL definition early in project development.
INTRODUCTION
A meaningful discourse about OSBL considerations for a refinery project and more specifically, an expansion project relies on a clear definition of what is and what is not meant by outside battery limits or OSBL. This term does not have a universally accepted definition. For different entities in the same organization the OSBL portion of a project often varies, especially during initial project conception and often, even further into project development. The same lack of a common definition can be said to be true between organizations, for example, between owner and engineering/construction contractor. The first section of this paper discusses how the entire scope of a refinery project can be split between ISBL and OSBL and how the OSBL portion can be divided further into subcategories according to the nature of the work.
The second section of this paper discusses recent refinery projects and how the nature of these projects is affected by several factors including return on investment in the refining industry, growth in demand for refined products, access to crude supplies and impact of environmental compliance. Recently, solid operating margins and continued profitability has allowed refinery owners to come out of the latest round of environmental spending for Low Sulfur Gasoline, LSG, and Ultra Low Sulfur Diesel, ULSD, with an increased appetite for additional refinery investment changing the fundamental nature of the typical refinery expansion project.
The third part of this paper looks at the OSBL portion of three recent refinery expansion projects: 1) VacuumUnit, VAC replacement, 2) Addition of a VacuumUnit coupled with a new Delayed Coker Unit, VAC/DCU, and 3)
Page 2 of 10
Addition of new Crude Distillation Unit, new Delayed Coker and new Hydrocracker, CDU/DCU/HDC. These examples will describe increased OSBL scope corresponding to the recent and larger refinery expansion projects currently underway in the refining industry.
The final section of this paper suggests guidelines and practices for improving the accuracy of the OSBL definition earlier in the project development effort. An accurate and reliable OSBL definition has become essential since the OSBL portion of an expansion project is no longer insignificant relative to ISBL and because the size of todays expansion project is now truly deserving of the title Major Project.
DEFINITION OF OSBL
A somewhat overly simplistic definition of OSBL relative to refinery expansion projects is all aspects that are not included in the ISBL portion of the project. In other words OSBL is everything else including scope that was unexpected and unplanned for during initial project development. By this definition OSBL will be incompletely defined until it presumably can be defined in latter stages of the development process. A more specific way to define OSBL is to initially attempt to identify what everything else includes as early in the project as possible and practical.
OSBL will include more than interconnecting piping and pipe racks. Also included is infrastructure, secondary process units, revamps to existing process units and financial costs like interest and taxes etc. Infrastructure includes not only utility system equipment but also roads, rail spurs, docks, loading and unloading equipment, buildings (warehouse, power house, control room, office buildings etc).1 Table No. 1 below lists classifications which can be used to differentiate OSBL scope and summarizes the items included in each category.
Table No. 1: OSBL Classifications
Classification Description Interconnecting Systems Pipe/Pipe Rack, Power, Controls Infrastructure Utility System Equipment, Roads, Tanks, Truck and/or Rail Feed and Product Unloading/Loading, Buildings Secondary Process Units WWTP (Waste Water Treatment Plant), ARU (Amine Regen Unit), SWS (Sour Water Stripper), SRU (Sulfur Recovery Unit), TGTU (Tail Gas Treating Unit), SMR (Hydrogen), Air Separation Revamp of Existing Units Increase Throughput and/or Conversion Financial Owners Cost, Start Up, Working Capital, Interest, Taxes Other Land, Permits, Fees
Infrastructure is very general and can be further categorized by considering process equipment to supply typical utilities like steam, water (boiler feed, cooling) air (instrument and plant), fuel (natural gas, and refinery fuel gas) power (electric) etc. Table No. 2 lists the equipment frequently associated with some of the more common OSBL infrastructure.
Page 3 of 10
Table No. 2: Examples of OSBL Equipment for Utility Infrastructure
Utility System Equipment Steam Boiler Deaerator, Boiler, Circulation Pumps Water Boiler Feed Filters, Ion Exchange, Chemical Treatment, RO Membrane, Preheat Exchangers, Pumps, Tanks Water Cooling Cooling Tower, Circulation Pumps, Chemical Treatment Air Instrument/Plant Compressor, Intercooler, Drier Fuel Fuel Gas Conditioning Mix Drum, Condenser, Liquid KO drum, Filter/Coalescer, Preheater, Strainer(s) Power Electric Transformers, power distribution
Additional utility systems, not shown in Table No. 2 above, which may require equipment for reliable supply may include nitrogen, potable water, utility water, fire water etc.
Infrastructure also includes systems and associated equipment to handle return streams and wastes. For refinery units these systems include steam condensate collection/return flares, sewers etc. Table No. 3 lists equipment associated with these systems.
Table No. 3: Examples of OSBL Equipment for Waste Streams
Utility System Equipment Excess Vapor/Overpressure Protection Flare Flare Header, KO Drum/Pump, Flare, Flare Gas Recovery Compressor Sewer Process Sump, CPI (Corrugated Plate Interceptor for Oil Removal), Pump(s), Slop Oil Tank Sewer Storm Sump Pump(s), Tank or Pond Condensate Steam Collection Drum, Pump(s), Tank
Some utility systems like sewers will require waste water treatment which should be considered in the OSBL classification of secondary or supporting process units. Essential secondary process units in todays refinery for treating waste include a Waste Water Treatment Plant, WWTP and Sulfur Recovery Facilities usually comprised of Sour Water Stripper, SWS, Amine Regeneration Unit, ARU, Sulfur Recovery Unit, SRU and Tail Gas Treating Unit, TGTU. The SWS and ARU process liquid streams, removing hydrogen sulfide, H 2 S, and ammonia, NH3, so the liquid streams can be re-used (i.e. lean amine) or processed further and discharged (i.e. stripped sour water).
The SRU/TGTU processes the concentrated sour gases fromthe SWS and ARU producing molten sulfur byproduct and dischargeable vent gas. Other process units that might be included in OSBL secondary process units include facilities to produce a key reactant for a primary process unit. Examples are a Steam/Methane Reformer, SMR, producing hydrogen for a Hydrotreater or Hydrocracker and an Air Separation plant producing Oxygen for Sulfur Plant Oxygen Enrichment or for petroleumcoke gasification.
Factors Affecting Refinery Expansion Projects Until very recently it has been difficult for refiners to attract investment capital both from internal as well as external sources. Some reasons for this have been low return on investment due to poor margins, surplus capacity and environmental regulation. In that kind of economic environment, limited capital was primarily appropriated for environmental compliance to remain viable. Investment for economic benefit i.e. profitability, was limited or non-existent. However, through creative and clever improvement of existing facilities some refiners conceived and executed low cost projects that had significant bottomline impact. These projects were
Page 4 of 10
usually characterized by step wise debottlenecking over several years that resulted in overall increase in refinery throughput and/or conversion. These types of projects were typically completed in conjunction with regularly scheduled maintenance turnarounds and did not involve addition of new process units or improvement to existing infrastructure. The OSBL portion of these projects was small or nearly insignificant.
For a time this approach was adequate to keep pace with growing demand. However, during this same time period many refineries, especially smaller less complex facilities were forced to close. Closings have been accelerated by the cost of environmental compliance both to manufacture LSG and ULSD and to reduce air and water pollution originating in refineries. Over the same period, growth in demand for transportation fuel increased steadily as the number of passenger vehicles as a percent of the US fleet has declined and the number of light trucks and sport utility vehicles as percent of the US fleet has increased.
Eventually the combination of growing demand and loss of capacity fromrefinery closings has exceeded increased output fromincremental debottlenecking and created a much more balanced, or, some would say, precarious market for refined transportation fuel. Margins and profitability have improved dramatically especially for refiners capable of processing heavier, higher sulfur crude oil. With the bulk of the large environmental expenditures already made, at least for the near to mid term (3 to 5 years), there is an increasing appetite for relatively large expansion projects. These larger expansion projects are now characterized by significant capacity increases of 50 to 100%. In some instances this involves a second parallel processing train with new infrastructure and secondary process units. The OSBL portion for these projects is a significant percentage of the overall project cost.
The three example projects in the next section will illustrate how the OSBL content has increased as refinery expansion projects have evolved fromincremental de-bottlenecking to significant capacity growth.
EXAMPLES OF RECENT REFINERY EXPANSION PROJECTS
Example No. 1: VacuumUnit, VAC, replacement
This project involved replacing the existing vacuumunit furnace, vacuumfractionation tower, overhead ejector system, Heavy Vacuum Gas Oil, HVGO, pumps and Wash Oil pumps, addition of new HVGO vs. Crude heat exchangers as well as modifications to the existing Crude preheat system, HVGO heat removal system, vacuumunit charge pumps and crude and vacuumsection heat integration. The project positioned the refinery for greater flexibility in crude feed selection allowing heavier crudes with higher percentages of gas oil to be processed. The increased gas oil filled excess FCC capacity. The scope and other details of the project can be found in reference 2.
Figure No. 1: VAC Replacement
The OSBL for this project was limited and was not identified separately from the ISBL as described. By definition VAC replacement excluded revamp work to existing process units. Spare FCC capacity already existed and the design basis defined the heavier crude such that the gas oil content increased but the residual content (i.e. DCU feed) would not increase as a result of the project. Replacement of portions of the HVGO product line to and around the Gas Oil Hydrotreater processing FCC feed was the only significant OSBL work. The HVGO piping replacement was less than 5% of the overall project and all the OSBL work was less than about 10% of the overall project.
Example No. 2: New Vacuum Unit and New Delayed Coker, VAC/DCU
Reconfiguring an existing refinery to process heavier crude and meet Clean Fuel requirements was achieved in this project by adding a new Vacuum unit and a new Delayed Coker. Revamp of at least 11 existing process units was part of the OSBL scope including converting an existing residual oil desulfurizer to a gas oil hydrotreater, a shift in FCC conversion to higher gasoline yield, upgrade of the light ends fractionation and treating areas and modification of two distillate hydrotreaters for ULSD production. In addition, the OSBL scope included upgrade and expansion of the refinery Amine Circulation and Treating, Sour Water collection and Hydrogen distribution. A new Hydrogen plant was also included in the OSBL scope.
Page 5 of 10
By far the largest parts of the OSBL scope were 2 miles of pipe rack, the corresponding interconnecting process and utility piping and over 500 tie-ins needed to install and support the pipe. There were many project specific requirements including extensive application of heat tracing, both steam and electrical, to new and existing interconnecting pipe. The introduction of new intermediate process streams from the DCU required a significant modification to existing tankage. These modifications vary for each stream but included new gas blanketing, a new floating roof, recommissioning of an existing tank heater, new insulation, new heat tracing, and addition of water draw collection, piping manifolds and pumps.
Overall, the OSBL was slightly above 30% of the total project cost. The revamps comprised about one third or 10% and the interconnecting piping and tankage modifications were about two thirds or 20% of the total project cost. Other than tankage, the OSBL for this example project did not have a very significant infrastructure component. This is somewhat unexpected considering the size and impact on the configuration of the refinery. Some possible reasons for this relatively small infrastructure requirement were some of the typical OSBL infrastructure like the coke handling facilities was included in the DCU ISBL and the expansion project was based on a shift to lower cost crude and increased conversion rather than an increase in throughput.
Figure No. 2: New VAC/DCU
Page 6 of 10
Example No. 3 - New Crude Distillation Unit, New Delayed Coker and New Hydrocracker, CDU/DCU/HDC.
This example involves the most extensive project of the three presented in that it combines a greater than 50% increase in throughput with an increase in conversion for processing a significantly heavier and higher sulfur crude. In fact the sulfur recovered fromthe refinery will increase by nearly an order magnitude as a result of this project.
Like the previous example this project involves a new VAC unit and a new DCU. In this example the new VAC is part of an entirely new Crude Distillation Unit, CDU. The differences end there since this project also includes a Gas Oil Hydrocracker which removes a significant amount of sulfur and converts a significant portion of gas oil producing distillate that meets ultra low Clean Fuels requirements and also produces a hydrotreated FCC feed stream. Applying the definition of established earlier, the OSBL will include interconnecting pipe, pipe racks, electric power supply and distribution, infrastructure, secondary process units, and revamps. The flow sketch in Figure No. 3 shows the major aspects of the ISBL portion for this example. Not shown in this figure are all the new secondary process units. These new facilities are part of the OSBL and include Hydrogen Production, Sour Water Collection and Processing, Amine Circulation and Regeneration, Sulfur Recovery, Tail Gas Treating and Waste Water Treatment.
Figure No. 3
There are also a significant number of revamps associated with this example that will be part of the OSBL portion of the project. They include upgrading the existing crude unit to process heavier crude, modifying the FCC for higher rate and shift in yield, expanding the existing DHT for increased throughput and higher feed sulfur, increasing throughput
Page 7 of 10
Page 8 of 10
and adding the capability to process DCU Naphtha in the Naphtha Hydrotreater, NHT, and Reformer and expanding the light ends treating, fractionation and processing in the Alkylation and Polymerization, ALKY/POLY area. A detailed listing of the OSBL scope for this project in comparison to the other examples is shown in Table No. 4.
Table No. 4: OSBL Content Comparison of Example Projects
OSBL Classification Example No.1 VAC Example No. 2 VAC/DCU Example No.3 VAC/DCU/HDC Interconnecting Systems HVGO Piping Process and utility Piping/Racks Pipe/Pipe Racks, Power, Controls Infrastructure None Utility System Equipment (Insignificant) Utility System Equipment, Roads, Tanks, Truck and Rail Product Loading, Buildings Secondary Process Units None SMR (Hydrogen) ARU and SWS WWTP, ARU/SWS, SRU/TGTU, SMR (Hydrogen) Revamp of Existing Units None Resid HDS to Gas Oil Feed HDT, 2 DHTs, 2 FCCs, LPG treating & Fractionation, Amine, SWS NHDS, DHDS, LPG fractionation Financial Owners Cost, Start Up, Working Capital, Interest, Taxes Same items as VAC Same items as VAC
Other Demolition, Permits, Fees Same items as VAC Same items as VAC
MEETING OSBL EXPECTATIONS DURING PROJECT DEVELOPMENT
This section will discuss possible reasons Why the OSBL costs of Refinery Expansion projects consistently exceed expectations by large margins and provide recommendations for improving OSBL definition quality.
There are many possible reasons that can cause the OSBL part of a refinery expansion project to exceed expectations. Taken in combination the difference between expectations and actual outcome will be significant. Some of these reasons are listed below in Table No. 5. They include factors that affect both definition and pricing of the OSBL scope.
Page 9 of 10
Table No. 5: Why Expansion OSBL Does Not Meet Expectations
No. Reason Impacts Definition Pricing 1. Unfamiliarity with size and complexity of evolving expansion projects. X 2. Inadequacy of time and resources allocated for OSBL development. X X 3. Overly optimistic about extra capacity in existing infrastructure for expansion needs. X 4. Failure to properly account for site specific issues like soil, climate, plant layout etc. X 5. Use of factors instead of current pricing to predict costs. X 6. Unrealistic allowance for escalation, contingency etc. X
The three examples discussed in the previous section illustrate why many may be unfamiliar with the size and complexity of evolving refinery expansion projects. Until recently expansion project scope was limited to revamp of a single existing unit with very limited OSBL/Infrastructure content like Example No. 1. The goal for this type of project was primarily to reduce raw material cost and improve operating margin with less emphasis on large increases in throughput and product volume. The more recent, larger projects combine very large increases in through put coupled with a significant shift in crude feed gravity and sulfur content. These projects are relatively recent and present a steep learning curve to the inexperienced. Assembling an experienced project team and planning and organizing a disciplined project development effort are essential first steps for better meeting project expectations.
Some might say it is somewhat foolhardy to estimate OSBL/Infrastructure cost too early in project development1. On the other hand more time is required to successfully define a large, complex project. Much of the early activity will not require cost estimating. Early activity should focus on gaining a realistic understanding of the capacity of existing infrastructure to support additional load and what must be included in the scope to meet site specific needs. If necessary, elements of the existing infrastructure should be inspected and tested while in service to prove suitability and capacity. Determining availability of open space, the extent of demolition and site clearing and relative location of ISBL, OSBL and Infrastructure is crucial.
OSBL development should be started early even while ISBL is still being developed. Initial site specific OSBL and Infrastructure scope can be developed early using similar or go by ISBL designs. Utilities and infrastructure needs can also be determined fromthe go by designs using scaling factors. The scaling factors can be validated later in the development when a firmISBL definition emerges. Develop site specific OSBL and Infrastructure Scope taking into account relative location of ISBL and Infrastructure. Conceptual cost estimating for refineries and chemical plants is typically done by applying installation cost factors to sized equipment. 3 While this technique has proven successful for the ISBL portion of projects, it is less than satisfactory for OSBL, especially projects containing a relatively large interconnecting pipe and pipe rack component. For this type of OSBL scope, using technical deliverables like preliminary layouts, pipe/rack routing, electrical one lines etc to produce material take offs is a much more reliable method for costing the non-equipment component of OSBL. Where significant equipment based infrastructure is needed installation cost factors can be used.
The scope definition should be checked by comparison against other similar projects. Adjustments for differences related to variation between projects due to site and project specific characteristics should be taken into account when making the comparison. In addition, the use of project development checklists specific to each project phase and rating tools to quantitatively assess the completeness of the scope definition should be included near the end of each project phase in the development process. Finally, given the evolution of refinery expansion projects fromsmall to large and
Page 10 of 10
simple to complex, time and funding should be included in the project development budget near the completion of the OSBL development effort for An independent assessment of the costs outside project influence. 4
Table No. 6 summarizes the recommendations made above for improving the OSBL development and achieving congruence between expectations and actual results.
Table No. 6: Recommendations for Meeting OSBL Expectations
No. Reason OSBL Fails Expectation Recommendation to Meet Expectation 1. Unfamiliarity with size and complexity of evolving expansion projects. Assemble experienced team and follow disciplined development plan. 2. Inadequacy of time and resources allocated for OSBL development. Start OSBL development effort early and gain site specific knowledge. 3. Overly optimistic about extra capacity in existing infrastructure for expansion needs. Inspect and analyze existing infrastructure and estimate preliminary cost to expand capacity as needed. 4. Failure to properly account for site specific issues like soil, climate, plant layout etc. Use check lists and rating tools to guide and assess development. 5. Use of factors instead of current pricing to predict costs. Use layouts, routings, one lines to develop material take offs for costing OSBL. 6. Unrealistic allowance for escalation, contingency etc. Engage independent outside review.
References
1. Smith, R. S. Factored Estimating Guidelines Refinery/Petrochemical Projects, Cost Engineering Vol. 39 No. 4 (April 1997): 36-41 2. Spangler, R. et al Flexibility in Design of Crude Unit Revamp AM-06- 14 NPRA Annual Meeting. Salt Lake City, Utah: March 2006 3. Page, John S. Conceptual Cost Estimating Manual, 2nd Edition Section 18 Elsivier, 1996 4. McIntire, P. Cost Estimating Challenges Face Frontier Projects, Oil & Gas Journal, Vol. 99 No. 33 (August 2001)