Over the past year, several construction projects and other
initiatives have not come about as anticipated, contributing to
uncertainty in the petcoke market. Among the anticipated
changes in the market were the start-ups of new coking units in
Brazil and Colombia, the start-up of a huge gasification plant in
India, and the shift from fuel oil to petroleum coke to fuel
Egypt’s cement industry.
On the production side, the new delayed coking units in
Brazil and Colombia were delayed in starting up. In Brazil, start-
up of Petrobras’ new Abreu e Lima (RNEST) refinery located
near Pernambuco, Brazil, has been delayed. As of the end of last
year, only one-half of the refinery had started up, and the
prospects for completing construction of the remaining capacity
remain questionable. As a result, only one-half of the expected
petroleum coke from this refinery is going to be entering the
market. Additionally, ramp up of production of the completed
coking unit has been slow, with less than 50% of petcoke
production capacity reaching the market this year.
The other delayed coking unit that has been delayed is at
REFICAR’s expanded Cartagena refinery. This expansion project
(which includes a new coking unit, initially scheduled to start up
in 2013), was widely expected to begin production this May.
However, recent indications are that this coker will start up in
the fourth quarter of 2015.
On the demand side, there has been some speculation
regarding the start-up of Reliance Industries’ huge coal/petcoke
gasification project. Initially it was expected to begin operations
in 2015. Although Reliance subsequently announced that the
first of the five modules would start up in March 2016,
indications are that the start-up date will likely slip to late second quarter, with each succeeding module following every three months. When operational, this project will have the capacity to consume 30,000 tonnes per day of coal and/or petcoke.
Lastly, the Egyptian government
passed legislation in 2014 allowing
certain industries to burn coal
and/or petcoke in lieu of more
expensive fuel oil. The shift to
petroleum coke has been much
slower than many in the petroleum
coke market had anticipated due to
operational and regulatory issues
on a plant-by-plant basis.
Additionally, since the bulk of fuel
savings are achieved by switching
from fuel oil to coal, some
operators are prioritizing switching
to coal as quickly as possible, with
possible switching to petroleum
coke to follow at some later date.
MIDDLE EAST RISING
The Middle East has historically been an importing region for petcoke, but this traditional role has changed from 2015 onward. The start-up of the SATORP refinery (a joint venture between Saudi Aramco and Total) located in Jubail, Saudi Arabia, initiated a wave of new coker additions that will impact the international petcoke market. In all, five new cokers have begun or will begin producing petroleum coke during 2015/2016, with an estimated total production of 5.4mt per year. Most, if not all, of this new production will enter the seaborne market, feeding burgeoning demand in Asia and Africa, notably India and Egypt. These new cokers are:
- SATORP and YASREF: these new refineries are located in Saudi Arabia. SATORP (a joint venture between Saudi Aramco and Total) is located on the eastern coast near the port of Jubail and YASREF (a joint venture between Saudi Aramco and Sinopec) is located at Yanbu on the Red Sea. SATORP began shipping petcoke in late 2014, while YASREF began shipping earlier this year. Each of these refineries is estimated to produce 2.2mt per year of fuel-grade petcoke, and is ideally located to supply the Indian and Egyptian markets.
- SOHAR: located in Oman, on the Persian Gulf, this new refinery is scheduled to start up in 2016 and it is estimated that it will produce ~0.5mt per year of fuel-grade petcoke. The Sohar Refinery is also strategically located to supply the Indian and Egyptian markets.
- RUWAIS: this new refinery is located in the United Arab Emirates, on the Persian Gulf, and is expected to start up later this year. The coking complex in this new refinery includes a petcoke calciner; it is estimated that the calciner will produce ~0.4mt per year of CPC. This refinery is conveniently located to supply the growing regional CPC market.
Recent environmental issues surrounding transporting petcoke have had a significant impact on the petcoke market. The highest profile of these issues has involved three petroleum coke and/or coal terminals located in the southeast side of Chicago, Illinois. These terminals received coal and petcoke by barge, rail, or truck; provided storage space; and transloaded material to Great Lakes vessels or barges. Barges loaded at these terminals could access the US Mississippi River system through a series of canals and tributary rivers. Significant quantities of petroleum coke loaded into barges at these terminals moved downriver to the New Orleans area for transloading to oceangoing vessels.
These Chicago area petcoke terminals have been embroiled in controversy regarding fugitive petcoke emissions since the fall of 2013, when the Chicago Tribune and other Chicago media outlets began covering complaints of southeast Chicago residents regarding fugitive petcoke dust emissions from open petcoke piles and during transloading operations. In March 2014, the City of Chicago Health Department issued a series of rules that significantly restricted petcoke and coal terminal operations and required storage areas be enclosed by June 2016.
Much of the controversy focused on petcoke produced by BP’s Whiting, Indiana, refinery that was shuttled by mini-unit trains to either of the two Chicago terminals owned by Koch Industries. In February, BP announced that it was going to halt use of Chicago area petcoke terminals by the summer of 2015, and is implementing these plans. As of the end of June, two of the Chicago area coal and petroleum coke terminals, Beemsterboer and KCBX North, are closed; the third terminal, KCBX South, continues to operate.
Due to environmental concerns, the SATORP refinery located near Jubail, Saudi Arabia, was designed to use a conveyor system to move its 4,500 tonnes per day of petcoke production the 26km (16 miles) from the refinery to the petcoke terminal in
the marine loading facilities at Jubail rather than moving it by truck. However, when the refinery started up in the fourth quarter of 2013, the conveyor system was plagued with problems, limiting the flow of petcoke from the refinery. It was not until June of this year that, via trucking and restricted conveyor operations, sufficient petcoke could be moved to the terminal to keep up with refinery production (about four vessels of petroleum coke per month). This conveyor/truck operation will likely continue until the conveyor system is fully operational.
In the last year, China’s interest in high-sulphur petroleum coke has dramatically declined as Chinese authorities are pushing for petcoke importers to avoid importing high-sulphur petroleum coke.
Perhaps potentially the largest regulatory impact on petroleum coke, MARPOL VI, looms on the horizon. If MARPOL VI is not changed, vessel operators will have to use fuel oil that does not exceed 0.5% sulphur or install SO2 seawater scrubbers by 2020. If significant numbers of ships are not retrofitted with SO2 scrubbers, then demand for high-sulphur marine fuel oil will decline significantly. In response to declining high-sulphur fuel oil demand, some refiners will likely choose to install coking units, potentially providing a flood of additional petcoke production for the petcoke market to absorb.
Petroleum coke has been buffeted by a series of events in the past year. Perhaps the most significant development is increased scrutiny of petcoke terminal and transport operations by environmental activists and regulators. While small compared to many other dry bulk or energy commodities, the petcoke market will continue to provide business opportunities for those that can evolve and change in response to various market and governmental forces.
1. Brazil, Canada, China, Egypt, Indonesia, India, Italy, Kuwait, Mexico, Saudi Arabia, Spain, Syria, United States, and Venezuela.
2. Hovensa St. Croix (US Virgin Islands),Valero Aruba, and six coking facilities inVenezuela.With the shutdown of Hovensa St. Croix and Valero Aruba in 2011, all current petcoke production is located in Venezuela.
3.Technically, all petcoke is ‘green’ when it is produced because all petcoke that has not been calcined is ‘green’. However, in the petcoke industry the term green petcoke (GPC) typically refers to higher-quality petcoke used as calciner feedstock.
4.While petroleum coke has higher heating value and lower ash content than coal, it has very low volatile matter content which causes flame stability problems. Additionally, petcoke macerals are much less reactive than coal macerals, so it is much more difficult to completely combust petroleum coke than coal. Petroleum coke is often more difficult to pulverize than coal (i.e. lower HGI).
ABOUT THE AUTHORS
Ben Ziesmer (Senior Consultant)
Contributing editor to Jacobs Consultancy’s Pace Petroleum Coke Quarterly©. He has an in-depth background in the power sector, including experience in procurement, operations, environmental compliance, and engineering. He leads Jacobs Consultancy’s fuel-grade petcoke practices and has been the project manager for numerous studies involving the fuel-grade petcoke market, environmental issues, and power generation.
Frank Wilson (Senior Consultant)
Frank Wilson brings years of experience and an in-depth knowledge of the petroleum, chemicals, and energy industries to the Carbon Group. He is a contributing author for the
Pace Petroleum Coke Quarterly and is involved with single-client studies of the global fuel-grade and anode-grade petcoke markets. Prior to joining Jacobs, he was a Petcoke Marketing Manager for ExxonMobil.
Jacobs Consultancy Inc. has published the Pace Petroleum Coke Quarterly© (PCQ) since 1983. The PCQ has been published monthly since 1984 and is considered the worldwide authoritative source for petroleum coke market information.