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Refiners say new technology lets them get more clean fuel out of every barrel of heavy crude

THE WALL STREET JOURNAL

FEBRUARY 8, 2009

Bottom’s Up

Refiners say new technology lets them get more clean fuel out of every barrel of heavy crude

By ANA CAMPOY

Refiners are making progress in their efforts to more profitably scrape the bottom of the barrel.

Not every ounce of crude can be easily refined into light transportation fuels, such as gasoline and diesel. At the very outset of the refining process, oil is separated into lighter and heavy components. There is usually a portion of sludgy material that must be run through complex and expensive equipment to break down, or typically ends up in a heavier, dirtier fuel known as residual fuel oil, used to power ships and generate electricity.

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As the world’s governments move towards cleaner fuels, refiners are being forced to find new ways to deal with the tar-like leftover. It’s a task that’s becoming more pressing as oil producers bring to market increasing amounts of heavy crude, which costs less but usually features more sludge and pollutants than light or sweet varieties.

Refiners have picked at the problem for years, but a handful now say they have developed technology that can transform all contents of a barrel of heavy crude into clean fuels. Two of these companies say they either are working with oil-producing nations on deploying the technology or are close to reaching licensing agreements. But the process, known as slurry hydrocracking, still hasn’t been widely tested on the massive scale at which the refining industry operates.

In the meantime, other refiners are tweaking technology that already exists, doing what they can to increase their yield of cleaner and more profitable light fuel.

Heavy to Light

One method that has been around for decades, known simply as hydrocracking, is becoming increasingly popular because it allows refiners to produce more diesel, which is in high demand, using some sludge, though not the thickest part.

A hydrocracker works somewhat like a drip-coffee machine. Tiny components called catalysts are loaded in the middle of a huge metal vessel, like coffee grounds sitting in a filter. As oil runs through the filter, hydrogen is injected into it under heavy pressure. The catalysts help break down the crude-oil molecules, which then hook up with the hydrogen atoms to create lighter, cleaner fuels.

A few companies, such as Royal Dutch Shell PLC, have developed a new generation of catalysts to help refiners use the same equipment to meet new fuel specifications, such as the U.S. mandate to reduce the level of sulfur in diesel.

“You can consider the catalysts like the software and the hydrocracker like your PC,” says Carl Mesters, Shell’s chief scientist for chemistry and catalysis. The catalysts allow companies to update their refining process without investing in new hardware.

Slurry hydrocracking is similar to this process, but can break down the thickest part of the sludge. The catalysts are much smaller and, instead of sitting in a filter, they circulate all over the vessel, says Salvatore Meli, technology director at the Italian oil giant Eni SpA. Dispersed catalysts have more of their surface exposed to the crude, promoting the transfer of hydrogen. In Eni’s process, the catalysts also are less prone to get mixed with contaminants.

Eni hopes its technology will give it an edge over other integrated oil companies seeking business in oil-producing countries, which have become more possessive of their resources. The company says it already has agreements with Brazil, Venezuela and Congo, which have reserves of heavy crude, to explore how its technology could be used in those countries.

A parallel slurry-hydrocracking method developed by UOP, a Des Plaines, Ill.-based division of Honeywell International Inc., makes the catalysts easier to replace than when they sit in a filter, UOP says.

UOP, whose slurry hydrocracking technique is based on technology developed by Natural Resources Canada, the natural-resources department of Canada’s government, says it is in talks with several refiners and expects to license the technology soon.

Ultrasound Waves

Meanwhile, another method of scraping the oil barrel may come from Sulphco Inc., a Houston-based start-up. This company is working on technology that uses ultrasound waves to break down and remove sulfur from raw and already-processed crude.

Sulphco says ultrasound waves make it easier for oil to react with catalysts, removing the need for the very high temperatures and pressure that other processes, such as hydrocracking, use to break down the oil molecules. This makes Sulphco’s technology potentially less expensive, simpler to use, and a good option for refineries that don’t already have sophisticated equipment such as hydrocrackers, says Larry Ryan, chief executive.

Sulphco says it is testing its equipment at potential clients’ facilities in the U.S. and Europe, and at a facility it owns in Fujairah, part of the United Arab Emirates.

Removing Contaminants

To squeeze more clean fuels from a barrel, refiners also have to figure out how to remove and dispose of contaminants, not just break down the crude into lighter fuel-blending components. Both Eni and UOP say that their slurry hydrocracking methods will collect contaminants for use in other processes, such as making cement and steel. DuPont Co., meanwhile, has ways of collecting and recycling sulfur-related pollutants produced from the refining process. One technology scrubs refinery emissions free of sulfur. Another process recovers sulfuric acid used in the production of gasoline additives. DuPont says that the sulfur it captures becomes the sulfuric acid used in soap and detergent manufacturing and to make chemicals used in agriculture, among other things.

“We take the sulfur that’s removed from the fuel and turn it into sellable products,” says Gary W. Spitzer, vice president and general manager of DuPont Chemical Solutions Enterprise.

The variety of approaches allows refiners to pick and choose elements to fit their needs. Alon USA Energy Inc., a Dallas-based refiner, is planning to build a hydrocracker from scratch at a refinery in California. It will also replace heaters at some existing refineries with newer, more efficient versions. The company says the new equipment will allow it to increase production of gasoline and diesel fuels clean enough to meet the state’s standards, which are among the strictest in the nation, while reducing emissions.

Jeff Morris, the chief executive, sees this as a way for Americans to keep their car-centric lifestyle without ignoring the environment. “Americans can have their cake and eat it, too,” he says.

[The Journal Report: Energy]

—Ms. Campoy is a staff reporter for The Wall Street Journal in Dallas.Write to Ana Campoy at [email protected]

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