PetroKazakhstan Oil Products: On the Modernisation Trail!
The Shymkent Oil Refinery is the “youngest” oil refinery in Kazakhstan and has the potential to refine up to 5.25 million tonnes of oil per year.The comprehensive agreement between NC KazMunaiGas and CNPC International, which defines the conditions for conducting joint business at the refinery, has helped the refinery achieve its second wind.
In recent years Shymkent Oil Refinery has begun increasing capacity. In 2005 the refinery produced 3,933 million tonnes, in 2006 – 4,035 million tonnes and in 2007 – 4,060 million tonnes.
The forecast is that in 2008 the Shymkent refinery will refine 4.1 million tonnes of oil. After the 1st half of the year the figure was at 2.24 million tonnes. During this period 455,357 tonnes of petrol, 134,459 tonnes of kerosene, 731,674 tonnes of diesel and 75,901 tonnes of liquid gas were produced. Production volumes of dark products for the 1st half of the year amounted to 388,387 tonnes of vacuum gas oil and 314,278 tonnes of commercial fuel oil.
This year the plant has committed to raising the production of light oil products to 62% of the total volume of refined raw materials. However, this goal has been complicated by plans to significantly increase the production of TC-1 aviation kerosene, which is one of the refinery’s most high-yield products. If last year’s yield was 159,391 tonnes, then in 2008 volumes will reach 240,000 tonnes. As machinery using kerosene works under special conditions, special requirements need to be introduced for its production, storage and quality. At the same time kerosene production techniques are currently linked to specific oil fields – Kumkol and Western-Siberia. This means that raw materials from other sources cannot be used without extensive testing.
New technical conditions (standards) have been developed to promote increased light oil product volumes, and from May a new type of summer diesel, ДТЛ + 5, has been in production and certified. All of this has improved the refinery’s production figures for light oil products and helped it meet the growing need for summer fuel during harvest periods.
Another important task is to increase the share of high-octane fuel, which has become necessary due to the growth in its use in Kazakhstan. The refinery currently produces three types of vehicle fuel: А-80, А-92 and А-96. Petrol produced at the refinery includes a cleaning additive that helps reduce carbon deposits on engine parts. A-96 petrol is produced incorporating modern high-octane additives.
According to Sergey Pilipenko, chief engineer, all of the refinery’s products meet current Kazakhstan requirements.
The Shymkent Oil Refinery has confirmed that it will be able to meet the most current ecological management requirements and norms. On16 July 2008 the French company AFNOR audited the refinery and certified that its organisational structure, covering activities such as oil and oil product refining, transportation and storage, has been installed in accordance with the requirements of international standard ISO 14001:2004.
Having taken the course of improving control over technical processes, PetroKazakhstan Oil Products (PKOP) management is preparing yet another important innovation, which is the launch of a Sigma-Fine comprehensive computer system. The system is to be used to calculate the material balance of oil and oil products (over any period of time) for each unit, installation or plant.
The Shymkent Oil Refinery currently produces roughly a third of all fuel in Kazakhstan. It is already the most stable oil refining company in Kazakhstan from the point of view of supplies.
The refinery still has problems, and they are very serious. Despite the Shymkent Oil Refinerybeing the “youngest” Kazakhstan refinery, it has a limited circle of operations and is actually second to the Pavlodar Refinery in production volume terms. The reason is that the refinery has no slow coking or catalytic cracking units – two secondary processes used in the extraction of a large percentage of light oil products. The refinery actually owns the required equipment but it is not in operation.
Anyone who’s been to the Shymkent Oil Refinerywill probably have noticed that the right wing – an enormous series of reactors, pipes and tanks – is lying idle and rusty. After the end of the USSR financing for the second phase of the Shymkent Oil Refinerywas stopped and a significant part of equipment already purchased, and 40% of already assembled equipment remained unused.
However, time does not stand still and the government has approved new technical fuel quality regulations. From January 2009 Kazakhstan is planning to introduce Euro-2 standard fuel, Euro-3 fuel from January 2014, and Euro-4 fuel from January 2016. The result should be a significant reduction in the quantity of harmful emissions. However, for this to happen, all oil refineries need to be modernised to meet new ecological requirements for increased percentages of lighter products from refined oil.
Modernisation has been an issue at the Shymkent Oil Refineryfor a long while.First of all the “frozen” facilities need to be put into operation, which involves completing construction of a catalytic cracking unitthat would ensure the hydroskimming of vacuum gas oil, a gas fractionation plant, a MTB unit fuel hydroskimming, isomerisation and polypropylene installations, and finally a benzol production unit. If all of the above equipment is put into operation then the extraction levels for light products should grow from the current 62% to average European levels of 87%.
After purchasing the CNPC plant, a commission of refinery representatives and an independent foreign company carried out a review of the available equipment and concluded that it was in good enough condition and may be installed. The only problem that remained was financing.
On 16 June 2008 PKOP LLP management held a meeting in Almaty with shareholder representatives to discuss the plan to modernise the Shymkent Oil Refinery. The meeting covered operating results and identified technical and financial committee plans.
Plant management has been given the task of finding ways of increasing refining capacity. If the initial modernisation plan was to increase the depth of crude oil refining and increase the yield of light oil products at Euro-3 standard, then KazMunaiGas representatives expressed an opinion, which took into account Kazakhstan’s growing economy, on the need to increase actual oil refining volumes.
Mr Tiyesov, deputy general director of Trade House KMG, mentioned that the current modernisation project (developed by the Beijing scientific research institute for oil refining in 2006) is at its most effective for oil refinery capacity of 4 million tonnes per year. However, according to the oil refining programme developed, the Kazakhstan government (Ministry of Energy and Mineral Resources) is demanding that refining capacity at the Shymkent Oil Refineryachieve Euro-3 and Euro-4 standard immediately.
With this regard it has been decided to develop a feasibility study for the refinery modernisation project based on the annual crude oil processing capacity of 6 million tonnes (in accordance with the long-term plan for Kazakhstan refining industry development prepared by the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan).
Feasibility study needs to be agreed with the Ministry of Energy and Mineral Resourceswhich involves discussing any related issues such as what type of oil is to be sent to the oil refinery, and can the government support and guarantee an increase in refining tariffs in light of significant investment in plant assets.
PKOP management and shareholder representatives are unanimous in their understanding of the need to modernise the oil refinery. The Shymkent Oil Refinery supplies the most densely populated region of the country with oil products. One of the meeting delegates expressed a desire to see the work with the Ministry of Energy and Mineral Resources and feasibility study completed as quickly as possible.
During a visit to Shymkent in April 2007 the Kazakhstan president also expressed his support for the project, which has already been included in the Programme for the development of the petrochemical industry of the Republic of Kazakhstan for 2008–2013.
It’s still difficult to estimate the cost of modernising the plant as a lot depends on theengineering parameters of the option chosen. The Chinese institute estimated the cost to be $500 million (in 2006 prices). Due to the increasing complexity of the refinery process flows, increased refining volumes and increased cost of materials this amount may grow up significantly.
In addition, the Ministry of Energy and Mineral Resourceshas still not guaranteed the required oil supply volumes for refining.
The financing issue will be discussed after the main technical parameters of the project had been determined. It has not yet been decided whether funds will be borrowed or shareholder funds will be used. This is where the government could support the project, for example in the form of tax and customs concessions for the reconstruction of the refinery. Governmental assistance in the project will probably take the form of project economics.
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