About the course

The content of the ‘Improving refinery profit margins’ course is as follows:

Economic environment

The objective of this section of the course is to describe the relationships between energy (and oil) demand and economic growth in both developed and developing countries, in the context of providing new refinery capacity and expanding existing refinery capacity. Overall refinery profitability trends will be examined together with the issue of capacity utilisation. In addition, the importance of refined product specifications will be discussed and the effect of environmental legislation on specifications will be examined.

Crude oil

This section is designed to illustrate the diversity of crude oil quality internationally in terms of classification methods and product yield. An explanation of the crude oil assay test procedure and the results obtained from assay testing will be provided. More importantly, course attendees will learn how to transform the laboratory assay
into the refinery yield obtained from a commercial atmospheric and vacuum distillation unit. The qualities of the various assay fractions
will be examined and examples provided of how to blend fractions to achieve refined product key specifications. The qualities of the fractions will also be examined in the context of their suitability for further processing (e.g. hydrotreating, catalytic reforming, catalytic
cracking, hydrocracking, and coking).

Crude oil evaluation

Here the effect of different refinery configurations on profitability will be examined in the context of determining the value of a particular crude oil with reference to the price of an international marker grade. Factors considered will include crude oil quality characteristics, refined product prices, geographical location and shipping and pipeline transportation costs. This methodology provides the basis for the initial selection of potential crude oils as refinery feedstocks in different types of refineries.

Refinery processes

The intention here is to describe the configuration and purpose of these process units, together with their key operating parameters. The effect of variation of these operating parameters on process unit product yields and on the economics of operation will be examined. This will provide the basis for the initial selection of process units within a refinery and enable a view to be taken of the optimum mode of operation for each of the units. The information obtained will also provide a basis for the valuation of individual process streams.

Product blending

Here the complexities of blending gasolines, distillates and fuel oils will be examined and delegates will be required to perform theoretical blend calculations in order to maximise blending profitability (minimise blending costs in the context of the values of the blend components). An introduction to the use of linear programming
(LP) will be given in order to illustrate how LP may be utilised to maximise blending profitability. Inventory control will also be examined as a potential input to the LP blending procedure.

Energy and other cost factors

This section of the course will examine the other key factors which influence refinery profitability, operationally and, from an investment perspective, strategically. The potential range in the size of refineries will be discussed and the advantages of larger and smaller refineries will be examined.

Price hedging

The objective here is to explain how the derivatives markets may be utilised to protect refinery profitability. The relationships between physical and futures oil prices will be explained and advice given on hedging the price of a crude oil purchase against potential fluctuations in physical prices. Similarly, advice will be given on hedging the price of refined product sales against potential fluctuations in physical prices. These techniques will be developed to show how refinery margins may be protected. Utilisation of the more complex derivatives will also be examined and their advantages and disadvantages discussed.

Scheduling and planning

The intention of this section is to apply in a hands-on fashion the information and techniques provided within the course to solving typical refinery scheduling, planning and investment problems.