REC: Phase-out of Leaded Gasoline: Current Conditions (3.3)

3. Current Conditions Influencing the Phase-out of Lead in the SILAQ Countries (continued)

3.3 The Refinery Sector

From a technological point of view, there are practically no obstacles to the phase-out of lead from gasoline. However, lead additives (i.e., tetra ethyl lead and tetra methyl lead) are a cheap and effective means of increasing the octane number of gasoline produced, possibly by as much as 10 to 15 units. Therefore, the removal of lead from gasoline will lead to increased production costs for the refinery.

Additionally, lead additives are generally believed to provide some engine lubrication, important for the older types of engines with soft exhaust valve seats. This issue is explored in more detail in section 4.2 on vehicle fleet composition.

CASE STUDY: Technical Options for Lead Phase-out

From a refinery's point of view, the crucial issue when removing lead from gasoline is how to compensate the resulting octane loss.
This can be achieved through increasing the severity of the reformer unit, thus producing less gasoline but with a higher octane number. New production equipment, such as catalytic reformers or isomerization units can increase the octane production capacity, but the process leads to an increased benzene and aromatic content.
An alternative option is to increase the octane number by adding commercially available organic additives such as ethanol, ethyl tertiary butyl ether (ETBE) or methyl tertiary butyl ether (MTBE). The latter is the most commonly used additive. While additives are generally expensive, their use does not require capital investment.
Other options include purchasing high-octane reformate from other refineries, or the installation of the fluid catalytic cracking (FCC) unit which enables a refinery to use more advanced processes to increase the octane number of gasoline or even produce its own MTBE additive.
Thus, the more advanced the refinery, the more technical options there are available for increasing the octane number of the gasoline produced. While an advanced refinery is not a technical prerequisite for the production of unleaded gasoline, the output is improved and the costs of unleaded gasoline production reduced - within the more modern refineries.
Source: COWI, Working Document for a Strategy for the Phase-out of Lead in Gasoline in Europe, October 1996

Refinery modernization is a priority issue in the lead phase-out process and it is the single largest economic obstacle. Each refinery has its own production structure and the processes used differ among each of them. As a result, each refinery has to take into account its own cost structure and technical requirements when converting to the production of unleaded gasoline.

The important processes involved are crude oil distillation, fluid catalytic cracking (FCC), and ensuring the inclusion of oxygenates and other additives when upgrading quality to increase the octane level.

Refinery Modernization

Cost-benefit analysis is needed for each refinery to select the best approach. Closer cooperation between the SILAQ countries and the involvement of Western partners may facilitate the process of refinery modernization and improve the production capacity of unleaded gasoline in the SILAQ countries.

3.3.1 Overview of the Refining Industry

Types of Refineries

Bulgaria, Hungary and Slovakia classified refineries according to their type. As specified in the questionnaire survey, three types of refineries exist:

Type 1 - simple refineries, undertaking crude oil distillation, treatment and blending;
Type 2 - refineries undertaking crude oil distillation, treatment, upgrading and blending;
Type 3 - complex refineries, undertaking crude oil distillation, treatment, upgrading, conversion, blending and catalytic reforming.

Poland, Romania and Slovenia classified refineries on the basis of the processes used. Table 13 summarizes the key characteristics of the industry for each of the SILAQ countries. Slovakia and Slovenia have one refinery each, but Slovakia's is a complex type refinery (Type 3) while Slovenia's is a simple refinery (Type 1). Bulgaria and Hungary have two refineries each, one of Type 2 and one of the more complex Type 3. The Czech Republic has four refineries, with two of them being small producers of lubricants and special products. Poland and Romania operate a larger number of refineries: seven and five, respectively. Most of the refineries in Poland are of Type 2 (five refineries out of the seven) while in Romania they are of the more complex Type 3.

TABLE 13: The Refining Industry in the SILAQ Countries - Structure and Capacities of Refineries (1996)
Country	Number of refineries			Crude oil refining capacity (000s barrels/day)			Crude oil processed (000s of barrels/day)			Gasoline production (000s m³/year)
Country	Type1	Type2	Type3	Type1	Type2	Type3	Type1	Type2	Type3	Gasoline production (000s m³/year)

Bulgaria	1	1	1		1,100¹	10,500¹			6.873¹	1,276^1,2
Czech Republic	4			1,650	160	51				1,649^*
Poland		5	2	443.9^*			394.7^*			5,589^*
Romania	5^*			350^*			240.786^*			4,634^*
Slovakia			1			48,000			38,489	1,130²
Slovenia	1			12			6.6			100.1²

1. In 000s tons/year 2. Type 3 refinery * Data broken down into specific types were not available: numbers represent total annual figures.

Use of ANABEX Therefore, it can be concluded that the prevailing type of refinery is Type 2, followed by Type 3. This means that many of those more advanced refineries have a wide range of possible technological options to increase the octane number of gasoline produced. However, the various types also therefore require different forms of optimal readjustment for the production of unleaded gasoline, and different costs associated with this process. In Slovakia, for instance, where the ANABEX additive had to be developed to replace lead in gasoline, the necessary R&D investments were significant. In Slovenia, the main problem is the import of additives (VSPA or other suitable types).
In other cases, refinery modernization can be extremely complicated, and it seems that considerable levels of investment will be necessary not just for conversion but for the replacement of old equipment.

Production Capacity Data on the production capacities of the refinery sector in the surveyed countries are shown in Table 13. The countries generally do not use their refineries to full capacity. Poland and Slovakia present the highest usage, at 89 percent and 80 percent, respectively. Romania and Bulgaria utilize their refineries to 69 percent and 65 percent, respectively. Only 55 percent of the refinery capacity is utilized in Slovenia.

Key Technological Processes Table 14 shows the kinds of refinery processes employed in the SILAQ countries. Clearly, crude distillation and conversion processes are the norm, with the upgrading and the use of organic and lubricating additives practiced in some refineries. Additives tend to be produced in-country, but the capacity can not meet total demand. Only Slovakia produces a surplus; however, its capacity to export ANABEX has yet to be exploited by the other SILAQ countries.

TABLE 14: Refinery Processes Employed (1996)

Refinery process Number of refineries

Bulgaria Hungary Poland Romania Slovakia Slovenia

Crude Distillation 2 1 5 1 1

  Direct blending into gasoline 2 -

  Direct blending in larger proportions 2 -

  Upgrading by isomerization 1 1

Conversion Process 1 1 1 5 1 -

  Fluid catalytic cracking (FCC) Hydrocracking 1 1

Upgrading 2 1 2 1 -

  Catalytic reforming 2 1

  Izometrization 1 1

  Alkylation and polymerization 1 -

Use of Organic Additives 1 -

  MTBE 1 -

Use of Lubracating Additives 1

  Sodium - 1

Use of ANABEX	Therefore, it can be concluded that the prevailing type of refinery is Type 2, followed by Type 3. This means that many of those more advanced refineries have a wide range of possible technological options to increase the octane number of gasoline produced. However, the various types also therefore require different forms of optimal readjustment for the production of unleaded gasoline, and different costs associated with this process. In Slovakia, for instance, where the ANABEX additive had to be developed to replace lead in gasoline, the necessary R&D investments were significant. In Slovenia, the main problem is the import of additives (VSPA or other suitable types). In other cases, refinery modernization can be extremely complicated, and it seems that considerable levels of investment will be necessary not just for conversion but for the replacement of old equipment.
Production Capacity	Data on the production capacities of the refinery sector in the surveyed countries are shown in Table 13. The countries generally do not use their refineries to full capacity. Poland and Slovakia present the highest usage, at 89 percent and 80 percent, respectively. Romania and Bulgaria utilize their refineries to 69 percent and 65 percent, respectively. Only 55 percent of the refinery capacity is utilized in Slovenia.
Key Technological Processes	Table 14 shows the kinds of refinery processes employed in the SILAQ countries. Clearly, crude distillation and conversion processes are the norm, with the upgrading and the use of organic and lubricating additives practiced in some refineries. Additives tend to be produced in-country, but the capacity can not meet total demand. Only Slovakia produces a surplus; however, its capacity to export ANABEX has yet to be exploited by the other SILAQ countries.

TABLE 14: Refinery Processes Employed (1996)
Refinery process	Number of refineries
Bulgaria	Hungary	Poland	Romania	Slovakia	Slovenia

Crude Distillation	2	1	5		1	1
Direct blending into gasoline	2				-
Direct blending in larger proportions	2				-
Upgrading by isomerization	1				1

Conversion Process	1	1	1	5	1	-
Fluid catalytic cracking (FCC) Hydrocracking	1				1

Upgrading	2	1	2		1	-
Catalytic reforming	2				1
Izometrization	1				1
Alkylation and polymerization	1				-

Use of Organic Additives	1					-
MTBE	1				-

Use of Lubracating Additives					1
Sodium	-				1

Ownership and Privatization Of the two refineries in Hungary, both are owned by MOL, the private Hungarian Oil Gas Company. Fifty-one percent of MOL's shares are owned by the state. In Poland, all refineries are owned by the state. In Slovakia, the sole refinery is in private hands. In Romania and Slovenia, ownership is shared by the state and private interests. In Romania, a 51 percent stake in all refineries is owned by the state, while in Slovenia the reverse is true (45 percent is state owned). In Bulgaria, two out of the three refineries are privately owned.

TABLE 15: Ownership of Refineries (1996)

Country Ownership (numbers and percentages)

State Private

Bulgaria 1 (75%) 2

Hungary 2 -

Poland 7 -

Romania 5 (51% state and 49% private)

Slovakia - 1

Slovenia 1 (45% state and 55% private)

It is very likely that the privatization process in the SILAQ countries will see a change in the ownership of refineries. Growth in private ownership is expected in Bulgaria, Hungary and Poland, and within the privatization process, agreement should be reached with prospective owners on the phase-out of lead from gasoline.

Gasoline Types Among the countries surveyed, gasoline quality ranges from RON 86 to RON 98, as shown in Table 16. For unleaded gasoline, RON 95 is the norm, followed by RON 98. Progress in the privatization process may heavily influence gasoline quality in the future. This process may bring about substantial restructuring within the refinery industry, and the inflow of capital may add more options to the range of gasoline quality produced.

TABLE 16: Gasoline Quality (1996)

Country RON quality

Leaded Unleaded

Bulgaria 86, 93, 98 95

Czech Republic 91, 96 95, 98

Hungary 92, 98 91, 95, 98

Poland 86, 94, 98 95, 98

Romania 95 90, 95

Slovakia 91 91, 95, 98

Slovenia 98 91, 95

3.3.2 Considerations for the Lead Phase-out Policy
Table 17 presents industry data and considerations related to the policy of lead phase-out. The table shows that Hungary and Slovakia are well-positioned to produce sufficient quantities of unleaded gasoline to meet domestic demand. The refineries in Bulgaria and Romania require some modernization in order to produce greater quantities of unleaded gasoline. An increase in isomerate application is planned in the near future in Poland.

TABLE 17: Key Considerations Regarding the Lead Phase-out Policy

Country Data and considerations for lead phase-out

Bulgaria Forty-five percent of the gasoline produced can be unleaded using the existing installations and technologies. The reconstruction of the catalytic reforming and the liquid catalytic cracking installations in "Neftochim" and construction of new facilities in "Plama" would ensure the production of unleaded gasoline in the required quantities. There is no octane surplus in Bulgaria.

Czech Republic The inability of domestic refineries to increase unleaded gasoline production is a limiting factor in pursuing the lead phase-out policy, besides the limited economic capacity for the increased import of unleaded gasoline.

Hungary The refining industry is able to produce sufficient quantities of unleaded gasoline to meet domestic demand. Therefore, conditions in the industry are not seen as a constraint to the phase-out of lead.

Poland Increasing reformer severity has been used to produce gasoline with a higher octane number. The MTBE additive is currently used to increase the octane number of unleaded gasoline, with plans to increase the isomerizate content in the near future. There is no octane surplus in Poland.

Romania The RON number of gasoline obtained from refineries is generally 90. This number will increase in the near future by modernizing some installations, and specifically by:

Increasing reformer severity (6 units);
The introduction of FCC (1-2 units)
Adding isomerate and the blending of oxygenates (maximum 5 units)

Slovakia The installation, in 1992, of an isomerization unit at Slovakia�s only refinery enabled the complete conversion to lead-free gasoline production. Notably, this was achieved without increasing of the reformer severity, hence ensuring production of gasoline without increasing the aromatic content.

Slovenia Slovenia's refinery, "Nafta Lendava," only produces virgin naphtha. The refining process line consist of a crude distillation unit, and involves no conversion or upgrading. Therefore, virgin naphtha has to be further processed in refineries in neighboring countries, and imported additives are added to gasoline in order to reach the accepted standards. There is no octane surplus in Slovenia

TABLE 17: Key Considerations Regarding the Lead Phase-out Policy
Country	Data and considerations for lead phase-out

Bulgaria	Forty-five percent of the gasoline produced can be unleaded using the existing installations and technologies. The reconstruction of the catalytic reforming and the liquid catalytic cracking installations in "Neftochim" and construction of new facilities in "Plama" would ensure the production of unleaded gasoline in the required quantities. There is no octane surplus in Bulgaria.
Czech Republic	The inability of domestic refineries to increase unleaded gasoline production is a limiting factor in pursuing the lead phase-out policy, besides the limited economic capacity for the increased import of unleaded gasoline.
Hungary	The refining industry is able to produce sufficient quantities of unleaded gasoline to meet domestic demand. Therefore, conditions in the industry are not seen as a constraint to the phase-out of lead.
Poland	Increasing reformer severity has been used to produce gasoline with a higher octane number. The MTBE additive is currently used to increase the octane number of unleaded gasoline, with plans to increase the isomerizate content in the near future. There is no octane surplus in Poland.
Romania	The RON number of gasoline obtained from refineries is generally 90. This number will increase in the near future by modernizing some installations, and specifically by: Increasing reformer severity (6 units); The introduction of FCC (1-2 units) Adding isomerate and the blending of oxygenates (maximum 5 units)
Slovakia	The installation, in 1992, of an isomerization unit at Slovakia�s only refinery enabled the complete conversion to lead-free gasoline production. Notably, this was achieved without increasing of the reformer severity, hence ensuring production of gasoline without increasing the aromatic content.
Slovenia	Slovenia's refinery, "Nafta Lendava," only produces virgin naphtha. The refining process line consist of a crude distillation unit, and involves no conversion or upgrading. Therefore, virgin naphtha has to be further processed in refineries in neighboring countries, and imported additives are added to gasoline in order to reach the accepted standards. There is no octane surplus in Slovenia

REC * PUBLICATIONS * PHASE-OUT OF LEADED GASOLINE * CURRENT CONDITIONS