Adding flexibility to petroleum refining through the introduction of modular plants – a case study for Brazil

ABSTRACT

This study analyzes the implementation of modular petroleum mini-refineries, testing the hypothesis that these facilities can be a feasible choice in countries where fuel demand is expected to increase, whereas uncertainties still last in the long-term fuel market. A simplified optimization model was developed and applied to compare conventional and modular mini-refineries under different scenarios. Findings showed that scale gains explain the larger margin of conventional plants when fuel demand is sufficiently high, but the modular units are more resilient to operate profitably when fuel demand falls. Modular units operating in parallel with larger traditional units may take advantage of this flexibility without compromising the economies of scale. The introduction of modular fast-building, fast and easy-decommissioning mini-refineries in Brazil can be an interesting solution to meet the country’s short-term fuel demand increase, whilst also dealing with long-term uncertainties.

KEYWORDS:

• Petroleum refineries
• modular plants
• economic analysis
• Brazil

Acknowledgments

We thank the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior – CAPES and the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis – ANP for making available, respectively, scientific databases and informational data that supported this study. We are grateful to Petrobras that promoted this study, granting one of the authors time for research, access to information, in addition to acquiring bibliographic material necessary for research.We thanks to the Conselho Nacional de Desenvolvimento Científico e Tecnológico – CNPq. Finally, we thank the engineers Eduardo Dominguez Trindade and José Marcos Ferreira for their valuable comments and contributions. The conclusions expressed in this viewpoint are solely of the authors. The authors thank very much the anonymous referees of Energy Sources, Part B: Economics, Planning, and Policy (ESPB) for helpful comments.

Disclosure statement

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Notes

¹ The concepts of mini-refineries or even small refineries are still diverse in the literature. The Energy Policy Act of 2005, a bill passed by the United States Congress, defined small refineries as those facilities with a gross processing capacity of up to 75,000 barrels per day (US DOE 2011). The United States Environmental Protection Agency has defined the maximum processing capacity of 50,000 barrels of crude oil to frame refineries considered small. In 1982, this capacity was revised to just 20,000 barrels of crude oil processed per day (Beale et al. 1993). The United States Federal Energy Administration (US FEA), between 1973 and 1981, coordinated several programs to stabilize petroleum prices and allocate petroleum among refineries. In one of the programs, Small Refiner Bias (SRB), FEA provided benefits to refineries with a processing capacity of less than 175,000 barrels per day (Lloyd 1990). In addition, studies found in the literature point to a diversity of refineries considered small or mini, varying between the number of employees, the initial investment amount and mainly, the processing capacity: 500 to 20,000 barrels per day, 1,500 to 5,000 barrels per day, 17,000 barrels per day, 50,000 barrels per day (Caetani, Ferreira, and Borenstein 2016; Shah 2020; Silverio 2018; Speight 2020).