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CHS Coker Project Nearly Complete (Jan08)

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This topic contains 14 replies, has 2 voices, and was last updated by  Charles Randall 12 years, 2 months ago.

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  • #3839

    Charles Randall
    Participant

    Coker project nearly complete

    BY LARRY TANGLEN Outlook Staff
    Wednesday, December 26, 2007

    CHS Refinery Manager Pat Kimmet anticipates the plant’s new $325 million coker unit will be ready to begin start up on Jan. 30 and be fully operational within the first quarter of 2008.

    The refinery has had as many as 2,400 workers on site this past year with construction of the coker, turn-around activities and regular plant operation, Kimmet said.

    “Considering that we planned this project before Hurricane Katrina and its impacts in 2005, we are very pleased the project hasn’t been delayed and that we have been able to get the necessary materials and workers that we needed to complete the project,” he said.

    Kimmet noted that other similar projects that began before the Laurel refinery’s project haven’t been so fortunate. “The shortage of materials and a lack of craftsmen have caused delays and driven up the cost of bringing other projects on line,” he said. “We were short of gas and product before Katrina hit and we are still feeling the effects of the shortage. That’s why we are pleased to be completing this coker project and increasing our gasoline production,” he said.

    “This project will increase our annual production of gasoline by 80 million gallons. That additional gas will be produced without increasing the amount of crude that we receive. We will just be able to recover the gasoline and coke from product that would have otherwise been used to produce asphalt.”

    The CHS coker will allow the refinery to make more gasoline and diesel fuel by processing a portion of the asphalt it produces. Through a thermal cracking process, the coker breaks down heavier oils into lighter petroleum products and produces coke as a fuel by-product.

    The coker unit will process the asphalt left from the crude oil refining and break down the asphalt further into more gasoline and diesel fuel, leaving coke as a residual product. The coke is a carbon product similar to coal used as a fuel in power generation plants.  The coker project follows a $96 million project completed several years ago to reduce sulfur in diesel as required by federal regulations.

    The coker unit is made up of two 22-foot diameter coke drums, 80 feet high. Asphalt in the drums is heated under pressure to release lighter petroleum products, leaving the asphalt coke inside the drums. The coke is fractured under high pressure using water and drilled out of the drums. The derrick atop the coker platform rises 299 feet in the air.

    The coker will produce about 800 tons of coke a day. The coke will be shipped out daily and will fill eight rail hopper cars. The project is the biggest in the refinery’s history and will make the plant more competitive with the valley’s two other oil refineries.

    With the completion of the project, an additional 35 permanent positions will be created that will increase the company’s annual payroll by $3.5 million.

    A recent survey conduct by the MSU-B Center for Applied Economic Research indicates that every new job created in the refining sector creates four new additional non refinery jobs. “That means this project’s impact will be felt in our local communities for years to come,” Kimmet said. Kimmet said the project will mean an increase in tax revenue of $50 million to Yellowstone County over the next 20 years. The company is already one of the largest taxpayers in the county.

    More than half the refineries in the country have closed over the past 20 years. CHS is one of the few cooperative refineries that has survived. CHS provides jobs for more than 300 full-time employees in Yellowstone County and has an annual payroll including benefits of nearly $30 million, according to Kimmet.

    CHS Inc. is owned by farmers, ranchers and cooperatives in the Midwest and West. Laurel Oil and Refining Company built the refinery in 1930. The former Farmers Union Central Exchange purchased it in 1943 for $750,000.

    During the 1990s, Cenex completed installation of an $80 million desulfurizing unit at the Laurel refinery, completed the Front Range 16-inch pipeline project from the Canadian border to Laurel, and constructed a new office building in Laurel connected to the refinery by a 256-foot sky bridge over Highway 212.

  • #7121

    Charles Randall
    Participant

    Here is recent news update on the CHS Coker project ready to pass from the EPC stage into operation in Jan 2008.  The article is ~ same as the Sept 2006 news release (see updated version on coking.com post Oct 2006 about CHS tearing up concrete for safety reasons) but has few more details around coke drum size & re-affirms that the 800 tpd petcoke will leave on 8 railcar shipments. As mentioned before – this will mean that all 3 refineries around the Billings Montana area will now have cokers (including the Exxon Fluid coking unit with other 2 delayed cokers).
     
    <Note some details on cost & timing are similar to news item around the CHS XMas lights in Dec 2007 coking.com post>
     
    Regards

  • #7117

    Anonymous

    Will the new coker eliminate all asphalt going to external markets such as paving/roofing? Or will it depend on gasoline/asphalt economics providing the better alternative?
     
    Thank you in advance for your reply. 
     
    Craig Fisher

  • #7116

    Charles Randall
    Participant

    Craig,
    Most of the articles have made it clear that some asphalt would continue to be produced, so the new coker will not eleminate all the asphalt to external markets. And yes the coker is going to shift a large portion from asphalt to gasoline/diesel products depending upon the economics.  The goals here were to be able to run heavier/cheaper crudes and shift more product into higher valued fuels.
     
    As the various refinery coker products move more fuel oil & asphalt products into transportation fuels, the surplus volume in both fuel oil and asphalt markets will be eleminated & prices will rise to market demand values.  It should be noted that asphalt has increased from ~$180/mt at end 2005 to $240/mt in 2006 & up to $320/mt in 2007 for some regions. Once asphalt / fuel oil reaches +$250/mt it starts competing with $2.70/gal. gasoline prices and so economics for coker start to drop….. but margins were at all time highs in 2006.  Also some of the price rise in asphalt / fuel oil is part of the linked price relationships & not necessarily from demand driven increases.
    This answer your question? Regards
     

  • #7115

    Anonymous

    Thanks so much for the helpful and informative reply. I noted one particularly interesting part of your reply and wondered if you could explain a bit further. Is there a linear relationship between asphalt/fuel oil and gasoline prices as it relates to eithers coker value? Your example points out that asphalt/HSFO at +$250 would compete with gasoline at $2.70/gal. So say, gasoline jumps up to $3.50/gal, is it possible to predict the breakeven price for asphalt’s best alternative either into the rack market or coker? I guess I’m trying to determine some rough rule of thumb that says if gasoline is at price X, then asphalt is valued at Y into a coker or Z into wholesale market. Any help would be greatly appreciated.

  • #7078

    Anonymous

    Good Morning All
     
    Can somebody provide an update on the CHS Coker ?
     
    Thanks

  • #7063

    Charles Randall
    Participant

    Here are couple updates on Cenex Laurel Refinery coker – don’t think anyone has done story on actual start up.
    <Your kind interest – must be past custome who used get asphalt supplies from CHS?>
                                                             ————– 
    No post start up confirmation but it is not unusual since the coker won’t be at full capacity until the end of 1Q08.  The new 2 drum 15MBD unit has coker technology by Foster Wheeler and before their EPC stage is completed it must operate at guarntee design conditions (usually drum life guarntee is at 18-24 hr cycles) and then run at the commercial operating conditions (cokers on heavy sour crudes often operate as low as 9-14 hr cycles – but usually new ones start out at 14-16 hr until shake down cruise is over). The petcoke is slated to load into railcars for shipment.  <Not mentioned but Asphalt production will become an optional product for this refinery based on economics against coker feed – as it did for ConocoPhillips when it started its Billings Coking Unit (COP Coker Technology).>
     
    Here are couple news blurbs few days before still confirming the Feb 1 startup date:
     
    New 15 MBD Coker Unit @ 55 MBD Laurel, Montana Refinery Feb 1, 2008
    Reuters, Jan 11, 2008 – The unit will be at full capacity by 1Q08’s end this year.  It will not raise the refinery’s capacity, a spokeswoman said, but will increase its refined fuels yield by about 14% < http://www.oe.netl.doe.gov/docs/eads/ead011108.pdf >
     
    OPUS Jan 28, 2008 CHS — The 60 MBD Laurel refinery’s new $325 million coker unit is scheduled to begin start-up on Jan. 30 and be fully operational within the first quarter of 2008.  The coker will increase annual producion of gasoline by 80 million gallons.  (http://www.opisnet.com/news/sample/ifisample.htm)
     
                                                    ———————
     
    All 3 Billings area refineries now have cokers

  • #7062

    Charles Randall
    Participant

    Ehhnnnnt: Sorry Mr Guest wrong question but thanks for playing our Coker quiz game.  My comments were more around using the various cutters in asphalt – the higher valued asphalts like MC, RC, SC all reqire some cutter to be blended into the base asphalt & even though it is priced much higher – generally refiners lose money because of large spread in prices between blend fuels & base asphalt – until the base asphalt begins reach the ~$250/mt price level.
     
    But to answer you question – any linear relationship or general assumptions around cokers are wrong ….. including this one!  Cokers compared to other units or processing in the Oil & Chemical industry is like comparing a platapus to duck, or unicorn to mule. I sort like unicorn label for cokers because everyone is unique due to refinery configuration up & downstream of it, the different mix of crudes & local area market product demands it supplies.  But the real gem for cokers is that they work both ends of refinery – they enable cost of crudes to be cut by runing the heaviest sourest crudes on the market at deep discounts because the Hydroskimming & Cracking refineries are unable to process it. And on the product end they take the cheapest/heavier products from the simplier refinery configurations like asphalt or Heavy Fuel Oil (HFO)/ Bunkers and upgrade them to fuel products diesel or jet or gasoline / all three – usually at a product yield pattern not far from the light sweet crudes like WTI. And if that isnt enough – the ratio of coker feed to crude feed is usually about 1:4 (CHS has higher ~1:3) so you have a leverage effect on every barrel coker charge of 2 – 3X on coker. Stated another way – even if you got asphalt or HFO price to match coker margin (big stretch) it still isnt enough to overcome the refinery crude margins at lower crude prices. Now cokers do have higher op cost due to high temps (but they are very efficient in heat recovery on various feed / product streams) and when margins collapse during times sweet crude oversupply (we wont be visiting that option very often), and demand for HFO & Asphalt are high – then there is case to loaf the coker / increase cycle time & make some heavier product available. <This would usually be a winter case where limited tankage puts constraints on thruput until peak gasoline season – aka 60% gasoline is consumed during Mar-Aug cycle but refiners now only have 5-10% spare capacity so must make enough all winter but due Account’s cost cutting Brainstorm “Just in Time inventory” there is no longer enough tankage or spare capacity at most refineries to pull that completely off.>
     
    So overall the answer is no – byproducts like HFO, Asphalt (assuming you are in a Complex – Very Complex Refinery) or Petcoke have little impact on refinery crude or coker margins that are function of  product gasoline/diesel demand. All the new cokers going in have already taken a lot of HFO/Asphalt oversupply off the market & values will rise to discounted thresholds of what demand will pay for them (alternate value concrete for Asphalt & alternate value of Diesel for HFO). And the environmentalist are working on HFO/Marine Bunker sulfur levels as they did with gasoline & diesel – it is likely that spreads between HFO 1% & HFO 3% could widen to $10/Bbl (~cost to put in resid desulfurizers) – more likely installing a coker or switch to diesel would happen first.
     
    Hope this helps some.
    Regards

  • #7061

    Anonymous

    Thank you again for your help.

  • #6996

    Anonymous

    Any update on this coker startup ?

  • #6954

    Anonymous

    The sulfur plant portion of the unit was started up March 12-14.

  • #6166

    Anonymous

    Charlie- I revisited your reply concerning coker margins and another thought came up. If asphalt becomes a favored economic alternative to coker feed given pricing/supply issues (as related to distillates) what is the breakeven? In other words, is there a formula or calcualtion to determine coker feed value compared to asphalt’s value. Can you help shed some light on this one? Thank you.  
     

  • #6163

    Charles Randall
    Participant

    Guest,
    Since your question is almost a duplicate of the one I answered, might I suggest you re-read earlier comments but this time lose your pre-concieved notion that you can get some simple “formula/calculation/relationship” between asphalt and coker feed values to establish what conditions “favor” more asphalt production.
     
    Most Asphalt refineries are “Simple” refineries in complexity (few units), usually inland, with low capacity (30-100MBD), and few products, and low margins. Given the current financial conditions with increasing fuel specifications/environmental regulations and Carbon tax/Cap on emissions these type refineries will be in next round of refinery closures as Complex refineries expand into their markets. (~ half existing 147 refineries have less 85MBD capacity, while top 10-15 largest refineries account for ~60% total US refining capacity.)
     
    However most of the largest asphalt producers are at Complex Coking refineries, usually coastal, with high capacity (more than 150-250MBD), wide range high value fuel products and high margins with mutiple crude supply options. They were often expanded from Simple or Cracking into the Complex/Coking stage while retaining thier asphalt producing options. The option would help unload the coker capacity, recover gas oil from Resid for FCC unit, and provide a backup during coking problems or seasonal demand/tankage limitations.
     
    As original comments stated – nothing about a coker is generally true, simple or as simplistic as what you are looking for.  Even if you had a local refinery to share all its unit limitations/crude slates/product market demand and operating cost – the value would only be of seasonal nature, or rare market conditions and would only work for that coker at that plant for that time……. refineries have LP models that take into account mutiple crude slates/product yields and estimated blending projections/unit limitations for the refinery with built in price forecast and histories to try this sort of projections and often they have to rely on actual operation types to help them get to working model by adjusting “Shadow Prices” on intermediate streams like FCC & coker gas oil and Naphtha product streams (these by way often account for 70% of sulfur that must be removed in fuel product streams) just to match real life results.  Now do you get picture dude?  

  • #6161

    Anonymous

    I appreciate your feedback Charlie. Thank you.

  • #6160

    Charles Randall
    Participant

    Always glad to help – difficult part is always getting past concept that lot of refinery products are just by-products that really are not primary drivers in refining operations which are mainly controlled by crude price/sweet-sour differentials & light-heavy differentials on the supply side and controlled by product fuels price (gasoline/diesel/jet)/product differentials on the demand side. The demand of a by-product almost never influences any of the supply side production until it threatens to become a crisis that halts/limits the refining drivers.
     
    The test for a whether a refinery product is a by-product or not is that it’s product is equal to or greater than the value of the crude cost. So Refinery Gas/Propane/Butane/Slurry Oil-Decant-CBO/HFO/Asphalt/Petcoke/Sulfur would all be byproducts and impact upon refinery drivers decreases at a higher rate than the decrease in Crude cost percentage.
     
    But you dont always have to have/know the relationship to know the trend potential buy zones. Several of the markets may not have firm relationship but “trend” over time either the price of the crude or the price of nearest product and sometimes both. During times of low values and low refinery margins is often the re-seller/consumers best purchase time for a by-product, whereas times of high values and high refinery margins is often the producer/marketers best sell time for by-products. Any time a market is rapidly changing up/down should be avoided on spot basis. Normally prices for HFO-Asphalt-CBO-Electrode Pitch tend to average 75-80% of WTI crude prices (depending on quality – often Low Sulfur by-products have up to $1 premium over posted by-product index prices). Coker Margins and hence Coker Feedstock values tend to track Refinery Margins & Product differentials or 3-2-1 cracked spreads. Before cost of Low Sulfur fuels Opt Cost was added – A rule of thumb for Coker product value was 75% of Diesel value. Understand once again this is trend not a relationship or tracking value as it would have a correlation of less than 60% far below the 80% it takes to say that there is a relationship.
     
    My advice for asphalt supply sourcing would be to look at Refineries like Nustar/Citgo had where they are really more Aggregate Refineries producing Asphalt than they are Product Refineries producing an Asphalt by-product. Which means the Asphalt producers need to integrate backwards to product their sources and take them into thier markets and out of the refining markets. ……. But it probably won’t happen in the same way that Coal Mine producers never really integrated back forward into the Power Plants they supplied and have now lost the opportunity that was there to expand thier mines & the plants they supplied (as well as stream line some of logistics).
     
    Ok – class is over I usually charge $15-50k for BD basic details and development fundamentals like this! Ha
     

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