Refinery operator Geoff Turner checks a heater...
Key points for 2006
• Record production and utilisation in second half
• Clean fuels facilities completed and operating well
• Refining performance improvement program helps lift production and reduce unit costs
2006 was a year in which Caltex’s two refineries demonstrated their ability to maximise throughput and lift production to record levels in the absence of shutdowns or other constraints in the second half of the year.
All diesel and petrol produced by Caltex for sale in Australia has met the tougher 2006 government standards since the completion of the company’s $500 million project to upgrade its two refineries for cleaner fuels production. Additional Australian standard diesel will be produced when a new diesel hydrotreater unit is built at the Lytton refinery obviating the need to export non-standard diesel.
Refiner margins were at historically high levels due to continued strong regional demand. The Caltex refiner margin in 2006 averaged $US10.13 a barrel (2005: US$8.40).
There was sound progress with the ongoing refining performance improvement program. A number of projects completed in 2006 produced significant benefits from improved production efficiency and higher revenue.
Production of all products in 2006 was a record 11.9 billion litres, up from 11.6 billion litres in 2005, and production of high value transport fuels increased to 10.2 billion litres, up from 10.0 billion litres in 2005.
The refineries set new throughput and production records when operations returned to normal in the second half of the year. This followed production constraints in the first half of the year due to the delayed start-up of the clean fuels plants and a maintenance shutdown at the Kurnell refinery.
The average utilisation for the refineries increased to 78% (2005: 74.5%) for the full year 2006 and averaged 85.2% in the second half. Throughput capability has been lifted by projects to improve reliability and scheduling. The challenge will be to sustain this performance and maintain the momentum for improvement through times of planned maintenance shutdowns.
The performance in the second half of the year also contributed to the best year on record for energy efficiency at the Kurnell refinery.
Both Caltex refineries are now contributing to cleaner air in urban centres by producing petrol with reduced benzene levels and diesel with reduced sulfur levels in line with 2006 standards required by the Australian Government.
Since May, when the fourth and final clean fuels unit, the Kurnell diesel hydrotreater, was commissioned, both refineries have been producing ultra low sulfur diesel (ULSD) which has a maximum of 50 parts per million of sulfur. Caltex started producing petrol with maximum 1% benzene with the completion of the new benzene hydrogenation units at the Lytton refinery in January and the Kurnell refinery in February.
The new clean fuels facilities at both refineries were commissioned safely and smoothly and are operating well.
The delays in completing the Clean Fuels Project and overrun of original planned investment were primarily due to shortage of skilled labour and late delivery of materials and equipment. Lessons learned from the project were reviewed and are being applied to other major projects.
Projects completed in 2006 delivered further benefits from the refining performance improvement program. The program was launched in 2004 to lift production of high octane petrol and diesel, improve throughput and yield and increase revenue. It is expected to increase the capacity to produce 12 billion litres a year beginning 2009.
To date, $63 million has been spent delivering ongoing benefits which are reflected in improved utilisation and higher production volumes. The cost of the total program is estimated at about $350 million.
The program consists of dozens of smaller projects and several major projects, including a new diesel hydrotreater at Lytton refinery, large crude oil and diesel storage tanks at Kurnell and octane optimisation projects at both refineries.
The new 3,000 tonne per day Lytton diesel hydrotreater unit will increase Caltex’s capacity to produce Australian standard diesel by about 40%.
Additionally a sulfur recovery unit will be built to maintain the quality of the local air shed, and will convert the sulfur removed from the diesel into a solid sulfur filter cake suitable for sale or disposal.
Already making a difference since it was commissioned in May 2006 is a new bitumen storage tank at Kurnell. The 2,700 tonne capacity tank increased the site’s bitumen storage capacity by 50% and made it possible to store product and maintain sales when the bitumen plant shut down in July while also enabling the production of an additional grade of bitumen. The tank cost around $4 million and is expected to provide payback within two years.
At Kurnell, benefits worth over $9 million EBIT a year are expected from a 2006 project which installed a new type of catalyst in the catalytic cracker. This will allow the refinery to process a wider range of crude oils with this greater flexibility providing most of the cost gains.
Also completed in 2006 was an octane optimisation project which involved changing the catalyst for Lytton refinery’s isomerisation plant. This change will improve the octane of light naphtha and upgrade the refinery’s blending mix, an improvement worth an estimated $4 million EBIT a year.
Work is well advanced on a new crude storage tank and diesel storage tank at Kurnell refinery. The tanks represent an investment of around $40 million and will be bigger than any current crude or diesel tanks at Kurnell. The crude tank will enable the refinery to better manage fluctuations in the timing of the delivery of crude oil while the diesel tank will prevent delays in production and enhance reliability of supply to customers.
The tanks are part of a suite of major projects which will provide the majority of benefits from the improvement program. The most significant will be a second diesel hydrotreater for Lytton refinery which is at an advanced planning stage.