Digital Exclusive: Refineries’ pandemic turmoil—KNPC’s gasoline demand: Opportunities and challenges

B. MATAR, D. A. ALQALLAF, I. ALESMAIL and F. AL-MUTAIRI, Kuwait National Petroleum Co., Ahmadi, Kuwait

The COVID-19 pandemic is regarded as one of the exceedingly difficult periods in the oil and gas industry's history. Refineries around the world encountered difficult periods in operating their units at their turndown capacities and were forced to temporarily shut down their units at their facilities. These unexpected environments added substantial pressure on refinery production volumes and profit margins to survive in this challenging market situation, compelling refiners to adapt and improvise. Unparalleled quarantines and lockdowns imposed due to COVID-19 had a serious consequence on fuel demand and oil prices.

Gasoline demand declined drastically during the epidemic, forcing refineries to adjust units’ operations. The gasoline-producing units were strained; however, some had flexibility. Fluid catalytic cracking (FCC) and naphtha reforming units are extremely flexible, as they play a vital role in optimizing refinery economics. The FCC unit (FCCU) converts vacuum gasoil/gasoil (VGO/CGO), upgrading feedstocks into high-value fuels, and chemicals feedstock, which boost the value of refinery product slates. Moreover, naphtha reforming, isomerization and alkylation have a significant contribution to gasoline production.

In this article, a comprehensive analysis of the difficulties and challenges that Kuwait National Petroleum Co. (KNPC) had experienced in facing the decline in gasoline demand and units’ adaptation in meeting the COVID19 epidemic impact in improving gasoline production. During the epidemic, the gasoline demand dropped drastically, forcing unit throughput reduction and shutdown. This period coincided with KNPC’s Clean Fuel Project (CFP) commissioning, which included new gasoline producing units. The following is a detailed description of the impact the epidemic had on gasoline demand in Kuwait, and how KNPC turned from gasoline importer to an exporter of this commodity.

KNPC: An introduction on gasoline. KNPC has two refineries: Mina Abdullah (MAB) and Mina Al-Ahmadi (MAA). Both refineries have modern units to produce clean-burning fuels conforming to Euro-V standards.

Prior to the completion of the CFP, the MAA and Shuaiba (SHU) refineries were the primary producers of gasoline, each producing three different grades. As per KNPC plans, the SHU refinery closed in February 2017, leaving the MAA refinery to be the only gasoline producer in Kuwait. After the closure of the SHU refinery, Kuwait Integrated Petroleum Industries Co. (KIPIC) commissioned the Al-Zour refinery in early 2023. The Al-Zour refinery was planned by Kuwait Petroleum Corp. (KPC) to provide feedstock for Kuwait’s power stations, as well as replace the SHU refinery.

KNPC produces three different octane gasoline grades: UL-91, UL-95 and UL-98. While the MAA refinery produces all three grades, the SHU refinery was able to produce only UL-91 from its 15,800-bpd reformer unit (a gasoline-blending component).

Various refinery streams are blended to produce gasoline in different grades. The primary streams are:

1. Reformate produced in catalytic reforming units 1 and 2 of the MAA refinery. These units produce a high-octane rating and high aromatic content.
2. Catalytic-cracked light naphtha and heavy naphtha produced in a FCCU, with a moderate octane rating (with a sweetening treatment unit), high olefins (alkene) content and moderate aromatics levels.
3. Hydrocracker light naphtha produced in a hydrocracking unit, with a medium-to-low octane rating and low aromatic levels.
4. Coker light naphtha that is imported from the MAB refinery. It has a low octane rating, high olefin content and a low aromatics level.
5. Straight-run naphtha directly from crude oil units 1, 2 and 3. It has a low octane rating, low aromatic content and no olefins (alkenes), which feed to the reforming units.
6. Alkylate produced in an alkylation unit, with a high-octane rating, which is pure paraffin.
7. MTBE is added to gasoline to increase its octane rating and help prevent engine knocking. In addition, oxygen present in MTBE helps gasoline burn more completely—the MTBE volume limit is 10%.

High-octane reformate is the main gasoline component, which is produced in two identical platforming processes. Each process train consists of a naphtha hydrotreater (NHT), a naphtha splitter and a CCR platformer. The aim of the complex is to produce reformate with a RON of 102, MON of 90.06 and a maximum benzene content of 1 vol%. The primary gasoline stream qualities are shown in TABLES 1 and 2.

TABLE 1. Gasoline stream qualities

TABLE 2. Gasoline stream qualities.

Each platformer train has a capacity of 18,000 bpd. The CCR’s throughputs can be varied depending on gasoline demand. Prior to 2001, gasoline requirements were normally met by one reformer; however, the second reformer’s operations may be required as per KPC’s reformate export requirements directive or in the case of FCCU shutdown (FIG. 1). Post 2003, domestic demand increased steadily until it surpassed the nation’s refineries' production rate, leading to continuous gasoline and MTBE imports until the commissioning of the CFP in 2020.

FIG. 1. Gasoline production among KNPC’s refineries.

FCC light and heavy gasoline are products from the FCCU—also referred to as FCC light and heavy naphtha. The 40,000-bpd FCCU has two streams that are treated separately in merox treatment units to remove mercaptans. Both streams have a moderate octane rating of 92 RON and 93.1 RON, respectively, with high olefins (alkene) content and moderate aromatics levels. Although both components are excellent in gasoline blending, FCC heavy naphtha blending is limited due to its high density and exceptionally low distillation recovery.

Alkylate is produced in the alkylation unit, which is part of the MAFP (MTBE, alkylation, FCC) block. The unreacted C₄ raffinate from the MTBE unit is fed to the alkylation unit to produce alkylate—the production rate is 3,900 bpd. Alkylate is produced by reacting isobutene and light olefins in the presence of sulfuric acid catalysts. The alkylate product has a boiling range of gasoline. It has a high-octane rating of up to 97 RON and is an excellent blending component in gasoline.

MTBE is produced in the MTBE unit, which is part of the MAFP block. The feed is the total C₄s bottom stream of the C₃/C₄ splitter in the FCC liquefied petroleum gas (LPG) splitter unit. This unit converts most of the isobutene in the C₄ stream into MTBE. This is achieved by reacting methanol and isobutene in the presence of an ion exchange resin-type catalyst. MTBE is used in gasoline as an additive to enhance octane rating and improve combustion.

Gasoline components are blended to meet product specification requirements, which has winter and summer specs. The typical product specifications are summarized in TABLE 3.

TABLE 3. Gasoline specifications

Post-CFP gasoline production. KNPC’s CFP involved the upgrade and integration of the MAB and MAA refineries, and the closure of the SHU refinery. The project increased the combined capacity of the refineries from 736,000 bpd to 800,000 bpd and lowered the sulfur content of petroleum products to 10 parts per million (ppm). Certain facilities at the neighboring SHU refinery were also renovated as part of the project. Selected offsite facilities of the refinery—including storage, blending and shipping/logistics—were integrated with MAA and MAB refinery operations.

After the CFP’s completion, the country was able to produce ultra-low sulfur gasoline. The existing gasoline blending facilities were upgraded to adhere to KPC’s EURO V specification and increased production. Different streams were included in the project to reduce aromatic content and limit the presence of benzene. The following blend components were added to produce different grades of gasoline:

1. CCR units 1/2 and an LPG treating unit to remove chlorides and hydrogen saturation of olefins in the combined LPG stream from the debutanizer of the platforming unit. Its main purpose is to reduce reformate RVP from 6 psi to 2.5 psi to allow high-octane isomerate and isopentane blending, which is essential to meet the gasoline RVP specs, especially in the summer.
2. An FCC NHT unit to selectively desulfurize cracked naphtha to a maximum of 10 ppm sulfur in each of the two FCCU streams.
3. A deisopentanizer unit to separate isopentane from the natural gasoline stream via a fractionation column and provide sufficient isopentane to meet gasoline-blending requirements. The unit’s primary aim is to upgrade the isopentane to gasoline rather than LPG, thus increasing gasoline production and adhering to aromatics limits.
4. An isopentanizer merox unit to remove mercaptans from the isopentane stream to meet the CFP sulfur specification of 10 ppm.
5. A deisobutanizer unit to provide incremental isobutane required for the alkylation revamp for a higher capacity. Feed to the deisobutanizer unit is field butane produced by the LPG trains in the MAA refinery.
6. An isomerization Unit to produce isomerate (RON 87.5) from light naphtha for mogas blending to increase the gasoline production and meet the aromatics limit.
7. Light naphtha from the MAB’s hydrocracker is transferred to the MAA refinery’s isomerization unit to increase gasoline production.
8. MAB refinery’s CCR unit was designed to produce reformate with a RON of 102 to upgrade naphtha and increase gasoline production.
9. A new 230,000-bpd mogas blender was built to meet the higher demand. The existing 50,000-bpd gasoline blender was modified to provide new components required for the blend recipes. Both blenders can be operated simultaneously.

The gasoline streams’ properties post-CFP are detailed in TABLE 4.

TABLE 4. Post-CFP gasoline streams’ properties

COVID-19 and KNPC’s refineries shift in demand and prices. The COVID-19 pandemic was a global crisis, with nations across the world experiencing unprecedented levels of disruptions. The oil and gas industry were significantly affected by the pandemic. Operations were interrupted, and production reduced significantly due to workforce movement curfews, health regulations, and decreased fuel and petrochemicals demand. Several companies set up systems to protect their workers and perform their operations safely to mitigate the crisis. Efforts to contain the virus have disrupted the global workforce and material supply chains.

KNPC, like other businesses, was not immune to the challenges brought on by the effects of COVID-19. Travel restrictions and lockdowns profoundly affected Kuwait’s domestic gasoline demand, which constrained refinery operations to process crude oil at maximum capacities.

Oil prices dropped drastically in March and April 2020 due to plummeting demand, rising crude oil supplies and diminished storage capacities. It caused such a pronounced crude petroleum price drop that, on April 20^th, crude petroleum traded at a negative price in the intraday futures market. Producer prices for crude petroleum declined 34% and 48.8% in March 2020 and April 2020, respectively.

During the COVID-19 pandemic, the global gasoline demand experienced a significant decline, as well. As a result, gasoline production also declined in most countries. When partial curfews were implemented in Kuwait, gasoline consumption fell to record lows (FIG. 2).

FIG. 2. Kuwait domestic mogas (gasoline) demand during the COVID-19 pandemic.

In turn, this affected the gasoline production units at KNPC’s refineries. Domestic gasoline demand declined from pre-pandemic levels of 10,000 tpd to 4,000 tpd and reached a low of 2,400 tpd in May 2020 (FIG. 3).

FIG. 3. Kuwaiti gasoline demand and production, October 2018–December 2022.

From May 2020–August 2020, all gasoline imports ceased. FCCUs operated at turndown capacity, and one of the naphtha reformers was kept idle. Consequently, naphtha exports increased (FIG. 4).

FIG. 4. KNPC’s naphtha and gasoline production, January 2020–June 2020.

Furthermore, naphtha and gasoline prices fell dramatically, with margins reaching a record low in April 2020 (FIG. 5). In view of decreased domestic demand and no export options available, the MAA refinery had to lower utilization or shutdown their units to match the diminished demand.

FIG. 5. KNPC naphtha and gasoline prices, June 2020–June 2020.

Unit operations have played a significant role in managing demand crises. Units such as the naphtha reformer and FCCU have operational flexibility in terms of unit throughput and were kept at turndown capacity. However, after the removal of COVID-19 restrictions, Kuwait’s domestic gasoline demand rose steadily, and KNPC increased production to satisfy demand. Although gasoline imports were needed to bridge the nation’s supply and demand gap, the completion of the CFP enabled KNPC to increase production capacity by 40%. This increase—from the addition of a CCR unit at the MAB refinery and the utilization of isomerzation, alkylation and de-isopentanizer units—played a significant role in providing flexibility in meeting local demand and exporting excess production.

However, gasoline exports were not attractive due to a low naphtha-gasoline margin; therefore, post-pandemic plans focused solely on meeting domestic demand. These economics changed in 2022 due to worldwide political events and sanctions on various nations, which boosted refiners’ margins to record highs.

During 2022, KNPC managed to satisfy local market demands and export excess quantities of gasoline. The exported cargoes—un-oxygenated grades and 92 octane ratings—were sent to European markets. Since August 2022, several gasoline cargoes have been successfully exported. The primary driver was the substantial difference in the naphtha-gasoline margin, which was an attractive market fundamental.

Takeaway. The COVID-19 pandemic had a tremendous impact on the world economy, especially in the disruption of supply chains and global fuels demand. Refineries suffered challenges in maintaining operations due to movement restrictions and drastic changes in demand patterns. The reduction in demand necessitated more flexibility in refinery operations.

The drastic change in the world’s economic environment led to financial losses and several refineries were forced to shut operations. Therefore, refineries must have plans, strategies and built-in flexibility to hedge against unfavorable circumstances and to capture favorable opportunities.

ACKNOWLEDGMENT

The dedication and challenging work of experienced KNPC staff for the growth of the company to enhance KNPC’s refineries overall profitability.

The Authors

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