Email a friend
  • To include more than one recipient, please separate each email address with a semi-colon ';', to a maximum of 5

  • By submitting this article to a friend we reserve the right to contact them regarding Fastmarkets AMM subscriptions. Please ensure you have their consent before giving us their details.

Refined behavior

Feb 17, 2017 | 01:33 PM | Gregory DL Morris

Tags  Energy, oil, steel tube and pipe, OCTG, tubulars, steel, line pipe, oil refineries ships

Demand is growing for heavy chromoly pressure vessels as new rules for ship fuel drive a global process review by refiners, leading to an increase in demand for metals and possibly creating a new market for steelmakers to sell existing and new products.

Oil refiners around the world are scrambling to meet a tight deadline of 2020 to reduce substantially the amount of sulfur in bunker oil, used primarily as fuel for ships. To do that many refiners will need to install large new process trains built around huge, heavy, thick-wall pressure vessels made primarily from chromium-molybdenum steels. Fabricators, engineering companies, and analysts tell AMM that they anticipate some increase in demand for such steels, along with bookings for vessels, pipes, valves, pumps and other ancillary equipment. No one anticipates a crisis, but normal lead times, already measured in years, could grow significantly longer.

While boilermakers and tank erectors are ubiquitous, in all the world there are fewer than a dozen fabricators of the immense, thick-wall vessels that are used as high-pressure, high-temperature reactors in refiners and chemical plants. The vessels alone cost many hundreds of millions of dollars, and full installations with construction, plumbing, and technology cost $1 to $2 billion.

Two of the largest fabricators are Japan Steel Works Ltd. and Kobe Steel Ltd. In competition and collaboration they made important advances in metallurgy and fabrication going back to the 1960s and remain major players today. Most of the rest are based in Italy, several of which have operations in other regions. It bears mentioning that there are no fabricators of the largest vessels left in the United States.

One of the leading Italian firms is ATB Riva Calzoni SpA, with manufacturing facilities in Italy and in Malaysia and more than 60 years experience in design, fabrication and inspection of heavy-wall pressure vessels for the energy and chemicals industries. The company can make units up to a maximum wall thickness of 358 millimeters (14 inches), maximum length of 100 meters (330 feet), and maximum weight of 1,620 tonnes (1,786 short tons).

“ATB is one the few fabricators worldwide experienced in manufacturing reactors and separators for hydroprocessing operating at high temperature and high pressure,” according to Salvatore Poddighe, commercial director for oil and gas. “This equipment is normally made in low-alloy material. In the last decade or so vanadium alloy has been added to increase mechanical properties and resistance to hydrogen attack.”

The current top of the line, he states, is 2.25Cr 1Mo 0.25V. Either rolled plates or forged rings can be used. ATB has fabricated about 120 pressure vessels made of vanadium alloy steel with thicknesses ranging from 60 to 300 millimeters and weight up to 1620 tonnes.

“The vanadium-alloy steel is a very special material and only few suppliers are considered qualified and experienced for these applications,” Poddighe says. “Plates supplies are coming from France, Belgium and Germany. Forged rings supplies from Italy. Welding consumable supplies from France and Germany.” He declined to mention specific mills or vendors.

Noting that the current alloy formula has not changed in years, Poddighe adds that “ATB participates in joint research programs with base material suppliers of forged rings, plates and welding consumables to increase range of application of existing materials,” but preferred not to detail any specific advances or near-commercial developments.

New Hopes for Recovery

Fabricators are eager for new business, having weathered a lull in the last few years. That softness was not just a disappointment but a surprise given the strong refining margins in 2015 and 2016. Prices for crude oil were low and demand for fuels and lubricants was high, so refiners made some money. Mills and fabricators, as well as pipe, valve and pump makers were hopeful for more capital investment, but that did not materialize.

“The market is today suffering from a general reduction of investments in oil and gas that is affecting also refining projects,” Poddighe says. “The new regulations on marine bunker oil will require installation of new process units but until now this fact has not significantly impacted the market yet.”

In the end, even if refiners don’t rush to order dozens of new heavy pressure vessels, the reassessment of their processing is expected to drive a meaningful increase in new reactors and heavy equipment.

ATB has recently delivered four reactors for a total of 2,000 tonnes to Duluth, Minn., and another four reactors for a total of 3,600 tonnes to Malaysia. The shipment requires the charter of heavy-lift cargo ships with lifting capacity up to 3,000 tonnes. The transport is normally organized by the clients but sometimes it can be included in scope of work contracted to the fabricator.

“These are very complex vessels that require long lead times for critical components,” according to Daniel M. McCarthy, executive vice president of technology at global engineering and construction firm CB&I. “The thick, heavy walls for RDS reactors require exotic materials. We have three ongoing RDS projects, and I don’t know if any of them took less than four years lead time. So today, in 2017, if you consider four to five years from now, that does not work for the marine bunker rules. The tight time line for implementation was such a shock to the industry that people will have to look at tweaks and optimization of their current assets.”

CB&I, originally Chicago Bridge & Iron, has a long history of fabrication, including tanks, spheres, pipe spools and other vessels. “We can fabricate coke drums in the field, which is actually one of our specialties,” McCarthy says. “But we do not get involved in the heavy-wall reactors. We get those from third parties. In those situations there is definitely a benefit to being first in the queue. Currently the situation is good for orders, but it does not take much to create a backlog. Some clients buy reactors in advance, even before they select an EPC contractor. They work with a design firm and commission the vessel, then assign it to a contractor.”

Leon de Bruyn, managing director of Chevron Lummus Global, adds, “there have been backlogs in the recent past. There was one early in the decade, but in recent years we have seen some slowdown, so fabrication shops are less full today.”

Chevron Lummus Global is a 50-50 joint venture between CG&I and Chevron. CB&I acquired the Lummus process technology portfolio from Swiss engineering firm ABB in 2007. CB&I has also swept up all or part of several other big engineering and construction firms in the past few years, including John Brown and the Shaw Group.

Optimizing the Refinery

It may seem surprising that the effective removal of sulfur from a relatively small fuels market would have such a large knock-on effect for refiners around the world. The initial reason is that bunker fuel and petroleum coke were the last markets where refiners could send the sulfur that is common in many types of crude oil. So the elimination of those outlets means that refiners have to re-think how they handle sulfur.

Refineries are defined by how heavily they process crude. Low-complexity, light conversion plants usually take lighter crudes and essentially boil them into constituent fractions to make gasoline, diesel and jet fuel, as well as heavier oils. Medium complexity and conversion facilities use vacuum vessels, heat, and pressure, along with catalysts to turn more of the heavy oils into lighter, more valuable fuels.

The most complex, deepest conversion refineries use extremes of heat and pressure with powerful catalysts to turn almost every molecule into higher-value fuels. That can include using hydrogen to crack bigger molecules into smaller ones. Hydrogen also captures sulfur, and hydrogen sulfide is removed and processed. Those hydroprocessing, hydrocracking, and hydrodesulfurization (HDS) units require the strongest vanadium cromoly vessels.

The last step is the coker, where the last tarry residue is basically roasted to drive off the last volatiles, leaving essentially pure carbon solids, with any remaining sulfur or trace elements. Petroleum coke is burned as a fuel to generate power. It used to be a big source of cogeneration fuel, but most is now exported. A niche market, needle coke, is used in steelmaking.

As noted, HDS units and cokers cost $1 to $2 billion, so not every refinery has one. Cokers are more common, and of those in operation worldwide, engineering and construction firm Amec Foster Wheeler Plc (AFW) claims primacy with about 80 trains, or half the market. “Coking is still the core technology,” according to Steve Beeston, vice president of global technology business development for AFW. “That is the most economically attractive and proven technology.”

Coke drums “are not terribly complex,” he adds, “but there is still considerable lead time for fabrication. The compressors and pumps that go with it are not typically long-lead items, but the manufacturers can become saturated with orders quickly. We saw that back in the shale-gas boom on the U.S. At some times the suppliers were maxed out. You probably want to be first in line rather than fourth.”

According to Les Antalffy, senior fellow for coke drums and reactors at engineering and construction firm Fluor Corp., coke drums are usually about 2-inch thick clad plate. “It’s typically 1 1/4 chrome, 1/2 moly clad, close to stainless steel. There are numerous clad plate suppliers, including ArcelorMital, Nippon Steel, Voestalpine, and JFE. There is a modest but continuous market for clad plate because coke drums have to be replaced every eight years or so.”

Deep Conversion and Options

For the larger and heavier hydroprocessing vessels, the 2 1/4 chrome, 1 moly, 1/4 vanadium steel “has excellent resistance to temperature embrittlement,” Antalffy says. “They are designed with 30-year lifetimes, but with careful process control, maintenance, and operations can be extended significantly longer.” He estimates the global market for heavy pressure vessels at about $16 billion a year.

“I do not anticipate any significant expansion in the U.S., Canada, or Western Europe,” Antalffy says, with a few regional exceptions where there are major ports but refiners do not have deep conversion or sulfur-removal capabilities. “Developing countries will definitely need to increase their conversion and sulfur capabilities. Even so, I do not anticipate major problems in steel supply or fabrication. Deliveries may be extended, and prices may increase, but there will not be major problems.”

The current availability is one reason, another is that there are multiple options for some refiners, explains Maureen Price, technical and execution lead at Fluor. “Doing nothing is one option. Refiners could just dump residuals into the power market where they would be a likely replacement for coal.” In that case, refiners would in effect be passing their sulfur removal to the utility that have scrubbers and so can burn high-sulfur fuels.

“There are very much regional differences,” adds Price. “In the U.S. Gulf Coast in particular, but also elsewhere around North America and Europe most refineries are full conversion. In the developing countries we are seeing substantial interest. We see both coking and hydroprocessing being studied. Some plans are moving along to engineering, procurement and construction; others are still in the study phase. There is some urgency in some cases; others are taking a more wait-and-see approach.”

Another factor is the flexibility of current operations. “Most cokers can run as much as 80 perecent more than their nameplate capacity,” according to Jack Adams, principal at Adams Project Managers Inc. “They are less efficient at those higher rates, but they can push a lot through.”


Latest Pricing Trends Year Over Year