Refining Economics

Gain an In-depth Understanding of How Refineries Make Money and What Affects Refining Investment

Location: Kingdom of Bahrain

Venue: Kingdom of Bahrain (Check The Map)

Starts: 26 Jan 2022

Ends: 27 Jan 2022

Type: Course

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The Refining Economics course is designed to teach fundamentals of refining economics to non-refiners or to those newly introduced to refining. A technical background is not necessary to understand course materials and the course should be useful to financing or marketing individuals who have some involvement with refining or petroleum products. Similarly, a marketing background is not critical and the course may be helpful to refinery engineers who would like to understand how commercial and economic factors drive operating and investment decisions that affect their refineries.

Course Directors

Mr. Tod D. McGreevy

Vice President
Muse, Stancil & Co.
USA

Mr. Tod McGreevy has over 30 years industry experience and a diverse background in petroleum refining and manufacturing. Mr. McGreevy currently serves as Vice-President and Director of Muse, Stancil and Co., a global energy consultancy headquartered in Dallas, Texas. He has been with Muse since 2003 and is also a Director of Muse’s Singapore affiliate, Muse, Stancil & Co (Asia), Pte. Ltd.

During his career, Mr. McGreevy has held various positions that encompass many of the technical/managerial functions found in the downstream sector of the petroleum industry. Previous work assignments have given him a wealth of experience in refinery economics including tactical planning and optimization, long-term, strategic planning, project evaluation, economic justification, and development, budgeting, financial performance measurement and benchmarking, and financial modeling.

Mr. Ramin Lakani

Senior Consultant, Muse, Stancil & Co., UK

Ramin Lakani is a consultant in the energy sector with 30 years experience in upstream, midstream and downstream projects. He is currently based in Muse, Stancil & Co.’s London office. He has previously worked for Esso Petroleum, Premier Oil, BG Group, Shell, Schlumberger, PetroCanada, GCA, Halliburton & HARPS Marine. A Chartered Engineer, he holds a B.Eng. in Chemical Engineering from University College London, an M.Sc. in Petroleum Engineering from Imperial College London and an Executive Leadership degree from Texas A&M Mays Business School.

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KEY ISSUES TO BE COVERED

Petroleum Supply and Demand

Crude Oil Physical Properties and Valuation

Refined Product Grades and Specifications

Renewable Fuels Markets

Transportation Logistics

Crude Oil and Refined Products Pricing

Key Refining Technologies

Refinery Configurations: Typical vs. Marginal

Refining Yields and Operating Costs

Capital and Turnaround Costs

Refinery Economic Analysis Methodologies

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Who Should Attend

Refiners

Financial Analysts

Bankers

Crude Oil Marketers

Petroleum Analysts

Regulators/Government

Refinery Finance Executives

Technology Suppliers

Project Developers

Commercial Business Analysts

Crude & Products Managers

Products Supply & Distribution Executives

Strategic/Business Development Managers

Financial Institutions/Energy Lenders

Investment Analysts

Insurers

E&C Firms/Economic Feasibility Analysts

Crude Producers

Why Should You Attend

  • Understand how location, configuration and crude oil supply contribute to refining profitability
  • Identify new refinery project opportunities and learn how to maximize their commercial value
  • Discover how to develop new opportunities and reduce their operating, technical, and commercial risks
  • Find out how refinery configurations affect petroleum product prices worldwide
  • Improve your understanding of the role logistics plays in refinery profitability
  • Learn how to interpret published information on the refining industry and refining companies
  • Identify key methods of comparing refinery competitive strengths.
  • Understand the nature of petroleum markets, market cycles, and their global interconnectivity
  • Discover how refineries can be modified to become more profitable
  • Learn why refineries prefer different types of crude oils
  • Find out how trends in petroleum demand force refineries to invest
  • Hear about key issues driving refinery investment in the current market

Course Outline

+ Session 1 (Day One)

I. INTRODUCTION TO REFINING
Refining is a highly interconnected, global business yet regional variations persist. This initial workshop module will provide a short overview of the global refining sector.

  • History of the industry
  • Macro refining trends and drivers
  • Supply chain roles and contributors

 

II. CRUDE OIL BASICS
The cost of crude oil is approximately 70-80% of the cost of operating refineries. Understanding crude oil supply/demand trade patterns is vital to achieving a profitable refining business.

  • Regional oil consumption growth
  • Global crude oil trade flow
  • Global battle for oil supremacy

The next part of the session focuses on crude oil properties, assay interpretation, and blending techniques. The discussion will focus on the relationship between crude oil properties and economic value and how refiners can optimize financial returns by utilizing shrewd blending strategies.

  • Bulk crude oil property relationships with refining value
    • Signature properties: API gravity and sulfur content
    • Other commercial value drivers: distillation range, Total Acid Number, etc
  • Crude oil assays
    • Sources and types of assays (commercial / marketing versus project / planning quality)
    • Interpreting assay data

+ Session 2 (Day One)

III. PETROLEUM PRODUCTS
Environmental concerns are resulting in increasingly stringent transportation fuels specifications, and this has a significant impact on refinery operations and profitability. This session will review product consumption trends and changes to key specifications.

  • Product demand trends
    • Gasoline
    • Distillate
    • Fuel oil (IMO 2020 developments)
  • Product specification relationships with value

 

IV. CRUDE OIL AND REFINED PRODUCT PRICING
Determining prices for crude oil and refined products can appear daunting at first. This module removes some of the mystery by introducing basic techniques and methodologies used by refiners around the world to translate reference market prices to the refinery gate. We will also cover some of basic concepts used by forecasters to develop forward prices for various petroleum commodities.

  • Basic petroleum market pricing concepts
    • Benchmarks
    • Quality / Location drivers
    • Crude oil refining values (Gross Product Worth)
    • Key pricing differentials (Light / heavy, sweet / sour, etc.)
    • Overview of commercial pricing formulas
  • Transportation / Logistics costs
    • Modes of transportation
    • Worldscale tanker costs & Pipeline tariffs
    • Terminal and handling costs
  • Pricing of crude oils in Asia
    • Middle East Benchmarks
    • Price Formulas
    • Timing
    • Quality adjustments

+ Session 3 (Day Two)

V. REFINERY CONFIGURATIONS & COMPLEXITY
Refineries vary in configuration type and complexity depending on many factors such as market demand and company investment objectives. We will learn about the four major configuration types and where they tend to be clustered geographically. We will also examine how size and complexity can play a determining role with respect to refinery profitability and competitive positioning. We will also review a number of the major refining technologies that are deployed world-wide with a focus on heavy oil upgrading.

  • Refinery configuration types
    • Topping / Hydro-skimming
    • Cracking / Coking
    • Relative margins
  • Conversion Processes
    • Hydrocracking / Fluid catalytic cracking
    • Coking
    • Vis-breaking / Solvent de-asphalting
  • Upgrading Processes
    • Hydrotreating / Benzene reduction
    • Catalytic reforming & Isomerization
    • Alkylation
  • Other Processes (offsites, utilities, petrochemical, renewable fuel)

+ Session 4 (Day Two)

VI. FUNDAMENTALS OF REFINING ECONOMICS
Refining companies around the world depend heavily on optimization models to continuously maximize profitability, yet often, there are few people in the organization that truly understand the power that these tools wield in resolving complex questions of economic direction. This module will provide delegates with a glimpse inside the “black-box” before demonstrating the economic value of a sound refinery planning and optimization program.

  • Fundamentals of refinery economics and margin optimization overview
  • Tactical planning applications for maximizing refinery financial performance
    • Crude oil evaluation / Production planning / Inventory scheduling / Shutdown planning
    • Incremental margins / operating incentives

This module will lay out the basic economic metrics used by companies around the world to evaluate the financial positioning of refining assets. We will discuss several types of refinery margins used to describe profitability and learn how they are calculated. We will then cover the different elements that make up fixed and variable operating costs. The importance of capital spending will be examined, as will the effects of changes in working capital.

  • Financial Metrics
    • Gross, variable, net margins
    • Fixed and variable cost development
  • Capital costs
    • Categories (Sustaining, maintenance, environmental/regulatory versus discretionary)
    • Replacement Cost New (RCN) estimation and uses
  • Working capital requirements

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