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Q&A: Shell ramps up Rheinland to stay competitive

22 Dec 2017 09:04 GMT
Q&A: Shell ramps up Rheinland to stay competitive

London, 22 December (Argus) — Shell is the largest refiner in Germany with a 32.23pc share in the 301,000 b/d MiRO refinery in Karlsruhe, a 37.5pc share in the 208,000 b/d PCK Schwedt as well as the Rheinland refinery complex, which includes the 140,000 b/d Wesseling plant and the 170,000 b/d Godorf plant. Rheinland refinery director Thomas Zengerly spoke to Argus about planned upgrades at the plant and Shell's focus on the downstream business (interview translated from German and edited for clarity).

Refinery margins for middle distillates have recently risen, but the future for European and German refiners did not look too positive a few years ago. How do you see the short and long term future for refineries in Germany?

Even with falling demand, it can be expected that oil will retain its central role in the German energy mix in the future. The crucial question will be the extent to which individual locations are able to hold their own amid increasing international competition. Against this backdrop, we have made significant investments to make the Rheinland site fit for the future.

After we renewed the power plant in Wesseling in 2011 and 2012, the modernisation of the power plant in Godorf is now under way. The conversion from heavy oil to gas firing should increase profitability and reduce emissions. The project is at an early stage, planning has begun.

In 2013, we launched a comprehensive pipeline program. This includes the construction of around 20,000m of new lines between the Wesseling plant and the tank farm there, which began in October, and within the tank farm. In the summer of last year, we commissioned four modern cooling modules in Godorf.

Recently we were also able to complete a so-called sour water stripper. With this new plant within the conversion units, we gain flexibility in the selection of processed crude oil grades. We already use almost 100 different crude oils from all over the world, about twice as many as five years ago.

In addition, we plan to build a hydrogen electrolysis plant and a desulphurisation unit at the Wesseling site.

With the desulphurisation unit, Shell is also preparing for the IMO 2020 guidelines regarding the sulphur content of marine fuel. How will the change affect demand for heavy fuel oil and thus refinery production in Germany?

The project will fit in very well with our existing structure. We have been optimising our refinery for some time towards production of middle distillates — diesel, heating oil, jet fuel — because we saw growth opportunities there. The market development of the last decades has proven us right. Diesel sales in the commercial vehicle sector are continuing to develop very dynamically due to the increasing use of diesel [in new vehicle registrations] and the development in the commercial vehicle sector. Diesel sales in Germany were higher than ever before last year. So, in the medium term, we expect stable diesel sales.

But of course new framework conditions present us with new challenges that we have to face. The planned desulphurisation unit is a good example of this. It is intended to enable the desulphurisation of heavy residues resulting from production processes and their further processing into products such as heating oil. Heavy residues [produced at the refinery] have so far been used, among other things, as fuel for ocean-going vessels.

Last autumn, a new rail terminal went into operation at Wesseling. Will Shell continue to increase product exports by rail from the refinery? How did this approach work in 2017?

The new tanker loading has given us many new opportunities. The system is designed and approved for four block trains per day — four trains can be loaded and moved in and out each day. This means that the construction options on site are maximised for now.

Which areas are particularly in focus regarding Shell's strategy for the German market in the coming years?

We know that the world's population continues to grow, increasing the demand for energy. In order to do justice to [this as well as climate protection goals], energy systems have to be rebuilt so that fewer emissions are emitted. This applies to electricity generation as well as to the industrial, building and mobility sectors. We want to actively support this process.

I will single out the transport sector, for example. Here, the importance of electromobility will undoubtedly increase. But even in 2040 vehicles with combustion engines will still play an important role, especially in road freight transport and long-distance travel. In road freight transport, liquefied natural gas (LNG) and hydrogen can be an alternative. In short, in the medium term, we do not see an "either-or" scenario but more of an "as-well-as".

Accordingly, we offer a broad portfolio. As a joint venture partner of H2 Mobility, we are involved in the construction of a hydrogen infrastructure for 400 fuelling stations nationwide by 2023. We have recently acquired the Dutch provider NewMotion in order to be able to serve customers with battery electric vehicles, and are in conversation with providers of fast charging stations (350+ kW). For fleet customers we offer diesel from natural gas (gas-to-liquid).

We already have LNG filling stations in the Netherlands and are also looking into the German market. We have signed contracts with international cruise lines to supply new cruise liners with LNG. Our LNG barge for supplying vessels with LNG in Northwest Europe has recently started operation. We will charter a number of LNG operated inland vessels transporting product on the Rhine. Two of them are already in operation.

In the building sector, savings can be achieved by modernising existing boilers. In the short and medium term, heating technologies and energy sources will become more diversified — [for example] hybridisation, heat pumps, micro and mini CHP systems. However, since only about 12pc of all houses and apartments will be newly constructed with state-of-the-art energy standards by 2030, the energy renovation in existing buildings will be decisive for energy and greenhouse gas savings.