Petrobras` Refineries Caribbean Requirements for LSFO

IN CONFERENCE
LSFO and LSSR in the Western Hemisphere: The View from Petrobras
This issue’s “In Conference” is based on a presentation by Rodrigo Berkowitz of Houston-based Petrobras America
at World Fuel Oil Summit VI in Malta May 9-11, 2013. Mr. Berkowitz heads fuel oil and heavy feedstock trading at
Petrobras America. World Fuel Oil Summit VI was hosted by Enemalta Corporation and organized by Axelrod Energy
Projects.
An integrated energy company, Petrobras is the second largest
company in Latin America and seventh largest energy company in
the world. Outside of Rio de Janeiro, trading offices are located in
Beijing, Buenos Aires, London, Rotterdam, Singapore, and Houston.
Shares in Petrobras are traded on the Sao Paulo, New York, Madrid,
and Buenos Aires stock exchanges. The Brazilian government retains
a controlling majority stake through a golden share.
This issue’s “In Conference” examines Petrobras’ export availability
of LSFO in the context of LSFO import requirements in the Western
Hemisphere. Demand for low sul- fur heavy feedstock on the US Gulf
Coast is also considered.
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Petrobras’ Refineries
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Petrobras’ 12 refineries in Brazil have total refining capacity of 2.0 million bpd. The majority of Petrobras’
downstream refinery assets are located in the densely-populated and GDP-intensive Brazilian south- east. See the
accompanying table. Outside of Brazil, Petrobras has refining capacity in the United States, Argentina, and Japan.
The three Petrobras refineries outside Brazil have aggregate crude capacity of 281 kb/d (see the accompanying
table). Petrobras exports fuel oil from these Brazilian refineries: Reduc (2.5-3%S, 9-10 API), Revap (1%S, 6-11 API),
Repar (1%S, 6-9 API), Replan (1%S, 9-11 API), and Rlam (0.6%S, 12-14 API). See the accompanying map.
Reflecting Brazil’s outlook for higher domestic crude production and increased local product demand, Petrobras
is planning to add new crude distillation capacity. The 165 kb/d Comperj refinery, on the southeastern coast, is
scheduled to come online in April 2015 while the 230 k b/d Rnest refinery, on the northeast coast, is scheduled to
come online in May 2015. These two refin- ery additions will raise
Petrobras’ overall refinining capacity to 2.7 million b/d.
Petrobras is also evaluating the construction of two additional refineries
in northeast Brazil—the Premium I (600 kb/d) and Premium II (300
kb/d). Petrobras’ refining investment program in Brazil focuses on
higher rates of conversion with the aim of reducing production of fuel
oil and aug- menting light product output.
Caribbean Requirements for LSFO
The Caribbean requires imported LSFO for both power generation
and bunkers. On the power side, examples include Puerto
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PETROBRAS, FUEL-OIL EXPORTING REFINERIES
JULY-AUGUST 2013
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Rico, Guadeloupe/Martinique, and Jamaica.
On the bunker side, low sulfur IFO is available in Panama, St. Eustatius (Statia), and
Puerto Rico.
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Petrobras’ Fuel Oil Exports
In 2012, Brazil exported about 100 kb/d
of fuel oil, down from around 110 kb/d of
2011. Reflecting refinery upgrading and a
lighter crude slate, Brazil’s fuel oil exports
are seen falling to about 80 kb/d in 2013 and
as low as 40 kb/d in 2017. See accompanying chart. With respect to destination in
2012, Brazil’s fuel oil exports moved to the
US and Caribbean (42 percent), Europe (25
percent), Far East (25 percent), and South
America (8 percent). With respect to
Brazilian sourcing of fuel oil for
US/Caribbean demand in 2012, the material
was sourced in Salvador (55 percent), Rio de
Janiero (27 percent), and Santos (18 percent).
Two Key Outlets for Petrobras Resid
Exports
As part of its international trading and
bunker operations, Petrobras leases fuel oil
storage tanks in the Caribbean, Rotterdam,
and Singapore. In the Caribbean, Petrobras
leases 1.4 million barrels of fuel oil storage
capacity at NuStar’s St. Eustatius terminal.
The St. Eustatius terminal is a hub for blending for LS power generation and bunker
demand.
Puerto Rico
The Puerto Rico Electric Power Authority
(Prepa) has almost 3,000 MW of resid-fired
generation capacity. Prepa consumes about
1.75 million barrels/month of low-sulfur fuel
oil at its four resid-burning plants. Specifically,
the San Juan and Palo Seco power plants burn
an aggregate 750 kb/month and Aguirre
burns about 700 kb/month. Reflecting use of
natural gas, the Costa Sur plant only requires
about 300 kb/month of fuel oil. For Costa
Sur, fuel oil deliveries are made by vessel to
Guayanilla port. Fuel oil moves by barge from
Guayanilla to Aguirre, 80 km to the east.
The St. Eustatius terminal is logistically
advantageous for supplying Puerto Rico.
The St. Eustatius terminal is 9 days sailing
from Salvador and 3-4 days from the US
East Coast. From Statia, San Juan is 360 km
and Costa Sur 420 km. Fuel oil moves by
vessel to San Juan for San Juan/Palo Seco.
Various fuel oils can be used to meet
IN CONFERENCE
PETROBRAS, FUEL OIL EXPORTS
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BRAZIL, FUEL OIL EXPORTS
BY DESTINATION, 2012
Puerto Rican requirements. Brazil’s 0.6%S
Salvador LSFO is a key component in blending for Puerto Rico. European 0.7%S streams
from Sweden and Denmark can be used for
blending. Kazakhstan’s high pour, 0.7%S SR
can also be used for Puerto Rican blending.
Certain crudes (such as Yombo and Doba)
can be useful in blending for Puerto Rican
power generation. While having a low sulfur
content, Doba is disadvantaged by low flash
and high calcium content. LSSRs from WAF
(such as Cameroon, Congo, and Gabon) can
be used in Puerto Rican blending. These SRs
usually have poor qualities as feedstock but
their low sulfur content (less than 0.3%S)
make them helpful in Puerto Rican blending.
Product from the USAC presents challenges
in viscosity blending.
JULY-AUGUST 2013
Argentina
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In general, Argentina requires one million
tons of 0.95%S LSFO from March to
December for thermal generation. Due to its
proximity to Brazil, Petrobras is a natural supplier of fuel oil to Argentina. Supply alternatives
are the USAC, USGC, and Northwest Europe.
BRAZILIAN SUPPLY SITES FOR
THE US AND CARIBBEAN MARKET
In view of Brazil’s sulfur give away, Petrobras
looks for quality swaps to optimize deliveries.
LSSR/LSVGO
The US Gulf Coast is short about 400
kb/d of SR and VGO. Of that amount, LSSR
and LSVGO account for about 150 kb/d. The
main sources of heavy feedstock (low and
high sulfur) are West Africa, North Africa,
Northwest Europe, and FSU. In 2012, the
premiums for LSSR and LSVGO increased
owing to powergen demand in Japan and disruptions in Libyan supply. Good quality
LSSRs include Algeria, Kazakhstan, Ras
Lanuf (Libya), Palanca (Angola), Port
Harcourt (Nigeria), Warri (Nigeria). When
heavy feeds in the US Gulf are well supplied,
some LSSRs (such as Cameroon, Coraf,
Congo and Gabon) can be used in blending
for Puerto Rican power generation or put
into Statia’s 1%S RMG market.
Conclusion
The outlook for LSFO/LSSR in the
Western Hemisphere hinges on several fac-
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reduce requirements for fuel oil in
Argentina and Puerto Rico. Growing light
shale crude availability could lead to
increased requirements for heavy feedstock
in the USA. n
FUEL OIL & FEEDSTOCK TRADER
tors. The shift from 1%S max to 0.1%S
max in the IMO’s Emissions Control Areas
is expected to have significant consequences
for LSFO demand worldwide. Over time,
natural gas penetration could serve to
SECTION
JULY-AUGUST 2013
IN CONFERENCE
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