Impacts of Quality Upgrading in China VI on Blending Components of Oil Products

By Cao Jianjun

China has already arranged work on upgrading the quality of oil products several times in recent years. The upgrading of oil product quality in the sixth stage (China VI) is however quite different.

Sulfur reduction shifts to component control

1. The direction for adjusting quality indexes of oil products has changed
In China V and the quality upgrading of oil products made several times before, sulfur reduction was the main issue in upgrading. Grades of oil products were determined by the content of sulfur as the main indicator. In the quality upgrading from China V to China VI, however, the content of sulfur is not to be reduced, but indexes of composition and distillation range are adjusted. That is to say, the control on impurities shifts to the control on components.
Moreover, more stringent control is exercised on the content of benzene, the content of aromatics and the content of olefins in vehicle-use gasoline. The index for the content of benzene is even stricter than Europe VI. The index for the content of olefins in China VI-b is also stricter than Europe VI. T50 is reduced from 120℃ to 110℃. New requirements on the distillation range structure of oil products are proposed. Adjustments on indexes such as steam pressure are also defined. In terms of vehicle-use diesel, the quality upgrading made this time mainly proposes requirements on the content of polycyclic aromatics, density and the total content of pollutants. Table 1 and Table 2 show the comparison of indexes for vehicle-use gasoline and vehicle-use diesel between different standards.

Table 1  Comparison of indexes for vehicle-use gasoline between different standards (take 92# as example)

Index    China V    China VI-a    China VI-b
Content of sulfur  (ppm)    10    10    10
Content of benzene  (%v)    1.0    0.8    0.8
Content of aromatics  (%v)    40    35    35
Content of olefins  (%v)    24    18    15
T50  (℃)    120    110    110


Table 2  Comparison of indexes for vehicle-use diesel between different standards (take 0# as example)

Index    China V    China VI
Content of sulfur  (ppm)    10    10
Content of polycyclic aromatics  (%w)    11    7
Density  (kg/m3)    810～850    820～845
Total content of pollutants  (ppm)    24    24


2. The product structure of oil products has changed
First of all, vehicle-use diesel may be merged with conventional diesel. It is required in the “Work Scheme for the Prevention and Control of Atmospheric Pollution in Beijing/Tianjin/Hebei and Peripheral Areas in 2017” that “2+26” cities as transport channels of atmospheric pollution in Beijing/Tianjin/Hebei must be the first to complete the merging between vehicle-use diesel and conventional diesel. Before the end of September 2107 all vehicle-use diesel supplied must conform to China VI and the sales of conventional diesel will be prohibited.
Quality standards for conventional diesel, bunker fuel oils and petroleum tar are also further upgraded. China V will start full-scale implementation to conventional diesel in 2018. According to requirements defined in the “Law of the People’s Republic of China on the Prevention and Control of Atmospheric Pollution”, river/coastal ships must use conventional diesel conforming to the standard. Oceangoing ships should use bunker fuel oils conforming to requirements on the control of atmospheric pollutants after reaching ports. The sales of residual oils and heavy oils to non-road mobile machinery and river/coastal ships will be prohibited. The International Marine Organization has decided to propose bunker fuel oils with a sulfur content of 0.5% in a full-fledged way in 2020. The content of sulfur in bunker fuel oils will therefore make a drastic reduction. The quality upgrading of other oil refining products such as petroleum tar is also in the making. A series of changes in quality requirements will lead to the shift of some conventional diesel to bunker fuel oils. The control on contents of petroleum tar and sulfur will also likely force refineries to readjust the total process flow. Changes in the product structure will therefore be induced.
3. The component structure of blending pools needs to be readjusted
Different from previous periods when the quality upgrading of oil products could be completed solely by means of product refining, the quality upgrading in China VI needs to make readjustments to gasoline pool and diesel pool. Regarding gasoline, in particular, in addition to systematic readjustment and optimization made to the raw material structure, components with high octane value, low content of olefins, low content of aromatics and rational instillation range must also be added.

Quality upgrading is closely combined with oil refining restructuring

1. The consumption structure has considerable changes
With the growth slowdown of the economy, although the demand for oil products in China still has made an increase the growth is slowed down and the demand structure has made changes. It is expected that the demand for oil products will still have a period of growth for 10 years or so. The demand will make an increase of around 800 million tons before 2025. The apparent consumption of oil products is expected to have an average annual growth of around 3% during the Thirteenth Five-Year Plan period (2016-2020), being much lower than 5% during the Twelfth Five-Year Plan period (2011-2015).
Judging from the demand for oil products by structure, gasoline, kerosene and diesel present different trends of development. The demand for diesel has already entered a plateau today. The demand for gasoline will still go up in near future and is expected to enter a plateau in around 2025. The demand for diesel will maintain the rising trend for a considerable period of time and will not reach the peak before 2030. It is expected that during the Thirteenth Five-Year Plan period the demand for gasoline can be kept at an average annual growth of around 7%, the average annual demand growth of aviation kerosene can reach the level of around 10% and the average annual demand growth of diesel will be slightly lower.
2. Substitutes for oil products make a rapid increase to suit energy restructuring
The substitution for communication energies has presented a diversified trend in recent years. A pattern of joint development taking natural gas as the lead and combining various forms such as electric vehicles, bio-fuels, methanol and CTL has been gradually formed. In the consumption of oil products in China, the proportion is around 95% for oil-based fuels, 0.5% for coal-based fuels (0.3% for CTL and 0.2% for methanol), 1% for biomass fuels (0.6% for ethanol and 0.3% for bio-diesel) and 4% for non oil products (3% for CNG and 1% for LNG).
With energy restructuring, CTL and biomass fuels will make a further development during the Thirteenth Five-Year Plan period. The proportion of oil-based fuels will have a slight reduction, but they will remain to be major fuels with an absolute lion share of over 90%. The focus in the quality upgrading of oil products is still on oil-based fuels.
3. The liberalization of the use right of imported crude oil urges some private refineries to conduct restructuring
After the liberalization of the use right of imported crude oil, large amounts of oil refining enterprises with private refineries in Shandong as the lead have conducted restructuring to their refining units. Great quantities of reforming and hydrocracking units are constructed, approaches for the processing of gasoline and diesel are improved and structures of products are optimized accordingly. Moreover, the acquisition of imported crude oil has freed up capacity of private refineries, and their operating rates have gone up. According to incomplete statistics, the operating rate of private refineries in Shandong in 2016 was 10 percent points higher than the previous year.
4. There is considerable pressure of international competition and it is hard to effectively mitigate capacity surplus through export
The net export amount of oil products in China has made a drastic increase in recent years. The export amount exceeded 33.0 million tons in 2016. There will however be extremely severe international competition and export can hardly be used as effective tool to mitigate oil refining capacity surplus.
First, the output of oil refining products will make a gradual pickup in the United States. With the revolution of shale gas and the recovery of the manufacturing industry, net export amounts of gasoline and diesel in the United States are hoped to increase. Second, the Middle East and India will increase their oil refining capacities and some oil products will flow to Asia-Pacific region and form direct competition to the export of oil products in China. Third, traditional countries for the import of oil products in Southeast Asia will develop their oil refining capacities and increase their self-sufficiency rates. The space for the export of oil products in China will therefore be squeezed.
5. The oil refining restructuring poses new requirements on quality upgrading
The quality upgrading of oil products is accompanied by systematic restructuring and industrial upgrading including processing route, production unit structure, raw material structure (such as hydrogen source), market competition and cooperation, environmental element, technical level and management. The demand structure, in particular, will change enormously. Such changes will be synchronous to and have interactions with requirements on quality upgrading.

Major problems in quality upgrading and analysis

In the composition of gasoline market in China, the proportion of refined FCC gasoline is unduly high, being over 60% whereas the proportion of alkylated and isomerized components with low content of olefins and low content of aromatics is unduly low, being less than 5% in 2015 and less than 10% in 2016. The irrationality of the component structure is the major factor constraining quality upgrading.
Properties of crude oil have considerable influence on quality indexes of oil products and especially straight-run diesel. The weight of refined straight-run diesel in diesel pool is around 60%, but the cetane value of straight-run diesel is directly influenced by crude oil. The difference of the cetane value in straight-run diesel processed from different types of crude oil in China can reach as high as around 30. In two most typical types of crude oil, the cetane value of straight-run diesel in Daqing is as high as 58 whereas the cetane value of mixed straight-run diesel in Shengli is only 43. In enterprises processing different types of crude oil, difficulties for the cetane value of diesel to reach the standard are widely different. Due to the difference in processing routes and processing flows used in enterprises, there are great differences in proportions and properties of blending components. There are therefore considerable differences in overall properties of gasoline pool and diesel pool. It is also a major factor for the great difficulty in conducting quality upgrading in some enterprises. Some enterprises have unduly high reliance on FCC. The proportion of FCC gasoline and diesel is high and the content of olefins in gasoline and the cetane value of diesel are therefore not up to standard. Enterprises need to readjust their processing flows and optimize product output and quality indexes or increase high-quality blending components.

Impacts on the market of blending components

The market of blending components for oil products is quite brisk today. The import amount of blending components such as “mixed aromatics” made a drastic increase in 2016. Figure 1 shows the detail.
Reasons for the trade volume increase of blending components are mainly two. One is that production enterprises have a quality gap and need external resources for compensation. As quality backgrounds of oil products in enterprises are different, requirements on blending components are not the same. The other is that some nonstandard oil products flow into market. Traders may use trading resources for quality index compensation.
Properties of blending components are widely different and requirements on different blending components in quality upgrading are also not the same. Alkylated oils are excellent blending components. They have high octane value, low content of olefins, low content of aromatics and satisfactory distillation range. Major influencing factors include resource source and price competitiveness.
Isomerized oils have low content of olefins, low content of aromatics and satisfactory distillation range, but the octane value is on the low side. They are selective components in the market of blending components and are suitable for use in enterprises with surplus octane value but insufficient olefins and aromatics. The demand space is on the whole quite limited.
Aromatized oils are also selective components. They have low content of olefins, high octane value and adjustable distillation range, but the content of aromatics is quite high. Strict control, in particular, needs to be exercised on the content of benzene. They are suitable for use in enterprises with insufficient olefins but surplus aromatics. In terms of overall requirements on quality upgrading, there are quite a few factors constraining their demand.
MTBE is a conventional blending component. It is low in olefin content, low in aromatics, has a high octane value and high oxygen content, but conflicts to methanol gasoline and ethanol gasoline. Under the macro background of advocating the development of biomass fuels, its demand will be constrained by policies.
The quality upgrade made to gasoline today is mainly to reduce olefins, reduce aromatics, remove benzene, maintain octane value and optimize distillation range (and octane value) structure. The market of mixed aromatics as blending components for oil products will shrink. After the concentrated completion of reforming units in private refineries, in particular, the declining trend will become all the more evident.
In terms of blending components for diesel, there will basically be no space for the use of blending components with low cetane value and high density in quality upgrading. Diesel produced through indirect liquefaction has high cetane value and low density and can therefore be of help to quality upgrading. Due to problems in standard system and freezing point, however, there is still some uncertainty as to whether it can be fully margined into the vehicle-use diesel system. Moreover, resources of some blending components for diesel will likely be shifted to the market of fuel oils.