Shell to Develop $500 Million Hydro-Desulfurization Plant at Pernis Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) has announced plans to proceed with the development of a $500 million hydro-desulfurization plant at its Pernis refinery in Rotterdam, Netherlands. The Pernis refinery, which has a capacity of about 400,000 barrels per day (BBL/d), is one of Shell's largest facilities globally and its largest in Europe. The new hydro-desulfurization plant is part of Shell's response to stricter environmental requirements and new product-quality restrictions, and will allow the refinery to process heavier crude oils.

The addition to the Pernis refinery is part of Shell's long-term plans to focus on larger refining sites and expand downstream interests. The unit is also part of the modernization planned for the Pernis refinery, which underwent extensive upgrades in 1997. Shell wants to shift the focus of the refinery toward a wider range of exports and is considering investing as much as $1.3 billion in the refinery in the next five to seven years.

The majority of the output from the new plant will be sold in the German market as domestic heating oil. Stricter sulfur-content requirements have been placed recently on this type of oil. In anticipation of even more stringent European requirements for energy consumption and emissions control, the furnace for the new plant will have a specially designed multi-burner system installed to reduce NOx emissions to the lowest possible levels.

In November 2008, Shell raised concerns about the future of the Pernis refinery in view of the stringent carbon-trading rules that will be imposed by the European Union after 2012. As part of the effort to reduce greenhouse gas emissions, the European Commission emission-trading system will force carbon-dioxide producers to buy permits for the emissions, placing the refinery at Pernis in an unfavorable position compared with competitors in the U.S. and China.

The new hydro-desulfurization plant is expected to be in production by the second half of 2011 and will provide work for an additional 1,300 people in addition to the current staff of 2,100 employed at the refinery. The plant will be constructed on the site of an earlier unit that has been removed. Construction of the new unit is not expected to affect normal operations at the refinery.

The Pernis refinery produces a variety of products from the 400,000 BBL/d of crude oil. Gasoil makes up 25% of the output, while gasoline and bunker oil each contribute 17%. Diesel at 13%, jet fuel at 10%, and naphtha at 10%, make up the majority of the remainder of the products, while the remaining 8% consists of mainly liquefied petroleum gas (LPG) and solvents.

In December 2007, Shell was reportedly shifting production away from gasoil, the heating oil mainly used in central Europe and the northeastern U.S., in order to concentrate on gasoline, the world's main transportation fuel. However, the announcement of the new plant indicates that Shell will continue to place a priority on heating oil.

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