Slashing the C02 emissions of two North Sea coastal refineries is not just good business strategy, but also stay-in-business strategy, according to the former Conoco man who four years ago returned from a typically international oil career to run Swedish refiner Preem. When I met CEO and President Michael Loew at the Stockholm offices of the privately owned company, I was keen to find out how he justified rhetoric that in 2006 grabbed headlines across the country. The promises spoke of "green refining"—drastic emissions reductions, biofuels production, biocrude processing and carbon capture and storage.
Preem operates its facilities as a sea-linked complex. Products are shipped both ways between a simpler site at Gothenburg and Preemraif-Lysekil, the pioneering, zero-sulfur diesel manufacturer that some perhaps still know as Scanraff. In early 2006, Lysekil started up a new Isocracker and associated hydrogen production to convert 3.4 million metric tons of gasoil to diesel road fuel. The zero-sulfur diesel produced for domestic consumption is not just European standard, but the gold-plated, low aromatics Swedish Class 1. Preem intends to go further still with a zero-fuel-oil policy to be implemented through a substantial new coker project.
By at least one measure, this process intensity will severely disadvantage Preem. C02 emissions rose by 800,000 tpy after the commissioning of the Isocracker, although its engineers say net C02 emissions/passenger kilometer will drop by 200,000 tpy.
Nevertheless, even today Lysekil is a star of the Solomon study. In its 2006 annual report, Lysekil claims C02 emissions 40% below the average of Europe's 106 sites. S02 and NOx are 73% and 78% lower, respectively, according to the company.
Tom Jones. Somehow the conversation turns to Wales as we are settling into the comfy chairs around Michael Loew's office coffee table: Tom Jones, Las Vegas and the expansion of Welsh coal mines. Coal prices, like it seems any commodity you care to mention these days, are at record levels, I point out.
"The British coal industry was a big problem for us here in Sweden," says Mr. Loew, explaining that it was through acid rain that Swedes first began to understand that hydrocarbons contained sulfur. "We got millions of tons of sulfur from the UK in the old days." Having already removed lead from gasoline in 1986, the acid rain issue played a role in emboldening Swedish politicians to make strong policy on sulfur in road fuels. So in 1994, while European refining lobbyists argued with the European Parliament over the economic disaster that zero-sulfur fuels would visit upon the industry, the company called in ABB Lummus and Criterion Catalysts, built its groundbreaking SynSat units at both sites and—using a model of tax breaks that would later be adopted all over the continent—quietly did the impossible to diesel.
Like others who adopted clean fuels technology early, the 65%-export Lysekil refinery made a killing from its investment— first in Sweden, then England, Germany and other markets. A
year earlier in 1993, the company had started blending FAME in diesel at 2%, so that when Mr. Loew joined Preem in 2003, a strong environmental legacy already existed. In addition, Lysekil had retained a Solomon top-quartile ranking on net cash margin throughout the investment-heavy period.
Carbon capture. But that was then, the era of clean fuels. Now we have Kyoto, global warming and emissions trading. Mr. Loew begins speaking about the economics he's looking at. "We anticipate that from 2013, C02 emissions rights will be auctioned. Todays price is already €23/metric ton, so if you have to buy 2.5 million metric tons, as we would, you can see there is a business case for being efficient and being low-carbon emitters.
This math and the previously mentioned sense of corporate citizenship are behind a striking pledge from Mr. Loew: "We are committed now to C02 capture in refining .... We have to solve this problem," he says. "Sometimes you make statements without knowing how to do it, as Kennedy did when he said the Americans will get a man on the moon." Mr. Loew says that it may take the company some time to figure out how to do this, and he's aware that it's a promise that is going to make him unpopular with some of his peers. A second pledge is that by 2011,10% of the raw material for inland diesel production at Preem will be from nonfossil sources.
The idea of biorefining, in which biomass is transformed to a liquid "biocrude" was put forward by UOP and Lurgi at the November 2007 ERTC meeting in Barcelona.
With ample forest land and wood waste, Sweden is a natural candidate for this new take on biofuels. And through its paper industry, it has a head start on countries that will construct purpose-built biomass liquefaction and upgrading plants. Sweden has Tall, or Pine Oil, a byproduct of paper manufacture, together with black liquor.
As Mr. Loew and I wrapped up our interview, I suggested that a Houston refiner might say to all this: "If some two-refinery outfit in Sweden wants to go and commit economic suicide using the Kyoto protocol, it can be my guest."
"Yeah, probably," he says. "We'll work on C02 capture and biorefining, while Bush is into biofuels because of energy security," he says. "But there's a moral problem with that. Two years ago, wheat was 0.80 Swedish krona/kilogram here, now it's 2.30 krona. That's partly because there are more people who need food, but it's also biofuels. There's a study that says that each time you increase food prices by 100%, hundreds of millions of people slip below the starvation level.
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