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Annual Meeting March 17-19, 2019 Marriott Rivercenter San Antonio, TX

AM-19-TECH9 CNOOC Experience with the IsoTherming® Hydroprocessing Technology

Presented By: Zhang Shuguang, Chief Engineer CNOOC Jiang Longyu Operation Division Director CNOOC Hou Aiguo Operation Division Director CNOOC Li Yilu Unit Manager CNOOC

Pam Pryor Business Development Manager DuPont Sarah Jertson Proposal Manager DuPont Huaping Chen Senior Technical Consultant DuPont

These materials have been reproduced for the author or authors as a courtesy by the American Fuel & Petrochemical Manufacturers. Publication of this paper does not signify that its contents reflect the opinions of the AFPM, its officers, directors, members, or staff. Requests for authorization to quote or use the contents should be addressed directly to the author(s). Any discussion of impacts on supply or product prices is hypothetical and does not reflect the unique market considerations and variables applicable to individual facilities or member companies.

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Title: CNOOC Experience with the IsoTherming® Hydroprocessing Technology Authors:

CNOOC: Zhang Shuguang, Chief Engineer Jiang Longyu, Operation Division Director Hou Aiguo, Operation Division Director Li Yilu, Unit Manager

DuPont: Pam Pryor, Business Development Manager Sarah Jertson, Proposal Manager Huaping Chen, Senior Technical Consultant Abstract:

The DuPont IsoTherming® liquid-full hydroprocessing technology is providing the refining industry with proven utility and capital savings compared to its conventional trickle bed technology counterparts. This paper will provide Chinese National Offshore Oil Company’s (CNOOC) firsthand experience with successfully implementing the DuPont IsoTherming® technology at their Huizhou refinery. Operating data and economic benefits for the grassroots diesel and vacuum gas oil hydrotreating units at the CNOOC Huizhou refinery will also be discussed.

Project Background:

Increasingly stringent global requirements for on and off-road diesel sulfur specifications continue to drive refinery based hydroprocessing projects. Dangerous air quality concerns in China pushed diesel fuel reform over the course of the past ten years, as evidenced in Figure 1.

China National Offshore Oil Corporation ("CNOOC"), the largest offshore oil and gas producer in China, is a government owned company operating directly under the State-Owned Assets Supervision and Administration Commission of the State Council of the People's Republic of China. In May 2013 CNOOC received approval to construct Phase II in the CNOOC Oil & Petrochemicals Co., Ltd. Huizhou refinery to address the national need for low sulfur diesel brought about by Chinese environmental and fuel regulations.

Phase II was designed to increase crude processing capacity at the refinery by 10 million ton/yr and improve its flexibility to process a wider slate of more economically attractive sour Arab Gulf crudes. In October 2017, after three years of construction, CNOOC claimed successful startup and testing of 15 processing units, auxiliary production units, and supporting public works for the Phase II refinery project.

The Phase II project included grassroots diesel and VGO hydrotreating units, which presented an opportunity for CNOOC to evaluate their options considering new technology that has been commercialized since 2005. Trickle bed hydroprocessing technology has been demonstrated globally for decades in numerous refinery applications. However, trickle bed technology relies on maintaining a high hydrogen to oil ratio. This leads to high energy consumption and capital investment arising from the considerable amount of hydrogen circulation needed for the purpose of maintaining hydrogen partial

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pressure, control of temperature rise, etc. CNOOC wanted to explore the IsoTherming® hydroprocessing technology as it is characterized by low energy consumption, low capital investment, low operating costs, ease of maintenance and simple operation. In addition, at the time of the CNOOC technology evaluation, there were more than ten IsoTherming® units in commercial operation processing kerosene through 100% light cycle oil feeds in a variety of hydroprocessing applications. The CNOOC Phase II ULSD and VGO hydrotreating development process was carried out over a five-year time frame as follows:

Technical discussions with DuPont related to IsoTherming® began in March 2012; CNOOC carried out an evaluation between IsoTherming® and trickle bed hydroprocessing

technologies in terms of process, investment and operating costs from January to March 2012; CNOOC visited several U.S. IsoTherming® sites between April and September 2012; CNOOC selected the DuPont IsoTherming® technology for the Phase II ULSD and VGO

hydrotreater units in October 2012. Completion of two liquid-phase hydrogenation units at the Huizhou refinery, successful startup in

October 2017. CNOOC Hydroprocessing Technology Evaluation

A. Trickle Bed Technology:

In a trickle bed reactor, combined hydrogen make-up and recycle gases and liquid feed are mixed, heated to the desired reactor temperature and passed to a reactor fitted with an internal distribution device on top of the catalyst beds. The distributor serves two purposes. First, it provides even distribution of liquid reactants evenly across the catalyst bed. Secondly, it promotes mixing to pre-saturate the liquid feed, to a certain degree, prior to entering the catalyst bed. From the perspective of CNOOC, this reactor design has several fundamental shortcomings:

• As the reaction occurs at the catalyst surface between the dissolved hydrogen and the reactive

species in the feed, the hydrogen is depleted from the liquid. In most refinery applications, the amount of hydrogen required for the reactions is greater than the solubility of hydrogen in the fresh feed alone, or so-called gas-limited reaction zone. Thus, in order for the reaction to continue to completion, additional hydrogen must be replenished from the vapor phase. This in effect makes the rate of hydrogen mass transfer, or more accurately the creation of interfacial area (due to interfacial hydrogen transfer coefficient typically high) into the liquid phase a factor in the overall kinetics of the process.

• Once the interfacial area for hydrogen mass transfer is enough for the reaction to proceed, the catalyst activity within this gas-limited reaction zone has to be reduced by grading catalysts. Otherwise, excessive heat release from the reactions that occur in this zone would cause an excessive temperature rise and subsequent premature catalyst coking. As a result, the reactor volume is not effectively utilized.

• To ensure catalyst performance and longevity, excess hydrogen, often several times the quantity required for the reactions, is recycled back to the reactor to maximize the hydrogen partial pressure throughout the system. Hydrogenation reactions are highly exothermic. The mass flow of hydrocarbon feed and recycle hydrogen through the reactor has a limited capacity to adsorb the energy liberated and therefore hydrogen quench has to be used to control temperature rise. In applications that involve high chemical hydrogen consumption it is common to utilize a high hydrogen to oil flow ratio within the reactor to control the catalyst bed temperature rise. The higher temperature at the bottom portion of reactor bed, together with high gas flow, results in additional liquid feed vaporization. This phenomenon makes this aspect of trickle bed reactor design and operation very difficult, leading to low hydrogen partial pressure together with partially dry catalyst beds. This can seriously downgrade the reactor

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performance in this typically liquid-limited reaction zone. Partially dry-bed operation under high temperature causes not only performance degradation, but also promotes the more undesirable reactions such as cracking to light products (fuel gas, LPG and light naphtha). Cracking results in loss of valuable products and increased catalyst coking.

• Two-phase flow through a heterogeneous catalyst is prone to liquid flow maldistribution. Any slight variations in pressure drop through the bed, even an unlevel catalyst bed, will result in liquid/vapor maldistribution. This results in inefficient use of the catalyst and results in hot spots or coke formation.

B. DuPont IsoTherming® Hydroprocessing Technology:

In the IsoTherming® process, Figure 2, hydrogen required for the reaction is dissolved in the liquid before entering the catalyst beds. The supply of hydrogen is accomplished by saturating a combined feed and recycle stream of previously hydrotreated liquid prior to entering the reactor. The liquid recycle rate is set so that the amount of hydrogen dissolved in the combined (fresh and product liquid) feed is much greater than the reaction requirements. This design ensures excess hydrogen availability at the reactor inlet/outlet. To replace hydrogen that has been consumed throughout the catalyst bed, hydrogen is continuously injected between each catalyst bed to re-saturate the feed prior to the next catalyst bed. A nominal, continuous flow of excess hydrogen/off-gas is vented from each catalyst bed as an indicator that sufficient hydrogen is flowing to the inter-bed re-saturation point. Liquid distribution differences between IsoTherming® and trickle bed are illustrated in Figure 3.

Figure 3 IsoTherming® & Trickle Bed Liquid Distribution Differences

Make-Up Hydrogen

Feed

Compressor

IsoTherming®

Reactor

To LP Flash/Stabilizer Recycle Pump

IsoTherming®

Figure 2

• Vapor and liquid phases

• Requires almost

perfect feed distribution

• Single liquid phase • Lower temperature rise • Lower light ends yield • Lower catalyst

deactivation rates

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Trickle bed reactors require complex and carefully designed distributor devices along with multi-sized catalyst and inert grading. CNOOC perceived that reactor conditions associated with the IsoTherming® hydroprocessing technology would address areas of concern related to trickle bed technology including multiphase flow, pressure drop and maintaining the correct flow regime. The lack of a vapor phase and resultant reduced volumetric flow rate results in significantly lower pressure drop across the IsoTherming® reactor. In addition, the liquid full reactor and even distribution of reactants minimizes the possibility of forming isolated pockets of low flow and resultant “hot spots” within the reactor bed. Heat capacity of the total liquid IsoTherming® reactor feed (fresh feed plus recycle) is considerably greater than that of the mixed phase feed (combined fresh feed and the hydrogen gas recycle stream) associated with trickle bed technology. As a result, the temperature rise across an IsoTherming® reactor/bed is considerably less than that of a trickle bed reactor. This lower temperature rise eliminates the need for inter-bed cooling, typically associated with trickle bed and the additional complexity it brings to the reactor operation and design. For particularly severe services such as hydrotreating cracked stocks (coker gas oils or light cycle oils) or during mild hydrocracking, the considerably lower temperature rise minimizes catalyst coking rates and offers conceptually longer catalyst life. The IsoTherming® technology also virtually ensures that there can be no large thermal excursions and hence the chance of a runaway reaction is minimised. CNOOC deduced that IsoTherming® technology is inherently safer than trickle bed.

CNOOC ULSD & VGO Hydrotreating Technology Evaluation Summary

The inherent differences between IsoTherming® and trickle bed technologies led CNOOC to conclude that IsoTherming® has advantages over conventional hydroprocessing technology including: A. Lower Capital Requirements

1. High Pressure (HP) Related Equipment

The IsoTherming® technology offers a simplified process design with minimal high-pressure equipment due to replacement of the recycle compressor gas loop with a canned motor pump. By eliminating the hot and cold high-pressure separators, high-pressure condenser, recycle gas amine scrubber and the recycle compressor, CNOOC expected significant capital savings for both the ULSD and VGO hydrotreating projects. Table A provides a summary of differences in high pressure equipment requirements for the IsoTherming® and trickle bed technologies.

Table A: CNOOC Comparison of High-Pressure Equipment Requirements

for IsoTherming® and Trickle Bed Key Equipment IsoTherming® Trickle Bed

Reactor √ √ Amine Scrubber √

Amine Scrubber Knockout Drum √ Reactor Feed / Product Heat Exchanger √ √

Hot HP Separator Gas Cooler √ Hot HP Separator Gas/Recycle H2 Heat Exchanger √

Hot HP Separator √ Cold HP Separator √

Recycle H2 Compressor Knockout Drum √ Recycle Hydrogen Compressor √ Recycle Canned Motor Pump √

From CNOOC’s perspective, the less complex IsoTherming® reactors and the absence of a hydrogen recycle system result in a considerably smaller, simplified design. Depending on the

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application, these IsoTherming® capital cost savings can be as much as 25% compared to a conventional trickle bed design.

2. IsoTherming® Feed/Effluent Exchanger

The IsoTherming® reactor feed/effluent heat exchanger is a key piece of equipment designed to recover the heat of reaction energy by heating the reactor feed with the reactor effluent. A heat exchanger of this kind operates at a high temperature and pressure and has limited flexibility in operating conditions. The traditional hydrogenation unit adopts the thread locking ring heat exchanger. CNOOC opted to incorporate a new spiral-wound high-efficiency heat exchanger for this service. The spiral-wound tube heat exchanger design includes direct welding of the tube sheet to the shell rather than the traditional flange connection structure. This design minimizes the risk of leaks seen with the HP thread locking ring heat exchanger. CNOOC Huizhou replaced two traditional HP thread locking ring heat exchangers with one spiral-wound tube heat exchanger in the ULSD IsoTherming® hydrotreater. This equipment selection lead to an equipment investment savings of 3.88 million CNY (U.S.$577,232).

B. Low energy consumption By eliminating the hydrogen recycle gas compressor and its ancillary recycle loop equipment, significant maintenance and operating cost savings can be realized. Overall, the IsoTherming® technology has consistently demonstrated a 40-60% utility savings over trickle bed technology including:

• The IsoTherming® reactor canned motor pump consumes substantially less energy than a

comparable trickle bed recycle gas compressor. The IsoTherming® unit power consumption is reduced, on average, by 30-40% for any application.

• The combined feed and reactor recycle volumes are sufficient to maintain low temperature profiles across each catalyst bed. The traditional trickle bed hydrogenation technology must control the bed temperature rise with chilled hydrogen, in which a large amount of reaction heat is removed with the recycle hydrogen, and eventually the majority of heat is cooled in the HP air cooler.

• In addition, the IsoTherming® technology recovers the heat of reaction by recycling a portion of

the hot hydrotreated reactor bottoms back to the inlet of the reactor. This direct transfer of heat to the feed in turn reduces the fired heater duty, i.e. lowers fuel gas consumption. Overall, the IsoTherming® technology has consistently demonstrated a 30-60% drop in fuel gas costs due to the reactor feed/bottoms heat integration designed into each IsoTherming® unit. Any excess reactor bottoms heat, beyond what is required to pre-heat the reactor feed, can be used to generate steam.

CNOOC Evaluation of IsoTherming® Commercial Experience

The IsoTherming® hydrotreating technology was first commercialized in 2003 at the Giant refinery in Gallup, New Mexico. DuPont acquired the IsoTherming® hydroprocessing technology in 2007 and has since licensed more than twenty units globally. At the time CNOOC evaluated hydrotreating technology options, DuPont had licensed seven (7) IsoTherming® units in China across a range of range of capacities and applications as presented in Table B.

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Table B: DuPont IsoTherming® Licensing Activity

CNOOC Technology Conclusions:

The IsoTherming hydrotreating process eliminates the recycle hydrogen system used in the trickle bed process, thus leading to savings in energy consumption as well as savings in equipment investment. CNOOC concluded “Thus, the DuPont process can operate with lower investment and lower operating cost so that it is a state-of-the-art technology taking a leading position at home and abroad.” CNOOC went on to state “The full liquid-phase hydrogenation technology is characterized by

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low investment, small floor space and low energy consumption, etc. so that it deserves massive application. Therefore, it is feasible for Huizhou Refining & Chemical Project (Phase II) to utilize the full liquid-phase hydrogenation technology in its diesel hydrogenation unit and VGO hydrogenation unit.”

Design Overview of CNOOC Huizhou Phase II ULSD and VGO HT Units A. CNOOC Huizhou Phase II ULSD Unit

The CNOOC Huizhou Phase II, 3.4 MTPA (71,639 bpd) IsoTherming® ULSD unit was designed to operate with ADU/VDU straight-run diesel as feedstock to make a diesel product that complied with China National V criteria. DuPont designed the IsoTherming® ULSD hydrotreater based on feedstock properties, Table C, and product properties, Table D, provided by CNOOC.

Table C: Design Feedstock Properties of CNOOC Huizhou Phase II ULSD unit

Content Test method Unit SRD VRDS Diesel

VGO HT Diesel

Feed Blend

Density ASTM D-1 17 kg/m3 @20°C 847.3 863.7 850.8 853.0 Nitrogen ASTM D-4629 Total wppm 120 400 45 150

Sulfur ASTM D-2622 S>50 wppm 14600 500 155 10860 Cetane Index

ASTM D-4737A 51.2

Bromine Number ASTM D-1159 g/100g 2.2 0 0 1.6

Distillation ASTM D-86 IBP oC 254 160 170 175 50 vol% oC 288 - 278 285 90 vol% oC 307 - 310 310 EP oC 341 350 357 348

Aromatics ASTM D-6591 Mono wt% 16.3 23.2 25.8 18.4 Poly wt% 13.7 10.7 5.5 12.3 Total wt% 30.0 33.9 31.3 30.7

Metals ASTM D-5708/ Core ICP Fe wppm <1.0

Flow Rate Design kg/h 298608 56647 49507 404762

Table D: CNOOC Huizhou Phase II ULSD Design Product Properties

Content Unit SOR / EOR Naphtha

SOR / EOR Diesel

Flowrate kg/hr 5669 / 5909 390997 / 385233 Density (15°C) kg/m3 754.7 / 748.0 832.8 / 835.0

Total Sulphur, ASTM D-7220 wppm ≤10 Nitrogen, ASTM D-4629 wppm ≤1

ASTM D-86, vol% °C IBP -98 / -97 148 / 120 50 138 280 90 153 304 EP 179 348

An overall process flow diagram for the unit is presented in Figure 4.

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Figure 4: CNOOC Huizhou Phase II IsoTherming® ULSD Hydrotreater

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A summary of key IsoTherming® reaction zone design parameters for the CNOOC Huizhou Phase II ULSD hydrotreater are summarized in Table E.

Table E: CNOOC Huizhou Phase II IsoTherming® ULSD Reaction Zone Summary

B. CNOOC Huizhou Phase II VGO HT Unit

The CNOOC Huizhou Phase II, 2.6 MTPA (59,105 bpd) IsoTherming® VGO unit was designed to hydrotreat a ADU/VDU VGO feedstock to make VGO to be fed to the fluidized catalytic cracking (FCC) unit and to make a diesel product to be fed to the 3.4 MTPA (71,639 bpd) diesel hydrogenation unit for further processing. DuPont designed the IsoTherming® VGO hydrotreater based on feedstock properties, Table F, and product properties, Table G, provided by CNOOC.

Table F: Feedstock Properties of CNOOC Huizhou Phase II VGO HT Content Test method Unit VGO #1 VGO #2 Feed Blend

Density @ 20 °C ASTM D-1217 kg/m3 944.5 905.0 908.7 Nitrogen ASTM D-5762 Total wppm 2480 860 1024

Sulfur ASTM D-2622 S>50 wppm 4130 26100 23872 Bromine Number ASTM D-1159 g/100g 1.2 1.2 1.2

Distillation ASTM D-1160 at 1 atM

IBP oC 377 352 352 50 vol% oC 472 441 445 90 vol% oC 522 518 518 EP oC 553 559 557

Aromatics ASTM D-6591 Mono wt% 21.4 Di wt% 16.0 Tri+ wt% 14.6 Total wt% 52.0

Carbon residue Con carbon number

wt% 0.40 0.10 0.10

Metals ASTM D-5708/ Core ICP Method

Na wppm Ni wppm 0.40 0.10 0.13 V wppm 0.08 0.10 0.10 Fe wppm 3.0

Design Rate kg/h 31384 278140 309524

Table G: VGO Product Properties of CNOOC Huizhou Phase II VGO HT Property Test Method Units SOR EOR

Std. Liquid Density (20°C) kg/m3 880.0 881.2 Total Sulfur ASTM D-2622 wppm ≤1000 ≤1000

Nitrogen ASTM D-5762 wppm ≤600 ≤600 Distillation ASTM D-1160 °C

IBP 299 298 50 414 419 90 490 493 EP 544 543

Parameter Unit SOR EOR Reactor Inlet Temperature °C 342 368

Reactor Inlet Pressure MPa(g) 9.22 9.38 WABT °C 365 392 LHSV hr-1 0.70 0.70

Chemical Hydrogen Consumption Nm3/m3 feed 63.9 60.5 Number of Catalyst Beds 5

Cycle Length months 36

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A summary of key IsoTherming® reaction zone design parameters for the CNOOC Huizhou Phase II VGO hydrotreater are summarized in Table H.

Table H: CNOOC Huizhou Phase II IsoTherming® VGO Reaction Zone Summary Parameter Units SOR EOR

Reactor Pressure MPa(g) 13.82 13.83 WABT °C 382 410

LHSV (Hydrotreating) hr-1 1.15 Chemical H2 Consumption (100% purity) Nm3 H2 / m3 feed 95.4 88.5

Number of Catalyst Beds 5 Run Length months 36

An overall process flow diagram for the unit is presented in Figure 5.

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Figure 5: CNOOC Huizhou Phase II IsoTherming® VGO Hydrotreater

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CNOOC IsoTherming® Technology Operations Highlights

A. CNOOC Phase II ULSD IsoTherming® Hydrotreater

CNOOC broke ground for the ULSD unit on October 16, 2014 followed by a successful startup on September 29, 2017. At the time of startup, the ULSD unit operation complied with the design and the ULSD product met China V standards as well. The ULSD unit underwent a Performance Calibration Test at full rate September 4-7, 2018. During the calibration test, all the products and waste emissions met unit design criteria indicating the IsoTherming® technology operated per the design intent. Historical diesel product sulfur content is presented in Figure 6.

Figure 6 CNOOC Phase II IsoTherming® ULSD Product Sulfur

1. ULSD IsoTherming® Hydrotreater Reactor WABT and Normalized WABT

WABT calculations for traditional trickle-bed technology are well documented for refinery hydroprocessing. Hydrogen is in excess and once the reactor pressure is set, reaction rate is typically governed by non-hydrogen reactants and reaction kinetics are most often represented by targeted reactants such as sulfur, nitrogen etc. WABT calculations are in a power law format when calculating catalyst deactivation. Results of operational WABT and normalized WABT calculations for the CNOOC Huizhou Phase II ULSD unit using industry standard trickle bed methodology are shown in Figure 7. The operational WABT is calculated as usual, i.e., 1/3 of reactor inlet temperature plus 2/3 of the reactor outlet temperature. A linear trending line of the normalized WABT is also shown. The slope of this normalized trending line shows about 1.3°C (2.3°F) per month. In traditional trickle-bed technology, the slope of this trending line is viewed as the catalyst deactivation rate.

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Figure 7

CNOOC Phase II ULSD IsoTherming® WABT (Trickle Bed Methodology)

The issue with applying trickle bed WABT methodology to IsoTherming® is that hydrogen is also a variable, in addition to those mentioned above for trickle bed, (with even stronger variation than other reactants along reactor beds) and needs to be represented in the kinetics if the power law is to be used to determine catalyst deactivation. This creates some challenges. Namely, in trickle-bed, normalized WABT is essentially an integral average of a single variable, for example, sulfur concentration. While in the IsoTherming® technology, the normalized WABT is an integral average of two variables in its product format (power law). So, mathematically, one is a line integration average (trickle-bed), the other is surface integration average (IsoTherming®). While integration average (normalized WABT) can always find a point (operational WABT) on the line to establish correspondence, there will be a much wider area to find a single corresponding point (operational WABT, most likely could be multiple points) on a two-dimensional surface to the integration average (normalized WABT). This means if one wants to find such a single and unique correspondence between operational WABT and normalized WABT, the normalized WABT must be calculated close enough to operation points where one of the variables, say, nominal hydrogen partial pressure more or less stays the same. Only such a calculated normalized WABT can be used to realistically detect the actual catalyst deactivation.

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Figure 8 CNOOC Phase II ULSD IsoTherming® Catalyst Deactivation

Figure 8 shows one such calculation and the slope indicated is 0.75 °C (1.35°F) per month. This result corresponds closely to commercial observations for the CNOOC Phase II ULSD IsoTherming® unit. A more intuitive way to look at this issue follows. The hydrogen profile for any IsoTherming® bed, Figure 9, would show that roughly one-third of the way down the bed, hydrogen has already been consumed to a significant level. Below this point, the reaction rate will typically slow down due to lower hydrogen availability, not catalyst deactivation.

Figure 9 IsoTherming® Hydrogen Profile

Attributing the slower reaction rate to catalyst deactivation, using the trickle-bed method, will reflect an over, and unrealistic, correction. This over correction must be accounted for during the normalization if trickle-bed normalization method is still to be utilized.

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2. Arsenic Poisoning

The design basis for the IsoTherming® ULSD hydrotreater did not account for the presence of arsenic in the feed. As a result, the current ULSD catalyst loading does not have specific arsenic guard material. Figure 10 illustrates the consistent presence of arsenic in the diesel feed analysis since startup.

Figure 10 CNOOC Huizhou Phase II IsoTherming® ULSD Feed Arsenic Content

Arsenic is widely recognized as a strong hydrotreating catalyst poison and its destructive effect on hydrotreating catalyst is regarded, by many, as permanent. The IsoTherming® Catalyst Deactivation plot, Figure 8, and commercial operating data does not reflect the expected negative impact of arsenic poisoning.

B. CNOOC Phase II VGO IsoTherming® Hydrotreater

CNOOC broke ground on the IsoTherming® VGO hydrotreating unit on October 16, 2014 and subsequently initiated a successful startup on October 1, 2017. CNOOC indicated it has demonstrated a successful application of the DuPont IsoTherming® liquid-phase hydrogenation technology in Huizhou Petrochemical, with all technical indicators proving the technology works well. A performance test for this unit will be completed in 2019 once sufficient feedstock is available to run the unit at maximum capacity.

CNOOC Huizhou Economic and Social Benefits Analysis

A. CNOOC Phase II Hydrotreater Economic Analysis

CNOOC developed cost estimates for engineering and bare equipment during their hydroprocessing technology option evaluation. Their results are summarized in Table I.

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Table I: CNOOC Hydrotreating Engineering & Equipment Cost Analysis

B. CNOOC Phase II Hydrotreater Operating Cost Savings

1. 3.4 MTPA (71,639 bpd) ULSD IsoTherming® Hydrotreater

CNOOC determined an average IsoTherming® ULSD hydrotreater only requires approximately 50% of the energy consumption of a comparable Chinese trickle bed design. A portion of the IsoTherming® operating cost advantage comes from reduced fuel gas use due to optimized feed/product heat integration. For any given IsoTherming® unit, the feed furnace duty is determined by start-up conditions when there is insufficient product heat to exchange with the feed. As a result, IsoTherming® feed heaters typically run at significantly lower design conditions once the unit is stabilized. For the CNOOC IsoTherming® ULSD unit, the feed furnace only operates at approximately 23% of design, leading to a fuel gas savings of 7.854 million CNY/year (U.S.$1,168,360/year) compared to a comparable trickle bed design).

Figure 11 CNOOC Phase II ULSD Feed Heater Fuel Gas Consumption

Trickle bed IsoTherming® Difference ¥362,759,800 ¥279,628,000 ¥83,131,800$54,413,970 $41,944,200 $12,469,770

Bare Equipment Cost Breakdown Trickle bed IsoTherming® Difference ¥108,132,000 ¥64,910,900 ¥43,221,100$16,219,800 $9,736,635 $6,483,165¥62,560,300 ¥43,857,700 ¥18,702,600$9,384,045 $6,578,655 $2,805,390

¥57,255,200 ¥32,280,500 ¥24,974,700$8,588,280 $4,842,075 $3,746,205

¥32,639,900 ¥26,406,500 ¥6,233,400$4,895,985 $3,960,975 $935,010

Static equipment

Mechanical equipment

Process pipe

Automation

CNOOC Total Engineering & Bare Equipment Cost Estimate

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As shown in Figure 11, the unit total fuel gas consumption on a per ton basis of fresh feed is plotted against the unit total fresh feed rate. It clearly shows that when more feed is processed, more energy savings can be realized (within the design limit) and this is one of the strong advantages of IsoTherming® technology. The fuel gas savings combined with additional IsoTherming® operating cost advantages result in total operating cost savings to CNOOC for the Phase II IsoTherming® ULSD unit of 65.7 million CNY/year (U.S.$9,853,200/year) compared to a trickle bed design.

2. 2.6 MTPA (59,105 bpd) IsoTherming® VGO Hydrotreater

A similar calculation was done by CNOOC for the Phase II IsoTherming® VGO hydrotreater. CNOOC determined an average IsoTherming® VGO hydrotreater only requires approximately 60% of the energy consumption of a comparable Chinese trickle bed design. While a portion of the IsoTherming® operating cost advantage comes from reduced fuel gas consumption, the CNOOC IsoTherming® VGO unit, realizes total operating cost savings of 27.3 million CNY/year (U.S.$4,095,000/year) compared to a trickle bed design.

C. Social benefit

CNOOC concluded that the projects, when built and put into operation, did yield a remarkable reduction in energy consumption. The anticipated savings of large amounts of fuel gas and steam were realized along with a considerable reduction in emissions. Overall the projects had a positive impact on environmental protection.

Conclusion

Currently two hydrogenation options are available for production of ULSD, including traditional trickle bed technology and liquid-phase hydrogenation technology, IsoTherming®. CNOOC technology selection targeted reduced operating costs and improved economic benefits. The IsoTherming® technology has demonstrated through commercialization that it is a well-proven, reliable and acceptable refining upgrading technology that is capable of diesel and VGO hydrotreating. CNOOC states the IsoTherming® hydroprocessing technology is characterized by low investment, minimal plot space and low energy consumption and therefore it deserves broad application.