Tesoro ready for upgrades in Nikiski

Petroleum refiner plans to add $45 million sulfur-stripping operation to meet Alaska’s need for ultra-low-sulfur diesel

Rose Ragsdale

For Petroleum News

Tesoro Alaska is moving ahead with plans to add a hydro-treating facility to its 72,000 barrel-per-day petroleum refinery in Nikiski.

The $45 million project will enable Tesoro, one of Alaska’s leading petroleum fuels manufacturers, to supply the state with most of the ultra-low-sulfur diesel it will need when federal rules mandate use of the 15 parts-per-million sulfur fuel in 2010 and 2012.

Tesoro, meanwhile, will provide the relatively small amount of ultra-low-sulfur diesel needed this year for Alaska’s urban highway fleet, using its existing refining capacity, according to Vern Miller, chief engineer at Tesoro Alaska.

“As time goes along in the future, we will need more fuel, but we can make the 10 percent needed right now, off our existing hydrocracker,” Miller told members of the Alaska Support Industry Alliance Kenai Chapter at a meeting May 16.

He said the Alaska Department of Environmental Conservation estimates that Alaska motorists use 3,000 bpd, or roughly 165,000 gallons per day, of diesel on the state’s non-rural highways during the high-demand summer months and a lesser amount in winter.

This does not include the marine and home-heating fuel consumed in rural Alaska nor the 3,300 bpd of diesel used by oil producers on Alaska’s North Slope.

Alaska’s rural and urban users together consume about 60 million gallons of diesel a year, according to DEC.

Miller gave the Alliance a brief overview of changing regulatory requirements for diesel fuel in Alaska as well as Tesoro’s plans for modifying its Nikiski refinery to meet USLD needs.

Groundbreaking this summer

The construction will include a 10,000 bpd diesel distillate desulfurizer comprised of a standard hydrotreater with a fracturenator instead of a stripper, Miller said.

“This will allow us to produce No. 1 diesel for winter and (other) summer blends of fuel,” he explained.

How does a distillate desulfurization unit work?

Once high-sulfur diesel or jet fuel is manufactured, it is then heated to temperatures hotter than 600 degrees Fahrenheit, according to a company illustration.

Next, hydrogen gas is mixed with the hot distillate and routed into a reactor where the mixture is subjected to high pressure in the presence of a catalyst. The resulting chemical reaction causes sulfur to leave the hydrocarbon molecules and bind to the hydrogen, forming H2S.

The mixture then is moved to a fracturing unit where the H2S is stripped from the diesel or jet fuel. The resulting fuel product is clean enough to meet regulations, and the H2S can be further processed to produce elemental sulfur.

Modifications begun this spring

To avoid contamination of ULSD with high-sulfur diesel, every operator in the supply chain, from the refiner to the trucking fleet manager, will be required to keep the cleaner fuel separated from the older product. This means separate refining facilities, pipelines, terminals, tankers and storage tanks.

Construction of a new dock, tank farm and terminal are under way at Tesoro, Miller told the Alliance.

Tesoro began flushing pipelines and stripping storage tanks for ULSD in Anchorage in April. “We will have a dedicated facility this year and a second terminal in 2007,” Jeff Evans told the Alaska Truckers Association in April.

Tesoro aims to manufacture ULSD with 6 ppm at the refinery that will average 8 ppm at the terminal and leave the terminal at 12 ppm, Evans said.

Tesoro already makes ultra-low-sulfur gasoline, so the refiner plans to sandwich the new diesel between batches of the gas in the same pipeline. In addition, the company also manufactures gasoline, liquefied petroleum gas, heavy oils and bunker fuels and liquid asphalt.

Tesoro plans to offer four grades of diesel this year, including ULSD and five grades next year. Some of the diesel will be exported to the West Coast, according to Evans.

Tesoro’s competitor North Pole refiner Flint Hills is helping to pay for the refinery upgrades thanks to a multiyear agreement the company entered with Flint Hills in November. That company contributed capital to cover part of the cost of the $45 million project in exchange for receiving a guaranteed minimum in-state supply of 6,000 bpd ultra-low-sulfur diesel.

Miller declined to say how much capital Flint Hills contributed to the project, but Flint Hills’ officials reportedly have said their company put $15 million toward the construction.