Economic Analysis of the Benefits to Petroleum Refiners for Low Carbon Boosted Spark Ignition Biofuels

A refinery modeling framework is developed to estimate the benefits of blending high-quality biofuels directly with refinery gasoline components to produce premium grade fuels. The results offer a change in paradigm - instead of biofuels being competitors to fossil fuels, biofuels can add value to refineries’ product slates, because of their favorable properties. This potential value can be characterized by calculating the breakeven value (BEV), as defined below. The proposed modeling framework incorporates extensive data from (1) projected product demands over the next few decades, (2) crude oil and refinery products pricing, and (3) fuel specifications. The complete refinery models serve as a basis for assessing the value of biofuels, assuming profitability remains the same for representative petroleum refinery configurations. Resulting valuations varied widely with BEVs observed between $10-$120/bbl given the considered blending levels and crude prices. Further, BEV was correlated with the fuel octane ratings such as octane numbers (research, RON and motor octane numbers, MON) and both antiknock index (AKI, average of RON and MON) and sensitivity (S, difference between RON and MON), with a slightly higher correlation with the sensitivity. However, the expected decrease in gasoline demand for the upcoming years could negatively impact biofuels demand and value, in a business-as-usual scenario. The analysis also showed high valuations in smaller refineries since they can enhance the capabilities for producing specialty, high-value fuels/products, and introduce high octane-barrels into otherwise constrained blending operations. Additional implications towards refiners include opportunities to rebalance operations, access to high-value fuel markets, and synchronization with broader transportation industry trends. Furthermore, results indicate the value of Co-Optima boosted spark ignition (BSI) efficiency gains can extend to refiners to incentivize decarbonization and diversified feedstock production.