Middle East PETROTECH 2001 Conference and Exhibition

29-31October 2001

HYDROGEN PLANTS FOR THE NEW MILLENNIUM

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INTRODUCTION

Hydrogen is increasingly being considered as a utility gas within the refining and petrochemical industry. From an end users perspective, investments in hydrogen plant capacity tend to be judged by the cost of producing hydrogen molecules rather than by the rate of return from the plant.

Hydrogen generation capacity is usually required to support major expansions or major reconfigurations of core process units. Assuming that all other hydrogen sources in an existing facility are fully utilised, there are two routes for the end user to obtain this additional hydrogen:

! !

For the end user to own and operate its own hydrogen plant For the end user to buy hydrogen over the fence from a third party industrial gas supplier

End users of hydrogen, bought via either route, look for reliable supplies to the specified hydrogen purity. In this context, there are limited opportunities for product differentiation. Therefore, the competitive strategy of the hydrogen plant supplier has to be based around being the lowest cost hydrogen provider.

The question to ask is what does lowest cost mean? Is it lowest initial capital investment, lowest feedstock / fuel / utility / catalyst / chemical consumption or lowest operational and maintenance costs? Foster Wheelers initiatives to develop its SMR hydrogen plant technology are driven by minimising the lifecycle cost of producing hydrogen by optimising the balance of these factors.

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Over a period of decades, SMR hydrogen plants have continued to be the leading technology used for generation of source hydrogen on refining and petrochemical complexes. A typical example and an SMR hydrogen plant is shown below:

50 MMscfd Steam Methane Reformer Hydrogen Plant at Lagoven, Amuay in Venezuala

SMR is a mature technology and is now unlikely to yield any large step changes in economic benefit from technological developments. Marginal economic improvements are the order of the day. These result from continued development and optimisation of the following:

! ! ! ! ! !

Main process design parameters Balance of capital and operating costs Synergistic design with existing plant facilities Project execution techniques Operation and maintenance techniques Financial modelling techniques

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This paper focuses on the techno-economic choices available in selecting and developing optimum SMR hydrogen plant configurations using the main process design parameters and Discounted Cash Flow (DCF) financial modelling.

ECONOMIC FACTORS AFFECTING THE COST OF HYDROGEN

Economic theory on the benefits obtained through technology development is, at best, a complex subject. Introductory notes covering economic theory are included in Appendix 1 for reference.

At a practical level, there are a large number of variable factors affecting the cost of producing hydrogen. Many of these, including the unit costs of feedstock and utilities are either given factors or pass through the economic evaluation calculations. The flexibility available in establishing optimised economic results revolves around financial modelling, charging structures and the main process design parameters.

2.1

Financial Modelling

Foster Wheeler uses DCF modelling methods to establish the lifecycle cost of producing hydrogen, to quantify the driving factors for technology development and to assist in the choice of optimum hydrogen plant configurations. In order to perform accurate DCF modelling, all major costs elements need to be input covering each year in the lifecycle of the hydrogen plant. Typical inputs to the DCF model include the following:

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Initial plant capital, typically spread over a two year project schedule Residual capital value (if any) at the end of the plant lifecycle

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! ! ! ! ! ! ! !

Annual costs of feedstock and utility consumptions Annual costs of catalysts and chemicals Annual costs of operating staff and overhead costs Annual costs of maintenance Annual revenues from exporting the hydrogen product Annual revenues from exporting the steam products The cost of financing the resulting cashflows The required rate of return over the lifecycle

In pure costs terms, the cost of the capital elements of the plant can vary from as little as 10 % of the overall cost, in cases where feedstock costs are high, to in excess of 40%, where the scale of the plant is relatively small. This demonstrates the need to select plant configurations suiting the economics of the project rather than offering the same standard plant configuration to suit all cases.

2.2

Charging Structures

Revenue charges can be arranged to suit the end users cashflow requirements. Typical examples of this include fixed and variable fee elements or combining charges as a totally variable fee with a guaranteed minimum product take.
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Plant capital charges are usually arranged such that the ownership of the plant resides with the industrial gas supplier. Options can also be included allowing the end user to lease the plant and take delayed ownership based on residual capital values at the time of purchase. These types of option can be used to reduce the end users initial capital investments and in some cases tip the balance of project sanction. Charging structures can be arranged to provide considerable flexibility to suit the overall project economics and the end users cash position.

2.3

Hydrogen Plant Design Parameters

To establish the minimum life cycle cost of hydrogen, all the major fixed and variable cost elements need to be established. The choices taken in shaping a hydrogen plant design need to be economically driven. Some of the choices available are discussed in the following section along with typical examples to demonstrate their economic effect on the cost of producing hydrogen.

DESIGN PARAMETERS AFFECTING THE COST OF HYDROGEN

There are many design parameters ultimately affecting the cost of the product hydrogen. This discussion is limited to five process parameters affecting the hydrogen yield and the energy balance. Hydrogen plant variable operating costs are a substantial portion of the total cost of the product hydrogen. The five parameters considered are: ! ! ! ! !

Reformer outlet temperature Steam to carbon ratio Unit operating pressure Shift reactor operating temperature H2 recovery in the PSA unit
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3.1

Reformer Outlet Temperature

The steam methane reforming reaction is strongly endothermic and therefore favoured by higher temperature. Typical reformer outlet temperatures fall in the range 1500 F to 1650 F. As the temperature is increased, the hydrogen yield increases which is observed by a reduction of the methane concentration in the reformer effluent, known as the methane slip. The higher yield means that less feedstock is consumed, for example, a 1.3% reduction in feedstock can be achieved by increasing the outlet temperature by 10 F. Due to the lower methane slip, the energy in the PSA tail-gas is reduced and since this stream is the base load fuel for the reformer, the supplementary fuel imported to the unit increases. This effect is enhanced because the higher reformer outlet temperature increases its radiant duty. The supplementary fuel is a relatively small flow and is strongly influenced by small changes to the reformer heat balance, so that in this case, there is a small increase in the total feed/fuel consumption.

The export steam flow will increase by 1.3% for an increase in the reformer outlet temperature of 10 F. This effect is due to the increase in radiant duty and reduction in the steam requirement for the process feed giving the net increase in the steam available for export.

Taken overall, the higher reformer outlet temperature shifts the heat balance to produce more steam from more feed/fuel. DCF analysis is a useful tool to evaluate the economic benefit of design optimisations. The effect can ultimately be expressed as a change in the life cycle cost of hydrogen product, but in this discussion, the effect on the project internal rate of return (IRR) is used as a general way of illustrating the impact.

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In this case study, typical monetary values are assigned to process streams as follows: Natural gas feedstock Supplementary fuel Export steam (600#) Demineralized water Cooling water Electricity 2.1 US$ / MM Btu 2.1 US$ / MM Btu 5 US$ / 1000 lb 6 US$ / 1000 USgal 0.12 US$ / 1000 USgal 0.05 US$ / kWh

The case study uses a natural gas feed/fuel design configuration with a nominal capacity of 10 MMscfd. The graph below shows IRR against the normally acceptable range of reformer outlet temperature available to the designer. In this case study, the economic factors have been chosen to give results with the IRR centred around a nominal 10%.

It should be noted that the nominal IRR figure chosen is for illustrative purposes only and should not be read as an upper limit on hydrogen plant investment returns.

Reformer Outlet Temperature

Internal Rate of Return (%) 11.5 11 10.5 10 9.5 9 1510

1530

1550

1570

1590

1610

1630

Temperature (deg F)

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The graph demonstrates the significant impact on the project profitability, which would be translated into life cycle cost of hydrogen in terms of $ per scf. The case study utilises a design configuration based around Foster Wheelers proprietary Terrace Wall reformer. The modern trend at Foster Wheeler is to use high reformer outlet temperatures in the region of 1620 F to take advantage of the economic benefits available with these typical feed and utility costs.

3.2

Steam to Carbon Ratio

The feed gas to the reformer is a mixture of steam and hydrocarbon gas. The mixture is characterised by the steam to carbon ratio, which is the molar ratio of steam to the reactive carbon contained in the hydrocarbon gas. A higher steam to carbon ratio drives the reaction closer to the equilibrium and increases the hydrogen yield. Reforming catalysts require steam to be present in excess, increasing the volumetric throughput and cost of the plant and so there is always interest in reducing the steam to carbon ratio. In doing so, there is an increase in feedstock consumption, which is almost balanced by a decrease in demand for supplementary fuel. A 1.8% increase in feedstock use will be the result of reducing the steam to carbon ratio by 0.1. The mechanism of these effects is opposite to that for higher reformer outlet temperature, in that the methane slip increases and the PSA tail-gas contains more energy.

The decrease in steam to carbon ratio gives rise to an increase in the reformer radiant duty, which increases the steam generated in the convection section. Less steam is used in the process and the steam exported from the plant is further increased. A 0.9% increase in steam export will arise from a reduction in steam to carbon ratio of 0.1.

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Steam to Carbon Ratio

Internal Rate of Return (%) 11 10.5 10 9.5 9 2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 3.6 Molar Steam/Carbon Ratio

In this case the significant benefit of lower steam to carbon ratio is clearly shown. Todays hydrogen plants almost always minimise the steam to carbon ratio driven by these economic benefits. On this subject the technology edge is with the catalyst performance and an understanding of the tendency of the feedstock to form carbon at the reformer inlet. A typical steam to carbon ratio in a configuration containing an HTS reactor is 2.8.

3.3

Unit Operating Pressure

Hydrogen plants comprising a steam methane reformer and a PSA purification section, can comfortably produce hydrogen over a pressure range of 260 psig to 400 psig. Quite often, these pressures are suitable for the facility hydrogen network and so the hydrogen plant operating pressure will be set by the network without the need for product compression. In this case, feedstock must be supplied at about 160 psi higher than the product hydrogen. However, it is also common that there is a need to provide compression for both the feedstock and the product hydrogen, in which case, the reformer operating pressure will be chosen by consideration of appropriate stages of compression and also the effect on the plant performance and cost.

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Typical reformer conditions give an increase in molar flow rate of approximately 50% across the catalyst tubes, and therefore the reactions are favoured by lower pressure. The change in pressure affects the reformer hydrogen yield and the energy contained in the PSA tail-gas in a similar way to the previous discussion. For a reduction in the pressure of 15 psi, the feedstock consumption reduces by 1.1%, while the supplementary fuel demand increases by a lesser amount, such that the overall energy input is reduced.

For a change in the reformer operating pressure, the change in the export steam flow rate is insignificant. This is essentially because the reduction in feedstock flow reduces the steam generation by a similar amount to the reduction in the steam required by the process.

Unit Operating Pressure

Internal Rate of Return (%) 11 10.5 10 9.5 9 260

280

300

320

340

360

380

400

Hydrogen Pressure (psig)

The graph demonstrates the value of lower operating pressure. Whenever there is a choice of operating pressure, Foster Wheeler aims to select the lowest practical pressure when optimised with other parameters.

3.4

Shift Reactor Operating Temperature

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The water gas shift reaction is moderately exothermic and so is favoured by lower temperature. A range of commercial catalysts is available covering operating temperatures of 390 F to 750 F providing plenty of flexibility in the design of the process configuration. Changing the catalyst type from iron (HTS) to copper (LTS) together with associated flowsheet changes, can have significant benefits, whereas optimising the operating temperature of HTS catalyst has a more mild effect. When its operating temperature is reduced, the carbon monoxide concentration in its effluent decreases, which improves the hydrogen yield. For a reduction in temperature of 70 F, the feedstock consumption reduces by 1%, however, due to the change in the energy in the PSA tail-gas, the supplementary fuel increases by a similar amount. The effect on export steam flow is very mild. It is influenced by the small change in feedstock consumption and the minor variation to the syngas cooling train, which recovers heat into the steam system.

HT Shift Temperature
Internal Rate of Return (%) 11 10.5 10 9.5 9 620

640

660

680

700

720

Inlet Temperature (deg F)

It can be seen that the effect of HTS operating pressure on the IRR are mild, and for this reason Foster Wheeler prefers to standardise the design to optimise the performance of the catalyst and employs a temperature ramping technique to this end.

3.5

Hydrogen Recovery in the PSA Unit

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The key design specification for the PSA unit is the hydrogen recovery, defined as the moles of hydrogen in the product compared to the moles of hydrogen in the PSA feed gas. Modern high performance designs can achieve up to 89% hydrogen recovery, while simpler designs using fewer adsorber vessels can still achieve 84%. As the hydrogen recovery specification is increased, the plant feedstock consumption reduces accordingly, but at the same time, the flow rate of PSA tail-gas also reduces, so that more supplementary fuel is required with the net result being a noticeable reduction in the total feed/fuel consumption. For a 5% points increase in hydrogen recovery, the feedstock consumption will decrease by 5.7%.

Higher yield in the PSA means that all of the flows in the front end of the plant are reduced including the export steam. For the 5% points increase in hydrogen recovery, the steam export flow reduces by 4.3%. Taken overall, the higher hydrogen recovery shifts the heat balance to produce less steam from less feed/fuel.

PSA Unit Hydrogen Recovery

Internal Rate of Return (%) 11 10.5 10 9.5 9 83 84 85 86 87 88 89 % Hydrogen Recovery

The graph illustrates the more moderate impact of hydrogen recovery on the IRR of the project and therefore also on the cost of product hydrogen. Even so, when optimising a plant design, this benefit is valuable in todays highly competitive market. Using the monetary

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values in this case study, Foster Wheelers new plant designs typically utilise PSA recovery in the region of 88%.

3.6

Comparison of Benefits of Design Parameters

The relative benefits of the design parameters on the feedstock consumption are presented below:

Impact of design parameters on Feedstock. ( expressed over practical range of design ) Ref T.out S/C Ratio Pressure Shift Temp PSA Rec 0 5 10 15

% Change in Feedstock

The impact on feedstock consumption is given approximately for the whole of the practical ranges available to the process designer, for each of the discussed parameters. Broadly, this indicates that reformer temperature, steam to carbon ratio and unit operating pressure, are significantly more powerful than PSA hydrogen recovery and shift reactor temperature. This is most relevant when the feedstock is expensive and the supplementary fuel has only low value.

However, some project sites have significantly different economic factors, such as very low cost gas feedstock, which leads to variations in the optimum process parameters. Additionally, there are other technical factors, which impact the way in which the individual parameters may be combined into a design. For example, it is impractical to choose a steam
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to carbon ratio of 2.5 with an HTS reactor in the configuration and also impractical to choose a PSA recovery of 89% with a product hydrogen pressure of 260 psig. Therefore in the large scale hydrogen plant field, it is still most common to optimise the design to the site conditions, rather than select a pre-engineered, off-the-shelf unit.

3.7

Variable SMR Designs for Specific Steam Export Requirements

HP steam is a natural by-product from the Steam Methane Reformer because of the large quantity of waste heat generated at high temperature and because steam raising equipment is always present to produce the process steam for the reformer feed gas. Of the fuel energy fired in the reformer furnace, about 50% escapes into the convection section, while only about 15% is required to preheat the process feedstock. Not only this, but there is also a very large amount of heat in the reformer process effluent and very few cold streams to preheat, leaving a lot of surplus heat available to generate steam for export. The by-product steam can be superheated or saturated, at pressures of 600 psig or higher. It is most suitable as a base load steam generator since the export flow rate is linked to the hydrogen production flow rate, but also because generation is at a very high thermal efficiency of greater than 90% LHV basis, which is usually higher than steam boiler units.

In the most simple hydrogen plant designs, all the surplus energy is converted into steam using coils in the convection section and process gas waste heat boilers. A graph of typical steam export rate across the range of hydrogen production is shown below:
Typical Va riations in Steam Export Rates ( no air preheat )

2
Steam Rate Factor

1.5 1 0.5 0
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40

100

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Plant Operating Capacity %

The steam rate factor in the graph is expressed as US ton per hour per MMscfd of hydrogen. An effective method of reducing the steam export flow rate, is to move heat into the combustion air using air preheaters installed in the flue gas system. To handle the combustion air, it is necessary to include a forced draft fan with ducting to the burners, in addition to the usual induced draft fan for the flue gas. A diagram of an air preheat system is shown below:

The steam export flow rate can also be increased above that provided by the simple design, by adding auxiliary burners in a combustion chamber integrated with the convection section. The location of auxiliary burners in the reformer is shown below:

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Auxiliary burners provide the ability to vary the steam export semi-independently of the hydrogen production rate and typically can produce up to an extra 50% steam export. In this way, although the steam by-product should still be considered as a base load facility, some degree of control is provided for its production.

The ability to vary the steam export using auxiliary burners can even be combined with an air preheat system to achieve the variability at a lower level of export flow rate. Typical variations in steam export rates with single and double air pre-heaters and auxiliary burners are shown below:

Typical Variations in Steam Export Rates

3
Steam Rate Factor

2.5 2 1.5 1 0.5 0 40 100

Plant Operating Capacity %
Double Air Preheat Single Air Preheat No Air Preheat Auxiliary Burners

The flow rate of export steam is one of the most variable specifications in the basis of design of a hydrogen plant. It can often be dictated by the project site steam balance, and will always be subject to the prevailing economic conditions. As an illustration, an example of the impact of including a single air preheater in the design is given. The effect on the plant performance is shown in the table below. Quite simply, there is a shift in the heat balance in that less supplementary fuel is consumed to produce less export steam.

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Hydrogen production Natural gas feedstock Supplementary fuel Export steam (600#)

MM scfd MM Btu/h MM Btu/h US Ton/h

No air preheat 10 141 48 17

Single air preheat 10 141 34 12

Using as before the typical feedstock and utility values and the DCF analysis, it becomes apparent that with the air preheat system, the price of the export steam must increase by 1.3 US$ / 1000 lb when all other factors are kept constant. Therefore, in this case, the economics favours producing more export steam using the simpler design without air preheat since the marginal cost of the extra steam is low. The air preheat system is clearly suited to economic conditions where the cost of the fuel is high relative to the price of the steam.

Consider the effect when the DCF analysis is repeated with the fuel cost at 5.0 US$ / MM Btu. With the air preheat system, the price of the export steam can decrease by 0.50 US$ / 1000 lb when other factors are kept constant, except the price of hydrogen, which for any design will rise in line with the cost of feedstock and fuel. In this case, the economics favours the air preheat system and the marginal cost of more steam is high.

SUMMARY AND CONCLUSION

Foster Wheelers initiatives in developing its SMR hydrogen technology are driven by minimising the lifecycle cost of producing hydrogen using discounted cash flow methods. This has resulted in a variety of new plant configurations, based on the following changes to the main design parameters:

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! ! ! ! !

Higher reformer outlet temperatures Lower steam to carbon ratios Lowest practical operating pressures Temperature ramping techniques for HTS catalysts Higher PSA recovery levels

The question posed in the introduction to this paper is What does lowest cost mean? Foster Wheelers view is that all providers and end users of hydrogen benefit from using lifecycle cost analysis. With this in mind, it is usually preferable to design with high reformer outlet temperature, low steam to carbon ratio and high recovery in the PSA unit for a given operating pressure. Use of DCF financial modelling clearly demonstrates the advantages gained by this approach and is the driving factor behind the development of Foster Wheelers Steam Methane Reforming Hydrogen Plant.

REFERENCES

Nellis, J.G. and Parker, D. (1997) The Essence of Business Economics, 2nd Edition, London: Prentice Hall International.

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APPENDIX 1 ECONOMIC THEORY OF TECHNOLOGY DEVELOPMENT There are a number of defined economic terms relating to the effects of technology development on plant economics:

Marginal costs of production, defined as the additional costs of producing one more capacity unit of hydrogen, depends on the changes in variable costs in the short run because fixed costs are constant as output changes.

Short run average costs (SRAC) of production, defined as production cost over a period where at least one of the main parameters of production is fixed, e.g., the installed capacity of the hydrogen plant.

Long run average costs (LRAC) of production, defined as the production costs over a period where all factors of production can be varied in order to alter the scale of production.

The aim of the plant designer is to select the plant configuration which produces the lowest short run average cost of production at the design capacity of the plant, using the best available current technology.
Average Cost Curve

Unit Production Cost Short Run Average Cost

Long Run Average Cost

Production Capacity
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If the plant is operated in turndown mode, the cost of production increases following the left hand side of the SRAC curve. If the plant is operated above the design capacity, the cost of production increases as the capacity becomes limited by the controlling plant design factors.

The effect of marginal technology improvements in the long term is a reduction in the short run average costs of production. When a technology improvement is implemented, the LRAC curve shifts down and to the right giving lower unit costs of production. The obvious message here is that all hydrogen plant suppliers must continuously improve their current technology to remain competitive in the long term.

As an existing technology matures, it becomes increasingly difficult to shift down the LRAC curve any further. Introduction of a completely new technology for producing hydrogen would have the effect of shifting the LRAC curve down and to the left. The immediate effect of this would be a step change reduction in the unit costs of production, even for smaller capacity plant. The longer term effect of this would be to negate the use of the existing mature technology.

The obvious message here is that all hydrogen plant suppliers must keep their eyes open for the development of completely new technologies which may supersede SMR hydrogen technology, position themselves to implement this, or fall into terminal decline.

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