The main reason for the change is the shift in demand for fuels and chemicals. Annual refined products growth up to 2030 is expected to be 0.6% before flattening and then slowly starting to decrease. This is mostly due to environmental policies that encourage use of other alternative products as energy and fuels.
The future for petrochemical products, on the other hand, looks very promising thanks to growing quality of life and emerging new materials derived from polymers/plastics, etc. New petrochemical project announcements have been on the rise – a year-over-year increase of 30%-40% in recent years.
Logically, refinery-petrochemicals integration will continue to grow so that energy companies can ride the wave of the changing market landscape. Global trends in petrochemical project development are: refinery-petrochemicals integration for operating and new facilities; residue upgrading; optimisation – better feedstock and product flexibility; crude-oil-to-chemicals (COTC) concept; higher petrochemical yield from refining units; revamp of RFCC (residue fluid catalytic cracking) and other processes; on-purpose petrochemical feedstock production; market focus for petrochemical plants; changes towards targeted high value/specialty chemical products; and molecule management.
According to IHS Markit’s analysis of refinery margins in East of Suez region, at least 30% of refineries are in the first quartile with margins between $15-$30/barrel net, and they are (with only a couple of exceptions) heavily integrated with petrochemical production.
Refineries of the future
We compared the views of leading industry players such as Nexant, Axens, Honeywell UOP, McDermott, KIPIC, and others with our in-house experts’ viewpoints and compiled them into an evolution scheme.
As of today, a typical refinery processes crude to mainly make fuels (end products) and also to make certain feedstocks that go into petrochemical complexes. The refinery’s main goal is to maximise transportation fuels. But, if demand for those products eventually decrease, there will be a need for technologically advanced complexes that demonstrate flexibility, producing high-quality products only, less diesel and more jet fuel, more petrochemicals (olefins to aromatics ratio 75/25). The final point of this journey – as many experts and companies predict – is a COTC plant, producing zero fuels with expected lower environmental impact, efficient in both capital and marginal perspectives, prioritising higher value petrochemical products.
Key elements that shape deep integration, or COTC concepts are: complexity and technology (know-how), including operational agility and commercial flexibility; scale – market, investment and resource capabilities; and project strategy and execution – management of risks, thorough evaluation of all important inputs and scenarios, reliable partners and contractors, and availability of funds.
For now, only national oil companies, or international holdings could possibly apply this strategy without risking the stability of current operating model and its profitability. The major difference between ‘traditional’ integration route and COTC is that the latter can increase the scale of petrochemical production in up to four times (maybe more as technologies continue to develop). The complex can operate in crude processing capabilities same as a refinery does.
COTC requires a significant reconfiguration of the refinery. We agree with the opinion that several large COTC plants can and would strongly alter the world’s petrochemical balance and prices. There are a few COTC routes: conventional (crude oil/refinery/naphtha/steam cracker/petrochemicals); ExxonMobil’s technology (light crude/steam cracker/petrochemicals); Saudi Aramco/SABIC (light crude/COTC/petrochemicals); and Chinese facilities (mix of crudes/COPX complex/paraxylene and other petrochemicals).
The driving forces are different: Saudi Aramco – from oil company to petrochemical company (traditional high-value route); and Chinese projects – integrating back petrochemicals via new refinery to produce feedstock (PX).
Today, there is only a few operating COTC plants in the world – one is located in Singapore based on ExxonMobil’s technology (1mmta ethylene cracker), and a few more in the pipeline, located in Asia and the Middle East.
Saudi Arabia is the leader in new petrochemical capacity investments. The kingdom plans to nearly triple petrochemical production capacity by 2030 – from 12mmtpa to 34mmtpa. The country will accomplish this goal by adding petrochemical capacity to existing reﬁneries, as well as building grassroots facilities. They analysed that going towards circular economy will help gradually reduce GWP (global warming potential) per barrel of crude consumed by 47% after all the alterations and modernisation is completed. That is an unprecedented saving on resources and increase in expected efficiency.
The COTC project concept involves the construction of an integrated refinery and petrochemical complex in Yanbu, Saudi Arabia, which will process 20mtpa of Arabian Light and Arabian Extra Light crude, with the maximum production of petrochemicals (polyolefins, aromatics and butadiene). The project process configuration will include an integrated primary and vacuum distillation unit, distillates hydrotreatment, vacuum gas oil hydrocracker and residue catalytic cracker.
The petrochemical part of the project will be represented by a steam cracker operating on mixed feed, as well as polyethylene and polypropylene production units, and butadiene and aromatic hydrocarbons extraction. Saudi Aramco and SABIC was expecting to receive the final FEED by the end of 2019, and in mid-2020 to open a tender for construction and assembly works, and by the end of 2024 the complex is scheduled to be put into operation. The total project investment is more than $20bn.
Zhoushan refinery complex located in China is operated by the Zhejiang Petroleum and Chemical Company. The new refinery started up both its CDUs (crude distillation units) in 2019 – first one in May and the second one early November. The complex consists of two phases and will have a refining capacity of 800,000bpd. Other downstream products that will be produced at the complex include polyethylene (PE), polypropylene (PP), ethylene oxide/ethylene glycol (EO/EG), ethylene vinyl acetate (EVA), styrene, butadiene (BD), and many others. The crude shall be imported from Saudi Aramco, and also possibly may be taken from China.
Another interesting example of integration is the project of Hengli Petrochemical (Dalian) Refinery Co in China. The configuration of the complex includes a refinery that provides processing of 20 million tonnes of oil per year, and a number of petrochemical units: propane dehydrogenation, isobutane dehydrogenation, and polypropylene production, and the ‘heart’ of the plant is ‘crude-oil-to-paraxylene’.
This complex includes three reformers with the catalyst continuous regeneration, two extraction lines, xylenes isomerisation and paraxylene (PX) purification. The capacity of the complex is three million tonnes of PX per year. The refinery went into full operation successfully in May 2019. Implementation of the Dalian project will allow the mother company to extend the value chain up to the oil refining and thereby ensure independence from third-party suppliers of PX, guarantee stable supplies of feed, and strengthen control over operating costs.
There are alternative routes to COTC in Asia – methane to olefins and syngas to light olefins (coal-based). Saudi Aramco-SABIC COTC projects will permit Saudi Arabia to better monetise oil assets and to diversify its petrochemical feedstocks from NGLs (natural gas liquids). COTC in China will allow PET (polyethylene terephthalate) producers to increase its PX self-sufficiency substantially.
COTC requires significant refinery residue upgrading. Hydrocracking will remain one of the most important processes in COTC projects. Hydrocracking for COTC will require catalysts that can produce more light and heavy naphtha, rather than middle distillates and diesel for fuel production. Focusing on chemical production means changes to crude selection and selecting optimum configurations. Key performance indicators will include hydrogen consumption, total utilities consumption, product yield, and capital investment.
COTC takes scale and integration of petrochemical production to a different level. In addition to feedstock advantage and accessible markets, process configuration, investment efficiency and choice of technology will all become important competitive factors.
COTC projects coming online will impact the global petrochemical industry – markets will need to adapt. Potential risk is oversupply of certain petrochemical products. Refiners who will still find market for fuels will benefit from lower petrochemical product prices in this case; but, this is not a desirable scenario on global scale.
For the latest refining and petrochemical industry related videos, subscribe to our YouTube page.