New Horizons in COTC, and Refinery and Petrochemical

Refinery and Petrochemicals integration has been occupying hearts and minds of global industry managers for some time now and still there is a substantial potential for this process to develop further.

The main reason for the change is the shift in demand for fuels and chemicals. Annual refined product growth up to 2030 is expected to be 0.6% before flattening and then slowly start 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 Petrochemicals Project Development

• Refinery-Petrochemical Integration for Operating & New Facilities
  • Residue Upgrade
  • Optimisation - Better Feedstock & Product Flexibility
  • COTC concept
• Higher Petrochemical Yield from Refining Units
  • Revamp of RFCC & other processes
  • On-purpose Petchem Feedstock Production
• Market Focus for Petrochemical Plants
  • Changes towards Targeted High Value / Specialty Chemical Products
  • Molecule Management

According to IHS Markit’s analysis of refinery margins in East-of-Suez region, at least 30% of refineries are in the 1st quartile with margins between 15-30 $/barrel net, and they are (with only a couple of exceptions) heavily integrated with petrochemical production.

So what will the refinery of the future look like?

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:

So 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 - so the refinery’s main goal is to maximize transportation fuels. But if demand for those products eventually decrease, there will be a need for technologically advanced complexes that demonstrate flexibility – i.e., produce high quality products only, less diesel and more jet fuel, more petchems (olefins to aromatics ratio 75/25). The final point of this journey – as many experts and companies predict – is a crude-to-chemical (COTC) plant, producing zero fuels with expected lower environmental impact, efficient in both capital and marginal perspectives – prioritizing higher value Petrochemical products.

Key elements that shape deep integration or COTC concepts are:

1. Complexity & technology (know-how), incl. operational agility & commercial flexibility
2. Scale – market, investment & resource capabilities
3. Project Strategy & Execution – management of risks, thorough evaluation of all important inputs & scenarios, reliable partners & contractors, availability of funds

For now only NOCs 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 4 times (maybe more as technologies continue to develop) so the complex can operate in crude processing capabilities same as refinery does.

COTC requires a significant reconfiguration of the refinery. We agree with the opinion that several large COTCs 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-petchems)
• ExxonMobil’s technology (light crude-steam cracker-petchem)
• Saudi Aramco/SABIC (light crude-COTC-petchem)
• Chinese facilities (mix of crudes-COPX complex-PX and other petchems)

Driving forces are different:

• SAUDI ARAMCO – from oil company to petchem (traditional high-value route)
• Chinese projects – integrate back petchem via new refinery to produce feedstock (PX)

Today there is only a few operating COTCs in the world, one is located in Singapore based on EM’s technology (1mmta ethylene cracker), and a few more in the pipeline – located in Asia and ME (see the comparative table,6 active projects in total).

Saudi Arabia is the leader in new petrochemical capacity investments. The Kingdom plans to nearly triple petrochemical production capacity by 2030 - from 12 MMtpy to 34 MMtpy. The country will accomplish this goal by adding petrochemical capacity to existing refineries, as well as building grassroots facilities. They analyzed that going towards circular economy will help gradually reduce GWP per barrel of crude consumed, by 47% after all the alterations and modernization is completed – that is an unprecedented saving of 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 20 mta 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, butadiene and aromatic hydrocarbons extraction. By the end of 2019 Saudi Aramco and SABIC expect to receive the final FEED, and in mid-2020 to open a tender for construction and assembly works, and by the end of 2024 the complex is scheduled be put into operation. The total project investment is more than $ 20 billion.

Zhoushan refinery complex located in China is operated by the Zhejiang Petroleum and Chemical Company, the new refinery started up both its CDUs this year – first one in May, and the second one early November. The complex consists of two phases and will have a refining capacity of 800,000b/d. 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 from China.

Another interesting example of integration is the project of Hengli Petrochemical Refinery Co. Ltd., China. The complex's configuration includes a refinery that provides processing of 20 million tons of oil per year, and a number of petrochemical units: propane dehydrogenation, isobutane dehydrogenation, polypropylene production, and the ‘heart’ of the plant is "Oil to Paraxylene". This complex includes 3 reformers with the catalyst continuous regeneration, 2 extraction lines, xylenes isomerization and paraxylene purification. The capacity of the complex is 3 million tons of paraxylene 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 paraxylene, guarantee stable supplies of feed and strengthen control over operating costs.

Conclusions:

• Alternative routes to COTC in Asia: Methane to Olefins & Syngas to Light Olefins (Coal-based)
• Saudi Aramco/SABIC’s COTC projects will permit Saudi Arabia to better monetize oil assets and to diversify its petrochemical feedstocks from NGLs
• COTC in China will allow PET 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 - however.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 petrochemicals 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
• Crude oil to chemicals (COTC) projects coming online will impact the global petrochemical industry – markets will need to adapt. Potential risk – oversupply of certain petrochemical products (refiners that 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)

Ekaterina Kalinenko

Project Director

EURO PETROLEUM CONSULTANTS

Stefan Chapman

Vice President

EURO PETROLEUM CONSULTANTS

Euro Petroleum Consultants is a technical oil and gas consultancy with offices in Dubai, London, Moscow, Sofia and Kuala Lumpur. Euro Petroleum Consultants also organises leading conferences worldwide.

Published by:

January 2020