Introduction

Refinery and Petrochemicals facilities transform gas and liquid hydrocarbons to a wider range of refined and petrochemical products respectively. The feedstock used in a refinery is crude oil, while in case of petrochemical facilities the feedstocks used include LPG, naphtha and gasoil. These feedstocks are often from refinery sources. Globally, approximately half of ethylene production is based on liquid feedstocks, the large majority of which is derived from refinery streams.

The optimum way of operating an oil refinery is to maximize the production of fuels from crude oil. Fuel production is different from petrochemical production. Fuels are produced as a blend of refinery streams, each stream having its own process route. A number of process technologies can be required to be coupled together in order to produce blend components for each fuels pool. Most refineries have more than one fuel pool but typically include a gasoline and diesel pool. To illustrate further, a gasoline pool and its component blend streams can be considered. Propylene from an FCC is processed with isobutane to produce alkylate. Naphtha is processed in a reformer to produce reformate, a component that is rich in aromatics and has a high value into gasoline blending. Reformate and alkylate amongst other blend stocks are blended to produce finished gasoline. These streams also have uses in petrochemical facilities as detailed in Table below:

A petrochemical facility, typically in the production of olefins, predominantly removes hydrogen to produce functionalized, more reactive, unsaturated molecules which are used to further produce polyolefins. Byproducts are also formed which are of lower value to the petrochemical facility. In most cases, these byproducts can be used by the refinery in some way. For example, a steam cracker generates light olefins (ethylene and propylene) and produces hydrogen and methane as major byproducts. Methane can be used as fuel, whereas hydrogen has been increasingly consumed as a raw material in refineries because of cleaner fuels programs. Increases in the price of natural gas have resulted in the hydrogen requirement becoming a troublesome, additional operating expense for refiners, especially in regions with high natural gas prices.

Integrating a steam cracker with a refinery provides a useful outlet for the hydrogen byproduct. Other cracker byproducts are also useful for refineries.

Background

The movement towards the production of chemicals and petrochemicals such as olefins and aromatics directly from crude oil, as opposed to via thermal cracking of naphtha/ethane (for olefins) and via traditional refining reforming (for aromatics), is being driven by numerous factors, the most important of which is the imbalance between demand for oil-derived liquid fuels (diesel, gasoline) and the more rapid growth in markets for petrochemicals like olefins (ethylene, propylene), aromatics (BTX) and specialty intermediate streams like C4s and higher olefins. The imbalance has made the idea of using crude as a direct feedstock more appealing for integrated producers of fuels and chemicals as well as direct chemical companies. According to BP’s 2018 Energy Outlook, the share of the average oil barrel dedicated to transportation fuel will peak at 58% in 2025 and begin to decline. Oil consumed by industry, buildings, and power will also slump. Chemicals, however, will continue to grow, from 16% of oil demand in 2020 to 20% by 2040.

Current experiences

Singapore

ExxonMobil officially launched the world’s first chemical unit that processes crude oil in Singapore in 2014. This facility feeds light sweet Malaysian crude oil (Tapis Light) directly to modified cracking furnaces. The cracked gas from these furnaces is further processed in a traditional steam cracking facility producing ethylene, propylene and related products. Bypassing a refinery saves both costs as well as time. This proprietary process used by ExxonMobil takes advantage of the crude-naphtha spread and is economically viable only in case of light crudes with low resid content.

China

Several new mega-sites across China are being planned for refinery-to- petrochemicals integration, heralding a new wave of aromatics investments.Hengli Petrochemical recently started up a refinery-PX (para-Xylene) complex that can process 20 million tons per year (equal to 400,000 barrels per day) of medium and heavy crudes. From these raw materials, the complex can produce 4.3 million tons of PX plus benzene and other chemicals. The conversion is estimated at 42% of all chemicals per barrel of oil. Majority of the process technologies were supplied by Axens.

A similar facility is being developed by Zhejiang Petroleum and Chemical, which is a $26 billion joint venture among Rongsheng, Tongkun Group, and Juhua Group. The JV is building a refinery-PX complex to convert 40 million tons of crude to about 8 million tons of PX. The conversion is estimated at 40% of all chemicals per barrel of oil.

Shenghong Petrochemical is also building a similar refinery-PX complex at Lianyungang, in Jiangsu province. starting with 16 million tons of crude oil to produce 2.8 million tons of PX and other chemicals annually. The project obtained environmental approval but construction has not started yet.

Brunei

In Brunei, Chinese company Hengyi Group is constructing a nearly $20 billion refinery-PX plant that will convert 8 million tons of crude oil and condensates, producing 2. 8 million tons of PX and other products per year. Operations should begin in 2020, and the manufactured PX volumes are expected to export back to China.

Saudi Arabia

In November 2017, Oil major Saudi Aramco and chemicals firm SABIC signed a memorandum of understanding to develop a fully integrated COTC, complex at an estimated cost of US$20 billion.

The planned COTC facility will be the largest such complex in the world and would be located in Saudi Arabia. It is expected to convert 400,000 barrels per day of crude oil into about 9 million tons of chemicals once it starts operations in 2025. This is equivalent to 45% conversion to chemicals per barrel of oil. Aramco/ SABIC JV is moving at a swift pace and have already placed contracts for front-end engineering and design (FEED).

In parallel, Aramco has signed a joint technology development agreement with Chevron Lummus Global (CLG) and CB&I (now McDermott) to integrate CB&I's ethylene cracker technology, CLG's hydro processing technologies, and Saudi Aramco's Thermal Crude to Chemicals (TC2C™) technologies with a target of converting 70-80% per barrel of oil to chemicals. If a COTC complex is built based on this future technology starting from 20 million tons of crude oil, it would produce 14-16 million tons of chemicals per year, taking a large share of the annual growth in chemical demand.

To put it in another perspective, a COTC project based on Aramco's optimized technology would produce more chemicals than all eight first-wave ethane-based steam crackers in the United States, which have a combined production capacity of 11 million tons of ethylene per year.

Integration increase complexity...

Petrochemicals projects are uniquely challenging as the best placed among them are technically complex and can, produce a diverse slate of specialty products (most of which are hard to even pronounce) into wildly varying markets. Undertaking an integrated refinery-petrochemical project significantly increase project complexity, whether that be in terms of construction activity, integrating highly specialized technology systems into a single complex, attracting and training a stellar workforce to execute a mega-project, ensuring the web of downstream and upstream operations remain functional and integrated or having the ability to adapt to technological advances and dynamic market conditions. A project of such scale requires lenders to distill various components and to analyze diverse revenue streams, all the while coming to grips with an ambitious finance plan and schedule.

...but adds value and risk

The relationship between refining and petrochemicals was once largely an arm’s-length one. Refineries focused on fuels, and those that made naphtha would sell it to operators of ethylene steam crackers. These plants crack naphtha at high temperatures into ethylene, propylene, and other basic chemical building blocks. The COTCs tear down the old walls between refining and chemicals and at a scale which is unprecedented. Reconfiguring refineries to produce petrochemicals elevates their production 5-10 times. However, such reconfiguration is not without risk. A massive shift from refining to petrochemicals could result in overinvestment into petrochemicals, with the risk that this would erode petrochemicals margins in the future.

The refining business is changing and the next few years will not be business-as-usual. The impacts of this change are imminent and will be profound, including a major shift in the landscape of global competition. Having advantaged feedstock alone will not be enough in the new era. Competitive advantage will expand to a newly elevated scale that values accessible markets, capital efficiency, and technology optimization for converting maximum volumes of crude into chemicals.