Crude oil–to–chemicals: A game changer for the chemical industry

13:12 PM | November 29, 2019 | Mark Thomas

 

Because of its sheer scale and the volume of products that can potentially be produced, crude oil–to–chemicals (COTC) technology could be one of the most important trends ever to impact the global chemical industry.

COTC technology could more than double the profitability derived from a single barrel of crude oil, according to recent scenario analysis from IHS Markit.

The results of the study, released earlier this year, significantly exceeded expectations, according to Don Bari, vice president/chemical technology at IHS Markit. “While the technology is still new, in my 40 years in the industry, I haven’t witnessed any technology that has the potential to unlock such value and truly revolutionize the refining and chemical industries as this COTC technology. At the same time, it does so in a manner that is less carbon-intensive.”

The technology is already having a significant impact on the chemical industry. One COTC plant began operating in China earlier this year, with others following close behind, also in China and in Brunei, and front-end engineering and design is under way by a joint venture (JV) between Saudi Aramco and Sabic for another in Saudi Arabia that could potentially start up within the next decade.

A masterclass on Day Zero of the Annual GPCA Forum (3–5 December) will focus on aspects including how COTC could disrupt markets and trade flows; be cost-competitive against existing producers; the various possible configurations, products, and levels of capital expenditure; and how existing producers could mitigate the risk posed by these new technologies. Those taking part include Richard Charlesworth, executive director/oil, midstream, downstream, and chemicals at IHS Markit; Ahmed Al-Khowaiter, chief technology officer at Saudi Aramco; Dr. Fahad Al-Khodairi, corporate fellow/polymer specialty technology and innovation at Sabic; and Juhan Roberts, vice president/basic chemicals at ExxonMobil Chemical.

For COTC projects to be successful, the technology and configuration choices to ensure operational reliability and availability are critical, according to IHS Markit’s latest Process Economic Program (PEP) analysis. Finding an outlet for the large amount of chemicals produced is also a critical competitive factor.

Several world-scale projects are currently following a path of configuring a refinery to produce maximum volumes of chemicals, instead of transportation fuels as in a conventional refinery. Four are by Chinese companies in China and Brunei, with the fifth being the Aramco-Sabic JV at Yanbu, Saudi Arabia. All these refinery-based COTC projects will be able to convert 40–60% per barrel of oil to chemicals, says IHS Markit.

The plant already operating is Hengli Petrochemical’s COTC refinery–p-xylene complex at Dalian, China. Hengli announced in May that it had achieved full-line trial production. The complex is expected to produce 4.34 million metric tons/year (MMt/y) of p-xylene, in addition to 3.9 MMt/y of other chemicals. The total chemical conversion per barrel of oil is estimated to be 42%.

The first phase of Zhejiang Petroleum and Chemical’s COTC refinery–p-xylene project in Zhejiang Province, China, is close to completion with several units in initial trial operation. Full operation is expected before the end of this year, with Phase 1 expected to produce 4.0 MMt/y of p-xylene, 1.5 MMt/y of benzene, 1.4 MMt/y of ethylene, and other downstream petrochemicals. The total chemical conversion per barrel of oil is about 45%. Phase 2 of the project is also under way and when complete will be of a similar scale to Phase 1 but including two world-scale steam crackers compared with one for the first phase. The total chemical conversion is forecast to then rise to 50%.

Hengyi Industries’ PMB project in Brunei is expected to start up COTC plants in 2020. When it does, the three plants combined will add up to 9.8 MMt/y of p-xylene capacity, as well as 3.4 MMt/y of ethylene.

Scheduled to follow in 2021 is Shenghong Petrochemical Group’s planned refining and petchem facility in Jiangsu Province, China, with a planned oil refining capacity of 16 MMt/y, with 2.8 MMt/y of p-xylene and 1.1 MMt/y of ethylene capacity, as well as other downstream products.

The scale of these COTC plants is unprecedented and will change the industry’s structure, said Sanjay Sharma, vice president/Middle East and India at IHS Markit, speaking at IHS Markit’s recent 7th Annual Asia Chemical Conference held in Singapore. China’s crude–to–p-xylene plants will allow some polyethylene terephthalate (PET) and polyester producers to integrate backward and further blur the line between refiners and petrochemical producers, he said. Additionally, these mega p-xylene plants will increase the self-sufficiency of PET and polyester producers in China. As production stabilizes at Hengli’s new plant and other new assets come online in the coming months, current tightness is expected to turn to a long-term p-xylene surplus, according to Sharma.

Drive to maximize chemicals from crude
Aramco and Sabic’s Yanbu project is being driven by Aramco’s push to monetize better its huge oil assets. With the forecast gradual slowdown and eventual decline of fuel demand by 2030–35, Aramco has a strong incentive to convert a higher percentage per barrel of oil to higher-value chemicals, with maximizing light olefins production the main target.

Aramco’s Al-Khowaiter stated earlier this year that “maximizing the output of high-value chemicals products from our future crude-oil processing projects is one of the key objectives in our downstream technology strategy.” In addition to the acquisition of Sabic, Aramco has committed $100 billion to invest in petrochemicals through 2030.

At Yanbu, the companies aim to refine an estimated 20 MMt/y of light crude oil to produce 9 MMt/y of chemicals, including 3.3 MMt/y of ethylene. The COTC project, if it does eventually proceed to sanction, will add the equivalent in terms of ethylene capacity of two world-scale steam crackers. The plant is expected to be operational within 7–8 years, though it will initially only utilize part of its capability to convert the crude using dual cracker trains, according to IHS Markit’s Europe/Middle East Light Olefins Monthly Report.

Abdulrahman Al-Fageeh, Sabic executive vice president/petrochemicals, spoke to Chemical Week about the project’s progress on the sidelines of the recent K 2019 plastics fair in Düsseldorf, Germany. Fageeh said the proposed project forms part of Sabic’s ambitions for global growth, wherever it can find advantaged feedstocks. “All these projects, including the COTC, during the design and development phase, go through a gating procedure until a final investment decision is made. During that time, we will look at all the economics and some of the projects go ahead and others get refined. The COTC project would employ unique and complex technology. This is the first time that we are developing a petrochemicals project based on this process and the technologies need to be demonstrated and evaluated,” he said. He added that “nothing is going to change until we go through a [final] gate, and when we reach that gate and make the proper analysis for the economics, we can either move or rescope the project, or do something else with it.”

Aramco is currently working with its technology partners to develop at least three new technologies using differing processes aimed at converting up to 80% per barrel of oil to basic chemicals and petrochemicals. If its technical collaboration with companies such as McDermott, Chevron Lummus Global, CB&I, TechnipFMC, and Axens—in combination with its own proprietary technologies—achieves this goal, a COTC complex receiving 20 MMt/y of crude could produce up to 16 MMt/y of chemicals, says IHS Markit.

Whereas a world-scale, integrated refining and petrochemical facility typically earns about $8.50/bbl of crude oil, a facility employing Saudi Aramco Technologies’ COTC design could achieve plant net margins of approximately $17/bbl, according to IHS Markit’s Bari and PEP study co-author Michael Arné, executive director/emerging technologies research.

“This process is both transformative in terms of its potential, and timely, as refiners face declining future demand for gasoline and fuel production due to carbon emission mandates, greater vehicle fuel efficiency, and an increasing penetration of electric vehicles,” Bari says. “The objective is to shift the product slate derived from a barrel of oil to a range of 60% to 80% chemical production and nonfuel products, up from the traditional range of 10% to 15% or so, in order to significantly increase the value of crude oil reserves and provide demand security in Aramco’s case. This transformative COTC technology goes beyond even the most highly integrated sites today that are pushing 30–40% chemicals production with traditional approaches,” Bari says.