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Petrochemicals and Crude
Oil Refining: A Changing
Business Model?
Blasis Stamateris, Andy Allen
Introduction
The need to maximise long-term profitability in
crude oil refining and petrochemical projects has
made investment planning a complicated process.
The good old days are gone where the selection of
a project location was mainly driven by feedstock
availability or local demand, sites which enjoyed
special status or protected local markets.
Investors are looking not only at hard facts like
availability of feedstock or demand for refining and
petrochemical products, they are looking for political
regimes that offer stability and ways to secure
recovery of investments and mobilisation of
dividends to wherever they are required to achieve
This paper examines the opportunities for integration between refineries and petrochemical
facilities, alternative feedstock for fuels and chemicals production, and the impact of possible
future environmental legislation. Also considered are the roles that evolving technologies such
as gasification and carbon sequestration may play in future project development.
corporate objectives. Investors are facing many
challenges and opportunities and in the search for
long-term profitability, they have tried to capitalise
opportunities and mitigate project risks. One of the
many ways to achieve this goal is through integration
of refining and petrochemical facilities.
The increasingly loud debate on global warming
and its many impacts is starting to change the face of
legislation, taxation (or incentives), policies and
consumer attitude and it now seems that an
industry focused solely on moving forward in the
conventional manner is inconceivable in the long
run.
Integration of Refinery and Petrochemical
Facilities
Technology developments, demand growth and
economics have steadily driven larger-scale
investments. What would have been regarded as a
world-scale ethylene or polyethylene plant some
10 years ago would probably now be regarded as
unattractive in economic terms typical plant sizes
having almost doubled over this period. Integration
has many aspects that need to be considered.
Figure 1 summarises the drivers for integration
between refining and petrochemical facilities. The
issues have been extensively discussed elsewhere;
Figure 1: Drivers for integration of refinery and petrochemical facilities.
58 HYDROCARBON ASIA, SEPT-OCT 2008 Visit our website at: http://www.safan.com
here we highlight some of the opportunities:
Streams produced in refineries that have
traditionally been oriented towards production of
transportation fuels could be processed to produce
aromatics and petrochemicals, which may offer
better margins and/or allow diversification of the
product slate, reducing the impact of market
volatility. The key is to have steam crackers and
aromatics complexes on the same site.
Refining processes are operated at higher severity;
new catalyst systems allow increase in conversion
and better selectivity towards desired products.
Improvements in design allow extended run
lengths, energy integration, sharing of utilities
supply, offsites (tankage allows transfer of refinery
intermediate products to petrochemicals, common
flare, waste water treating facilities), infrastructure
(buildings, laboratory), qualified human resources,
leading to lower investments through economies
of scale and lower operating costs.
Another aspect of integration is the use of combined
light ends recovery facilities between a steam cracker
and Fluid Catalytic Crackers (FCC). Figure 2 shows
examples of refinery streams, such as LPG, that can
be used on steam crackers and/or in common facilities
for the recovery of ethylene and propylene.
There are different levels of integration. For
instance the minimum would be to send off-gas from
the FCC to the steam cracker to recover ethylene or to
use a common propylene-propane splitter, to full
integration using only the front end of the FCC unit
consisting of reactor, regenerator and main
fractionation, with overhead of the latter sent along
with the olefins unit water quench tower to share
common cracker gas compressor and product
recovery systems.
As shown, the full integrated scheme can offer
enhanced returns on investments but also leads to
many design challenges mainly to guarantee the
operability of both process units.
In another application, we illustrate the use of the
catalytic naphtha stream that is typically used to
produce gasoline; in this case the change is driven by
reduced gasoline demand and tighter specifications
in terms of benzene and aromatics content, along
with higher prices of petrochemicals and aromatics.
A refinery configuration was studied which had a
Residue Fluid Catalytic Cracker (RFCC) to produce
a relatively high propylene yield (>12 wt%) for the
type of feed. The RFCC would have to be operated at
high severity (high reactor temperature and high
cat/oil ratio) using catalyst system with a relatively
high zeolite content. The increase in LPG-type
material would come at the expense of gasoline yield
and with an increase in the concentration of aromatics,
yielding values of at least 55%.
Working along with aromatics technology licensors,
we analysed several possibilities for the processing
of the C7-C10+ catalytic naphtha into an aromatics
complex. The more promising options were:
1. Process heavy straight-run naphtha along with
catalytic naphtha through the Continuous Catalytic
Reformer (CCR)
2. Process catalytic naphtha in a separate hydrotreater
then to a sulfolane aromatics extraction unit; extract
would go along with the reformate extract to the
BTX fractionation section and the raffinate rich in
naphthenes would be processed along with the
heavy straight-run naphtha through the CCR
Both options are technically feasible but each has
pros and cons. In option 1, the aromatics content of
the feed to the CCR would be relatively high (in some
cases higher than 40%) requiring a larger regeneration
section on the CCR since C10+ aromatics (and
polycyclics) have been identified as strong coke
precursors.
In option 2, the raffinate rich in naphthenes would
be a very good feed for the CCR, operating within a
Figure 2: Integration opportunities to maximise olefins production.
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more conventional design range, reducing its capacity
by more than 20% compared with option 1 but
requiring an additional sulfolane aromatics extraction
unit (AEU), adding to cost. Figure 3 shows the selected
processing scheme.
In summary, we identified a relatively simple
refinery configuration that, when processing 15,000
KTA of a typical Middle Eastern crude blend (which
could be adjusted to process 17-22 API crudes) for the
production of transportation fuels, aromatics and
petrochemicals. With process units operating within
proven design range would be able to produce at
least 1,000 KTA of ethylene, 1,100 KTA of propylene,
1,500 KTA of p-xylene and 500 KTA of benzene and
vary gasoline production according to local market
demand. Incremental production of gasoline would
be at the expense of petrochemicals and aromatics
production. With conservative price scenarios,
estimates show pay-back of times of less than five
years.
Biofuels: Where is the Advantage?
Public awareness of land conservation
requirements, climate change, energy security, the
desire of farmers to have a share in oil industry
revenues, and of politicians to reduce subsidies,
underpins the use of so-called green fuels and has led
to legislation that enforces its use. For instance, in the
European Union, 5.75% of the energy content of
transportation fuels must come from renewable
sources by year 2010.
There has been a headlong rush into investing in
bioethanol and biodiesel so it might be considered
that the benefits of these products displacing
hydrocarbon fuels are fully established but this is
certainly not the case. An increasingly loud debate is
being conducted in the media about the sustainability
and ethics of biofuels. Discussions are centred on the
following key points. Firstly there is concern that
using grain for fuel competes with food use and is
driving up food prices in many regions.
Secondly the global warming benefits appear to be
less than originally claimed wheat for bioethanol
seems to provide only marginal benefits whilst the
removal of rainforest to plant for palm oil production
(for biodiesel) removed what is well-known to be a
carbon sink. Current production is just around 2% of
total demand for petrol and diesel and even though
they are good quality blending components there is
concern over whether a reduction in the emissions is
actually achieved when the overall impact is
considered from well-to-wheel.
Only sugar cane, now starting to be used as a
feedstock for olefins (via bioethanol), currently
delivers any significant benefit in addressing global
warming, see Table 1. Emissions of oxides of nitrogen
from agriculture, which contribute to global warming,
are not included. The resulting products might have
a significant advantage in the market place due to
consumer acceptance and a willingness by retailers
to pay an enhanced price for polymers. This position
will improve further when new technology is
commercialised. Much effort and investment is being
made in this area.
Thirdly, the financial viability depends critically
on governmental support either through subsidies
or through tax reduction. Removal of tax incentives
in countries like Germany and the higher cost of feed
generate losses in facility operation and some
investors have either closed their facilities or are
considering moving their production to more
favourable locations.
Figure 3: Aromatics Plant Configuration Additional Aromatics from
FCC.
Table 1
Feedstock Tonnes of anhydrous bioethanol per tonne
of emitted CO
2
Wheat 1.2
Corn 1.6
Sugar beet 1.9
Sugar cane 8.3
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But there is still some hope for biomass as second
generation biodiesel when produced from waste
biomass such as wood residues, corn stover,
municipal paper waste, agricultural residues and
fast-growing, dedicated, non-edible crops which
could be available in large quantities. Gasification
or bioethanol production from the whole plant
would represent significant progress regarding the
use of biomass feedstocks and much investigation
is proceeding on this technology, many being
supported by government grants. Overall, there
would be a higher reduction of CO
2
emissions, and
productivity in terms of litres of fuel/year/Ha is 3-
4 times higher than first generation biofuels, but
there are several challenges to making production
economically viable and before large-scale
commercial application plants enter the production
stage.
Gasification is Here and Now
Coal, eclipsed by oil and then gas, is starting to
make a comeback. The start of much early chemistry
was with biomass but the more sophisticated
developments in Europe in the 1700s and 1800s were
heavily based on the availability of coal. Only at the
start of the oil age did the gradual switch over to what
we now regard as conventional hydrocarbons begin
and for the past sixty years oil, and more recently gas,
has been dominant in our industry. We are now
seeing that coal and biomass have a new role to play
for a variety of reasons.
It is clear that in terms of oil and gas, the largest
consuming nations are not self-sufficient in
indigenous resources and therefore have concerns
over security of primary energy supplies. However,
countries such as the USA, India and China do have
their own significant coal resources.
Process technologies to unlock the energy stored in
coal are well known and has been mostly used for
power generation, but with crude oil prices hitting
new heights, coal can be a cheap feedstock for many
processes typically based on syngas using gasification
technology. With the recent cost advantage there has
also been a range of new technology developments
allowing coal to be used as a feedstock for clean
liquid fuels, synthetic natural gas, and methanol (for
olefins and Di-Methyl Ether (DME)).
The integration of gasification into refining
operations has some clear advantages. It allows
refiners to maximise the yield of high-value clean
products while processing high sulphur crudes and/
or low value by-products. There are many outlets for
that syngas, such as hydrogen for hydrocracking and
hydrotreating processes, utilities such as electricity
and steam in IGCC, chemical applications like
ammonia, methanol, acetic acid, oxo-alcohols, and
synthetic fuels.
The downside of all this is the environmental issue.
Traditional liquid fuels are delivered to the market
with great efficiency in the retention of calorific
value. Apart from LNG, most of the other alternative
fuels involve chemical reactions resulting in
significant loss of calorific value, some 30% in most
cases, significantly increasing global warming
potential and possible adversely affecting future
market place positioning.
Traditional liquid fuels 95%
LNG 90%
Methanol 65%
DME <65%
GTL 65%
(All efficiencies very approximate)
These replacement fuels and feedstocks are not as
carbon efficient, but some processes offer CO
2
recovery potential. Emerging technology routes to
chemicals via syngas also suffer with a lower calorific
efficiency.
Carbon Sequestration
That global warming exists now appears to have
the support of most of the scientific community since
historic data from ice cores shows a strong correlation
between temperature and CO
2
concentration, lending
support to the opinion that carbon sequestration is
an essential part of our response. Sequestration is a
relatively new technology and one that has little
track record. It does represent substantial additional
cost and those undertaking the exercise will be looking
to cover this cost penalty to justify the additional
investment.
There are a couple of routes to deal with the
situation: carbon capture and storage (CCS) or CO
2
to
chemicals.
HYDROCARBON ASIA, SEPT-OCT 2008 63
CCS involves capturing the carbon dioxide,
preventing the greenhouse gas entering the
atmosphere, and storing it deep underground.
Emissions can be reduced by capturing CO
2
and re-
injecting it into oil fields with additional benefits of
enhanced oil recovery of the remaining recoverable
reserves. This can extend oil production for some
fields that are approaching the end of their life using
current conventional technology, thereby generating
extra revenue.
CCS is best applied to large stationary sources such
as power plants and industrial facilities where CO
2
can be separated at some stage of the process. The
concept of CO
2
capture consists of three primary
processes:
Separation and capture: isolation and capture of
CO
2
either prior to or post combustion by
separating it from the flue gas
Transport: by either tanker or pipeline, with the
pipeline option being particularly effective for
larger volumes
Storage: in order to prevent CO
2
from entering the
atmosphere, it must be stored long term and
geological formations such as depleted oil
reservoirs, depleted natural gas fields, deep saline
aquifers and unmineable coal seams appear to
offer potential. While injection into the oceans has
been discussed, there are concerns over the
long-term viability due to uncertainties over the
ecological impact.
Whilst sequestration is typically discussed in terms
of power generation, there is a developing list
of chemical processes which would enable
CO
2
to be removed and then sequestered. If
sequestration is to attract incentives, or CO
2
emissions
to atmosphere are to be penalised, then there have to
be some advantages for processes that enable cost-
effective removal of CO
2
. In such cases the reduction
64 HYDROCARBON ASIA, SEPT-OCT 2008 Visit our website at: http://www.safan.com
in the carbon footprint of the process has to be a
valuable economic evaluation point. For example, in
enhanced oil recovery, the economic incentive arises
from the increased oil recovery, either directly or
through reduced tax rates or through lifting of
production rate restraints on new oil so economic
return could be easily calculated and projects justified
on economic grounds.
On the other hand, CO
2
can be converted into
chemicals, fuels and polymers and there are
technologies available today to achieve this. In
context, the entire output of the chemicals industry
(excluding fuels) is equivalent on a carbon basis to
around 1-2% of the total annual anthropogenic carbon
emissions (6Gt)
(1)
. Therefore, chemicals based on CO
2
could contribute to reducing carbon emissions but
not at a significant level. CO
2
as a building block in
long-lived polymers can be viewed as a mechanism
to sequester carbon in the long term. There are a
number of potential technologies that require further
research and development.
If carbon sequestration is to play a significant part
in future investment decisions then it can be expected
that the introduction of a combination of financial
encouragement and reliable and cost-effective
technologies would provide a tipping point leading
to large-scale investments but only if the financial
encouragement can be depended upon for much of
an assets life.
Legislation
Legislation has been the driving force behind
much investment for many years but as legislation
becomes more widespread the implications become
fundamental. Possibly the best examples of the
impact of environmental legislation are the many
improvements made to transport fuel quality in the
recent past reductions in sulphur in particular have
been almost entirely driven by legislation arising
from concerns over emissions, though engine
manufacturers have been supportive of fuel quality
improvements. Few fuel quality investments would
have been proposed purely on a return on investment
basis.
In a similar manner, emissions from producing
facilities have been gradually tightened over the
years, generally in response to emissions legislation,
which has improved the environmental impact of
the processes but until recently CO
2
was not
regarded as a pollutant. Renewable energy (power
and fuels) targets are now a common requirement of
legislation and the developing carbon trading market
will be driven further by stricter legislation.
Throughout history there is a common theme of
technology developing answers to meet industry
demands and the current CO
2
position is and will be
no different from this.
The central concern for investors where
conventional economics do not support project
investments is whether the financial incentives (or
advantages, if alternatives are penalised) can be
regarded as being firm and predictable throughout
the life of the asset. Elsewhere there is
an uncomfortably long history of investment
encouragement in national projects for alternative
fuels only for these to be ended when oil prices fall or
national energy security fears subside, or when
governments change. For example, in the US the
Carter Administration encouraged the investment in
synfuels from coal and shale oil but this was
subsequently reversed.
At this point there are more questions than
answers a clear conclusion is that a significant
degree of due diligence by investors should be
undertaken. One would expect that this situation
will significantly blunt investors interest in
projects that depend upon incentives/penalties
outside investors control to make the projects
economic - or that significantly higher margins
will be required to offset the risk of changing
incentives/penalties.
We can expect that certain countries will move far
more rapidly to address global warming or energy
supply security than other countries and that this
will directly affect a widening range of processes
located in those countries and products sold in those
countries. We can also expect moves to penalise
products from countries that do not adopt similar
policies.
A new term in European industry is carbon
leakage, used to describe the threat that certain
industries will gradually leave Europe to migrate to
regions with less strict global warming legislation.
HYDROCARBON ASIA, SEPT-OCT 2008 65
The chemicals industry clearly has the potential to be
affected. In the long term it is likely that legislation
will be developed to encourage imports from more
stringently regulated locations, at the expense of
those that are less stringently regulated.
The Kyoto Protocol drafted in 1997 and entered
into force in February 2005 legally requires
participating developed countries to reduce emissions
of six greenhouse gases to an average of 5.2% below
1990 levels by a period of 2008-2012. Since CO
2
is the
most abundant greenhouse gas, reducing CO
2
emissions is a central objective of the Kyoto Protocol,
which includes flexible mechanisms which allow
developed economies to meet their greenhouse gas
emission limitation by purchasing emission
reductions from elsewhere.
The carbon market is the most visible result of early
regulatory efforts to mitigate climate change.
Regulation constraining carbon emissions has
spawned an emerging carbon market that was valued
at US$ 64 billion in 2007
2
. Its biggest success so far has
been to send market signals for the price of mitigation
carbon emissions. The Kyoto Protocols Clean
Development Mechanism (CDM) alone saw primary
transactions worth US$ 7.4 billion with demand
coming mainly from private sector entities in the EU,
but also from EU governments and Japan
2
. The
voluntary markets, supporting activities to reduce
emissions not mandated by policy makers, also saw
a significant increase in transacted volumes.
A Way Through Investment Planning
This paper has outlined some potential changes,
primarily driven by security of energy and feedstock
supply and also global warming concerns that are
likely to affect investments being made in the chemicals
industry in the longer term. The nature of these changes
are such that the individual investor will have to
consider matters other than feedstock availability and
product pricing when planning project investments
and it will be very difficult to influence the spread of
changes resulting from global warming. The latter can
be expected to include financial penalties and
incentives driven by legislation and a key concern of
investors will certainly be the extent to which these
incentives or penalties will be in place and unchanged
through the life of their planned asset.
With the nature of these uncertainties there will be
a requirement to widen the area for due diligence
and to address a wide range of different scenarios
when addressing economics and project risks for
both new and existing facilities.
References
1. Report Converting Carbon Dioxide to
Chemicals, July 27
th
, 2006, Royal Society of
Chemistry (RSC), Environment, Sustainability and
Energy Forum.
2. Capoor, K., P. Ambrosi, State and Trends of the
Carbon Market 2008, Report from The World
Bank, Washington, D.C, May 2008
This paper was presented by Blasis Stamateris,
Downstream Business Consultant, Foster Wheeler
Energy Limited, Reading, UK and Andy Allen, Global
Business Line Director Chemicals, Petrochemicals
and Polymers, Foster Wheeler.
Andy joined Foster Wheeler in Reading
as a process engineer in 1974. In 2003
Andy took up the position of Global
Business Line Director covering all of Foster
Wheelers Chemicals, Petrochemicals and
Polymers business. Responsibilities include setting
the strategies for sales and business development
activities together with leading the main client and
technology supplier relationships. Andy now also
chairs Foster Wheelers Global Technology Committee
with the intent of accessing technologies to assist in the
companys global development. Andy has an honours
degree in chemical engineering from Birmingham
University.
Blasis is a Downstream Business
Consultant and has over 20 years of
experience working in the oil refining and
upgrading business. Since joining Foster
Wheeler, he has been a key member of
refinery configuration studies for the upgrading of
refineries in the Middle East and Far East. Previously
working in Venezuela, he has gained hands-on
experience with products trading, fuel oil blending,
supply chain analysis, refining processes, operations,
linear programming models (PIMS), project
visualisation, conceptualisation, definition and start-
up, and project economic evaluations and capital
budgeting.
HA