In the 19th century, chemicals production depended largely on coal processing. But the increasing availability of petroleum and gas drove the industry into “petrochemicals”, a term that was first used in 1942 to distinguish its products from those obtained from coal.
The need for materials to conduct the Second World War drove Germany in 1940, followed by others, to produce synthetic rubber from petroleum fractions. The simpler and less expensive processes made manufacturers shift from coal to the new, flexible and inexpensive oil or gas feedstock.
The development of petroleum refining also played a role in enhancing the petrochemical industry by providing a wider range of feedstock. World oil reserves, including condensate and natural gas liquids, have grown to 1,669 billion barrels in 2012 and there is more to come if Canadian and Venezuelan heavy deposits are included. At the same time, natural gas reserves have grown to 187 trillion cubic meters.
Therefore, one can say with confidence that resources are available for continued growth in providing feedstock for the petrochemical industry. The choice of feedstock for petrochemicals depends on the oil and gas resources available and the deferential price between the two and the desired product that is finally sought.
Liquid petroleum products such as LPG, naphtha and gasoil are used when a wider range of basic petrochemicals are sought. However, gas processing is now so developed that its liquid products (GTL) — which can be used as fuels or feedstock — are now possible. The yield usually differs for different feedstock and must be taken into consideration.
At today’s oil prices of more than $100 (Dh367) a barrel and gas prices at almost half on an energy equivalent basis, gas is becoming a real choice for the petrochemical industry whenever other conditions are equal. In the US, as a result of the sharp increase in shale gas production and its low prices there, the petrochemical industry is looking for a renewed expansion based on gas.
Worldwide, naphtha is the major petrochemical feedstock followed by LPG, then natural gas and gasoil. Nevertheless, coal was, and continues to be, present in this industry though at a relatively lower role. Due to the high differential between oil and coal prices, it is likely that coal will come back strongly as a feedstock in countries like China with its substantial coal reserves.
Due to high price of oil, investors are considering heavier products as feedstock including atmospheric and vacuum residue, which can produce more olefins at 50 per cent reduction of feedstock cost. In short, the advances in chemistry, catalysts, refining and chemical engineering technology can now provide a wider selection of feedstock to produce petrochemical products.
There are many challenges facing the petrochemical industry and the Arab region is no exception. Capital investment doubled since 2000 not only due to inflation but also to the rising cost of raw materials and competition for engineering and construction services. The number of active petrochemical projects was reduced from 1,889 in June 2010 to 1,237 in June 2013.
Maintenance and operating costs
But spending in the petrochemical sector in 2013 was expected to be $114.4 billion and this year’s $137.3 billion, with the major share used up for maintenance and operating costs.
Asia and the Middle East are building large-scale refineries, which will facilitate wider feedstock and final products choices. The trend in these refineries is the integration with petrochemical plants to facilitate the synergy between the two with respect to energy saving, by-product exchange, capital and operating cost reduction, environmental protection and improving the profit margin of the integrated facility.
The best example in the Arab countries is the Jubail and Rabigh refineries where in both plants considerable integration with petrochemical production exists.
Demand for petrochemical products worldwide is driven by economic growth, population growth, oil prices and the low cost, versatility and desirability of the products.
In a scenario provided by the International Energy Agency (IEA), oil demand in the petrochemical industry is expected to increase from 11.9 million barrels a day (mbd) — including fuels — in 2012 to 15.6mbd in 2035. Demand for gas in the petrochemical and fertiliser industries is expected to increase from 200 billion cubic metres (bcm) in 2011 to 300bcm in 2035.
In conclusion, the world is approaching a new and determined growth in the demand for petrochemicals. Oil and gas resources are available as feedstock and the technology in oil refining and gas processing has widened the choice of feedstock.
Coal may become a competitor to oil and gas feedstock in coal-rich countries. The integration with petroleum refineries is not only desirable but is becoming the trend.
The Arab industry should be aware of the challenges facing the industry with respect to capital investment, operating cost and the technical innovations in catalyst, revamps and new processes.