Integrate petrochemical plants and refineries to go with the flow In the Pipeline

For those interested in history, the chemical industry preceded that of oil and gas processing because it depended on coal as feedstock.

However, as the oil industry took off in 1860, the chemical industry shifted gradually to oil and gas feedstock and the petrochemical industry was launched.

In 1912 the first continuous distillation refinery was built and in 1913 thermal cracking of petroleum fractions was discovered and its chemical byproducts became useful. The British extracted aromatics from petroleum in the First World War and the first modern petrochemical plant was built in 1920 in New Jersey.

The development of naphtha reforming for gasoline in 1925 made more extraction of aromatics for petrochemicals possible. In the Second World War, demand for petrochemicals increased rapidly and surplus naphtha from refining in the early 1950s prompted steam cracking to produce more petrochemicals.

In the 1960s, the term petrochemical refinery became increasingly used and even the famous magazine Petroleum Refiner changed its name to Hydrocarbon Processing. Still the integration between the refineries and petrochemical plants proceeded on a slow pace only to be forced by economics and logistics to become more and more evident.

In a recent article in Hydrocarbon Processing magazine (February 2009), the case for integration of refining and petrochemicals is discussed in line with advances in processing and catalyst technology which could bring synergy to both industries.

While petrochemical plants can be fully independent from refineries, it became increasingly clear that better profit margins can be achieved for both industries with integration. Both are known to be capital intensive and integration can substantially reduce the cost by sharing the common facilities such as utilities and storage.

Energy requirements are high and any integration is likely to reduce the energy requirement for a particular product slate to the benefit of overall economics. There are basically no differences in the codes and standards used or the skills required for both industries and integration will reduce the manpower especially in engineering, maintenance and other related services.

Natural gas was and continues to be an important feedstock for the petrochemical industry due to its low cost relative to oil and to its ease of processing. However, natural gas has its limitation and cannot provide the products chain that liquid feedstock such as naphtha can provide. This fact has driven new and expanded petrochemical plants toward more liquid feedstock and therefore towards more integration with refineries.

In fact some strictly refining processes such as catalytic cracking and naphtha reforming have been developed to produce gasoline and petrochemical feedstock and thereby increased the flexibility of owners to seek a better market position.

Depending on the degree of complexity of the refinery and petrochemical units, the above article tells us that in a case study using a 300,000-barrels-a-day (kb/d) refinery using Arab Heavy crude, the relative investment can vary between 100 for a complex refinery to over 200 for a complex integrated petrochemical refinery while the gross margin can vary between 100 and 380 for the two cases respectively and the rate of return on investment can double. There are however cases in between where less processing complexity is used and there is a need for detailed analysis for individual projects.

It is clear that the rate of growth of demand for petrochemical products far exceeds that of fuels and this makes the case for integration even stronger to optimise the use of hydrocarbons for both requirements and have sufficient flexibility built in.

There are good examples in our region for the progress of the above trends. The petrochemical industry in most countries is shifting to liquid feedstock and therefore more integration with the refineries. On the low to moderate level of integration, the Jubail (290 kb/d) and Rabigh (400 kb/d) refineries in Saudi Arabia and Takreer in the UAE are examples where the petrochemical products are likely to be 5 per cent to 10 per cent of the crude feed. In Ras Tanura (550 kb/d) however, the integration is much higher where 17 per cent of the feed could be petrochemical products.

The new projects under construction or design in Saudi Arabia will probably go for even higher integration and complexity and there is room for the current refineries to go more in the direction of petrochemicals. In the Comperj complex in Brazil, the petrochemical products are 50 per cent of the crude oil feed which stands at 150 kb/d.

Generally, in the Arab countries, the refining industry is rather simple but growing in complexity due to changing requirements of demand and product specification. The new projects are likely to be large and complex and planners are well advised to consider some degree of petrochemical integration at an early stage of development.

The writer is a former head of the Energy Studies Department at the Opec Secretariat, Vienna.