​The case study will highlight options for refinery/petrochemical integration and their impact on steam cracker economics.
The case study presented here is for the steam cracker with its associated utilities, storages etc. This study reviews cost of productions for six different levels of refinery-petrochemical integration. For reference, a purity ethane cracking case is added. All cases were studied for a 1,200 kTA steam cracker located in Asia. The energy and feed/product pricing are based on crude oil at $75 per barrel and natural gas $6 per million Btu.
The cases are described below:
Case 1: Ethane cracking, mostly based on imported feed supply
Case 2: Naphtha Cracking based on different naphthas from the refinery
Case 3: Ethane and High severity FCC off gas based on import ethane and large capacity high olefins mode of FCC operation in refinery
Case 4: FCC off gases, Coker off gases, saturated gases based on large and complex refinery with FCC, Delayed Cokers, Platforming/Aromatics, Hydrotreating/Hydro-processing units that generate large amount of off gases. In this refinery fuel demand is met by import of fuel gas or through synthetic fuel gas generation (like coke gasification).
Case 5: Heavy naphtha and hydrotreated vacuum gas oil feed based on medium complexity refinery with heavy crudes
Case 6: Naphtha, Light/heavy gas oils, Hydrocracker distillate, butane, refinery off gases based on a complex refinery with hydrocracking/hydrotreating, FCC and Platforming units. High level of integration and optimization based on crude diet to the refinery.
Case 7: Light crude (OSO) cracking based on the concept of minimum processing/separation of unprocessed crude sources

Refinery off gas stream typically contain contaminants that impact the product quality and ethylene plant operation. These contaminants need to be pretreated to ensure reliable and safe operation of the steam cracker. Steam cracker design must account for variations and flexibility of feedstock due to changes in crude oils handled in the refinery and the normal adjustments made in the refinery processing to meet changing fuels demand. Evaluation and selection of design options to optimize an integrated complex requires a great deal of understanding about refinery operations as well as the steam cracker design, operation and reliability. The decisions made during early stages of facility development have a major impact on the overall economics over the life of that facility and therefore the competitiveness. Hydrocarbon management is the key to convert the synergy of refinery-petrochemicals operation into an economic advantage in a market place of constantly changing energy dynamics and shifting product demands. Therefore, the optimization should be based on the integrated facility level depending on supply/demand and pricing of raw materials and products at the in/out boundary. Any sub-optimization based on artificially fixed transfer pricing defeats the purpose of integration synergies.
For this case study, the process units include feed preparation and treating as required. Mixed C4s and Raw Pygas are sent to downstream units for further processing. Main by-products include hydrogen, polymer grade propylene, mixed C4s and raw pygas. In addition, gas oil and fuel oil products are routed to other facilities.
The table below summarizes the cost of production for all cases based on grassroots facility:
(1) Total cash costs include cost of raw materials, credits for by-products, utility costs and fixed (labor costs, overheads, maintenance, insurances/property tax etc.) costs.
(2) Depreciation is based on capital costs for ISBL and OSBL facilities as well as owner’s costs during development and execution of the project.
The overall economics is dependent on feed, product and energy pricing. The table above presents a snapshot cost of production for different options for refinery-petrochemical integration. This analysis provides relative comparison of integration options and their impact on cracker economics based on historic prices of cracker feeds relative to crude pricing (therefore these do not represent a true indication of synergy advantages of integrated operation). For this pricing scenario, the refinery off-gas based cracker (Case 4) results in lowest cost of production. It also indicates that the higher levels of integration provide the opportunities to improve cracker economics as compared to a conventional naphtha cracker (Case 2).
The integrated complexes will have a better economic return and diversified market as compared to standalone fuels refineries. Steam crackers in crude oil feed dependent regions must compete with feed advantaged regions (like North America’s shale-based ethane or Middle East’s low-priced feedstock) and look for feedstock supply integration and synergies. 

Refinery-Petrochemicals integration is not a new development. The depth and levels of integration has varied over the years in different regions of the world depending on site specific drivers and economics.
Integrated complexes typically converted 3 to 20 wt. % of crude intake to petrochemicals[i] and are now pushing this to about 50 wt.% utilizing currently available conversion technologies. These complexes typically start with a mix of light to heavy crude diets. The heavier crudes and higher target yield of petrochemicals lead to a more complex refinery configuration. The petrochemistry building blocks typically include steam cracker and aromatics complex.[ii] The integrated complexes are driven by refinery conversion units (catalytic processes) as well as opportunities for improving overall economics by upgrading low value refinery streams to high value chemicals.[iii] Refinery processing objectives can be achieved through a combination of hydrogen addition technologies (like fixed bed, ebulated bed or slurry based hydrocracking of vacuum gas oil and resid), carbon rejection technologies (like FCC/RFCC, delayed coking, flexifluid coking etc.) and carbon concentration technologies (like deasphalting, visbreaking etc.). Steam cracker plants use a thermal cracking process and are highly flexible and can process a variety of refinery streams starting from light off gases to vacuum gas oils.[iv] Aromatics complex is a combination of processing units for converting naphtha and pyrolysis gasoline into benzene, toluene and xylenes.[v] Integrated facilities provide feedstock synergy and flexibility to adapt to future market changes in product quality specifications and product demand shifts.
Refinery businesses are looking for product diversification and vertical integration to secure market share, given the uncertainty about demand growth in fuels market. Steam cracking is a dominant technology for production of olefins and will remain so for the foreseeable future. Naphtha is the leading feedstock globally, and chemical companies constantly look for advantage feedstock for building and operating olefin complexes in a competitive and cyclical business environment. Shale related developments in North America resulted in abundant ethane feedstock supply at very attractive pricing based on cheap natural gas. Natural gas price is expected to stay relatively stable at lower levels. This changed the global energy dynamics of natural gas pricing relative to crude. Chemical companies, operating in regions of the world where most of the feedstock is sourced from crude oil, are constantly looking at the options for staying competitive in the changing marketplace. With most of the new refinery capacity being added in those regions of the world, it’s a logical option to build integrated refinery petrochemical complexes to stay competitive. The case studies, based on different levels of integration between refinery and petrochemical complex, presented in previous publication demonstrate improvement in overall economics. The diversification of product portfolio helps in increasing the production of higher value products and minimizing the processing costs and thus positioning integrated businesses to be competitive in rapidly changing marketplace.i  Integrated complexes are highly capital intensive and complex to plan and implement. It requires a great amount of understanding of the different refining and petrochemical technologies for evaluating the configuration options, along with approach towards integration, to meet the desired business objectives over the long-term life cycle of these facilities.[vi] The scale of these projects is enormous and some in the industry refer to these as “giga-scale”.[vii] Most of these large scale projects are joint venture ownerships (multiple partners) because of large scale investments (tens of billions of dollars). The success of these joint venture lies in understanding of all the aspects of these ventures (strengths of each partner, business drivers, synergy, understanding of technologies/operation and facility operating plan, clear and crisp contractual arrangements based on sound understanding of dynamics that impact the projects/plants over the course of their life etc.) early and upfront.                                                                                                              
There is a further push to increase the petrochemicals yield to 70-80% level (Saudi Aramco and Chevron Lummus Global signed a technology development agreement to commercialize the crude oil to chemicals technology).
Many chemical companies and technology suppliers have focused their effort on crude and condensate sources to directly feed these to the ethylene plants.[viii],[ix] These developments are targeted to eliminate the needs of separation/processing facilities to reduce the overall investment and energy consumption. These technologies are generally limited to lighter crudes of suitable quality for achieving optimum results. These lighter crudes normally have a heavy, non-volatile tail (typically referred as residue or resid). This residue material needs to be separated from the feed entering the high temperature areas of the steam cracking furnaces as this leads to coke build-up. Most the developments to handle these crudes relate to separating the residue from the feed prior to entering high temperature zones of the steam cracking furnaces. Some plants in Asia and Europe have successfully cracked lighter crudes and condensates. Most of the focus previously (in 1960s and 1970s) was related to development of technologies that allowed full vaporization of heavier feeds (straight run or hydrotreated/ hydrocracked gas oils, vacuum gas oils) at conditions that avoided the problems of heavy fouling in convection sections of the steam cracking furnaces. These technologies have been applied successfully in many industrial applications.
For heavier refinery streams and crude oil cracking, many processes were developed and tested from 1960 to early 1980s.[x] Most of these processes were based on fluidized bed cracking. Lurgi developed the sand cracker using sand as heat carrier.[xi] Ube used inorganic oxide as heat carrier.[xii] Kunugi and Kunii process used coke as a heat carrier.[xiii] Gulf Chemical and Stone&Webster jointly developed a thermal regenerative cracking process using solid heat carriers in the fluid bed.[xiv] The development of these processes stopped after crude oil prices collapsed in early 1980s and none of these processes achieved commercialization.
Steam cracking, to produce basic building blocks – ethylene/propylene/butadiene/butenes/ aromatics, is the most versatile and critical technology that drives the integration approach and effective management of hydrocarbons. In upcoming blog, I will present a case study that will highlight options for integration and their impact on steam cracker economics.
References
[i] Kapur et. al., PTQ Q3 2009, “Competitive Driving Force for Integration”, pages 17-23
[ii] Kapur et. al., Hydrocarbon Processing – February 2009, “Why Integrate Refineries and Petrochemical Plants”, pages 29-40
[iii] Kapur et. al., 20th Ethylene Producers Conference April 6-10, 2008 New Orleans, “Catalytic Routes to Olefins Shaping the Integrated Complex Configuration”, paper number 219f
[iv] Sanjeev Kapur, RLPA Conference 1994 Singapore, “Pyrolysis of Hydrocarbons to Olefins”
[v] Zhou et. al., Hydrocarbon Processing – November/December 2012, “Improve Integration Opportunities for Aromatics Units – Parts 1 and 2”
[vi] Sanjeev Kapur, International Petroleum Refining – April 2011, “Planning is imperative for the Success of an Integrated Facility”, pages 66-69
[vii] Interview of Joseph Brewer of Sadara by Ashraf Ayoub of ECC, Hydrocarbon Processing Website – June 19, 2018” http://www.hydrocarbonprocessing.com/news/2018/06/when-mega-goes-giga-a-discussion-on-the-sadara-petrochemical-complex
[viii] Stell et. al., Patent US7588737B2, “Process and Apparatus for Cracking Hydrocarbon Feedstock Containing Resid”
[ix] K. M.Sundram, Patent US20160097002A1, “Thermal Cracking of Crudes and Heavy Feeds to produce Olefins in Pyrolysis Reactor”
[x] Kapur et. al., ENI Encyclopedia of Hydrocarbons – Volume II/Refining and Petrochemicals, “Section 10.5 Ethylene and Propylene”, pages 551-589
[xi] Schmalfeld P., Hydrocarbon Processing and Petroleum Refiner, vol. 42, 1963, “How Lurgi Improved Sand Crackers”, pages 145-148
[xii] Matsunami et. al., Hydrocarbon Processing – November 1970
[xiii] Kunugi D., Chemical Engineering Science, vol. 35, 1980, “Chemical Reaction Engineering and Research and Development of Gas Solid Systems”, pages 1887-1911
[xiv] Ellis et. al., Proceedings of AIChE National Meeting April 1981, Houston, “TRC. A New Olefins Technology”

Ethylene based petrochemical facilities are large and complex, based on most of the contributing criteria. These facilities involve high level of process complexity with all the sophisticated unit operations involved and the processing conditions. These facilities require advanced and complex controls for operating them safely while meeting high level of performance and environmental requirements. The construction, commissioning and start-up efforts pose a special challenge during planning and execution of these projects. These facilities are highly capital intensive.
The capital cost of ethylene plants has been increasing in real terms since early 2000 and has more than canceled out the benefits of larger capacity. Era of escalating capital costs also makes it difficult to forecast the rates of return on capital invested.
It is nearly impossible to determine the sole impact of plant size on the capital cost due to other changes and many interactive factors occurring at the same time. As loss of production has high impact on overall economics, there is strong emphasis on reliability. The development and execution of these large facilities not only creates peak loads for equipment/ materials/ fabrication industry (particularly for items that have limited number of suppliers), it also creates a large demand for engineering resources. This peak demand often leads to higher costs and impacts the quality as well as productivity, resulting in recycles and late changes thus impacting the cost even more. Industry is losing experience and knowledge as individual retire or move-on to different roles/industry. Industry also has a tendency of lack of hiring and training during prolonged low cycles.
While developing and executing these facilities, capital cost is estimated with different levels of accuracy during different stages. Majority of the large capital programs fail to meet their budgeted investment levels. A part of the reason is the estimation of capital cost, as it’s not an exact science.
There is a high risk in estimating bulk materials, as these don’t have the same favorable relationship with plant size as does the equipment. The bulk materials are impacted by climatic conditions, design requirements/specifications, and owner preferences. Large equipment and piping require adequate access for construction, operation and maintenance purposes resulting in larger spacing needs and plot size. This impacts directly on bulk quantities and fabrication/construction. Cost estimation requires a great deal of judgement based on experience, interpretation of engineering data/specifications and level of details. Costs are impacted by market and macroeconomic conditions as well as local conditions. Cost is also heavily dependent on project size and complexity.
Ethylene plants (like most of the hydrocarbon industry) differ from manufacturing industry in expected productivity gains in designing/constructing these facilities over time. The plants are rarely replicated for a variety of reasons.
Some owners may take the approach of duplicating or replicating or introduce small changes necessitated by the business needs. This assumes that lessons learned are applied to avoid any problems experienced. The changing feedstock situation, energy costs, environmental regulations, changes in equipment design/suppliers or construction techniques may necessitate the changes.
Large scale ethylene-based investments are always challenging to develop, execute and operate. The robustness of these decisions depends on multiple interdependent factors.
High investment intensity and high economic impact of loss of production pose inherently high risk for owners/operators. Fewer decisions can be left to chance. Inherent understanding of process technology, equipment/design limits and controls/safety philosophy/systems is essential for supporting these facilities effectively through early development, execution and throughout the life cycle. 
Based on the feedback about the capital cost increase over the recent years, there is a need to at least challenge the perceived beliefs about plant scale as well as technical options and their applicability to meet desired business objectives. A great deal will always have to be left to the informed judgement and technical expertise applied to the project specific objectives and needs. The incentive to carry out and lead this analysis, supported by experienced and knowledgeable individuals, lies with owners and operators due to high level of risks and rewards.

​This question is on the minds of crude oil suppliers and refiners for developing a sustainable business strategy. Many consulting and forecasting pundits believe that crude oil demand will peak sometime between 2030 to 2040. This challenge is different than the crude supply constraints that the world was expected to run out of crude oil/hydrocarbons and was on everyone’s mind in previous decades. The concern now is that with abundant crude resources and declining demand can threaten the industry’s future. Businesses hope and expect that demand of hydrocarbons for petrochemicals will grow at higher pace (in-line with GDP growth) and can be an answer to the business sustenance. “Are Petrochemicals the answer to Crude Oil Demand?” is a key question that most of the companies in oil and gas businesses are trying to fully understand. We think that the petrochemicals are going to be a part of the answer in short to mid-term and that there is a greater uncertainty about longer term future. Multiple trends are at play and more are expected to evolve, that will influence the future.
Yes, Petrochemicals are part of the answer – Business Case
​Figure 1 highlights some of the current industry trends that are shaping the future. Fuel demand, particularly in transportation sector, is facing environmental pressure due to climate change (including greenhouse gas emissions) and air quality in large urban centers. Electrification of vehicles, sharing platforms (like Uber etc.) and disruptive technologies/models for supply chains including commercial transportation (mainly trucks and freight carriers) will impact fuel demand significantly in coming years. Regulatory environment is evolving quickly to limit emission levels related to sulfur and other components as well as requiring electrification of transportation systems and higher contribution of renewable/alternate energy sources. These forces will result in slowdown in fuel demand in coming years.
Energy market has always been very dynamic over last 50 years driven mostly by geopolitics along with demand growth in developing economies. Last decade has seen disruptive technologies, particularly shale, playing a much larger role in shaping the energy market. These resulted in higher market volatility. Geopolitics have been further complicated by sanctions regime and threats of trade barriers/tariffs. Countries around the world are rethinking their energy security and options to lower current threats and risks.
Hydrocarbon demand for petrochemical industry is expected to grow at much higher levels as compared to energy demand. Petrochemicals demand is closely tied to growth of GDP and population growth. It’s driven primarily by growing middle class in emerging economies and a larger shift of population to urban centers. Petrochemicals growth will see some negative impact due to change in regulatory environment (e.g. ban on single use plastics) and a greater emphasis as well as environmental pressure for increased plastic recovery and recycling. Overall the petrochemical products contribute tremendously in improving quality of life and as the larger percentage of population in developing economies move into middle class, we will see continued growth in demand.
It’s no surprise that refineries are now looking at higher levels of petrochemical integration as a prudent diversification strategy for future sustainable growth. This is evident from some of the complexes that are currently in engineering and construction or in early stages of development. Some of the recent announcements include:

• Saudi Aramco and SABIC JV for Crude Oil to Chemicals (COTC)
• Ratnagiri integrated Refinery and Petrochemical Complex (likely JV of 3 Indian Oil Companies, Saudi Aramco and ADNOC)
• DUQM Refinery and Petrochemical Integrated Project
• ADNOC Mixed Feed Cracker integrated with Refinery
• TOTAL, Saudi Aramco JV SATORP Mixed Feed Cracker integrated with refinery
• 5 (or more) major Refinery-Petrochemicals integrated projects in China announced in last 2 years
• Petronas and Saudi Aramco JV Refinery and Petrochemical integrated development (RAPID project)

 
I will touch some more on refinery-petrochemical integration in future. Please feel free to contact me at sanjeev@apexpetroconsultants.com

Steam cracker based petrochemical investments are capital intensive and on average take five to eight years from feasibility stage to start-up. The changing energy dynamics and evolving market conditions always challenge the chemical companies to build and operate these facilities in a competitive and cyclic business environment. The product demand side is closely tied into GDP growth and maturity of the local economy. Demand in mature economies relate closely to GDP while emerging and growing economies see much higher demand of petrochemical products as the middle class grows.
The success of chemical businesses depends on:
1.      Access to (competitive) feedstock, market, and resources
2.      World scale, integrated, efficient and reliable
3.      Global footprint
4.      Product range coverage and access to differentiated technologies
The regions such as North America will see petrochemical capacity built up due to feedstock and cheap energy advantage. This growth will be driven by export to growing regions of the world. Cheaper ethane in US only will not meet the demand growth in rest of the world. Therefore, emerging economies will invest in petrochemical facilities based on market access among other drivers. Most of these investments will depend on feedstock derived from crude oil or condensates sources. Smart integration, flexibility and lower capital costs will drive the competitiveness of these facilities. Countries like Saudi Arabia will look for optimizing the full hydrocarbon value chain to stay competitive and contribute to social and economic growth locally. Recent push by SABIC and Aramco to develop “Oil to Chemicals” is an example of this approach.
All these approaches can be successfully managed provided chemical companies plan for energy and market dynamics with deep understanding of technology and technology options that drive the competitiveness and are optimum for local conditions. Strategic thinking, industry insights and experience based knowledge is a must for managing the technical complexity and risk profile in a competitive and cyclical business environment. A holistic approach that takes into account business drivers, market dynamics, technology/engineering options and local conditions leads to a robust solution. Access to this knowledge and resources can help petrochemical businesses to develop, build and operate best-in-class facilities.