I hope that everyone is staying healthy and safe while coping with many changes impacting our working and social lives.

These are the times of uncertainty and at times seem like lacking hopefulness. We are faced with an unprecedented slowdown of economic activity due to the COVID-19 pandemic and that impacted the overall demand for petrochemicals, as it is tied directly to the GDP.

Oil prices plunged due to a supply glut created by a price war between Saudi Arabia and Russia, in parallel with an unprecedented demand slowdown because of the pandemic. Even though OPEC+ has agreed to significant production cuts, these may not be enough to deal with the demand impact. In the near term, crude prices will likely remain low combined with high volatility.

The petrochemical industry is seeing similar impacts, with exception of demand related to health, hygiene, and the food/grocery industry (and maybe to some extent for digital technologies-related activity). Even with demand increase in niche segments, overall demand has slowed down significantly. At this point there is uncertainty about the timing for the start on the road to recovery and how long will it take to reach the pre-pandemic levels. The pundits and economists have a large divergence in their estimates, starting from 3 months to 2 plus years (with some estimates of recovery very similar to the trend seen after the last financial crisis). I will leave these discussions to experts (pandemic experts and institutions to determine the timing for opening the economic activity and to economists/policymakers to find a path to help the individuals to participate in a productive recovery). These factors are not under our direct control.

Our focus and energy, as individuals and companies, need to be channeled toward the things and issues that are under our control. It goes without saying that we all need to be aware of the developments around factors beyond our direct control to make adjustments to our plans on a needed basis.

We must bring the financial discipline to conserve and manage cash in times of uncertainty. This translates to savings in operating expenses as well as managing capital spending in the right places to position the companies to come out stronger on the other end. Each idea and item on the savings list need to consider the direct and indirect impact on core business and success factors, given the competitive landscape in a demand-constrained environment. I have talked about the turn-down operation or shutdown of some of the facilities in the previous blog. There is tremendous potential for savings in the decisions related to the operation of these facilities. Keeping the needs of employees, customers, suppliers, and other stakeholders; during these hard times; in the overall decision-making process pays out many folds over. I am available to discuss (pro bono phone consultation) to brainstorm ideas that can help this analysis. Please feel free to send me a message to reach me.

​As I write this blog, let me start by saying that hope everyone is staying safe and healthy!
With double whammy of demand destruction (impact of pandemic and efforts to slow the spread) and oil supply/price war, the ethylene cost of production curve has turned-on-its-head.

• European naphtha cracking is lowest cost of production
• Even in US, naphtha or butane cracking is seeing lower cost of production as compared to ethane cracking

These trends may not represent long-term expectations but highlight some of the obvious issues around short-term volatility and feed flexibility.
The main issue, crackers are facing and may continue to face, relates to demand destruction and the decisions to run at turn-down or shutdown some of the facilities.
There is no silver bullet to address the challenges that each of the owners and operators face. There are specific knobs that each facility or company-wide operations can explore to minimize cost of production. At Apex PetroConsultants, we are available to discuss (pro bono phone consultation) with owners/operators about approaches and ideas for minimizing their cost of production. 

Here are some thoughts about the pandemic that we as engineers, particularly chemical engineers, can relate to. These are like runaway reactions that need to be contained by all possible means before they can result in loss of containment. As we all know that loss of containment in a reactive system can cause significant damage to the facilities and potentially to the employees and communities. We know from experience that we take all necessary steps to avoid and arrest the runaway reactions and not worry about the production. That's the reason for our pandemic experts and emergency response teams are telling all of us to stop the reactive chain of pandemic. This is going to be a tough task given the size and complexity, it does require individuals to be fully involved and responsive to the needs of the times.
Once the dust settles, we will need to assess the impact before getting things started towards the road to normalcy. Again, like in a runaway situation we look at the mechanical integrity of the system and we reevaluate the procedures before restarting so that we can avoid another situation where we can avoid the conditions that result in a runaway in first place and recur.
We, as individuals and companies/businesses, have to do our part to deal with this pandemic and there will be a time to look back and assess lessons learned to make the systems more robust and resilient.

The ethylene industry has been growing at a significant pace since the turn of this century, but more so in the last decade. We have seen growth in North America driven by shale-related advantaged feedstock. There is also continuing growth in Asia, particularly China, driven by demand and in the Middle East to capture value addition in hydrocarbon chains.
The growth story from the last decade is continuing and here is what to expect till about 2025:

• North America's renaissance continues. This region has added more than 11 million Metric Tons per Annum (MTA) of grassroots ethylene in the last 5 years and is expected to add more than 14 million metric tons more in the coming 5 years.
• China continues to add ethylene capacity and is expected to add more than 18 million MTA of ethylene in the next 5 years.
• Rest of Asia is expected to add more than 11 million MTA of ethylene by 2025.
• Middle East (excluding Iran) is expected to add more than 12 million MTA of ethylene in this period.

The regions mentioned here will likely add more than 50 million MTA of ethylene by building nearly 40 steam cracking units. These estimates include plants currently under construction and in various stages of development, including some that are in the feasibility stage.
This offers tremendous opportunities for the industry including the businesses that supply hardware and services to the industry. The key to success will depend on the business strategy for maintaining the competitive advantage to capture market share for sustained growth. The growth in this industry comes with challenges as the supply/demand equation comes under pressure in the short term.
As the petrochemical industry is going through a significant demographic and experience level change in staffing over the next few years, a wide range of skills is substantially lacking. The industry will need to invest in training professionals, including those who are directly involved in operations but also support roles, business development, service providers, etc. The industry must focus on imparting experience and knowledge in efficient and effective ways to not only fill the gaps left by the retiring workforce but to meet the growing demand for talent.  
At Apex PetroConsultants, we focus on imparting working knowledge based on experience and expertise to help individuals and companies in realizing their full potential.

As the new year is about to unfold, I wanted to share my thoughts on current state of our industry and how best to prepare for the future.
Summarizing the big picture:

• Integrated margins for olefins-polyolefins are declining and expected to stay low
• Capacity additions, in near term, exceed the demand growth
  • Lower global capacity utilization
• Slowing global economic growth
• Oil/refining majors investing in integrated mega-projects changing competitive landscape
• Chemical companies, in general, are shifting focus to capital discipline
• Plastic recycling picking up momentum for both mechanical and chemical recycling
  • Significant investment for developing new technologies
  • Breaking down plastic waste to pyrolysis oil or monomer
• Companies are preparing and positioning for reduction in carbon footprint

These issues will impact the industry and the individual players in significant ways. How you prepare for these issues will determine the future success.
No matter whether you are an oil/refining major or a chemical company, capital discipline and capital efficiency always help positioning for success in a competitive and cyclical business environment.
Whether you are trying to improve an existing operation or building a new facility, there are many areas that require attention:

• When identifying opportunities and setting the direction
• During implementation, to effectively turn the goals and objectives into the reality
• Knowing the full capability of the facility (existing as well as new)
• Utilizing the assets effectively, efficiently and reliably

The options can be technically complex with varying risk profile and deploying the process technologies effectively can be challenging. This requires a great deal of expertise, experience, industry insights and knowledge.
At Apex PetroConsultants, we provide independent expert advise and impartial analysis to help clients realize their full potential. Our clients, whether they have in-house expertise or not, have benefited from the independent reviews and input.

Greetings of the season and best wishes for the new year to you and your loved ones!

The plant owners/operators need to know the capability of an ethylene plant to produce the ethylene product. To be clear, it’s typically not the design or nameplate capacity.

The plant capability is a key parameter for

• Benchmarking the asset utilization
• Understanding the plant operation and maintenance effectiveness
• Determining the current plant bottleneck(s)

​A complete understanding of the plant capability helps in setting business strategies and plans. It typically results in better asset utilization.
This helps in determining the baseline for expansion/debottlenecking projects with a competitive and optimum technical scope.

We help clients in determining and reviewing the current plant capability for

• Better asset utilization and improved economics
• Setting up expansion/debottlenecking projects for arriving at competitive scope (resulting in lower installed cost)

We expect a supply overhang in olefins industry in next two to three years, can be even sooner. Main factors contributing to this are:

• Planned cracker capacity additions in North America, Asia including China, and Middle East
• Softening demand 
  • slowing economic growth
  • Geopolitics – Middle East tensions, Tariffs/Trade barriers

Petrochemical businesses, including steam crackers, need to start positioning to stay competitive when margins will be under pressure. Industry will likely prepare for this by tightening overall spending. We believe that this offers an opportunity to owners and operators to be more competitive while targeting the long-term growth.
Here are some of the smart ways to prepare for the future:

• Take a holistic view of the business
• Mid to long term targets for business growth

This provides key input for evaluating options and approaches:

• Aligning current efforts with future growth expectations

Significant part of the competitive advantages result from:

• Utilizing the current assets effectively and efficiently

The success of these efforts depends on a good understanding of:

• Cost of production from your  existing assets
• Current / historical operation and performance parameters along with benchmarks

We help clients with these assessments and develop a roadmap for staying competitive during the periods of supply overhang while aligning the efforts for future growth. We believe that independent and cold eye reviews provide owners and operators with benefit of a different perspective.

Future of Olefins (ethylene, propylene etc.) is dependent on the historical, geo-political and environmental factors among others.

• Historical factors include:
  • supply & demand
  • feedstock availability and pricing (crude oil and gas feed)
  • GDP growth
  • Population growth, more importantly growth of middle class in emerging and developing economies
  • Urbanization trends
• Geo-political factors include:
  • Trade barriers
  • Tariffs
  • Middle east tensions
  • Sanctions regime
• Environmental factors include:
  • Recovery of plastic waste
  • Recycling
  • Ban on single use plastics
  • Greenhouse Gas emissions & carbon taxation
  • Air quality in large urban centers
  • Climate change pressures
• Renewables and electrification of transport systems
  • Oil majors are shifting their focus to petrochemicals and away from fuels. This is changing competitive landscape of petrochemicals industry
• Large and complex facilities
  • High capital intensity
    • Leading to complex joint ventures
  • Developing and building these facilities within budget, schedule to achieve desired production and performance levels in reasonable timeframe
  • Operating safely, reliably and efficiently
• Disruptive technologies
  • As an example, shale developments brought petrochemical industry renaissance in US based on feedstock advantage
  • Transportation systems
  • Sharing platforms (like Uber)
  • Models for supply chains including commercial transportation systems
  • Alternate energy sources

The petrochemical industry is expected to grow in foreseeable future to meet the quality of life needs of growing world population, middle class and urbanization. This growth will follow the GDP growth.
Industry needs to proactively address the environmental and sustainability issues through innovation and operate these facilities efficiently and reliably to meet the future competitive challenges.

​At Apex PetroChemicals, we help our clients to manage technical complexity and risk profile in a competitive and cyclical business environment. We bring the value of strategic thinking, specific industry insights, knowledge, and a depth of experience for olefins based petrochemical businesses to develop, build and operate best-in-class facilities.

Furnace availability varies greatly from plant to plant and impacts the production levels, more so for the plants that are furnace constrained.
5 Leading Causes of Furnace Outages

1. Radiant coils – carburization, stress/creep rupture are the leading causes followed by plugging, bowing/twisting and brittle fracture
2. TLE cleaning – tube blockage
3. Instrumentation
4. TLE Repairs – contributing factors include water side corrosion, inlet tubesheet erosion, tube to tubesheet weld failure, gasket or seal failure
5. Refractory repairs

Reliability of furnaces can vary significantly depending on:

• Technology selection – including severity, selectivity, flexibility
• Design approach, specifications and selection of components
• Operation approach and discipline
• Monitoring and process control
• Maintenance approach and discipline

At Apex PetroConsultants, we focus on these aspects during all stages - including technology selection, modifications for performance improvements, design/engineering, operation and troubleshooting. Key is to maximize production at an optimum performance level and capital investment.