PTQ Q4 2022 Issue

Vol 27 No 5 Q4 (Oct, Nov, Dec) 2022 ptq PETROLEUM TECHNOLOGY QUARTERLY

Diversification strategies beyond 2023

I n the current era of sustainability and transition to ‘green energy’, EIA reports of over 105.6 million bpd global refining capacity seem astonishing. In fact, Global Data estimates that worldwide crude distillation unit (CDU) capacity is projected to grow over 10% from 2022 to 2026. Some markets like California plan on banning gasoline-powered vehicles by 2035. Other markets like India and China are pushing on to higher gasoline production and petrochemical diversification. I t was reported by the IEA that several world-scale refining projects were sched - uled to be online by 2022 or 2023 in Asia and the Middle East. The projects include Al Zour, Kuwait – 615,000 bpd; Jieyang, China – 400,000 bpd; Jizan, Saudi Arabia – 400,000 bpd; Rongsheng Phase II, China – 400,000 bpd: Lianyungang, China – 320,000 bpd; Duqm, Oman – 230,000 bpd; and various other expansions and restarts. The complexity of the projects reflects strategic plans for chemical produc - tion while processing a wider variety of feedstocks. Targeting high margins revenue streams like polypropylene leads to the short- est time intervals between project launch and achievement of stable cash flow. But higher capital outlays are necessary for many instances due to tightening environ- mental standards (such as Scope 1 and Scope 2). North America, Europe, and other mature markets are on track to phase out hydrocarbon-based fuels to make way for electric vehicles (EVs), while other markets like China are on track to ‘ride the train both ways’. They are expanding distillate production (marine diesel, SAF) and high-octane gasoline production for high compression engines in vehicles (for their expand- ing middle class) while also dominating the global manufacture and exportation of EVs, batteries, and solar/wind-powered systems. Nonetheless, petrochemicals and plastics demand is benefiting markets in most regions, where most petrochemical production is consumed to manufacture plastics from olefins such as ethylene and propylene, and onto polyethylene (PE) and polypropylene (PP), respectively. M oreover, hydrocarbon processing facilities, including recently shut down refinery infrastructure, may fit well into the oil and gas industry’s ‘Plan B’. The plan is a de facto option for participating in pyrolysis oil production from the chemical recycling of plastic waste, providing feedstock for the PE (from ethylene) and PP (from propyl- ene) production pathway. Why, if this pathway is already open through the oil and gas value chain? Mandates like the EU Directive on Single-Use Plastics predicate mandatory recy- cled content in all plastics packaging and implement an extended producer respon- sibility scheme that makes plastics producers cover the cost of waste management and cleanup. Refining assets can play more than just a peripheral role in this emerging value chain. For example, in this issue’s Q&A section, Mitrajit Mukherjee, President, Exelus, said catalytic processing of plastics-rich waste streams in a hydrocracker is a preferred alternative. The advantage of using the hydrocracking approach is the ability to handle all types of plastic waste (including PVC and PS), which allows a wider variety of materials to be recycled. L ike challenges with reconfiguring process assets for renewable feedstock pro - cessing, assessing plastic waste-derived feedstock qualities, contaminants, and processing options is still at an early stage. Refiners may have a narrow window to acquire financing from sustainability-focused investors to invest in pretreatment facilities or explore partnerships with third-party entities to supply pretreated plastic waste-derived feeds, to be discussed in future 2023 issues of PTQ .

Editor Rene Gonzalez editor@petroleumtechnology.com tel: +1 713 449 5817 Managing Editor Rachel Storry rachel.storry@emap.com Graphics Peter Harper Digital Editorial Assistant Ciaran Nerval US Operations Mark Peters mark.peters@emap.com tel: +1 832 656 5341 Business Development Director Paul Mason sales@petroleumtechnology.com tel: +44 7841 699431 Managing Director Richard Watts richard.watts@emap.com Circulation Fran Havard circulation@petroleumtechnology. com

EMAP, 10th Floor, Southern House, Wellesley Grove, Croydon CR0 1XG tel +44 208 253 8695

PTQ (Petroleum Technology Quarterly) (ISSN No: 1632-363X, USPS No: 014-781) is published quarterly plus annual Catalysis edition by EMAP and is distributed in the US by SP/Asendia, 17B South Middlesex Avenue, Monroe NJ 08831. Periodicals postage paid at New Brunswick, NJ. Postmaster: send address changes to PTQ (Petroleum Technology Quarterly), 17B South Middlesex Avenue, Monroe NJ 08831. Back numbers available from the Publisherat $30 per copy inc postage.

Rene Gonzalez

PTQ Q4 2022