PTQ Q3 2022 Issue

Capital priorities in the downstream industry

Margins opportunities in chemicals and biofuels dominate long-term investments

Rene Gonzalez Editor, PTQ

T he refining industry is a core component of any mod - ern economy, ultimately providing the energy, fuels, and chemicals required for global development. According to BofA Global Research of America, through - out most of the last half-century, every 1% change in world GDP tended to translate into a 1% change in energy demand. However, historic refinery closures during the 2020-21 pandemic created a deficit in 2022. Sanctions such as those recently imposed on Russia and an inability to respond to price signals are creating inef - ficiencies for refiners globally while they search for more supply amidst demand destruction. But with feedstock and raw material shortages, and high energy costs, turning challenges into opportunities could possibly be enhanced by setting objectives, executing strategies, and adapting new technology. Objectives Some objectives include alleviating naphtha deficits such as heavy naphtha to maximise downstream aromatics production. Execution of connectivity strategies is another important objective and is foremost to linking renewable and biofuels processes to downstream operations, affect - ing everything from fuels and olefins production to plant utilities. Strategies Refiners in major markets from Asia to North America are seeing value in reconfiguring the final conversion section of a refinery towards naphtha production, considering long-term downward projections for fossil-based gasoline and diesel. We are seeing market incentives to maximise intermediate streams, including light and heavy naphtha for olefins and aromatics production. To date, plant capacity, complexity and level of integra - tion have influenced the amount of naphtha a refinery can deliver to steam cracking facilities and aromatics units. Against this backdrop, the current global average crude oil- to-chemicals (COTC) is about 8-10% conversion to chemi - cals per barrel of oil. For a very well-integrated complex such as Petro Rabigh in Saudi Arabia, each complex can achieve 17-20% con - version to chemicals. However, information from Axens emphasised that announced COTC projects could pro - duce about 40% of chemicals per barrel of oil. The scale

of conversion delivered with COTC technology provides an additional competitive factor over current world-scale pet - rochemical facilities. Integrated COTCs facilities are more complex to oper - ate, so optimising the process configuration and associ - ated catalytic and thermal conversion assets will ensure operability and productivity. It is no secret that higher complexity requires higher capital investment, predicating a staged investment strategy to spread out CAPEX over longer periods. Complexity apparently favours process licensors who can provide the best-integrated technologies to convert heavier crude assays to produce maximum chemicals with the least utilities and hydrogen consumption (preferably from green hydrogen sources). Along with plans to link refiners to the petrochemical value chain, processing renewable and biomass-derived feedstock through hydroprocessing and FCC units has gained favour with investors in transitional and sustain - ability-focused markets. However, routes to producing renewable fuels with existing refinery assets are not with - out their challenges. Technical challenges For the expanding fuels market, the focus on FCC and hydrotreating for coprocessing fossil feedstocks with triglyceride-rich biomass feedstock and other highly oxy - genated feedstocks such as pyrolysis oils has created new process and operational challenges. 1 Like the challenges refiners faced with the introduction of shale-based crude feedstocks a decade ago, resolving the operational nuances with renewable feedstocks is ongoing. Some of the challenges have involved: • Achieving targeted density and cold flow pour point (CFPP) • Co-processing renewables can be hindered by high oxy - gen content (in the oxygenated compounds), predicating exothermic reactions and high hydrogen consumption • High acid numbers in many renewables increases corro - sion risks due to the presence of high chlorine content and carboxylic acids • Contaminants in renewables (Si, P) depositing on cata - lysts increase pressure drop and accelerate deactivation. Further downstream, the plastics ecosystem is not with - out its own technical challenges. Plastics production and

PTQ Q3 2022