Times of change. Converting crude to chemicals, and traditional refineries to COTC

Engineer man in safety uniform at the oil industrial refiner on sunset background

With a petrochemicals sector that currently accounts for 12% of global oil demand and is set to almost triple that by 2030, converting crude to chemicals may be a life-raft for a fossil fuels market struggling to stay afloat.

But it’s not just the crude material that’s going through a conversion. Turning to new business models to adapt, traditional refineries are also undergoing a transformation.

Ir. Saiful Anuar Bin Mohd Mokhtar, Principal Engineer (Process Design) at PETRONAS shares with Asian Downstream Insights a case study in the journey from traditional oil refinery to crude to chemical complex, and an operator’s survival guide to adapting to the growing demand for petrochemicals.

Middle classes, mega-trends and market shifts

The strong growth in petrochemical products demand is expected to outweigh the demand of transportation fuels in the near future. The global pandemic cut commutes and shut borders, resulting in a drop in gas and jet fuel of up to 22%, from 2019 averages.

It isn’t all down to COVID. A growing ageing population and middle class and “mega-trends” such as urbanisation and increased consumption of plastic products are driving petrochemicals as a long-term shift in the market. “As such we are expecting the integration of refinery and petrochemicals will grow substantially in the near future as [COTC] allows the production of higher value chemicals straight from crude”, Mokhtar predicts.

COTC 101

COTC is a concept which aims to shift the product slate derived from a barrel of oil to higher percentage of base chemicals and non-fuel products. Whilst the current mainstream refinery prioritises the production of transportation fuel over petrochemicals, COTC reconfigures a refinery to produce full chemicals in place of fuels, merging refining and petrochemical plants into one.

This integrated approach allows traditional refiners to monetize Naphtha and other refinery products to higher value products in the face of changing emissions regulations and depletion of  demand for transportation fuel, and a business opportunity to catch and capitalise on a market upcycle.

Full visibility for full evaluation

It may seem like a seamless transition. However COTC is not as simple as building a new greenfield facility, Mokhtar warns. There is a limited amount of feedstock that can be processed by existing refineries. Limitation in asset life, and of existing plant equipment adequacy also means that many current refineries are not resourced to manage efficient COTC conversion.

In order to mitigate these challenges, Mokhtar suggests a thorough feasibility study, that will assess all aspects of the conversion process, from the nature of the feedstock to commercial viability and techno-economic evaluation.

“In order to mitigate these challenges, a thorough visibility study should be performed”, he stresses.

A menu for different business needs

Analysing these risks will bring different results, according to the unique infrastructure of your refinery. Conversion should always be aligned to “specific business objectives”. Overall, Mokhtar summarises, there are three main options available.

  1. A simple steam cracker conversion built into an existing butadiene refinery
  2. A combination of steam cracker with diesel hydrocracker
  3. A combination of steam with distillate hydrocracker

This COTC menu caters to different tastes across the brownfield refinery spectrum. But the choice, Mokhtar explains, boils down to two key variables: CapEx and yield.

Option 1 has the lowest CapEx, then you get more expensive as you move to numbers 2 and 3”, he says simply. “However, option 3 will give you the highest yield”.

Based on these, and other benchmarks, refiners can analyse the attractiveness of each option, and make a sound business case for COTC conversion.

Chemicals at a critical crossroad

As news of vaccines injects hope into the headlines, the fuel market is slowly revving up. In China, petrol and diesel demand picked up last month and jet fuel consumption has also rebounded across Asia to almost pre-COVID levels. However, Mokhtar is confident that COTC and refinery-petrochemical integration will remain a key part of the industry’s near future.

“COTC provides the opportunity to convert existing refineries to produce higher value petrochemicals in lieu of threat of regulations and depletion of fuel demand”, he confirms.  “However, care should be taken to overcome the challenges in converting existing refinery into COTC complex”.

This can be done through a rigorous feasibility study, analysing the potential configurations available for yield and return. The groundwork, Mokhtar firmly believes, will be well worth the investment. Success is where opportunity and preparation meet, and petrochemicals is at a critical crossroad.