Oil & Gas Product News Logo

Crude-oil-to-chemicals technology could boost per-barrel profits for refiners and petrochemical producers: IHS Markit

0161/40027_en_8eb1b_42649_ihs-markit-report-1.jpg

Company info

4th floor Ropemaker Place
25 Ropemaker Street
London,
GB, EC2Y 9LY

Website:
ihsmarkit.com

Read more

A revolutionary new chemical process technology, called crude oil-to-chemicals (COTC), could more than double the profitability derived from a barrel of crude oil, according to a new, independent economic assessment from IHS Markit.

Currently, global, integrated refining/petrochemical companies typically earn about $8.50 per barrel of refined crude oil*, but by leveraging the new COTC process technology (based on a Saudi Aramco Technologies COTC design**) in a world-scale refining and chemical facility***, owners could increase their plant net margins to approximately $17 per barrel, according to findings published in the IHS Markit Process Economics Program scenario analysis: Crude Oil to Chemicals and Oxidative Coupling of Methane: Potential for Synergy?

"This innovative new COTC-process technology is still in its infancy, but, according to our independent analysis, if commercially proven and built to world-scale, it has the potential to more than double the value refiners can unlock from a barrel of oil," said Don Bari, vice president of chemical technology at IHS Markit, and an author of the report along with Michael Arné, executive director, emerging technologies research, at IHS Markit. "This process is both transformative in terms of its potential, and timely, as refiners face declining future demand for gasoline and fuel production due to carbon emission mandates, greater vehicle fuel efficiency, and an increasing penetration of electric vehicles," Bari said.

Global chemicals demand is growing at a significantly higher rate than fuel demand, Bari said, so the desire to produce higher-value chemicals from lower-value feedstocks like crude and ethane is driving tremendous interest in these disruptive technologies. One of the most significantly disruptive technologies or categories of technologies being developed, based on their sheer volume, is crude oil-to-chemicals, Bari said. These projects fuse a refinery and petrochemical plant together in a fundamentally new way.

"This goes well beyond the state-of-the-art refinery petrochemical integration by implementing new reconfigured unit operations into a refinery," Bari said. "The objective is to shift the product slate derived from a barrel of oil to a range of 60% to 80% chemical production and non-fuel products, up from the traditional range of 10% to 15% or so, in order to significantly increase the value of crude oil reserves and provide demand security in Aramco's case. This transformative COTC technology goes beyond even the most "highly" integrated sites today that are pushing 30% to 40% chemicals production with traditional approaches," Bari said.

Bari said the IHS Markit chemical process research team was motivated to embark on a deeper analysis of the economic potential of the COTC technology following the 2018 announcement by Siluria Technologies (a technology provider that produces olefins directly from natural gas) that it had joined forces with Saudi Aramco Technologies: Siluria Technologies and Saudi Aramco Technologies Company join forces to maximize chemical production.

In the IHS Markit announcement discussing the two technologies following the 2018 Siluria announcement, Bari said the Siluria Technologies process, which produces olefins directly from natural gas through oxidative coupling (chemistry) of methane (OCM), is expected to further allow Saudi Aramco's future crude oil-to-chemicals facilities to create more value by converting very low-value off-gases (largely methane) into higher-value olefins products, which improves carbon efficiency and increases the volume of the barrel of oil directed to valuable fundamental petrochemicals.

"One of the reasons these crude oil to chemicals technologies are of such great interest is because they are potentially so disruptive to the industry's current processes and capabilities," Arné said. "This is due, largely, to the scale involved and what it will deliver in terms of volumes. In time, COTC could literally disrupt the global chemical balance. For that reason, everyone in the industry is interested in this technology—energy producers, refiners, chemical producers, technology providers, and, of course, investors," Arné said.

Arné said COTC becomes even more intriguing when you consider Saudi Aramco's recent announcement that it had acquired a 70% controlling stake in SABIC (Saudi Basic Industries Company, the chemical arm of Saudi Arabia). The deal combines Saudi Aramco, by far the world's largest oil producer by volume (in 2018, it produced 13.6 million barrels per day of crude and condensate), with SABIC, the world's fifth-largest chemical company by sales (SABIC revenues in 2018 were $45.1 billion) according to IHS Chemical Week.

Ahmad Al Khowaiter, chief technology officer of Saudi Aramco has publicly stated that "maximizing the output of high-value chemicals products from our future crude-oil processing projects is one of the key objectives in our downstream technology strategy." The SABIC acquisition moves Saudi Aramco "a step closer to achieving its long-held ambition of becoming the world's leading integrated energy and chemicals producer," according to the IHS Chemical Week report on the deal, enabling the company to build on a solid platform to support Aramco's continued investment in petrochemicals—the fastest growing sector of oil demand. In addition to the SABIC deal, Aramco has committed $100 billion to invest in petrochemicals through 2030.

Aramco, Bari said, has stated it plans to drive growth by increasing its global refining capacity from the current 4.9 million barrels of oil per day to 8 million to 10 million barrels of oil per day by 2030. "If you consider that of the increased refining capacity Aramco proposes, 2 million to 3 million barrels per day will be used to produce chemicals, the potential additions to the global chemical balance are quite extraordinary to contemplate," Bari said.

In its current analysis of the COTC technologies, IHS Markit assessed just the potential economics of the Aramco COTC process because of its near-term viability at scale. The Siluria process is still too early in its development for IHS Markit to model economics, Bari said. The IHS Markit assessment, however, did take the OCM process into consideration for purposes of discussing increased yields through integration.

IHS Markit's refined products balances demonstrate the necessity for higher levels of petrochemical integration as the two largest refined products, gasoline and diesel/gasoil, reach global peak demand in the mid-2030s, but refinery-derived petrochemical feedstocks continue growing beyond 2050 even as global crude runs decline. Deeper refining/petrochemical integration - including COTC as it's proven commercially - is an essential part of IHS Markit's outlook****, particularly in certain Middle East and Asian hubs, Bari said.

"The IHS Markit COTC process concept illustrates why so many companies are interested in this technology," Bari said. "Our base case shows a 48% yield to prime olefins," Bari said. "On a third-quarter 2018 Saudi basis, the refinery margin is $17/barrel EBITDA and $12/barrel EBIT  for a high performing (though small) refinery of 200,000 barrels per day, compared with $7/barrel to $10/barrel EBITDA for top-quartile Euroasia refineries."

"The results of the analysis significantly exceeded what we initially expected—it was one of those ‘wow' moments as a researcher and chemical engineer, when you have to run the numbers again to believe what your eyes are seeing," Bari said. "While the technology is still new, in my 40 years in the industry, I haven't witnessed any technology that has the potential to unlock such value and truly revolutionize the refining and chemical industries as this COTC technology. At the same time, it does so in a manner that is less carbon intensive."

According to the IHS Markit analysis, the COTC process affords the refiner/petrochemical producer sustainability gains through the reduction in the overall carbon footprint of a facility due to integration and optimization of assets, which become more efficient.

 

*Based on the IHS Markit Euro-Asia 3Q 2018 analysis for top-quartile producers

**IHS Markit first assessed the Saudi Aramco COTC design in its Process Economics Report 29J, "Steam Cracking of Crude Oil (March 2016).

***The process analysis presented in the latest IHS Markit Process Economics Review discussed here is consistent with some of Saudi Aramco's patents in this area, but the IHS Markit COTC process concept should be considered speculative. IHS Markit does not know whether Saudi Aramco will be using the same process configuration. Additionally, the IHS Markit Siluria OCM design basis represents a "next-generation" conceptual process with conversion that is higher than that currently understood to have been demonstrated by Siluria. The OCM process concept discussed in the IHS Markit analysis has been developed independently of Siluria.

**** IHS Markit Annual Strategic Workbook and Light/Heavy Naphtha Service

More from Industry News

Data acquisition system cuts costs on oil well stimulation services

CAS DataLoggers provided the data acquisition solution for MTS Solutions, an oil field service company headquartered in Bakersfield, California. MTS has been providing well stimulation services in California for over 30 years, maximizing production for clients using both traditional and green products. Data Acquisition Operations Engineer Kevin England explains, "We're a small business 25-man crew, as opposed to a multi-national company, so we needed a cost-effective monitoring solution for our jobs that still had the advanced functionality our customers require."

High HP phase electric motors coupled with pumps provide rapid productivity

Single Phase Power Solutions, the world's only manufacturer of high horsepower single phase electric motors, match their motors to a pump to provide instant productivity.  Available from 30 to 100 HP these single phase pump solutions are easily installed by simply connecting to available single phase utility power - they do not require a phase converter or Variable Frequency Drive (VFD).  The company incorporates their Belle Single-Phase MotorT which uses Written-PoleR technology to power standard suction end centrifugal pumps, rotary gear pumps, and turbine pumps in both horizontal and vertical configurations. These pump solutions are ideal for irrigation, drinking water distribution, well pumps, aquifer management, water treatment, wastewater pumping, wastewater collection, wastewater treatment and discharge, and other water and wastewater processing applications.   With expertise in pump systems design and manufacture, Single Phase Power Solutions team helps determine the correct materials and style of pump to suit specific application requirements.

Subscribe to our free newsletter

Get our newsletter

Learn more

July rig count up in Canada, but down from 2018: Baker Hughes

Baker Hughes, a GE company announced  that the Baker Hughes international rig count for July 2019 was 1,162, up 24 from the 1,138 counted in June 2019, and up 165 from the 997 counted in July 2018. The international offshore rig count for July 2019 was 255, up 9 from the 246 counted in June 2019, and up 38 from the 217 counted in July 2018.

Superior appoints Belterra to distribution role in Quebec

Superior Industries, Inc., the U.S. based manufacturer and global supplier of bulk material processing and handling systems, has announced a new partnership with Canada's largest distributor of conveyor belting, components and other bulk material handling solutions. Belterra, a 50-year-old distributor with 19 locations throughout the country, will stock, sell and service Superior's conveyor idlers, pulleys, scrapers and accessories in Quebec. 

Iris Automation, Skyfront and Echodyne power first ever beyond-visual-line-of-sight drone flight without human visual observers

The University of Alaska's Unmanned Aircraft Systems Integration Pilot Program (UASIPP) has conducted the first ever beyond-visual-line-of-sight (BVLOS) drone operation without visual observers, an industry milestone powered by Iris Automation's on-board, and Echodyne's ground-based, detect-and-avoid systems integrated onto a Skyfront Perimeter UAV. 

Hauling experts Mammoet to acquire ALE

Mammoet has announced its intentions to acquire ALE. Both companies are specialists in engineered heavy lifting and transport for sectors such as the petrochemical industry, renewable energy, power generation, civil construction and the offshore industry.

Subscribe to our free magazine

Get Our Magazine

Paper or Digital delivered monthly to you

Subscribe or Renew Learn more

PSAC forecast update confirms low investor confidence in Canada

The Petroleum Services Association of Canada (PSAC), in its third update to its 2019 Canadian Drilling Activity Forecast, announced that it is decreasing its forecasted number of wells to be drilled (rig released) across Canada for 2019 from 5,300 (May 2019 revision) to 5,100 wells drilled. PSAC based its updated 2019 Forecast on average natural gas prices of $1.60 CDN/Mcf (AECO), crude oil prices of US$57.00/barrel (WTI) and the Canada-US exchange rate averaging $0.76.

Joint review panel for Frontier Oil Sands Mine Project submits report

The Joint Review Panel established to review the Frontier Oil Sands Mine Project, proposed by Teck Resources Limited (the proponent), has submitted its report to the Minister of Environment and Climate Change. The review was completed in accordance with the Agreement to Establish a Joint Review Panel for the Frontier Oil Sands Mine Project, issued on May 19, 2016 and amended on August 24, 2017.

PSAC raises more than $39,000 for education and energy literacy

The Petroleum Services Association of Canada (PSAC) has announced that its "PSAC Working Energy Golf Classic", powering Canadian energy and education and raising funds for awareness and education, raised over $39,000 thanks to the generosity of energy industry companies, employees, their guests, and the numerous sponsors whose livelihoods depend on the health of the industry. The sold-out event took place July 24 at the Inglewood Golf & Curling Club. 

Cuda Oil and Gas to sell Quebec assets for $10.59 million

Cuda Oil and Gas Inc. has entered into a series of binding Asset Purchase Agreements  to sell all of its oil and gas assets and related liabilities located in the Province of Quebec at a total transaction value of CAD$10.59 million, including cash consideration at closing of CAD $4.29 million, to arm's-length purchasers.  The Transaction is anticipated to close on or about August 30, 2019.

Cenovus shows gains in 2018 environmental, social & governance report

Cenovus Energy Inc. has published its 2018 environmental, social & governance (ESG) report detailing the company's progress in advancing environmental, health and safety performance, investing in and engaging with the communities where it operates and maintaining the highest standards of corporate governance. A number of Cenovus's key performance indicators for land, air and water improved last year, partly due to ongoing process improvements and partly due to the sale of the company's legacy conventional assets in 2017 and early 2018.

Subscribe to our free newsletter

Get our newsletter

Learn more

Messer highlights new "Huff 'N Puff" treatment to recharge well stimulation at the Unconventional Resources Technology Conference 2019

At URTeC 2019, Messer is highlighting its RECHARGE HNP, or "Huff ‘n Puff," technology, a proven solution for well production enhancement. Ideal for re-stimulating depleted oil and gas wells, the energized RECHARGE HNP treatment combines the proven enhanced recovery properties of carbon dioxide (CO2) or nitrogen (N2) with the latest in advanced nanoparticle technology from Nissan Chemical. URTeC takes place July 22 – 24 in Denver.

Suncor Energy releases 2019 Report on Sustainability

Suncor has released its annual Report on Sustainability which details the company's environmental, social and economic performance. Suncor's perspective on the challenges and opportunities of climate change, and the transition to a low-carbon economy are contained in its third Climate Risk and Resilience Report available within the Report on Sustainability and as a stand-alone downloadable PDF. The annual Report on Sustainability is available both online and as a downloadable PDF.

FortisBC secures first export contract for Tilbury LNG facility

FortisBC has entered into its first term supply agreement to produce liquefied natural gas (LNG) for Top Speed Energy Corp. to export to China. This term supply agreement is an unprecedented development in Canada's LNG export industry and was made possible by the completion of the Tilbury LNG expansion project in Delta, B.C. earlier this year.

New chief executive takes COSIA's helm

Canada's Oil Sands Innovation Alliance (COSIA) is pleased to announce the appointment of Wes Jickling as the organization's next Chief Executive, effective August 6, 2019. The appointment aligns with COSIA's updated strategic plan, focused on accelerating environmental performance through collaborative action and innovation, while sharing its story with Canadians and beyond.

Encana signs agreement to sell Arkoma Basin natural gas assets

Encana Corporation wholly owned subsidiary Newfield Exploration Mid-Continent Inc. has signed an agreement to sell its natural gas assets in Oklahoma's Arkoma Basin to an undisclosed buyer. Total cash consideration to Encana under the transaction is $165 million. The agreement is subject to ordinary closing conditions, regulatory approvals and other adjustments and is expected to close in the third quarter of 2019.  

Subscribe to our free magazine

Get Our Magazine

Paper or Digital delivered monthly to you

Subscribe or Renew Learn more