The Oil, Gas, and Petrochemical Industry Newsletter Edition 22
DEEPAK RASTOGI
Oil & Gas Professional | 10+ years experience in Refining and Petrochemical Industry | Chemical Engineer | Energy Sector | Production Manager@ IndianOil
1. Price Trends for Brent, WTI, and Natural Gas
Before diving into the latest developments, let's take a look at the recent price trends for Brent, WTI, and Natural Gas.
2. Decarbonization and Low-Carbon Initiatives
Exploring Low-Carbon Chemicals in India
BASF and AM Green have signed a Memorandum of Understanding (MoU) to explore the production of low-carbon chemicals in India. This partnership aims to develop business opportunities for chemicals produced using renewable energy. They plan to conduct feasibility studies and evaluate potential technologies for this purpose.
Additionally, they have a non-binding agreement for the offtake of 100,000 tons per year of green ammonia, which will be produced using renewable energy sources. This green ammonia will meet EU standards for renewable fuels.
The collaboration is part of a broader effort to support the sustainable transformation of the chemical industry in India.
Challenges in Decarbonizing Steam Crackers
Steam crackers are essential in the petrochemical industry for producing chemicals like olefins and aromatics. However, they generate significant CO2 emissions due to the use of fossil fuels like natural gas. Decarbonizing steam crackers involves transitioning to low-carbon alternatives such as green hydrogen.
Hydrogen combustion does not produce CO2, making it an ideal option for reducing emissions.
However, challenges include the storage, transport, and handling of hydrogen, as well as modifying existing infrastructure. Despite these hurdles, using hydrogen is a crucial step towards a sustainable chemical industry.
ADNOC's $80 Billion Low-Carbon Investment
ADNOC has launched XRG, a new investment company with an enterprise value of over $80 billion. XRG will focus on lower-carbon energy and chemicals. The company aims to capitalize on three megatrends: the transformation of energy, the growth of artificial intelligence (AI), and the rise of emerging economies.
XRG will develop three core platforms: Global Chemicals, International Gas, and Low Carbon Energies.
The goal is to meet the increasing global demand for low-carbon energy and chemicals, driving sustainable economic growth and technological innovation.
Global Decarbonization Research by Baker Hughes and UC Berkeley
Baker Hughes and the University of California, Berkeley have established the Baker Hughes Institute for Decarbonization Materials. This institute will focus on developing next-generation materials for energy and industrial applications, including carbon capture, utilization, and storage (CCUS), hydrogen, and clean power generation.
The collaboration aims to accelerate the deployment of cost-effective climate technology solutions.
The institute will be led by Professor Jeffrey Long, a renowned expert in materials science. Baker Hughes will fund the research, which will connect academic breakthroughs with commercial innovation to support sustainable energy development.
3. Hydrogen and Renewable Energy
Innovative Hydrogen Solutions for Decarbonization
The U.S. Department of Energy (DOE) has announced a $10 million investment to demonstrate innovative hydrogen solutions for industrial decarbonization. This project, led by the University of Wisconsin-Madison, will integrate a solid oxide electrolyzer cell (SOEC) with an industrial direct reduction shaft furnace. This integration aims to reintegrate waste heat into hydrogen generation, which can then be used to produce direct reduced iron. The SOEC technology does not require scarce platinum group metal catalysts, making it more sustainable. The goal is to achieve a 90% reduction in greenhouse gas (GHG) emissions for ironmaking, supporting the national clean hydrogen strategy and the Hydrogen Shot goal of $1 per kilogram within a decade.
Developing Hydrogen Hubs in India
India is focusing on developing green hydrogen hubs as part of its National Green Hydrogen Mission. These hubs are organized areas where production and utilization facilities are closely linked, addressing the challenges of long-distance hydrogen transport. The mission aims to make India a global leader in green hydrogen production, usage, and export.
The government has allocated INR 200 crore to establish two green hydrogen hubs by 2025-26.
These hubs will support essential infrastructure, including storage, transportation, and refueling stations. The initiative is expected to create jobs, boost local economies, and attract investments in clean energy, contributing to India's transition to a low-carbon economy.
Indonesia's Commitment to B40 Biodiesel
Indonesia is set to implement its B40 biodiesel program starting January 1, 2025. This program involves blending 40% palm oil with diesel fuel, aiming to reduce carbon dioxide (CO2) emissions by up to 40 million tonnes annually.
The B40 program builds on the success of the B35 biodiesel program, which has already reduced CO2 emissions by approximately 32 million tonnes annually.
This initiative is part of Indonesia's long-term strategy to reduce its carbon footprint and promote sustainable energy. Palm oil, a major agricultural product in Indonesia, plays a crucial role in the energy sector through its use in biodiesel production, helping to reduce reliance on fossil fuels.
4. Petrochemical Industry Developments
Construction of Major Petrochemical Complex in China
Saudi Aramco and Sinopec have started building a major refining and petrochemical complex in China's Fujian province. This project, costing approximately $9.82 billion, is a joint venture with Fujian Petrochemical Industrial Group.
The complex will include a refinery with a capacity of 320,000 barrels per day, a 1.5 million metric tons per year (mtpa) ethylene plant, and a 2 mtpa paraxylene facility.
Paraxylene is a key feedstock for producing other industrial chemicals. The project aims to supply 5 mtpa of petrochemical feedstock to the Gulei Petrochemical Base and is expected to be operational by 2030. This initiative is part of Aramco's strategy to expand its downstream business in high-growth regions like China.
BASF's New HDPE Brand and Construction Milestones
BASF has launched a new brand of High-Density Polyethylene (HDPE) called Easiplas?. This brand emphasizes the production of high-quality, reliable plastics that are easy to process and user-friendly. The new HDPE plant at the Zhanjiang Verbund site has achieved significant construction milestones, including the installation of major equipment like a reactor and product purge bin.
The plant, which started construction in 2023, is expected to be operational by the end of 2025 with an annual production capacity of 500,000 metric tons.
Easiplas? highlights BASF's commitment to sustainability by incorporating the latest technologies and renewable energy sources in production, offering solutions with lower carbon footprints.
5. Oil and Gas Market Trends
Surge in U.S. Ethane Exports
U.S. ethane exports have surged significantly, reaching an all-time high of 21.6 million metric tons (MMt) in 2023. This represents a 135% increase since the U.S. began exporting ethane in 2014. The growth is driven by expanded export capacity and an increased tanker fleet. Ethane, primarily used as a petrochemical feedstock, is crucial for producing ethylene, which is further processed into various plastics. The U.S. has become a major supplier to countries like Canada, China, and India, leveraging its abundant natural gas resources to meet global demand for ethane-based petrochemicals.
Tight Naphtha Supply in Asia
Naphtha supply in Asia is expected to remain tight over the next two years due to increased demand for blending with gasoline and the commissioning of new crackers. The shortfall is estimated at 1.73 million barrels per day (bpd) in 2025 and 1.51 million bpd in 2026.
This tight supply could support higher prices for naphtha, benefiting refiners but putting pressure on petrochemical producers facing weak demand and high inventories.
Maintenance at refineries in the Middle East and India, along with potential increased exports from Russia, will also influence the supply dynamics.
Rising Iranian Oil Prices to China
The price of Iranian crude oil sold to China has reached multi-year highs due to new U.S. sanctions that have tightened shipping capacity and increased logistics costs. Discounts for Iranian Light crude have narrowed to about $2.50 per barrel against ICE Brent, compared to wider discounts earlier. These rising prices are challenging for China's independent refiners, who account for a significant portion of the country's oil demand. Some refiners are switching to alternative supplies from the Middle East and West Africa to meet demand, especially during peak seasons like winter and the Lunar New Year.
Peak of China's Refined Oil Consumption
China's refined oil consumption peaked in 2023 at 399 million metric tons (MMt), equivalent to 7.98 million barrels per day (bpd). This peak is expected to be short-lived, with consumption projected to decline by 1.3% to 394 MMt in 2024. The decline is driven by rapid advancements in electrification, alternative fuels, and shifting economic priorities. By 2035, China's refined oil consumption could drop by 25-40%, significantly impacting global oil markets. The rise of electric vehicles and alternative-fuel trucks is expected to reduce gasoline and diesel demand substantially.
Gasoline consumption in China has also been declining due to increased sales of electric vehicles (EVs), slow economic growth, and a declining population.
In August 2024, gasoline consumption averaged 3.2 million barrels per day (bpd), a 14% decrease from the previous year. The trend continued in subsequent months, leading to a reduction in forecasted growth for petroleum and liquid fuels. The shift towards EVs and hybrids, which accounted for more than half of passenger vehicle sales in recent months, is a significant factor in this decline, impacting the overall demand for gasoline.
India's Leading Role in Global Oil Consumption Growth
India has emerged as the leading source of growth in global oil consumption for 2024 and 2025, surpassing China. India's consumption of liquid fuels is expected to increase by 220,000 barrels per day (bpd) in 2024 and 330,000 bpd in 2025. This growth is driven by rising demand for transportation fuels and fuels for home cooking.
While China still consumes significantly more oil overall, India's rapid growth highlights its increasing importance in the global oil market.
This shift reflects broader economic trends and the country's expanding energy needs.
Non-OPEC+ Countries' Contribution to Oil Supply Growth
Non-OPEC+ countries are expected to significantly contribute to global oil supply growth in the coming years. In 2025, non-OPEC+ supply is projected to rise by about 1.5 million barrels per day (bpd), led by the United States, Brazil, Guyana, Canada, and Argentina. This increase will help offset production cuts and supply disruptions from OPEC+ members.
The growth in non-OPEC+ supply is crucial for maintaining a balanced global oil market, especially as demand for petrochemical feedstocks continues to rise.
This trend underscores the importance of diverse sources of oil production in ensuring energy security.
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6. Industrial Safety and Incidents
Deadly Gas Release Incident in Texas Refinery
On October 10, 2024, a hydrogen sulfide (H2S) gas release at the PEMEX Deer Park Refinery in Texas resulted in the deaths of two workers and injuries to 13 others. The incident occurred during maintenance activities when workers accidentally opened a flanged connection on piping containing H2S gas.
Hydrogen sulfide is a toxic gas with a characteristic "rotten egg" odor and can be deadly even at low concentrations.
The release prompted shelter-in-place orders for nearby communities and the temporary closure of Texas State Highway 225. The U.S. Chemical Safety Board (CSB) is investigating the incident, focusing on permit-to-work practices, energy isolation procedures, and emergency response systems.
Safe Operation of Burn Pit Flare Systems
Burn pit flare systems are used in oil and gas fields to safely dispose of excess gases and liquids. These systems are typically located at grade level, where fluids enter through a horizontal tip and are ignited and flared. Burn pits are cost-effective and do not require the infrastructure needed for elevated flares. However, they require a sterile zone to ensure safety.
Design considerations for burn pits include handling two-phase streams and ensuring continuous sweep gas and fuel gas through pilot lines.
Proper maintenance and operational procedures are crucial to prevent hazards such as internal burning or flashback, ensuring the safe operation of these systems.
7. Technological Innovations in Energy
Efficient Warm-Up Practices for Centrifugal Pumps
Centrifugal pumps used in high-temperature applications require efficient warm-up practices to prevent premature failures. The goal is to achieve and maintain a uniform temperature within the pump to ensure the integrity of internal clearances, enhance performance, and extend the equipment’s lifespan. Uneven warm-up can lead to casing distortion and rotor bowing, causing internal rubbing, pump seizure, and mechanical seal damage. It is crucial to follow the manufacturer’s recommendations for warm-up procedures.
For pumps processing materials above 150°C (300°F), warm-up lines are essential to prevent thermal shock.
This involves pre-warming the pump and ensuring a continuous warm-up flow to maintain dimensional thermal uniformity, thereby preserving pump efficiency and longevity.
Designing Flare Systems to Avoid Liquid Pockets
Flare systems are critical for safely disposing of excess gases and liquids in oil and gas facilities. Proper design of flare headers is essential to avoid liquid pockets, which can cause safety hazards like accumulation of corrosive fluids and slug formation. The flare header should be sloped towards the flare knockout drum (FKOD) to ensure effective liquid separation.
According to API 521, the slope requirement is 21 mm in 10 m (0.25 in. in 10 ft).
This design prevents liquid accumulation and ensures reliable operation during emergency flaring. Early consideration of these design aspects in the front-end engineering design (FEED) stage can prevent costly modifications later.
8. Corporate Strategies and Mergers
Shift of European Oil Giants from Renewables
BP, Shell, and Equinor are scaling back their renewable energy ambitions to refocus on traditional oil and gas operations. This shift is driven by the energy shock from Russia's invasion of Ukraine and the declining profitability of many renewable projects, particularly offshore wind.
BP has halted 18 early-stage hydrogen projects and plans to sell its wind and solar operations. Shell is also scaling back its low-carbon operations, including floating offshore wind and hydrogen projects, and is seeking buyers for its carbon offset company, Select Carbon.
This strategic pivot aims to improve performance, boost returns, and address investor concerns over future profits, as these companies return to their roots in oil and gas.
Formation of UK's Largest Independent Oil Company
Shell and Equinor are combining their UK offshore oil and gas assets to form the UK's largest independent oil and gas company.
This joint venture, based in Aberdeen, will be equally owned by both companies and aims to sustain domestic oil and gas production while ensuring energy security for the UK.
The new company will manage significant assets, including Equinor's interests in Mariner, Rosebank, and Buzzard, and Shell's holdings in Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair, and Schiehallion. The venture is expected to produce over 140,000 barrels of oil equivalent per day by 2025, playing a crucial role in the UK's energy transition and economic recovery of the North Sea basin.
ConocoPhillips' Acquisition of Marathon Oil
ConocoPhillips has completed its acquisition of Marathon Oil Corporation in an all-stock transaction valued at $22.5 billion, including $5.4 billion of net debt. This acquisition adds high-quality, low-cost supply inventory to ConocoPhillips' portfolio, enhancing its position in the U.S. unconventional oil sector. Each share of Marathon Oil was converted into 0.255 shares of ConocoPhillips common stock. The integration is expected to deliver synergies of over $1 billion on a run-rate basis within the next 12 months. This strategic move strengthens ConocoPhillips' financial framework and supports its long-term growth and value creation goals, ensuring a robust and diversified asset base.
9. Environmental Policies and Regulations
Impact of Trump Policies on U.S. Energy Sector
During his presidency, Donald Trump implemented policies that significantly impacted the U.S. energy sector. His administration's support for the fossil fuel industry and skepticism towards climate change led to the rollback of numerous environmental regulations. This included withdrawing from the Paris Agreement, which aimed to limit global warming, and promoting the development of oil, gas, and coal resources.
These actions sparked concerns among environmentalists and global climate tracking communities, fearing a reversal in the momentum towards a global energy transition.
The policies aimed to boost domestic energy production and reduce reliance on foreign oil, but they also raised questions about the long-term sustainability and environmental impact of such an approach.
API's Energy Policy Roadmap for Trump Administration
The American Petroleum Institute (API) released a Five-Point Roadmap for the incoming Trump administration, outlining key energy policy recommendations. The roadmap emphasized the importance of American energy leadership and included proposals to expand access to domestic oil and gas resources, streamline regulatory processes, and support infrastructure development. API's plan also highlighted the need to reduce regulatory burdens that could hinder energy production and innovation. The roadmap aimed to ensure energy security, create jobs, and stimulate economic growth while maintaining environmental protections. API's recommendations were designed to align with the administration's goals of boosting the U.S. energy sector and achieving energy independence.
Emissions Detection Tech Deployment by TotalEnergies and Oil India
TotalEnergies and Oil India Limited (OIL) have signed a Cooperation Agreement to deploy advanced methane emissions detection and measurement technology at OIL sites in India.
The technology, known as AUSEA (Airborne Ultralight Spectrometer for Environmental Applications), is a pioneering tool developed by TotalEnergies. It uses airborne sensors to detect and measure methane emissions with high precision.
This initiative aims to enhance the monitoring and reduction of methane emissions, a potent greenhouse gas, in the oil and gas sector. The collaboration supports India's commitment to reducing its carbon footprint and aligns with global efforts to combat climate change by improving environmental performance and sustainability in energy operations.
10. Regional Energy Projects
BPCL's Refining Capacity Expansion Plans
Bharat Petroleum Corporation Limited (BPCL) plans to expand its refining capacity to 45 million tons per year (tpy) by 2028, up from the current 35.3 million tpy.
This expansion is driven by the anticipated steady rise in India's consumption of refined fuels and petrochemicals, projected to grow by 4-5% and 7-8% respectively in the foreseeable future.
BPCL is exploring the construction of a new refinery with a capacity of 180,000-300,000 barrels per day (bpd) in either Andhra Pradesh or Uttar Pradesh. Additionally, BPCL is investing 1 trillion rupees in renewable power, green hydrogen, compressed biogas, and carbon capture utilization and storage to achieve net-zero carbon emissions by 2040. The company also aims to build 2 gigawatts (GW) of renewable energy capacity by 2025 and 10 GW by 2035, supporting India's transition to a sustainable energy future.
Oil India's Offshore Exploration with New Rig
Oil India Limited has commenced a long-term exploration drilling contract with Dolphin Drilling's Blackford Dolphin deepwater semi-submersible rig. The rig, which arrived in Indian waters in October 2024, has a maximum operating water depth of 6,000 feet (1,829 meters) and a maximum drilling depth of 30,000 feet (9,144 meters). The contract includes a firm three-well drilling campaign over 14 months, valued at $154 million, with an optional extension of seven months. This project marks Dolphin Drilling's return to the Indian market and aligns with India's ambitious energy goals. The Blackford Dolphin rig, built in 1974 and upgraded in 2008, will support Oil India's exploration and development activities, enhancing the company's offshore capabilities and contributing to India's energy security.
11. Operational Efficiency and Best Practices
Measuring Hydrogen, Tomorrow’s Innovative Fuel
Hydrogen (H2) is emerging as a potential frontrunner in the quest for clean energy due to its ability to be stored, transported, and burned without producing greenhouse gas (GHG) emissions. However, transporting hydrogen efficiently and cost-effectively presents significant challenges. Hydrogen can be stored as a gas or a liquid, but liquefaction is preferred for long-distance transportation due to its higher energy density.
Liquefying hydrogen requires cryogenic temperatures below its boiling point of –252.9°C (–423.2°F), which is nearly 100°C colder than the temperatures needed for liquefied natural gas (LNG).
This process consumes about 30% of hydrogen's energy content and poses measurement challenges. Most current measurement technologies cannot operate at such low temperatures, necessitating innovative solutions for accurate hydrogen measurement. Effective hydrogen transportation and measurement are crucial for its role as a sustainable fuel source.
Thank You !
Thank you for being a part of our journey. We look forward to bringing you more exciting updates and insights in the future. Stay informed, stay connected, and let’s continue to grow together!
Warm regards,
Pre-Final Year in Chemical Engineering | Former Summer Intern at Coromandel International ltd | Head of Editorial Team IIChE | Teaching Volunteer at Gyanarpan, Project Amethi
2 个月Very informative and insightful sir????