Refining Economy Concepts – A Balance between Bottom Barrel Conversion and Petrochemicals Yield

Introduction and Context

???????????As any industrial activity, the crude oil refining industry aims to get profits through the commercialization of derivatives of interest to society. In this sense, the downstream sector aims to add value to the crude oil through a series of chemical and physical processes aiming to obtain marketable crude oil derivatives with the lower environmental impact as possible. ?

???????????Refiners profitability is directly proportional to his capacity to add value to the processed crude oil, aiming to maximize the production of high added value streams and derivatives. Equation 1 presents a simplified concept of the liquid refining margin.?

The first term in Equation 1 corresponds to the obtained revenue through the commercialization of the crude oil derivatives, represented by the sum of the product between the derivative market value and the volume or weight commercialized. As aforementioned, the profitability or refining margin is directly proportional to the refinery capacity to add value to the processed crude slate, the maximization of higher added value derivatives lead to the maximization of the first term in the Equation 1.?

???????????The players capable to maximize the yield of higher added value crude oil derivatives in the refining hardware, reaches a highlighted competitive advantage in the downstream market.

Reaching Maximum Added Value in the Downstream Industry

????????????The maximization of high added value derivatives is directly related with the adopted refining scheme, Figure 1 presents a basic process flow diagram to a typical refinery operating with the “Topping” refining configuration, considered the simplest and with the lower complexity of the available refining schemes.?

Figure 1 – Typical Process Configuration to a Refinery with “Topping” Refining Configuration

Nowadays, this refining scheme is less practicable once the purely physical processes difficultly achieve an economically attractive level of crude oil conversion, furthermore, the produced derivatives have high contaminants content, especially sulfur and nitrogen, making prohibitive his commercialization as final derivatives without infringing the current environmental regulations, in this case, the derivatives can be commercialized as intermediate streams that have relatively low added value. The quantity of asphalt and fuel oil which are products with low added value and restricted market produced in a Topping refinery makes his operation uncompetitive economically. In this cases, the profitability is normally reached only under the processing of specific crude oils (lighter and with lower level of contaminants), that have high acquisition cost and restrict supply market, leading to a competitive loss.

The addition of higher capacity of treating and conversion, especially of bottom barrel streams makes the crude oil refining scheme more complex, however, raises the yield of high added value derivatives, contributing positively to improve the refining margin, according to Equation 1. Figure 2 shows a typical process flow scheme for a refinery operating under the Coking/Hydrocracking refining configuration. It’s important to highlight that the raise of refinery complexity also tends to raise the operational costs.?

Figure 2 – Process Arrangement for a Typical Refinery Operating Under Coking/Hydrocracking Configuration

In the Coking/Hydrocracking refining configuration, the production of fuel oil and asphalt is reduced to the minimum needed to meet the available market consumer, delayed coking and hydrocracking units raises the production of higher added value derivatives as naphtha, diesel, and kerosene that allow a significant improvement in the refiner profitability.

Even in complex refineries, a common strategy to maximize the liquid refining margin is add to the high added value derivatives the maximum quantity of streams with low added value to compose the final derivative. However, it’s necessary to meet some restrictions as presented in Figure 3.?

Figure 3 – Schematic Representation of the “Blending Space” to Crude Oil Derivatives

The hydrocarbon mixture which will compose the final derivative needs to respect some restrictions as the available component stocks, market demand, the refining hardware limits, keep the prices attractiveness, and, mainly meet the quality and environmental regulations. The region limited by these restrictions is called “blending space” and, respected these restrictions, is possible to blend the low added value streams to compose the final derivatives. ?

???????????In the Equation 1, the term Pc corresponds to the acquisition cost of the crude oil, the refiners normally don’t have control about the market and the acquisition cost of petroleum that is controlled by the geopolitical scenario and the international market. The cost reduction in the crude oil acquisition can be achieved through the processing of heavier crude oils which have relatively low cost, however, due to the lower distillates yield and higher contaminants content, the processing of heavier crude slates requires refining configurations with higher conversion capacity, raising the operational costs. ?

The fixed and variable costs, (Fc + Vc) in Equation 1, represents the operational costs of refiners.?

According to Equation 1, an attractive strategy to maximize the refiners profitability is to reduce the operational costs. Energy consumption in the refining hardware is responsible by a major part of the variable costs, in this sense, an adequate energy management plan has a key role to allow that the refiners achieve higher economical results.

???????????Another factor with great relevance in the refinery profitability is the equipment availability that is directly related to the maintenance management aiming to ensure market compliance and avoid production loss events due to equipment unavailability. Currently, the downstream industry has been looked to achieve a prescriptive model in the asset management in the sense of to anticipate to failures of critical equipments, minimizing losses of production or market opportunities.

???????????In real scenarios, it’s necessary to take account seasonality factors in the demand by derivatives as well as regional peculiarities that can represent specific markets to refiners. The adoption of more complex refining schemes and with higher conversion capacity need be accomplished by a deep market study aiming to ensure a constant demand by higher added value derivatives once the capital cost is significantly higher as well as the operational costs, in other words, the revenue expected by the derivatives commercialization need to justify the raise in the operational costs and improve the refining margin, according to Equation 1. ??

A New Approach to Reach Profitability – Petrochemical Integration

The current scenario shows strong pressure in the sense of reduction of transportation fuels demand due to the growth of electric vehicles (EVs) in circulation and restrictive environmental regulations that have been some countries to define a limit term to ban vehicles moved by internal combustion engines.

According to Figure 4, in a 04 years interval (2014 to 2017), the number of electric vehicles raise close to five times.?

Figure 4 – Evolution of Electric Vehicles in Circulation (EIA, 2020)

The growth of electric vehicles in circulation already have been reduced the transportation fuels demand, especially Diesel and Gasoline.

The technical and economic viability of the cleaner alternative energies to passengers transport associated to the necessity to minimize the environmental impacts of the crude oil derivatives are still leading countries like United Kingdon and Germany to manifest the intention to ban internal combustion vehicles in the middle term.

On the other side, the demand by petrochemical intermediates has been presented a tendency of growing in the last years, as presented in Figure 5.?

Figure 5 – Growing Trend in the Demand by Petrochemical Intermediates (Deloitte, 2019) - Note: Bars represent total demand (million metric tons or MMT), circles represent total capacity (MMT).

Face these data, the refiners have been looked by optimize his refining hardware to promotes better integration with petrochemical process plants, minimizing then the production of streams dedicated to composing the pool of transportation fuels.

???????????The higher availability of light crudes, mainly by the high production of shale oil in the North American market boosts, even more, this tendency. The higher integration between refining and petrochemical hardware allows minimizing costs and adding value to the derivatives produced by both sectors, raising the profitability of the downstream industry.

In this business environment it’s possible to adapt the Anssoff Matrix to taking into account the contraction profile of transportation fuels market to analyze the available alternatives to the downstream players, the Anssof Matrix is presented in Figure 6.

Figure 6 – Adapted Ansoff Matrix to an in Contraction Market (Based on ROGERS, 2016)

In Figure 6 the current position of downstream players is focused in transportation fuels demand that present a contraction profile as aforementioned. In this scenario there are three alternatives to the players:

1 – Look for new clients – This alternative seems attractive in a first look, but the stricter regulations and trend of reduction in the consumption create great pressure over the consumption of fossil fuels. The major consumers of transportation fuels is still the in development economies like Brazil, Mexico, and India but the most efficient engines and substitute technologies like hybrid and electric vehicles tends to reduce the market growth even in these countries;

2 – Offer a new Value Addition – Face the reduction in transportation fuels, an attractive strategy to the downstream sector is to offer a new proposed value to the market through higher value addition to the processed crude oils as well as needed materials to the society with lower environmental footprint than fossil fuels. The petrochemical intermediates have higher added value to refiners and growing demand as aforementioned data, the substitution of steel is some engineering materials is an interesting way to ensure market to petrochemicals in short term, in this sense, the refiners can change the production focus from transportation fuels to petrochemicals, especially in markets like Asia and Europe where the falling in transportation fuels demand is most significant.

3 – New Clients and New Value Addition – Strategically, this alternative seems the right way to follow, mainly to refiners with most complex refining hardware. Through the promotion of closer integration with petrochemical sector, the refiners not only offer a higher proposed value to the clients and society but can reach a new range of costumers capable to ensure higher added value to the processed crude oils and lower operational costs through available synergies between refining and petrochemical assets.

The main focus of the closer integration between refining and petrochemical industries is to promote and seize the synergies existing opportunities between the both downstream sectors to generate value to the whole crude oil production chain. Table 1 presents the main characteristics of the refining and petrochemical industry and the synergies potential.

As aforementioned, the petrochemical industry has been growing at considerably higher rates when compared with the transportation fuels market in the last years, additionally, represent a most noblest destiny and less environmental aggressive to crude oil derivatives. The technological bases of the refining and petrochemical industries are similar which lead to possibilities of synergies capable to reduce operational costs and add value to derivatives produced in the refineries.?Process streams considered with low added value to refiners like fuel gas (C2) are attractive raw materials to the petrochemical industry, as well as streams considered residual to petrochemical industries (butanes, pyrolisis gasoline, and heavy aromatics) can be applied to refiners to produce high quality transportation fuels, this can help the refining industry meet the environmental and quality regulations to derivatives.

???????????The integration potential and the synergy among the processes rely on the refining scheme adopted by the refinery and the consumer market, process units as Fluid Catalytic Cracking (FCC) and Catalytic Reforming can be optimized to produce petrochemical intermediates to the detriment of streams that will be incorporated to fuels pool. In the case of FCC, installation of units dedicated to produce petrochemical intermediates, called petrochemical FCC, aims to reduce to the minimum the generation of streams to produce transportation fuels, however, the capital investment is high once the severity of the process requires the use of material with noblest metallurgical characteristics. ?

??????????????Considering the Equation 1, the petrochemical integration can offer an attractive way to improve the refining margins through the maximization of high demand derivatives with high higher added value than transportation fuels.

Recovering Maximum Added Value from Bottom Barrel Streams – Deep Hydrocracking Technologies

Although the residue upgrading technologies based on carbon rejection technologies like FCC and solvent deasphalting presents competitive advantages, the refiners processing heavier crudes can face difficulties to achieve high added value to bottom barrel streams through these technologies, especially to comply with the IMO2020. In extreme cases, despite the high performance, even the fixed bed hydrocracking technologies can be not economically effective to treat residue from heavy and extra-heavy due to the short operating lifecycle. Technologies that use ebullated bed reactors and continuum catalyst replacement allow higher campaign period and higher conversion rates, among these technologies the most known are the H-Oil and Hyvahl? technologies developed by Axens Company, the LC-Fining Process by Chevron-Lummus, and the Hycon? process by Shell Global Solutions. These reactors operate at temperatures above of 450 oC and pressures until 250 bar. Figure 7 presents a typical process flow diagram for a LC-Fining? process unit, developed by Chevron Lummus Company while the H-Oil? process by Axens Company is presented in Figure 8.

Figure 7 – Process Flow Diagram for LC-Fining? Technology by CLG Company (MUKHERJEE & GILLIS, 2018)

Catalysts applied in hydrocracking processes can be amorphous (alumina and silica-alumina) and crystalline (zeolites) and have bifunctional characteristics, once the cracking reactions (in the acid sites) and hydrogenation (in the metals sites) occurs simultaneously.?

Figure 8 – Process Flow Diagram for H-Oil? Process by Axens Company (FRECON et. al, 2019)

An improvement in relation of ebullated bed technologies is the slurry phase reactors, which can achieve conversions higher than 95 %. In this case, the main available technologies are the HDH? process (Hydrocracking-Distillation-Hydrotreatment), developed by PDVSA-Intevep, VEBA-Combicracking Process (VCC)? commercialized by KBR Company, the EST? process (Eni Slurry Technology) developed by Italian state oil company ENI, and the Uniflex? technology developed by UOP Company. Figure 9 presents a basic process flow diagram for the VCC? technology by KBR Company.

Figure 9 – Basic Process Arrangement for VCC? Slurry Hydrocracking by KBR Company (KBR Company, 2019)

???????????In the slurry phase hydrocracking units, the catalysts in injected with the feedstock and activated in situ while the reactions are carried out in slurry phase reactors, minimizing the reactivation issue and ensuring higher conversions and operating lifecycle. Figure 10 presents a basic process flow diagram for the Uniflex? slurry hydrocracking technology by UOP Company.

Figure 10 – Process Flow Diagram for Uniflex? Slurry Phase Hydrocracking Technology by UOP Company (UOP Company, 2019).

???????????As aforementioned, another commercial slurry phase hydrocracking process is the EST? technology by ENI Company, this process is shown in Figure 11.

Figure 11 – Basic Process Scheme for EST? Hydrocracking Technology by ENI Company (ENI Company, 2019).

Other commercial technologies to slurry hydrocracking process are the LC-Slurry? technology developed by Chevron Lummus Company and the Microcat-RC? process by Exxon Mobil Company. Aiming to meet the new bunker quality requirements, noblest streams, normally directed to produce middle distillates can be applied to produce low sulfur fuel oil, this can lead to a shortage of intermediate streams to produce these derivatives, raising his prices. The market of high sulfur content fuel oil should strongly be reduced, due to the higher prices gap when compared with diesel, his production tends to be economically unattractive.

The Deep Conversion Refining Hardware – Petrochemicals from Bottom Barrel Streams

???????????As aforementioned the residue upgrading units are capable to improve the quality of bottom barrel streams, the main advantage of the integration between residue upgrading and petrochemical units like steam cracking is the higher availability of feeds with better crackability characteristics.

???????????Bottom barrel streams tend to concentrate aromatics and polyaromatics compounds that present uneconomically performance in steam cracking units due the high yield of fuel oil that presents low added value, furthermore, the aromatics tends to suffer condensation reaction in the steam cracking furnaces, leading to high rates of coke deposition that reduces the operation lifecycle and raises the operating costs. In this case deep conversion units like hydrocracking can offer higher operational flexibility.

Once cracking potential is better to paraffinic molecules, and the hydrocracking technologies can improve the H/C in the molecules converting low added value bottom streams like vacuum gasoil to high quality naphtha, kerosene and diesel the synergy between hydrocracking and steam cracking units, for example, can improve the yield of petrochemical intermediates in the refining hardware, an example of highly integrated refining configuration relying on hydrocracking is presented in Figure 12.

Figure 12 – Integrated Refining Scheme Relying on Residue Upgrading and Petrochemical Maximization Technologies (UOP, 2019)

???????????Considering the recent trend of reduction in transportation fuels demand followed by the growth of petrochemicals market makes the presence of hydrocracking units in the refining hardware raise the availability of high-quality intermediate streams capable to be converted into petrochemicals, an attractive way to maximize the value addition to processed crude oil in the refining hardware. As presented in Figure 11, the synergy between carbon rejection and hydrogen addition technologies like FCC and hydrocracking units can offer an attractive alternative, sometimes the hydrocracking and FCC technologies are faced by competitors technologies in the refining hardware due to the similarities of feed streams that are processed in these units. In some refining schemes, the mild hydrocracking units can be applied as pretreatment step to FCC units, especially to bottom barrel streams with high metals content that are severe poison to FCC catalysts, furthermore the mild hydrocracking process can reduce the residual carbon to FCC feed, raising the performance of FCC unit and improving the yield of light products like naphtha, LPG, and olefins.

Considering the great flexibility of deep hydrocracking technologies that are capable to convert feed stream varying from gas oils to residue, an attractive alternative to improve the bottom barrel conversion capacity is to process in the hydrocracking units the uncracked residue in FCC unit aiming to improve the yield of high added value derivatives in the refining hardware, mainly middle distillates like diesel and kerosene.

As aforementioned, the antifragile profile is related to options and refiners with more operational flexibility have more options available to decide how crude oil slate will be processed and what kind of derivatives will be maximized in compliance with market demand and to achieve better economic results. In this sense, taking into account the recent forecasts, a combination of adequate bottom barrel conversion capacity and petrochemicals maximization seems capable to offer antifragile characteristics to the players of modern downstream industry.

Conclusion

It’s important to consider that integrated processes lead to a higher operational complexity, however, given current and middle term scenarios to refining industry, a better integration between refining and petrochemical processes is fundamental to the economic sustainability of the downstream industry.

In the digital transformation environment, the companies need to find new ways to ensure added value to the costumers and creative ways to destroy his current businesses through the discovering of new markets. To the downstream industry, the closer integration between refining and petrochemical assets ensures both goals with higher revenues and lower operating costs to refiners as well as the high added value to the processed crude oils at the same time that offers lower environmental footprint and needed materials to the society. It’s fundamental to understand that the change needs be started before that the disruptive condition appears and the player loses significance in the market, the innovation or transformation should be sustained by the current business and in the right moment, the new value addition assumes as main revenues source keeping the competitiveness and economic sustainability. It’s always important to remember, the digital transformation is not only about technology its necessary a cultural change to discover new ways to keep and enlarge his significance in the market.

Nowadays, is still difficult to imagine the global energetic matrix free of fossil transportation fuels, especially for in developing economies. Despite this fact, recent forecasts and growing demand by petrochemicals as well as the pressure to minimize the environmental impact produced by fossil fuels creates a positive scenario and acts as main driving force to closer integration between refining and petrochemical assets, in the extreme scenario the zero fuels refineries tend to grow in the middle term, especially in developed economies.

The synergy between refining and petrochemical processes raises the availability of raw material to petrochemical plants and makes the supply of energy to these processes more reliable at the same time ensures better refining margin to refiners due to the high added value of petrochemical intermediates when compared with transportation fuels. The development of crude to chemicals technologies reinforces the necessity of closer integration of refining and petrochemical assets by the brownfield refineries aiming to face the new market that tends to be focused in petrochemicals against transportation fuels, it’s important to note the competitive advantage of the refiners from Middle East that have easy access to light crude oils which can be easily applied in crude to chemicals refineries. As presented above, crude oil to chemicals refineries is based on deep conversion processes that requires high capital spending, this fact can put under pressure the refiners with restrict access of capital, again reinforcing the necessity to look for close integration with petrochemical sector aiming to achieve competitiveness.

References

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GARY, J. H.; HANDWERK, G. E. Petroleum Refining – Technology and Economics.4th ed. Marcel Dekker., 2001.

MUKHERJEE, U.; GILLIS, D. – Advances in Residue Hydrocracking. PTQ Magazine, 2018.

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