Optimising the Refinery- Petrochemical interface

Transcription

1 Optimising the Refinery- Petrochemical interface Andy Allen, VP Global Chemicals, Foster Wheeler ME-TECH, February 2014, Dubai. All rights reserved

2 Safe Harbour Statement Safe Harbor Statement Foster Wheeler AG news releases may contain forward-looking statements that are based on management s assumptions, expectations and projections about the Company and the various industries within which the Company operates. These include statements regarding the Company s expectations about revenues (including as expressed by its backlog), its liquidity, the outcome of litigation and legal proceedings and recoveries from customers for claims and the costs of current and future asbestos claims and the amount and timing of related insurance recoveries. Such forward-looking statements by their nature involve a degree of risk and uncertainty. The Company cautions that a variety of factors, including but not limited to the factors described in the Company s most recent Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission, and the following, could cause the Company s business conditions and results to differ materially from what is contained in forward-looking statements: benefits, effects or results of the Company s redomestication to Switzerland, benefits, effects or results of the Company s strategic renewal initiative, further deterioration in global economic conditions, changes in investment by the oil and gas, oil refining, chemical/petrochemical and power generation industries, changes in the financial condition of its customers, changes in regulatory environments, changes in project design or schedules, contract cancellations, the changes in estimates made by the Company of costs to complete projects, changes in trade, monetary and fiscal policies worldwide, compliance with laws and regulations relating to the Company s global operations, currency fluctuations, war, terrorist attacks and/or natural disasters affecting facilities either owned by the Company or where equipment or services are or may be provided by the Company, interruptions to shipping lanes or other methods of transit, outcomes of pending and future litigation, including litigation regarding the Company s liability for damages and insurance coverage for asbestos exposure, protection and validity of the Company s patents and other intellectual property rights, increasing global competition, compliance with its debt covenants, recoverability of claims against the Company s customers and others by the Company and claims by third parties against the Company, and changes in estimates used in its critical accounting policies. Other factors and assumptions not identified above were also involved in the formation of these forward-looking statements and the failure of such other assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond the Company s control. You should consider the areas of risk described above in connection with any forward-looking statements that may be made by the Company. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures the Company makes in proxy statements, quarterly reports on Form 10-Q, annual reports on Form 10-K and current reports on Form 8-K filed or furnished with the Securities and Exchange Commission 1

3 Overview For refiners and petrochemical producers life just keeps on getting more interesting. The global Refining and Petrochemicals industries are going through a period of unprecedented innovation and uncertainty Advantaged feedstock opportunities are getting much more varied. It may be premature to predict the demise of naphtha cracking but there is no doubt it s under pressure Developing existing technologies offer closer & better integration between refining and petrochemicals but new technologies offer routes to products that threaten the refinery- petrochemical interface. These technologies are being driven in part by the high cost of crude versus other potential feedstocks Changes in the energy landscape as a result of shale gas are breathing new life into older sites The optimum technology solution is often not obvious and there is a need to validate assumptions and plans with feasibility studies. This presentation overviews how I see the situation developing and how evaluation and optimisation can assist. 2

4 An Example Traditional Integrated Flowscheme Ethane/ NGLs Pygas Hydrogen Crude Steam cracker Naphtha Aromatics complex Nonaromatic raffinate Gasoline blend components Fuel Shared utilities Reformate Hydrogen Refinery Fuel oil destruction Cracked naphtha Petrochemical FCC Cracked gases Benzene Toluene Para xylene / Mixed xylenes Common light ends recovery Recycle to steam cracker HT VGO Gasoline Kerosene Diesel Fuel Oil Chemicals Fuels Power Ethylene Propylene C4s A refinery petrochemicals complex integrating: Fuels refining Olefins Aromatics Petrochemicals FCC Note use of advantaged ethane can be very positive for project economics 3

5 Optimising the Refinery-Petrochemical Interface These synergies apply to co-located plants: Ability to share infrastructure, utilities and related services Potential to maximise the potential value of hydrocarbon streams, upgrading from fuel value to higher value transport fuels or petrochemical feedstocks Hydrogen balance management Conventional Synergies Maximises various feedstock cost advantages as pricing and availability varies Available trained workforce and specialist contractors Supportive local government and agencies Regional clusters give additional benefits over integrated complexes Existing sites have valuable infrastructure that can be re-used to lower overall project investment costs. This is very supportive of brown field and rust belt investment. Refinery Petrochemicals Regional Industry Hub BUT: different ownership of assets can cause significant optimisation complications 4

6 Prices Drive Refinery-Petrochemicals integration Product prices relative to Naphtha ( a snapshot in time ) Ethylene Propylene Para-Xylene Toluene Benzene Gasoline A huge range of chemical options are available to refiners: prepare and sell feedstock, single product unit and multi-unit complexes Whole Naphtha Crude Oil BUT: Refiners entering petrochemicals are building businesses and not just new plant. R&D, sales and marketing all add costs potentially advantaging a JV with a company who already has this in place. 5

7 Traditional steam cracking wt. % yields Ethane C 2 (65% conversion) Propane C 3 (80% conversion) Naphtha Ethylene Propylene C 4 + Ethylene Propylene C 4 + Ethylene Propylene C 4 C % 1.58% 2.85% 38.53% 23.78% 3.4% 32.49% 15.64% 10.71% 16.90% The easiest route to ethylene is steam cracking of ethane Advantaged ethane is currently overwhelmingly the most cost-effective route to ethylene Basis of build-out in Middle East and current investment surge in North America Ethane cracking has the least by-products lowering capital costs and simplifying the business model 6

8 What can be achieved with the FCC? Components Conventional yields on VGO feedstock gasoline mode Conventional yields on VGO feedstock max propylene mode Yields on VGO feedstock now available Preference for steam cracking of ethane reduces propylene make; on-purpose production of propylene now common; PDH and FCC the most common routes Ethylene <1% <2% ~ >5% Propylene 2% 5% ~ <20% C4 olefins 6% <8% ~ >10% Total aromatics 12% <15% ~ >25% FCC technology has developed - producing higher volumes of olefins and aromatics Useful ethylene also produced can be recovered within the ethylene plant Higher olefin yields go handin-hand with higher aromatic yields RFCC technology propylene yields are also increasing 7

9 The cost of fuel Foster Wheeler has undertaken many feasibility studies on refinery and petrochemical facilities throughout the Middle East and SE. We consistently find that the cost of fuel is a significant drag on project economics if tied into crude oil pricing. N America is clearly advantaged ME pricing of fuels also is very low The Middle East might be starting to crack liquids but the low fuel cost still advantages their position over (say) Europe and Asia. Likewise N American refinery economics also benefits from very advantaged fuel pricing. The importance of cheap natural gas to both chemicals and refining economics is increasing as fuels derived from crude, or tied to crude pricing, rise in price relative to other fuels. Low fuel costs also translate into lower power costs particularly for those who practice integrated steam/power strategies 8

10 Looking at potential Petrochemical Feedstocks: Pricing Forecasts (World Bank, Global Outlook, October 2013) Crude Oil* US$/bbl US$/mmBtu Natural Gas, US US$/mmBtu Australian Coal ** US$/mt US$/mmBtu *1 bbl oil ~ 5.6 mmbtu ** 1 tonne coal ~ 22.2 mmbtu US Gulf Coast. Naphtha from $100/bbl oil produces ethylene cash cost of US$0.35/lb whilst $3.5/mmBtu natural gas using MTO gives ethylene at $0.19/lb $10/mmBtu natural gas based MTO roughly same as $100 oil based naphtha Price differentials look to be a long-term feature of the market place and give increased security on investment decisions Local coal pricing in China can significantly undercut Australian traded coal. So methane via MTO to ethylene cannot compete with ethane cracking in the US but coal to olefins can compete with naphtha cracking in China. 9

11 Middle East Where/which are the advantaged feedstocks? But limited availability outside of Iran & Iraq for new sources of natural gas South America Natural gas in some domestic markets Russia/CIS Huge growth potential based on natural gas but difficult access to product markets North Africa Good potential but needs stability. Excellent access to Europe Biomass Coal Brazil & SE Asia but niche markets China very competitive and undercuts some naphtha-based projects significantly, India, South Africa & USA Shale gas Now North America, tomorrow China, S America, Europe? Consider also the potential to integrate (now? future?) with power generation to reduce power and energy costs (nuclear? clean coal?) 10

12 Market Trends from Shale Gas North America s steam cracking is switching to ethane feedstocks for ethylene C 3 + material production is dropping in the region In response PDH projects are being built to backfill the propylene demand In effect the refinery-petrochemical synergies are being weakened in N America Aromatics are likely to be increasingly be focused on naphtha reforming and naphtha cracking in the Middle East and Asia C 4 + C 5 chemicals again focus in Middle East and Asia Increased value from C 4 C 5 chemicals and aromatics will help Middle Eastern and Asian naphtha crackers but is not expected to close the gap with North American ethane crackers and PDH for new investments 11

13 Sustainability - What are Carbon Productivity & Carbon Efficiency? McKinsey work from ctivity_challenge The amount of GDP produced per unit of carbon equivalents (CO 2 e) emitted Or potentially, when looking at processes, the amount of carbon in the feedstock which is contained in the final product- i.e. Carbon Efficiency Carbon productivity must be drastically improved if CO 2 levels in the atmosphere are to be constrained Inefficient conversion technologies therefore don t just use more feedstock, they also have poor carbon productivity. Oil refining typically performs very efficiently Using CO 2 as a feedstock therefore improves carbon productivity and if process development and process efficiency improve this could be an important source of carbon Should you consider the potential threat from a future carbon tax? If so, efficient processes will be significantly advantaged. 12

14 We can also look at processes in terms of how much calorific value is lost in the conversion processes: Examples figures are very approximate & vary widely with impurities, fuel choices and operating severity Methane to methanol Carbon efficiency on methane feed = 82% Thermal efficiency = 62% Ethane to ethylene Carbon efficiency on ethane feed = 83% Carbon efficiency including fuel = 72% Thermal efficiency = 72% By contrast for refining Sustainability Thermal Efficiency? Loss of energy in a complex refinery is <10% of feed. Refining is an extremely efficient process compared to most chemical processes. 13

15 The threat to naphtha as a cracker feedstock Advantaged Feedstock Efficient Conversion Technology Advantaged Product Naphtha based technologies are typically mature Technology innovation is being driven by availability of advantaged feedstocks, national agendas to use indigenous resources (e.g. China coal, flared gas) and substitute technologies such as PDH Extensive resources of coal and natural gas are available at advantaged costs. Together with new process developments, these feedstocks are capable of competing with traditional routes. Low cost feedstocks may suffer from high processing or logistic costs so there is a need to study the entire value chain. Crackers are looking exposed against competing technologies that do not entail by-products: PDH for propylene, refineries doing aromatics extractions and shale ethane for ethylene. ExxonMobil has unveiled their new Singapore cracker as being able to crack crude noting lower feedstock costs, lower emissions and the elimination of refining steps Naphtha cannot be described as an advantaged feedstock so when competing against lower cost feedstocks naphtha is looking exposed New technology developments are opening up routes to products traditionally sourced from naphtha 14

16 On-Purpose PDH Propane C 3 (% conversion) Propylene 85% Interest is driven by the margin between propane and propylene Propane cheap due to shale gas Propylene tight due to ethane cracking rather than naphtha Low US PDH costs also a function of cheap gas for fuel Carbon efficiency = 78% Thermal efficiency = 78% Note all figures are approximate and vary according to operating severity, fuel choice etc. 15

17 A new role for coal and methane Ethane and heavier fractions have been the preferred feedstocks for petrochemicals production Coal and methane have played only a small role in the industry until recently Most readily available sources of ethane and heavier fractions have either been, or are about to be, exploited Except where, for a variety of political or geographic reasons, this has not been possible or reliable Coal and methane are available in many regions that have a substantial deficit in other hydrocarbons Technologies are now available to convert coal and methane to olefins (via methanol) in a cost competitive manner. This technology route Coal/ Gasification/ Methanol/ MTO is very capital intensive. Competitiveness depends upon achieving extra ordinary capital effectiveness. Processes are also very water intensive and need a secure supply Syngas direct to Olefins via an improved FT process would be even more advantaged e.g. as has been suggested by BASF 16

18 Olefins from methanol Changing chemistry revolutionary change Methane Coal syngas methanol ethylene (1/3 rd ) & propylene (2/3 rd) From methane - carbon efficiency = 71% thermal efficiency = 55% From coal - carbon efficiency = 35% thermal efficiency = 50% Compared to steam cracking of ethane or PDH routes via methanol are less efficient. Coal in particular is the most costly to build and the least efficient so is totally dependent on very advantaged coal pricing. 17

19 New technologies New technology routes are also being developed that produce olefin derivatives without producing the intermediate olefin CO Carbonylation NO Nitrous acid ester Regeration Feedstock Conversion Syngas DMO Hydrogeneration Purification MEG H 2 Catalyst developments will enable new process routes. Cheap methane will be significantly more advantaged than coal. Source: ASIACHEM 18

20 In the next decade we may see (amongst many things) the start of: Methane to ethylene in one step ( Catalytic cracking of ethane to ethylene ( Syngas to Ethylene directly via improved FT catalysts Oxidation of ethane to ethylene oxide Catalytic hydrogenation of carbon dioxide to olefins Methane to methanol in one step All promise to reduce the cost of production Potentially significantly Other Technology Developments Potentially driving a new wave of investments Potentially disrupting significant existing assets They do not undermine the fundamental cost advantage that low-cost feedstocks enjoy They reinforce it as costs focus more on feedstocks There s a pattern here! 19

21 Methane to Ethylene Challenge progress at last? Siluria is building a demonstration plant at Braskem s site in La Porte, Texas, to show how oxidative coupling of methane, or OCM, can produce ethylene, the most used petrochemical and a key ingredient in plastics, the companies said in a statement. The $15 million factory should open in the fourth quarter 2014, Siluria CEO Ed Dineen said Siluria s OCM process costs $1 billion a year less than average costs at naphtha crackers that produce ethylene and $250 million cheaper than ethane cracking, based on feedstock costs since 2010 Honeywell International and Dow Chemical are noted in the media as also developing catalytic conversion processes for methane to ethylene. If the technologies are successfully commercialised there is the potential for both: Investments to meet demand growth Investments to displace existing capacity based on superior economics 20

22 Process Route Efficiency % Carbon Thermal CAPEX Advantaged Feedstock Coal via methanol Very high Yes Natural Gas via methanol High Yes PDH Competitive Yes Methane oxidative coupling Ethane oxidation No data but expected high No data but expected high No data but expected high No data but expected high No data but expected low No data but expected low Ethane steam cracking Competitive Yes Naphtha steam cracking Optimising the Refinery-Petrochemical Interface Overview of Processes See Warning Note! Competitive, higher than ethane Warning: figures are for illustrative guidance only and vary on feedstock quality, severity of operation, exact product slate, extent of recycle etc. Yes Yes No 21

23 Impact of New Processes on the Refinery Petrochemical interface All the new routes to ethylene and propylene loosen the ties to refining. There certainly are benefits (e.g. PDH produces hydrogen) But the coal, methane and ethane technologies can in general be integrated just as successfully with other petrochemicals rather than with a refinery Or indeed any major site or asset cluster with existing infrastructure and services Coal will only survive in very specific locations as a play on a very advantaged feedstock price: It is the most inefficient route to product and one with the highest capex This is not a global play Assuming new technology for methane and ethane to olefins then coal to olefins looks extremely challenged economically 22

24 The Interface Alive but under Threat Feedstock developments and conversion technologies are challenging the traditional role that naphtha plays in the production of ethylene and propylene. BUT: The position of naphtha conversion to aromatics as yet seems unchallenged and is likely to remain so for the next decade If naphtha price premium continues then technologies will develop to produce aromatics from (say) syngas (but expect process efficiencies to decline) SO: The refinery-petrochemical interface: Is alive but facing challenges Needs to look closely at how it integrates the new wave of olefin targeted technologies 23

25 The Middle East s Position Only Iraq & Iran have significant potential for new natural gas based capacity The region retains its low cost fuels advantage but is having increasingly to turn to liquids cracking negatively impacting on project economics The refinery petrochemical interface will increase in the Middle East whilst its importance decreases in N America The Middle East product slate is getting heavier and will increasingly target more specialist derivatives Because of the scale and low age of the assets in the Middle East, the region is best placed to benefit from the integration of refining and petrochemicals Expect the pressure on Natural Gas availability to increase and the use of other energy sources to release gas for petrochemicals 24

26 Investment planning looks at : What are the optimum feedstocks and are these available? What products are in demand and should be produced? What capacity should the plant be? Where should the plant be? What process / technologies should be used? Is capital cost reasonable and are the economics acceptable (IRR, NPV etc)? Are logistics feasible? Feedstock supply Product distribution Construction access The Need for Investment Planning 25

27 The Foster Wheeler Approach - Real project execution experience that adds value to your business Agree objectives Market analysis Plant configuration study More detailed reviews Site selection Develop offsites/utilities/marine facilities concept Constructability studies Cost estimates Economic & financial analysis Recommend configuration development road map 26

28 Summary Refining is increasingly disadvantaged without ties into petrochemical production Optimisation of this interface is a key way to enhance profitability Crude oil is the highest cost source of feedstocks compared to regional coal and natural gas opportunities; naphtha is therefore at risk from disruptive technologies as a preferred feedstock for chemicals Refineries need to maximise synergies with natural gas based technologies and access low cost fuels Naphtha will be increasingly aimed at aromatics as it s cracker feedstock role decreases Single product technologies (methane to ethylene, ethane to ethylene, propane to propylene, on purpose C 4 s) all look to grow market share Coal conversion is hugely costly to build and is inefficient; its long term role therefore has to be questioned as other technologies are commercialised 27

29 Thank you for your attention Time for questions

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