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Raising profit margins through refining-petrochemical integration

by Arabian Oil & Gas Staff on Mar 26, 2018

Refining-petrochemical integration is the process of co-locating the processes of petroleum refining and petrochemical manufacturing. (Image courtesy: Orpic)
Refining-petrochemical integration is the process of co-locating the processes of petroleum refining and petrochemical manufacturing. (Image courtesy: Orpic)

It is clear that refining and petrochemicals manufacturing integration is a must for companies to gain sustainable competitive advantage in the future.

With the changing global economic conditions and the growing interest in environmental sustainability, there has been an increasing focus on the benefits of integrating the processes of petroleum refining and petrochemicals production.

While the idea of refining and petrochemicals manufacturing integration is not new, falling profit margins have lately compelled refining companies in the Middle East to look at integration as a means to increase revenues. The interest has been further fuelled by the fact that the petrochemical industry is witnessing a faster rate of growth than the oil and gas sector. According to a report by Grand View Research, the global petrochemicals market is expected to reach $958.8bn by 2025.

For the GCC’s oil and gas industry, which has been witnessing a slow rebound since the fall in oil prices brought about by the US shale boom, refining and petrochemicals manufacturing integration offers avenues to increase profit margins.

What is refining and petrochemicals manufacturing integration?

Refinery and petrochemical unit integration is the process of co-locating the processes of petroleum refining and petrochemical manufacturing. As the feedstock for producing petrochemicals come from the same crude oil that produces petrol and other fuels, integrating the processes helps achieve maximum utilisation of resources.

For instance, an existing refinery can be integrated to a catalytic olefins unit to generate ethylene, propylene, and BTX (benzene toluene xylene) aromatics. Additionally, a PDH (propane dehydrogenation) plant could be integrated with a catalytic olefin facility to produce polypropylene, acrylic fibre, propylene and phenol.

The BTX aromatics from the catalytic olefin facility could be integrated with an aromatics complex. Besides this, there are several opportunities to tap into low-value streams from the refineries to source feedstock for the catalytic olefins unit or these could be integrated with a fluidised catalytic cracking (FCC) unit to generate additional ethylene feedstock. Such a process increases the profitability margins of companies since they can trade in both petroleum products and petrochemicals.

“We are in a new era in the petrochemical industry that focuses on synergistic integration,” says Hamad A Mahdi, senior sales analyst for aromatics marketing at Kuwait’s Petrochemical Industries Company. “Integrated facilities bring in value addition to the oil and gas industry. Refinery streams could be optimised to meet all type of feed requirements and produce a range of olefins and aromatics.”

Advantages of refinery and petrochemical facility integration

There are several reasons why petrochemical unit and refinery integration proves highly advantageous for companies. Some of these include resource optimisation by the use of shared resources and utilities, maximising energy use, and minimising wastage.

Vinod Raghothamarao, director consulting, Energy Wide Perspectives, IHS Markit, states: “Integrated facilities offer higher operating margins, lower investment costs, and increased flexibility. Higher operating margins are gained by saving costs on feedstock, transportation, energy, and by cutting back on staff requirements, while increased flexibility comes from the freedom to choose feed streams based on petrochemical demand and the possibility of optimising the crude cocktail to meet refinery and petrochemical needs.”

According to Dr Gabor Kenessey, general manager, supply chain management, Orpic, the benefits of integration are three dimensional. “The first dimension is the simple operational synergies which can be achieved at an early stage between petrochemical plants and refineries. There are a lot of chemical and petrochemical feedstock produced in a refinery, which can be upgraded to petrochemical facilities to maximise value.”

“The second dimension is achieving business excellence by sharing best practices in operations, maintenance as well as other supporting services like IT, HR, and finance. Last but not least, there are some benefits of having an aligned strategy and a clear way forward in terms of growth and strategic planning, and having both refinery and petrochemical units going hand in hand to explore these opportunities.”

Costs involved

The process of integration between a refinery and a petrochemical facility calls for centralising of utilities, storage, logistics and maintenance. While there is some capital expenditure involved in the setting up of facilities, the benefits of setting up an integrated facility outweigh the costs involved.

“Steps like unification of the ERP (enterprise resource planning) systems and implementation of new policies and procedures come as a cost. However, the typical experience is that the benefits that come out of these integration synergies, business excellences and aligned strategies are at least two orders of magnitude higher than the associated cost,” remarks Dr Kenessey.


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