For most oil refiners and chemical producers, the need to improve margins and remain competitive has never been greater. The integration of refineries with chemicals is becoming an important growth strategy – but will it create value in the long term?
Refiners face a host of challenges. Overcapacity, IMO regulatory changes, the threat from peak oil demand to the transportation sector, a rising appetite for petrochemical feedstock and a shift in product demand patterns will force refiners to rethink the way they have operated in the past.
Faced with these dynamics, producers are turning to the more robust petrochemicals industry as a key target area for future long-term crude oil demand growth.
Crude oil’s future lies in plastic
Demand for petrochemicals continues to grow, supported by increasing urbanisation and improving standards of living.
Demand for oil in transportation is expected to peak in the mid-2030s
Strong growth rates for ethylene and propylene – which form the primary building blocks of products like film bags, plastic bottles and car parts – are largely driven by consumer demand for everyday products as global living standards improve. Similarly, the world continues to need more paraxylene supply to feed the growing demand for polyester, a hugely cost-effective product.
Integration is more necessity than choice
Changing market dynamics make it clear that crude-to-chemicals integration is becoming more of a necessity rather than a choice.
Mega-investments happening in China
A new wave of investments is happening across China. Two mega-projects, Hengli and Zhejiang PC, are both expected to start up in the next 12 months and will practice integration on a scale as yet unseen by the industry. There are at least 3 other proposed mega-refinery and chemicals projects being planned across the country.
Saudi-Aramco is betting the future is in chemicals
The largest oil company in the world, Saudi Aramco, plans to invest $100 billion in chemicals over the next decade. The company aspires to have 3m barrels per day of crude oil– nearly a third of its current production – converted to chemicals in the next 15 years.
Will these mega-investments pay off in the long term?
While we know that integration always adds value to a refinery, the benefits vary by site, technology choice, scale and a host of other factors. Integration also increases the complexity of an operation. To fully understand the value that is created, we need to take a holistic view of the integrated site.
On our recent webinar on crude-to-chemicals, we analysed the numbers for some of these mega-projects in detail using the integrated models we have built for these assets. Fill in the form on this page to access the report and find out more.