INSIGHT: Looking at refinery streams for chemicals

29 September 2010 18:00  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--Shell still has a great deal to play for in chemicals, but it can become more profitable by focusing on some important fundamentals.

That was the message from a senior management briefing this week by Shell Chemicals.

It used to be fine to talk about the refinery/chemicals interface. That phrase is now an anathema to Shell. “As long as you still have an interface, you have a problem,” said Ben van Beurden, the company's executive vice president for chemicals.

Shell Chemicals wants to capitalise on what it calls “advantaged” feeds from the refinery, both liquids and gases, but the company is under pressure in Europe and North America to perform.

Shell is likely to stick with its “cracker plus one” business model, which means it generally only ventures as far as first-line ethylene derivatives.

But the company appears not to be averse to creative thinking if further ethylene offtake into downstream units, such as polymer plants, is warranted.

Becoming further integrated within the Shell system, however, is the name of the game.

“If you want to be in upgrading hydrocarbons, adding a petrochemicals part to it does make lot of strategic sense,” van Beurden said, referring to Shell’s view of chemicals. Continued stress and strain on the refining system is pointing up (chemicals) opportunities.

“If you play the game very well, the whole envelope becomes more robust,” he said of Shell’s oil and gas-to-chemicals business strategy.

Refining has become a more complex, and certainly less profitable, business. But chemicals at Shell can capitalise on low-value and other refinery streams and add value to the whole, he suggested.

Shell is almost through in getting its overall portfolio in the right place, he said. The refinery divestment and closure programme affects chemicals in a relatively minor way – the loss of some capacities in Europe, when divestments are completed, will not have a major impact on the overall picture.

Shell’s strategy in petrochemicals is to become the “highest profitable hydrocarbon upgrader,” said van Beurden. “We have discovered a whole seam of feedstock advantage,” he added.

Tapping into those seams takes time: Shell has reconfigured its crackers at Deer Park and Norco on the US Gulf Coast (USGC) to crack more gas, less liquids and more “advantaged” feeds.

In Europe, it is closing a cracker in Germany but looking at upgrading another to take a modified feedstock slate.

The company’s cracker at Moerdijk, the Netherlands, has been given the capability to crack hydrowax, a heavy-refinery product that is difficult to transport and not always welcome. The shift towards advantaged feeds at the cracker could be significant by mid-decade.

The strategy fits closely with Shell’s view of refining, which is becoming a more complex business in every way. Chemicals profitability could benefit, van Beurden suggests, if the company gets its right, alongside the big investments in new petrochemicals capacities in Singapore, China and elsewhere.

Further down the line, Shell has a number of technology plays that could benefit chemicals.

Its Pearl gas-to-liquids (GTL) venture in Qatar uses Fischer Tropsch technology to convert synthesis gas into long-chain hydrocarbons. Shell also has the catalyst technology to convert methane to aromatics.

Shell is more gas-oriented upstream. So, on the technology front, at least, it makes sense, in chemicals, to follow suit.

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By: Nigel Davis
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