EPCA: Building a future as investment stays strong

27 September 2013 11:04  [Source: ICB]

With the leading players in petrochemicals continuing to allocate money for major projects in regions of high growth and/or cheap feedstocks, much of the investment in Europe has been concentrated on strengthening the industry’s international competitiveness.

That has meant putting money into schemes that improve efficiencies in production, energy consumption and logistics. Above all, it has resulted in allocation of funds to streamlining operations at major petrochemical hubs and complexes, most of which are integrated with refineries with links to feedstock sources and national, regional and international transport networks.

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Plant construction continues in Europe

“The European chemical industry will continue to remain a leading player globally as long it takes action on a number of different issues,” says EPCA board member Emanuele Tagliabue, vice president of the intermediates business unit at Versalis. “These include the development of integrated petrochemical clusters and sites with the aim of generating synergies and collaborative opportunities among companies. These sites should be integrated with refinery operations.”

Europe is already a pioneer globally in the planning and operation of integrated chemicals sites, particularly for the production of petrochemicals. So investment in integration will boost European petrochemicals’ competitiveness by compensating for weaknesses like high feedstock and energy costs.

“We have to optimise our structures so that we are even more integrated to make up for our disadvantages,” says Rainer Diercks, also an EPCA board member, and head of BASF’s petrochemicals division.

The high degree of integration in the production and marketing of petrochemicals in Europe presents a formidable hurdle for importers. This will be a crucial asset if the petrochemicals sector in Europe has to deal in a few years with a flow of imports of shale-based derivatives from the US.

Companies operating integrated refinery and petrochemical sites have been investing in the upgrading of the refinery plants to provide more feedstocks, and a wider range of them, for petrochemicals production. There is pressure on site owners to revamp their refinery facilities anyway because of changes in EU regulations on fuel-quality standards and a decline in demand for gasoline in preference for diesel.

France’s Total announced plans this summer for a €1bn ($1.32bn) project for the modernisation of the refinery at Antwerp, Belgium, which houses the company’s largest combined refinery and petrochemicals site. The scheme involves the building of a facility, due to start up in early 2016, for solvent de-asphalting and mild hydrocracking of heavy fuel oil into desulphurised diesel and ultra-low sulphur heating oil.

It also includes a plant, scheduled to come on stream in early 2017, to convert low-value refinery gases into low-cost petrochemical feedstocks as an alternative to naphtha, which is Europe’s main petrochemicals feedstock.

The company claims the competitiveness of the site’s refining and petrochemicals units will be increased as a result of the enhanced integration. “This upgrade plan is a milestone for the further development of the Antwerp facilities into one of the most profitable platforms of the refining and chemical business of Total,” says Patrick Pouyanne, president of Total Refining & Chemicals.

There is also an element of scrap-and-build in the scheme. Total plans to close next year the smallest of its three ethylene crackers at Antwerp, which has a capacity of 250,000 tonnes/year and is, says the company, “currently idled for lack of markets”. It is also shutting down a 510,000 tonnes/year high-density polyethylene (HDPE) unit that is “no longer competitive in the world economic environment”.

At its refinery at Leuna in Germany, which is part of a refinery-petrochemicals complex, Total has plans to close a fluid catalytic cracking (FCC) unit to replace it with one which produces a more and a greater variety of petrochemical feedstocks.

“We are hoping that the project will result in an increase in output of propylene from the refinery which can then be used to expand the production of caprolactam (capro) on our petrochemicals site,” says Martin Naundorf, head of site development at InfraLeuna, the operator of infrastructure facilities at the complex. “For refinery owners the production of more petrochemical feedstocks is an attractive option when demand for gasoline has been declining.”

Upgraded refineries can help meet the demand for lighter petrochemical feedstocks. “Access to larger quantities of light feedstock can increase the flexibility of Europe’s steam cracking capacity,” says Tagliabue.

Russia has launched a refinery modernisation programme that is being combined with a big expansion of petrochemicals capacity. Much of this will be in integrated refinery-petrochemical complexes or clusters using feedstocks based mainly on the country’s plentiful supplies of natural gas.

Over the past few years, the country’s major petrochemical producers, such as SIBUR, Gazprom, Rosneft and Nizhnekamskneftekhim, have announced plans for several large ethylene crackers that are due to come on stream mainly in the second half of this decade.

Last year, SIBUR contracted Linde of Germany to carry out the licensing and front-end engineering design (FEED) for what will be one of the world’s largest ethylene crackers at the ZapSibNeftekhim petrochemicals complex at Tobolsk in Western Siberia. The facility, which is due to come on stream in 2017, will have a capacity for 1.5m tonnes/year of ethylene, 500,000 tonnes/year of propane and 100,000 tonnes/year of butadiene (BD) from ethane, propane and n-butane.

Much of the output from the new planned crackers will be used to make higher-value and specialty chemicals, of which Russia has a big shortage. Any export of petrochemicals to western and central and eastern Europe will be constrained by the country’s ageing and costly export infrastructure.

Western EU plants

Logistical costs are also a difficulty for exporters of petrochemicals from areas outside Europe which have feedstock advantage. They will also be a disadvantage faced by potential exporters of shale-based petrochemicals from the US. There is a need therefore for the petrochemicals sector in western and central and eastern Europe to make its own logistics as efficient and cost-effective as possible.

“Petrochemicals logistics in Europe has become more complicated rather than simpler,” says Jossi Landesman, EPCA board member and director at trader BMS in Antwerp. “It is now more difficult to arrange a delivery through a logistical services provider when you would expect it to be easier.”

“We have seen some capacity reduction in logistics in the past two years,” says Hans-Jorg Bertschi, EPCA treasurer and CEO of Swiss-based logistics provider Bertschi Group. “Capacities have been getting quite tight in the past few months. The supply/demand balance is in the process of changing from overcapacity to becoming short again.”

Much of the current initiatives for logistical improvements are being made by integrated sites anxious to streamline transport infrastructures both inside and outside their complexes to boost output and attract investment in new plants and expansions.

“Accessibility to the market and infrastructure - ie logistics - are important,” says Eddy Bruyninckx, chief of the Port Authority of Antwerp, which has Europe’s largest petrochemicals hub. “We are, at this moment, building the world‘s largest lock, and also increasing the availability of berths so that Antwerp remains a congestion-free port. Our other main infrastructure projects are a new rail tunnel, a pipeline bundle within the port and pipeline corridor to Germany.”

At the Tarragona chemicals complex in Spain, work is expected to start shortly, after much pressure by local chemical companies, on the building of an international-gauge railway that will allow non-stop transportation from chemical plants to export markets in Europe. It will also enhance the position of the site and its port as a major hub for the supply of petrochemicals to the Mediterranean basin and North Africa.

Eva Canals, public relations director at the Association of Chemical Companies of Tarragona (AEQT), says: “We now export 65% of our output, much of it petrochemicals, and with this improvement in the rail connections we will be able to export even more chemicals.”

While upgrades in infrastructure and transportation are helping to bring in new investment into petrochemical sites, the vast majority of these are small or medium sized in scale. Nonetheless they can total large sums. “The petrochemical industry is planning to invest several billion euros in Antwerp,” says Bruyninckx.

There is a relatively large number of projects in Europe aimed at taking advantage of the region’s ability to produce aromatics and heavier olefins like butadiene from naphtha, for which there could be shortages outside Europe. Over the past 18 months, plans for five butadiene plants in Germany, France, Belgium and Hungary have been announced.

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