Corrected: INSIGHT: Crude oil to chemicals (COTC), a refiner's new mantra

Author: Julien Mathonniere


Correction: In the ICIS news story headlined “INSIGHT: Crude oil to chemicals (COTC), a refiner's new mantra” dated March 1 2019, paragraph 28 and 29 incorrectly stated that the “Saudi Aramco-Sabic joint venture COTC complex in Yanbu, Saudi Arabia, has 4.7m tonnes/year of light olefins”. It is actually the Aramco-CLG project that is the bigger Aramco project and it is 4.7m tonnes/year of ethylene. A corrected story follows.

ABU DHABI, UAE (ICIS)--Crude-oil-to-chemicals (COTC) technologies might be the next development step for refiners faced with diminishing returns on the production of petroleum products.

“COTC represents the ultimate integration stream”, panel experts said at the ME-TECH 2019 conference in Abu Dhabi this week.

Refined products constitute a mature market where the opportunities for growth are mostly limited to the mobility needs of a rising middle class in emerging economies.

Consensus estimates for the cumulative growth in refined fuels until 2030 stand at 0.6%.

The main threat comes from electric vehicles and improvement in fuel efficiency, even if non-OECD countries will still remain an important source of fuel demand in the medium-term, in particular in the Asia-Pacific region.

However, this exception confirms the rule. Combined with unprecedented swings in crude oil prices and lower refining crack spreads across the board, refineries have been struggling for value growth.

It is, therefore, no surprise if some of them are increasingly considering integration with petrochemicals production to supply a fast-growing market with higher-value products.

When the development of the petrochemical industry took off after the Second World War, driven by the growing use of plastics, some refiners saw the opportunity to supply these new markets, but the synergies between the refining and the petrochemical industries were essentially lacking.

Since then, the refinery/chemicals interface has been considered with limited success.

Refiners have instead earned most of their profit from selling road transport fuels such as gasoline and diesel.

Prices for petrochemical feedstock – since then forecast as one of the main sources of demand growth until 2050 – often trended lower than crude oil prices.


In Europe, the expansion of diesel as the main road transport fuel produced an excess of naphtha, which became available for making petrochemicals (about 30% of naphtha in Europe comes from the refinery stream).

In the US, naphtha is needed to make gasoline, still the dominant road, but ethane from shale oil and gas is now available in increasingly larger volumes and at a cheap supply cost for steam cracking.

In the Middle East, significant volumes of gas co-produced with crude oil were flared off until it was decided to develop a petrochemical industry to produce higher-value streams from the cheap and ample domestic supply of ethane.

The 26-unit Sadara petrochemical plant, a $20bn joint-venture (JV) between Saudi Aramco and Dow Chemical, can produce 1.5m tonnes of ethylene per year from local, cheap ethane feed from Aramco (alongside LPG and naphtha in the Kingdom's first mixed feed cracker), in addition to about 30 other chemicals.

The production of chemicals such as olefins and aromatics directly from crude oil –  as opposed to the steam cracking of ethane and/or naphtha or via traditional reforming, has found new momentum.

The current imbalance between a slower demand for motor fuels (gasoline, diesel) and the rapid growth in markets for petrochemicals like olefins (ethylene, propylene), aromatics (BTX) and specialty intermediate streams like C4s has given integration projects new life.


The product imbalance has made the idea of using crude as a direct feedstock particularly appealing to integrated producers (mostly large international oil companies –  IOCs), but also to large chemical companies.

With limited long-term growth perspective for motor fuels, many refiners will find it increasingly difficult to compensate for the reduction in road transport fuels sales.

The regain of interest in petrochemical integration  reflects a desire to hedge against this risk or simply survive lower margins by diversifying revenue streams.

From an  IEA  'Sustainable Development Scenario' - Source: OECD/IEA

The mismatch between refinery configurations and product demand should, in theory, give refiners an incentive to deepen integration with petrochemical plants and boost the production of high-value products down the processing chain.

The scale, complexity, technologies and project execution skills involved in COTC projects, however, require multinational companies or IOCs operating in growth markets with low capital costs.

One company with some degree of success has been ExxonMobil, which has been pushing for closer integration for several years and kicked off the COTC trend.

Its 1m tonne/year ethylene plant in Jurong Island, Singapore is integrated with its refinery, not only sharing facilities such as utilities, but also taking a heavy fuels feedstock from the refinery for olefins manufacture.

Exxon uses a proprietary technology that essential tops the lighter components from the crude through a separate vessel between the convective and radiant sections of the steam cracker.

Several Asian refineries have co-located steam crackers and paraxylene (PX) facilities that provide higher chemical yields of up to 40%.

The industry’s expectation, going forward, is to reach higher yields of 40-80%.

The Saudi Aramco-Chevron Lummus Global (CLG) joint development agreement is currently the bigger Aramco project and is intended to demonstrate and commercialise Aramco’s Thermal Crude to Chemicals (TC2C™) technology.

The project will have an estimated conversion yield of 72%, for a capacity of about 4.7m tonnes/year of ethylene, said Richard Charlesworth from IHS Markit.

That is close to three times the size of the largest steam cracker currently in operation.

As one panel speaker put it during the conference, “higher COTC conversion has the potential to create additional demand for oil”.

For oil majors, the objective is to place their barrels to preserve their crude market, even if they must - at least temporarily - accept a low return in exchange.

For integrated  oil companies that have the appetite to invest in a capital-hungry industry and accept higher hurdle levels, COTC, if only by the sheer scale of the projects coming on stream, will have a disruptive effect on the supply and demand balance of major petrochemicals.

Focus article by Julien Mathonniere