(Editor's note: The HPInsight article posted below is included in this month's Hydrocarbon Processing print edition. To read the top March 2012 headlines, click here.)
In this issue of HPInsight, workforce, fuel quality and capacity overhang are a few of the challenges that the hydrocarbon processing industry (HPI) must address and resolve. Expansion of the refining and petrochemical industries is followed by excess supplies chasing dwindling demand. This is not a new condition; however, history and technology do modify how the HPI re-emerges from the slump.
Headlines from Hydrocarbon Processing, March 2002:
What is the fuel combination to run future engines? Is zero pollution an objective that can be reached within five years, using available technologies? Yes, say representatives of automakers and engine R&D centers meeting at an international conference organized by the French Petroleum Institute (IFP). IFP claims that technologies for combustion by controlled auto-ignition in gasoline engines and homogeneous charge compression ignition for diesel engines are going to change considerably to protect the environment. IFP is developing a new approach to diesel combustion engines; it uses multiple-injection strategies. Concerns remain about fuel quality for new engines.
Chemicals slump: This, too, shall pass, but when? With the significant capacity overhang prevalent today, petrochemical producers will need to closely monitor comparative international oil and domestic natural gas prices, according to a CMAI report. In 2001, weakening economies became a focal point for the global economy, accompanied by a severe downturn in petrochemical demand. Strong recovery is anticipated for 2002.
More perspective on mergers and acquisitions. In the HPI, it is difficult to escape the boom and bust cycle. Corporate buying and selling have been extremely active for HPI companies, according to Accenture. Acquisitions can be very fruitful in bust cycles if done well. The Conoco/Phillips merger is one example of a promising and clear transaction.
Edinburgh becomes the worlds first city to offer both sulfur-free unleaded gasoline and sulfur-free diesel. These fuels became available in mid-February 2002 at 18 BP service stations. The new fuels are said to be the cleanest gasoline and diesel products available in the UK. (The fuel formulations are allowed to have a maximum sulfur content of 10 ppm.) The new clean fuels, arriving six years ahead of EU legislation requirements, are produced at BPs Grangemouth refinery in eastern Scotland.
In a remote part of Australia, Chevron and its
partners expanded the huge North West Shelf
natural gas project. Hydrocarbon Processing
Night view of Motivas Norco, Louisiana,
refinery. Hydrocarbon Processing 2007.
Headlines from Hydrocarbon Processing, March 1992:
The Saudis want to enter the US refining market via a joint venture (JV) involving half of Finas refining and marketing assets. The $1.3 billion deal would involve two Texas refineries and 3,000 service stations. This would be the first time that a privatesector Saudi Arabian company (Arabian Petroleum) has processed and marketed Arab crude outside the country. The 50-50 JV, Fina USA, aims to own refineries at Port Arthur (150,000 bpd), and Big Spring (60,000 bpd), both in Texas. In a similar plan, Saudi Aramco owns 50% of Star Enterprises, a 600,000-bpd refining network, and Texaco owns the other half.
US refining capacity rationalization has begun. Several refiners have announced downsizing and/or proposed sales of assets. Chevron, Shell, Amoco and Phillips are among those refiners rationalizing. In addition, many smaller refineries have announced temporary shutdowns due to poor margins. According to a Salomon report, the US refining industry is the envy of the world in terms of light product yields. But US refiners are tiny by world standards. At present, 194 US refineries are operating and have an average distillation capacity under 80,000 bpd. European and Asian refineries have an average distillation capacity of 200,000 bpd. About 90 US refineries have a processing capacity under 50,000 bpd. When the rationalization round is complete, the US refining industry will emerge a smaller and more profitable industry.
World LNG industry is growing. The world liquefied natural gas (LNG) industry is on the move, according to a new study by CEDIGAZ. In 1991, LNG trade reached 78.1 billion m3 (58 metric tons), an 8% increase over 1990 levels. The Asia Pacific region was particularly active, with an 11% growth in import volume. Japan, South Korea and Taiwan increased LNG imports from Malaysian and Australian liquefaction facilities. Two new grassroots facilities are planned: The Bonny Island, Nigeria, project will supply Europe and a new LNG facility will be built in Qatar to export LNG to Japan. Eight new LNG projects will be developed by 2010 with an estimated capital cost of $30 billion.
US crude oil price to hit $20/bbl soon. US crude oil prices will rise above $20/bbl, and natural gas (NG) will increase to nearly $2/Mcf by year end. The oil and NG prices now lag behind the economy. The global oversupply of crude oil has depressed US oil and NG prices. Seasonal demand for oil and NG was reduced due to mild winter temperatures. Domestic drilling for oil and NG is the lowest in the past 50 years due to price sensitivity.
Dow Chemical Co. olefins production facility
in Fort Saskatchewan, Alberta, Canada,
expanded operating capacity to 2.4 billion
lb/yr in mid-1998. Hydrocarbon Processing 1999.
Headlines from Hydrocarbon Processing, March 1982:
Natural gas pipeline to the Lower 48 from Alaska is closer than ever to a becoming reality. The Alaska natural-gas (NG) transportation system will have an initial capacity of 2 Bcfd of NG, enough to displace 400,000 bpd of crude oil for 25 to 30 years. The 745-mile Alaska segment of the project will be built and operated by a consortium of 10 US and Canadian NG companies.
Oil price decontrol proves to be no evil. Decontrol of crude oil prices initiated a flurry of dire predictions. With the complete phase-out of crude oil price controls in early 1981, oil production in the Lower 48 states nullify predictions that production would decline. Without price controls, the oil industry increased drilling to an all-time high. An estimated $50 billion was invested in E&P. Industry pessimists predicted that decontrol would lead to skyrocketing oil prices. In reality, the average price of a gallon of gasoline was 5¢ to 6¢ less than the peak price in 1981. With all of the improvements under decontrolling oil prices, the US still imports one third of its daily oil consumption. The nation is still very vulnerable to sudden, major disruptions of foreign oil supplies.
CEFIC investigates Western Europes chemical industry. Western Europes chemical industry continues to face economic and supply/demand imbalances. The European Council of Chemical Manufacturers Federation's (CEFICs) view is that Western Europe is in a deep recession accompanied by structural inflation. During the 1960s, chemical production increased 15%/yr. This annual growth stabilized in the 1970s to 5%7%. The rapid capacity expansion of the 1960s created excess production capacity. Western Europe now faces completion from Eastern countries. The Western European chemical industry must develop a new strategy based on structural changes. The new focus will be on raw material supply, processing efficiency and developing a range of products for manufacturing and distribution. The European chemical industry must find a balanced system in which profitability and productivity are depenalized.
Methanol research continues to make an impact for transportation fuels. Two methanol-powered automobiles with unique prevaporized fuel system designs are undergoing a two-year test by Conoco. Company employees will test drive the methanol cars1981 Ford Fairmontsunder normal conditions. Gasoline is used to start the engine and heat it to a set temperature before a sensor switches the engine to methanol. Because the methanol is vaporized first, there may be less cylinder wear.
Headlines from Hydrocarbon Processing, March 1972:
New regulations are proposed for no-lead gasoline. The US Environmental Protection Agency (EPA) has set a July 1974 deadline by which gasoline with 91 RON or less will be lead- and phosphorous-free. Lead in regular and premium gasoline should not exceed 2 g/gal after January 1974, 1.7 g/gal after January 1975, 1.5 g/gal after January 1976, and 1.25 g/gal after January 1977.
Toray has new styrene extraction process. A new process to extract styrene from cracked oil coproduced in naphtha cracking has been developed by Toray Industries. The process, STEX (styrene-extraction), is claimed to provide several advantages, such as low material cost and a simple process flow.
Pyrolysis process converts waste into fuels. Occidental Petroleum has developed a new pyrolysis process that can convert municipal solid waste into low-sulfur fuels and other salable products. The new process can recover 90% of the raw materials contained in municipal trash. The process does not require hydrogenation, and it operates at atmospheric pressure. Shredded waste is mixed with pulverized coal at a 90:10 ratio. The pilot program is sponsored by the US Environmental Protection Agency.
This giant tower will stand 17 stories when
erected at Sun Oil Co.s lube oil plant in
Puerto Rico. Badger Co., Inc., a subsidiary of
Raytheon Co., provided the design and
engineering for the new plant. The 270-ton
tower was prefabricated in the US and
shipped to the Caribbean by barge.
Hydrocarbon Processing 1970.
Headlines from Hydrocarbon Processing and Petroleum Refiner, March 1962:
Demand gains weak in 1961. In a preliminary study by Du Pont, total gasoline demand increased by 1% in 1961 over 1960 levels. Total gasoline production only increased by 0.6%the smallest gain in 15 years.
Merges increase slightly for the HPI. According to the (US) Federal Trade Commission, mergers and acquisitions in the chemical industry were up slightly in 1961. There were 66 mergers in 1961, 59 in 1960 and 62 in 1959. In the petroleum and coal industries, there were 21 mergers. And 38.6% of the total mergers involved companies with assets exceeding $50 million.
France dropping anti-dumping tariff. Imposed in the fall of 1960, France has retracted its anti-dumping tariff on polyethylene (PE). Other European nations have threatened similar action, but did not follow through. The tariff was enforced to hinder exporting cheaper US-produced PE to the European market.
Steel industry may replace coal for blast furnaces. Fuel oil may replace coke in the steel business. Likewise, natural gas is under consideration to be sent to blast furnaces with preheated air.
New copolymer developed. Union Carbide has developed a unique ethylene copolymer. The new copolymer is ethylene acrylate copolymer; it is similar to vinyls, PE, rubber and neoprene. It features include low-temperature flexibility (better than PE), good thermal stability during processing, and high resilience at room temperature.
New polypropylene polymers available. Amoco has developed three viscosity grades of liquid polypropylene (PP) polymers. The new products have low molecular weight. Because the PP polymers are liquid, new product applications are possible.
The Chinese Petroleum Corp.s $9.5 million
ethylene plant in Kaohsiung, Taiwan, was
constructed by The Lummus Co. The new
facility will produce 120 million lb/yr of high-
purity ethylene to support Taiwans emerging
petrochemical industry. Hydrocarbon
Headlines from Petroleum Refiner, March 1952:
Tennessee Gas begins operation of the largest gas plant. The largest natural-gas processing facility was recently completed. The facility is rated to handle 750,000 Mcfd. The separation of ethane and heavier hydrocarbons from the gas stream is accomplished by refrigeration. The liquid compounds will be used by the chemical industry.
Engineer shortage. The dangerous gap between the supply of engineers and the need for their services is becoming wider according to the US Office of Education and the American Society for Engineering Education. Only 28,000 engineering students will graduate in 1952 to meet the present demand of 60,000 to 90,000 engineers. Many of the 1952 graduates are either members of Reserve Officer Training Corps units or are subject to the draft, having been granted deferments to complete college courses. The defense industry is likely to be short 40,000 to 70,000 engineers.
Competitive vs. cooperative research. Applied research must remain competitive if it is to be productive, according to Dr. Robert Wilson, chairman of the board of Standard Oil Co. Petroleum refining has become essentially a chemical-synthesis industry, and its magnitude of operations dwarfs all other synthetic processes and products. Research has also made petroleum an increasingly important source for many vital products formerly manufactured from other raw materials. Over 90% of the applied petroleum research conducted today by competitive oil companies have brought benefits to the public. This research faces the same threats that hamper all industrial research. Among the threats are emasculation of the patent system, compulsory licensing and government competition in applied research.
Total view of the Rexall Chemical Co.s
Odessa, Texas, facility shows the
polypropylene storage silos and plant.
The 30-million lb/yr plant uses the
El Paso-Rexall process.
Construction of Sun Oil Co.s catalytic
cracking unit at Sarnia, Ontario, Canada.
Petroleum Refiner 1953.
The secondary fractionating tower at Sinclair
Refining Corp.s Corpus Christi, Texas
refinery is eight stories tall. It weighs 90,000 lb
and has 24 process trays. Petroleum Refiner 1957.
Headlines from The Refiner and Natural Gasoline Manufacturer, March 1942:
Standard Oil Co. has signed a contract with the US government to construct a toluene plant at Whiting, Indiana. The facility will be operational within a year and produce as much of this explosive ingredient as produced for WWI. The company is also considering possible construction of alkylation and isomerization units for the same site.
Premier Oil Refining Co. will build a $3 million plant at its Cotton Valley, Louisiana, site. The new unit will provide 100-octane aviation gasoline and other products.
The Canadian government announced plans to spend $40 million in connection with aviation gasoline and butadiene. The plant will be operated by the dominion government and will be located near a refining center.
Headlines from The Refiner and Natural Gasoline Manufacturer, March 1932:
Fractionation will reduce gasoline costs from high-sulfur petroleum. The cost of processing high-sulfur crudes may be lowered by proper fractionation methods according to a new study by the US Bureau of Mines, Department of Commerce. Gasoline processed from high-sulfur oils required chemical treatment after distillation to meet motor-fuel specifications. The cost of this post-treatment is the main difference in processing gasoline from various crude oils. Better fraction methods can eliminate post-treating gasoline.
Consumption lubrication oil on the rise. US demand for lubricating oils in January 1932 increased sharply in domestic and export businesses. Domestic consumption increased to 1.5 million bbl over 1.4 million bbl in December 1931. Exports of lubrication oils rose from 597,000 bbl in December 1931 to 616,000 bbl in January 1932.
Still runs down in January. The Bureau of Mines figures for January show that crude runs to stills were reduced by about 4 million bbl (MMbbl) to a total of 68.7 MMbbl. The reductions occurred for domestic crude; runs of foreign crude remained at the same rate as December (1931). Domestic crude oil consumption by refineries averaged 2.2 MMbpd in January, down slightly from 2.24 MMbpd crude runs in December. Foreign crude oil runs averaged 108,000 bpd.
Headlines from The Refiner and Natural Gasoline Manufacturer, December 1922:
Excess California crude bids for refineries. Present oil production in the state exceeded plant capacity by more than 130,000 bpd. The average daily refining capacity of California is slightly over 300,000 bpd. The daily crude oil production rate is 432,000 bpd. Not all of the produced oil is refinable; however, there is a surplus of refinable crude oil in California. A number of announced new refinery projects are expected to be completed.
Destructive distillation of oil shales. Oil shale is the subject of an experiment. Distillation of shale oil does yield a cut that will pass for motor fuel, but the specific gravity of the cut is too low. Cracking this material yields paraffins, naphthenes, unsaturates (acetylenes and olefins) and aromatics.
When can gasoline be classified as good? Gravity as the basis for quality specification of gasoline is fast losing ground. Distillation testing is preferred. Not all gasoline is good. Many refineries do produce quality gasoline that is water free. But does gravity testing guarantee good gasoline? New developments show that distillation testing can provide consistent quality results. Also, distillation methods reveal the composition of the gasolinesomething that gravity cannot. HP