Feb-2023

Closing the sustainability cycle

Role of plastics recycling technologies in the future of the downstream industry.

Marcio Wagner da Silva
Petrobras

Article Summary

According to recent forecasts, the expanding petrochemical market will be responsible for a major portion of crude oil consumption, surpassing transportation fuels, compelling refiners to pursue closer integration with petrochemical assets through the maximisation of petrochemical intermediates using refinery assets. Integration with petrochemicals serves as a strategy to ensure better refining margins and higher value addition from crude oil. Figure 1 presents an overview of the growing petrochemical market trend to 2040.

Some markets are already in a gasoline surplus. In this case, directing naphtha to petrochemicals against gasoline can be an attractive way to ensure refinery competitiveness.

The naphtha to petrochemicals alternative could soon be a trend for refiners competing in markets with a gasoline surplus. According to data from Wood Mackenzie Company (2021), highly integrated refiners can add from US$0.68 to US$2.02/bbl. According to Wood Mackenzie, the Asian market presents the major concentration of integrated refining plants. Gasoline demand will be sustained in developing economies, as shown in Figure 2.

Closely related to the previous discussion, a recently published article3 classifies the competitive markets in the downstream industry. The authors define the conventional market as a red ocean, where players tend to compete in the existing market, focusing on ‘defeating competitors’ through the exploration of existing demand, leading to low differentiation and low profitability.

The blue ocean is characterised by the look for space in non-explored (or few explored markets), creating and developing new demand and reaching differentiation. This model can be applied (with some specificities once in a commodity market) to the downstream industry, considering traditional transportation fuels refineries and the petrochemical sector.

The transportation fuels market can be imagined as the red ocean, where margins tend to be low and under high competition between players with low differentiation capacity. On the other side, the petrochemicals sector can be visualised as the blue ocean, where few players can meet the market in competitive conditions, higher refining margins, and significant differentiation in relation to refiners dedicated to the transportation fuels market. Figure 3 presents the basic concept of the blue ocean strategy compared to the traditional red ocean, where the players fight for market share with low margins.

In comparing the differences, market forecasts indicate that refiners able to maximise petrochemicals against transportation fuels can achieve the highlighted economic performance in the short term. In this sense, crude oil-to-chemicals technologies can offer an even greater competitive advantage to refiners with capital investment capacity.

It can be difficult to understand the term ‘differentiation’ in the downstream industry as this is a market that deals with commodities. However, differentiation in this instance is related to the capacity to reach more added value to the processed crude oil. As previously presented, this translates to the capacity to maximise petrochemical yields, creating differentiation between integrated and non-integrated players.

Maximising added value to the processed crude
The focus of the closer integration between refining and petrochemical industries is to promote and seize the synergies existing between both downstream sectors to generate value for the whole crude oil production chain. Table 1 presents the main characteristics of the refining and petrochemical industry and potential synergies.

As aforementioned, the petrochemical industry has been growing at considerably higher rates when compared with the transportation fuels market in the last years, representing the lesser environmentally aggressive route for crude oil derivatives. The technological basis for refining and petrochemical industries are similar, which leads to potential synergies capable of reducing operational costs and adding value to derivatives produced in refineries. 

Figure 4 presents a block diagram showing integration possibilities between refining processes and the petrochemical industry.

Process streams considered low added value to refiners, such as fuel gas (Câ‚‚), are attractive raw materials for the petrochemical industry. Also, streams considered residual to petrochemical industries (such as butanes, pyrolysis gasoline, and heavy aromatics) can be applied to refineries to produce high-quality transportation fuels. This can help the refining industry meet environmental and quality regulations with derivatives.

The integration potential and synergy among the processes rely on the refining scheme adopted by the refinery and the consumer market. Process units such as fluid catalytic cracking (FCC) and catalytic reforming can be optimised to produce petrochemical intermediates to the detriment of streams that will be incorporated into the fuels pool. In the case of FCC, the installation of units dedicated to producing petrochemical intermediates (i.e., petrochemical FCC) aims to minimise the generation of streams towards transportation fuels production. However, capital investment is high once the severity of the process requires use of material with the noblest metallurgical characteristics (such as 316 S.S, Monel). 

The IHS Markit Company proposed a classification of the petrochemical integration grades, as presented in Figure 5.
According to the proposed classification, crude-to-chemicals refineries are considered the maximum level of petrochemical integration, where the processed crude oil is totally converted into petrochemical intermediates.

Plastics recycling technologies
As previously described, with growing petrochemicals demand, an increasing portion of crude oil derivatives has been applied to produce marketable plastics. Despite the higher added value and significant economic advantages compared to transportation fuels, the increase in plastics consumption and the resulting plastic waste is not sustainable.

The demand for recycled plastics will increase significantly going forward, accelerated by consumer awareness, stricter regulations, and ESG/sustainability pledges assumed by players in the plastics market to minimise the industry’s environmental footprint. Some players have made public commitments to reach recycled content in their production in percentages that vary from 15 to 50% by 2025. Nowadays, just 9% of global plastics production is recycled, mainly through mechanical recycling processes.

Mechanical recycling technologies have been successfully applied, especially for polyethylene terephthalate (PET) and polyethylene (PE) which are applied to produce bottles. Regardless of this success, there are concerns and restrictions related to using mechanically recycled plastics for the noblest purposes, such as food-grade packages, due to the contamination risk.

Despite efforts related to the mechanical recycling of plastics, increasing volumes of plastics waste call for the most effective recycling routes to ensure the sustainability of the petrochemical industry through the regeneration of the raw material. In this sense, some technology developers have dedicated investments and efforts to develop competitive and efficient chemical recycling technologies for plastics.