Unwanted Diesel Production Vexes Europe’s Oil Refiners

Unwanted Diesel Production Vexes Europe’s Oil Refiners

Oil refiners had pinned their hopes on European diesel as the Continent’s fleet of personal diesel-powered vehicles grew to 45% by 2015, compared with 2% in the U.S., according to the International Energy Agency. Total had poured more than $2.4 billion into diesel-friendly upgrades at its two largest European refineries. Repsol and CEPSA invested $4.76 billion and $2.4 billion, respectively, on similar upgrades and modernization projects. Even independent refiners like Saras that aren’t tied to big oil-exploration companies shelled out hundreds of millions of dollars. However, a backlash against diesel sparked mostly by the Volkswagen AG emissions scandal has upended Europe’s big oil refiners. Sales of diesel vehicles are plummeting. “Diesel was the darling and has become the devil,” said Dario Scaffardi, executive vice president at Saras. To be sure, Europe still remains one of the world’s biggest consumers of diesel. European demand is estimated at 6.4 million barrels a day this year, over a fifth of global diesel consumption, according to the IEA. “Refineries that invested in complexity will have the ability to modify output toward heavier distillates [like marine and jet fuel]. They are well prepared,” said John Cooper, the head of refining industry group Fuel Europe. Switching to shipping fuel or jet fuel is easier for upgraded refineries because they are diesel-related distillates. By pumping out shipping fuel, the refiners can take advantage of new emissions curbs that cut the amount of sulfur allowed to be used in marine fuel starting in 2020. Source: The Wall Street Journal, 9/30/2017, p.B1.

TCGR Note: So where to from here! European refiners are already under intensifying competition from Asian and particularly Middle Eastern refiners. More Russian fuel exports are anticipated in the future. Between 2009 ─ 2016 about two dozen older refineries closed. Recent announcements like banning diesel vehicles from certain cities and increasing diesel taxes in France are now forcing big car makers like BMW, Daimler and even VW to scramble to increase their electric vehicle (EV) programs and Volvo/Geely has even announced all of their production vehicles will be either electric or hybrids by 2022. All of this brings serious revamp questions – more chemicals? For more information, see TCGR’s recently launched multi-client study “Oil-to-Chemicals: Technological Approaches and Advanced Process Configurations”.

EIA Projects 28% Increase in World Energy Use by 2040

The U.S. Energy Information Administration’s latest International Energy Outlook 2017 (IEO2017) projects that world energy consumption will grow by 28% between 2015 and 2040. Most of this growth is expected to come from countries that are not in the Organization for Economic Cooperation and Development (OECD), and especially in countries where demand is driven by strong economic growth, particularly in Asia. Non-OECD Asia (which includes China and India) accounts for more than 60% of the world’s total increase in energy consumption from 2015 through 2040. Although liquid fuels—mostly petroleum-based—remain the largest energy source throughout the IEO2017 projections, the liquids share of world marketed energy consumption is projected to fall slightly, from 33% in 2015 to 31% in 2040. As oil prices rise, energy consumers are expected to turn to more energy-efficient technologies and switch away from liquid fuels where possible. Source: The U.S. Energy Information Administration (EIA), 9/14/2017.

TCGR Note: EIA also released this week on 9/21/17 a report detailing the changing quality mix of crude oil since 2016. This is an important aspect to the growing interest of evaluating more chemicals production within and outside of the refining complex. For more information, see TCGR’s newly launched multi-client study “Oil-to-Chemicals: Technological Approaches and Advanced Process Configurations”.

DowDuPont Alters Split Plans, Shifts $8 Billion in Revenue to Specialty Products

DowDuPont will shift businesses with $8 billion in annual revenue from its planned material science spinoff to the specialty products spinoff as part of a previously announced portfolio review. Businesses moved to specialty products include: Dow automotive systems’ adhesives and fluids platforms; Dow’s building solutions business; Dow’s water and process solutions business; Dow’s pharma and food solutions business; Dow’s microbial control business; DuPont’s performance polymers business; and several Dow silicones-based businesses aligned with applications in industrial LED, semiconductors, medical, as well as Molykote brand lubricants for automotive and industrial equipment and Multibase, which serves the thermoplastic compounding industry. Materials science will have the “vast majority of its sales aligned to three narrower and deeper, high-growth market verticals; packaging, infrastructure and consumer care,” says Andrew Liveris, executive chairman of DowDuPont. The materials business had 2016 net sales of more than $40 billion with higher than 20% operating EBITDA margin. The only part of DuPont that remains with materials now is a portion of DuPont’s performance materials segment, including its Orange, Texas cracker and ethylene copolymers. The shifts will boost specialty products revenue from roughly $13 billion to $21 billion in annual sales with operating EBITDA margins of 25%. The business will be aligned around four market segments: electronics and imaging; transportation and advanced polymers; safety and construction; and nutrition and biosciences. Businesses shifting over include DuPont’s $4-billion performance polymers business, a leading producer of engineering plastics and elastomers, including nylon, acetal and fluoropolymers that had been slated to move to materials. The business also gains Dow’s automotive adhesives and fluids business; building solutions, including Styrofoam insulation and Great Stuff. In silicones, the business adds medical and trichlorosilanes as well as additional electronic materials. Source: IHS Chemical Week, 9/12/2017.

Vertimass Receives Go from US Department of Energy’s Bioenergy Technology Office (BETO) After Completing Intermediate Technology Validation

Vertimass LLC announced completion of intermediate technology validation from the U.S. Department of Energy’s (DOE) Bioenergy Technology Office (BETO), which verified performance against negotiated milestones, provided progress on scale-up, and reviewed Vertimass’ estimated cost for their transformative catalytic technology. Vertimass believes this BETO verification paves the way for Vertimass to move to the demonstration scale of this important technology for converting sustainable ethanol into fungible gasoline, diesel, and jet fuel blend stocks and the chemical building blocks benzene, toluene, and xylene (BTX).  Source: PR Newswire, 8/21/2017.

TCGR Notes:
Vertimass is offering an oligomerization process from corn ethanol and using Technip FMC as its EPC scale-up partner. It seems a classic variant to methanol-to-gasoline (MTG).  

BIO 2017: Getting Down to Business at World Congress on Industrial Biotechnology

Developers of bio-based chemicals are adapting to market challenges on both the commercial execution and financing fronts, by focusing on higher-performing products, partnerships, and new business models, according to attendees of this year’s World Congress on Industrial Biotechnology, held 23–25 July in Montréal, Québec. “The bio-based chemicals market has become more pragmatic and realistic than five years ago, with a focus on getting things to work,” says Peter Nieuwenhuizen, head of AkzoNobel Chemicals R&D. “Five years ago you had a lot of people who were feeling it out. Now, it’s business-focused. We’re all working on making very specific deals.” “Developing a green drop-in isn’t really a winning strategy,” says Rich Weber, general manager/performance chemicals at NatureWorks (Minnetonka, Minnesota). “We need to be developing products with unique attributes and understand how we translate that into product performance.” NatureWorks is adding to its porfolio of polylactic acid (PLA) by launching a platform of value-added products from its building block, lactic acid. Branded Vercet, the focus will be on providing differentiated lactides, polyols, binder resins, and chemical intermediates into coatings, adhesives, sealants, elastomers (CASE); toners; and fine chemicals. DuPont is currently building a furan dicarboxylic methyl ester (FDME) pilot plant with ADM, and aims to produce polytrimethylene furandicarboxylate (PTF)—a novel polyester made from FDME and 1,3-propanediol (PDO)—which DuPont has produced at commercial scale since 2006. AkzoNobel has finalized its first bio-based polymer application agreement with Itaconix (Stratham, New Hampshire) for coatings and construction applications. Itaconix will contribute its proprietary polymers from itaconic acid. AkzoNobel is also using its Imagine Chemistry startup challenge to identify technologies that can improve the sustainability profile of its portfolio. In June, three winners—Ecovia Renewables (Ann Arbor, Michigan), Renmatix (King of Prussia, Pennsylvania), and Industrial Microbes (Emeryville, California)—were awarded joint development agreements with AkzoNobel’s Specialty Chemicals business to help bring their ideas to market. Rick Eno, senior partner at Roland Berger (Munich, Germany), noted that bio-based chemicals are, on principle, attractive to large chemical companies, but the uncertainty around commercializing the technologies makes them uncomfortable. “The number one issue on chemical executives’ minds today is growth. The chemical industry grew between 1% and 2% in volume last year. Industrial biotechnology is growing 10% per year.” Source: IHS Chemical Week, 7/31-8/7/2017, p.33.

TCGR Note: The biochemicals and biopolymers market development certainly has been hit, due to the lower price of oil, and certainly the funding for startups has been more scarce during the last two years but the important take-away is the realization that being “green” doesn’t buy you a lot. Like the petroleum-based counterparts new chemicals at the molecular level have to add new, better or different performance advantages. If not, they are unlikely to get the market traction needed to be successful.

Ethylene Exports from the U.S. Planned

Thanks to cheap natural gas from shale, the U.S. has become a large exporter of ethane as a feedstock for overseas ethylene makers. As U.S. chemical projects start to come on-stream later this year, the country will grow as an exporter of ethylene derivatives such as polyethylene (PE). Now, U.S. companies want to cultivate a chemical commodity that hasn’t been a steady export business: ethylene itself. Energy services firm Enterprise Products Partners and the marine liquefied gas carrier Navigator Holdings plan to build an ethylene export terminal at Enterprise’s Morgan’s Point complex on the Houston Ship Channel in Texas. The terminal will have the capacity to load 100 metric tons of ethylene onto ships per hour. It will be connected to an ethylene storage facility currently under construction that can hold 270,000 metric tons of ethylene. Last year, Enterprise opened an ethane export terminal in Morgan’s Point with the capacity to move about 550 metric tons per hour. At the moment, the U.S. doesn’t have a lot of ethylene export capability. The only such facility is operated by Targa Resources in Galena Park, also on the Houston Ship Channel. According to the U.S. Census Bureau, the U.S. exported nearly 190,000 metric tons of ethylene last year. In 2014, it exported only 3,000 metric tons. Enterprise isn’t the only company looking to get into the ethylene export business. Odfjell Terminals is considering a facility for its Houston Ship Channel location in Seabrook, Texas. Source: Chemical & Engineering News, 7/24/2017, p.11.

TCGR Note: The two main markets for ethylene exports are likely to be Europe and China. China is home to many companies that make ethylene derivatives but aren’t back integrated with a source of ethylene, making them vulnerable as Chinese open market sources of ethylene are dwindling.

The Propylene Oxide Problem

Propylene oxide (PO) is in strong demand, especially for polyurethanes applications, but tight control on the technology is limiting the building of new plants. PO is one of the fastest growing uses of propylene, with production up 3.5%/year from 2010-2016. Given the forecast growth rates, more PO units need to be built to satisfy demand. But planned plants are few and far between with technology limitations strong. However, this could change in the near future as the Chinese launch new production processes. PO technology is currently in its third generation. In 2006 Sumitomo developed a method using oxidation by cumene hydroperoxide. The by-product cumyl alcohol can be recycled back to cumene. This was followed in 2008 by technology oxidising propylene with hydrogen peroxide (HPPO), with water the only by-product. This was simultaneously developed by Degussa-Uhde (now Evonik) and BASF/Dow Chemical. Sumitomo’s technology has not taken off to the extent the company hoped. There are only two plants globally – the original one in Japan and one in Saudi Arabia, launched in 2009 by PetroRabigh, a Saudi Aramco/Sumitomo joint venture. Another two are planned to open in Asia, with licences from Sumitomo. One will open in 2018 in South Korea, operated by S-Oil. The second is in Thailand, operated by PTT Global Chemical and due to start in 2019. Industry sources say this process is complex and costly, and has been overshadowed by the newer, more efficient HPPO process. HPPO is a relatively simple process with few by-products. As such, it is seen as the most modern, cost efficient process. Degussa-Uhde claim the first plant – built in 2008 by SK Chemicals in Korea. This was very shortly followed by a BASF/Dow plant in Antwerp also in 2008. More plants came from BASF/Dow – a plant in Thailand in 2011, and a Dow joint venture Sadara Chemicals opening in Saudi Arabia in 2017. Degussa-Uhde (now owned by Evonik) sold the technology under licence to Jishen Chemical industries in Jilin, China (from 2014). However, a couple of Chinese players are working on their own HPPO technologies and this could be a game changer for the PO market. If Chinese players are successful, this could lead to a new wave of PO plants and a loosening of supply. Source: ICIS Chemical Business, 7/6/2017.

TCGR Note: The original process was the propylene chlorohydrin route used by Dow Chemical. This was superseded by oxidizing propylene using organic peroxides e.g. tert butyl peroxide (TBP) but copoducts like MTBE or styrene made POSM plant investment decisions difficult. RIPP/Sinopec are one of the Chinese groups working on HPPO technology. They began operating a commercial demonstration unit in late 2015 (see CAP Communications dated 10/19/2015).

IndianOil and LanzaTech Sign a Statement of Intent to Construct World’s First Refinery Off Gas-to-Bioethanol Production Facility in India

Indian Oil Corporation Limited (IndianOil) and LanzaTech have signed a Statement of Intent to construct the world’s first refinery off gas-to-bioethanol production facility in India. LanzaTech has developed a gas fermentation process to make fuels and chemicals. Instead of sugars and yeast, the company uses a biological catalyst to ferment waste gas emissions. The large volume of waste gas produced at industrial facilities such as refineries cannot be stored or transported; rather it must be combusted to make power locally and emitted as carbon dioxide (CO2). Power can be carbon-free, and in India today, the cost of renewable power has fallen below the cost of coal, accelerating the transition to a carbon-free grid. LanzaTech’s technology allows refineries to divert waste gases from the grid, supporting the transition to fully renewable power while recycling this carbon into liquid fuels and petrochemicals. The basic engineering for the 40 million litres (35K MTA) per annum demonstration facility will begin later this year for installation at IndianOil’s Panipat Refinery in Hayrana, India, at an estimated cost of 350 crore rupees (USD 55 million). It will be integrated into existing site infrastructure and will be LanzaTech’s first project capturing refinery off-gases. LanzaTech’s first commercial facility converting waste emissions from steel production to ethanol will come online in China in late 2017. Source: LanzaTech, 7/10/2017.

TCGR Note: CAP members should be aware that TCGR’s Carbon Dioxide and Conversion (CO2CC) Program has documented LanzaTech’s technology and other CO2 conversion processes in several reports. For more information, contact John Murphy at jmurphy@catalystgrp.com or +1.215.628.4447.

Volvo to Use Electric Motors in All Cars from 2019

Volvo Cars announced that every model from 2019 onwards would have an electric motor, making it the first traditional carmaker to call time on vehicles powered solely by an internal combustion engine. Volvo said that it would put electrification at the core of its business. From 2019 it will only make three types of cars: pure-electric, plug-in hybrids, and so-called “mild” hybrids combining a small petrol engine with a large battery. “This announcement marks the end of the solely combustion engine-powered car,” said Håkan Samuelsson, chief executive. “Volvo Cars has stated that it plans to have sold a total of 1m electrified cars by 2025.” The Swedish carmaker was purchased by Chinese domestic carmaker Geely in 2010. The new owners have proven to be a catalyst in the race to electrify its models, as China is already the world leader in electric car sales and Geely is the only Chinese-owned carmaker producing vehicles for the US. Globally, the market for pure-electric cars is tiny, accounting for less than 1 per cent of sales last year, but is growing quickly. Volvo said it would launch five pure-electric cars between 2019 and 2021. Three will come from Volvo while two will come from Polestar, the high-performance unit it launched last month. By 2019 no new Volvo cars will be sold without an electric motor, as internal combustion cars are “gradually phased out”, Volvo said. It also aims to make its manufacturing operations “climate-neutral” by 2025. Source: Financial Times, 7/6/2017, p. 11.

TCGR Note: It is projected that global light vehicle production will exceed 100 MIL/yr by 2020 and if only 1% of vehicle sales were pure electric last year that would be less than 1 MIL/yr in 2016. What is less obvious has been the growth of plug-in hybrids and gasoline-hybrids which are now approaching several million and predicted worldwide to be above 10% p.a. by 2022, mostly outside of the US. Note refiners should think about this impact on traditional transport fuel sales.

Indian Oil, Partners Sign Deal for $40-Billion Refinery, Petchem Plan

India’s state-owned oil companies-Indian Oil, Bharat Petroleum, and Hindustan Petroleum- have signed a joint venture (JV) agreement to build one of the world’s largest integrated refinery-petrochemical complexes in Ratnagiri district of Maharashtra State on India’s west coast. The 60-million metric tons/year (MMt/y) west coast refinery complex will be built at an estimated cost of $40 billion, and is expected to be commissioned by 2022. It will be a greenfield refinery with 50 units and will be self-sufficient in power and utilities requirements. Designed to produce Euro-Vl and above grade transportation fuels, the refinery will have in-built flexibility for processing a spectrum of light and heavy crude oil grades, utilizing various blending techniques. It will also be able to produce on-demand product mixes of gasoline and diesel streams, as well as other refined products and petrochemical streams with a high level of integration and energy efficiency, the JV partners say. Indian Oil will be the lead partner with a 50% stake and Hindustan Petroleum and Bharat Petroleum will each have 25%, Indian Oil’s Chairman Sanjiv Singh said at the signing ceremony. According to Dharmendra Pradhan, India’s oil minister, Saudi Aramco wants to enter into exclusive talks with India to buy a stake in the planned refinery. The planned petrochemical complex will have aromatics facilities, a naphtha cracker, and polymer plants. The refinery will include three crude oil processing units of 20 MMt/y each. The refinery will be able to source crude oil from the Middle East, Africa, and South America. Source: IHS Chemical Week, 6/19/2017, p.15.