Shifting Sands: Petrochemical Processing In The Middle East
March 1, 2012
Kevin M. Beirne, Sabin Metal Corporation, USA, argues that the myriad changes in the Middle East demand tighter control over precious metals recovery and refining programs.
It is not especially noteworthy that 80% of the world’s readily accessible oil reserves are located in the Middle East, with approximately 62% of those reserves in Saudi Arabia, the UAE, Iraq, Qatar and Kuwait. However, what should be considered newsworthy is the slow shifting of Middle East cracker capacity towards increased petrochemical/chemical processing and production to satisfy a growing global market.
The reasons for this shift are obvious: volatile crude oil prices, global economic crises, Middle East geopolitical instability, increasing competition and reduced fossil fuel consumption in many industrialized countries have all contributed. These are the major factors that have created uncertainty, not only in global oil markets in general but also with Middle East oil producers in particular. As a result. many Middle East oil producers (some of which are conglomerates composed of two or more individual organizations) have been moving towards integrating their hydrocarbon processing refining capabilities for fossil fuel products to petrochemical/chemical products instead. This trend has unsurprisingly been encouraged by a number of Middle Eastern governments, as they constantly look for additional revenue sources from their natural resources.
Cyclical trains, refining margins and a thin band of margin operation for overall profitability make integration essential to even out the margin vagaries. For example, the Kuwait National Petroleum Company (KNPC) has adopted the mindset that all new refining projects essentially incorporate integration with petrochemicals, resulting in greater savings and investment costs.
Production of chemicals and petrochemicals from natural gas and crude oil refining is achieved by primarily utilizing ethylene and its derivatives. The products are used in cosmetics. drugs, detergents, fertilizers, pesticides, plastics, aromatics, paints, and more. Last year, for example, Middle Eastern producers generated over 20 t of ethylene, almost all of it for export. However, some Middle Eastern refiners are now developing internal plastics processing facilities to enhance ‘value added’ productivity for internal consumption and to help reduce polymer exports. With regard to petrochemicals for plastics (one of the largest groups of petrochemical products) there are two main classes. These are olefins, which include ethylene and propylene, and aromatics such as benzene and xylene.
The contemporary Middle Eastern petrochemical/chemical industry started approximately 60 years ago in Saudi Arabia, when gas flared at well heads was used as feedstock. Today, many petrochemical/chemical plastic derivatives are produced using natural gas as feedstock due to the abundance of natural gas reserves in the Gulf region. Enhanced gas production is also likely to fuel growth in the Middle East for the establishment of other petrochemical processing facilities.
More insight into the rationale for growth in the Middle Eastern petrochemical sector is offered by a US daily newsletter focusing on the oil industry. Money Morning predicted that ‘oil prices will create serious financial problems in the future’. According to this publication. ‘it is not an issue of supply or demand or geopolitical unrest’; instead, the oil price crisis may come from a rising inability to determine the ‘genuine’ value of crude oil. This obviously concerns global speculation. Money Morning predicts that there will be many widespread differences between the high and low oil prices as they rise and fall ‘artificially’. While the newsletter claims that today’s oil market is fueled by instability, intense volatility, pricing and trading, there is also a significant level of uncertainty that has not been seen for the past 40 years. Their prediction is that pricing may rise to US$ 200/bbl, based on world politics and legislative and regulatory decisions that ‘impede free trade, cross border capital flows, access to assets and general geopolitical instability in the Middle East’.
This gloomy outlook, combined with shifting demands for hydrocarbon based commodities and their derivatives, is encouraging Middle Eastern oil producers to work towards integrating their hydrocarbon processing refining capabilities (for production of traditional fossil fuels) with petrochemical/chemical refining and production (Figure 1).
With regard to the medium term outlook for the refining industry, KNCP representatives have predicted that gas development will assume more importance, especially since its availability seems to be more widespread. Environmental concerns will also push for the gas maximization. With an abundance of natural gas reserves in the Middle East, the new direction for enhanced processing of chemicals and petrochemicals is simply logical, since natural gas is an ideal feedstock for hydro-chemical production.
Even now, many Middle Eastern refineries constitute a major factor in global petrochemical/chemical processing. In fact, a recent white paper featured the Middle East’s top 10 petrochemicals players, and stressed that the ‘region is filled with many petrochemical professionals and executives who have contributed to making the Gulf the hottest destination on the planet for those with designs on downstream success’.The list features organizations such as SABIC (chemicals, fertilizers, plastics and metals); and Gulf Petrochemical and Chemicals Association (GPCA). This company’s downstream subsidiary in Kuwait (Equate) is a major producer of polyethylene and ethylene glycol. Other organizations mentioned include Qatar’s Qapco, a joint multinational venture that produces fertilizers, as well as other refined petroleum products including ethylene, low density polyethylene (LDPE) and solid sulfur.
While there are many other organizations mentioned in this white paper, they all share common goals, including the obvious: managing their businesses by maximizing efficiencies and enhancing profitability, whether through conventional hydrocarbon processing/refining or possibly more sophisticated petrochemical/chemical processing with crude or natural gas feedstocks.
Maintaining profitability in the future will be even more of a challenge for many Middle Eastern chemical and petrochemical producers, based on two ‘game changing’ factors. The first is more aggressive US competition; the second is a predicted slowdown in global consumption, according to Downstream Today’s Middle East Petrochemical News. This publication pointed out that ‘successful exploitation of huge shale gas reserves in the US has upset the balance of the global gas industry. Relatively cheap shale gas will make US chemicals more competitive as the cost of moving SABIC’s [used solely as an example in its editorial] products to the American market will be far higher than that of Saudi feedstock.
Competition may also be increased significantly in the future, if and when China develops its massive shale gas resources, which may have major negative impact on Gulf region petrochemical/chemical producers. Even now, Middle Eastern refiners (including SABIC) are partnering with Chinese organizations (in this case, Sinopec) for building cracking facilities for derivative production, Kuwait Petroleum Corp. and Qatar Petroleum are following suit by pursuing cracker projects in China, according to a recent article in ICIS Chemical Business.
With all these issues to consider and an uncertain future, it is more important than ever for Middle Eastern petrochemical/chemical refiners to work smarter and maximize profitability. One way to do this is to look carefully at all possible sources of income or profits. An approach in this direction (although not generally a method ‘at the top of the list’ with regard to tools and techniques to enhance profitability) is to acquire the greatest possible value for the precious metals used in petrochemical/chemical catalytic production processes.
Typically, these metals include platinum, palladium, rhodium and ruthenium and are commonly referred to as platinum group metals (PGMs), along with rhenium and, in some instances, gold, silver or other precious metals. These metals are typically used singly or in combination in petrochemical/chemical processes to facilitate and/or speed chemical reactions; sometimes PGM bearing catalysts are also employed in end of pipe pollution abatement applications. Incidentally, this is certainly a predicted growth area, based on increasingly stringent pollution abatement laws being enacted in most industrialized nations.
Petrochemical/chemical processing catalysts do not last forever: they deactivate over time due to their harsh processing environments, which contaminates them with carbon, sulfur, volatile organics, moisture or other substances that reduce their efficacy. Consequently, they must eventually be replaced with ‘new’ catalysts to continue production in a speedy manner in order to reduce or eliminate process downtime.
However, almost all of the catalysts precious metals content remain in a spent catalyst lot, and thus must be recovered and subsequently refined for reclamation. Values of PGMs in particular have been rising significantly over the past decade. Due to their high values, combined with supply/demand price fluctuations, their owners must view precious metals leasing, purchasing and recovery management programs with key emphasis on costs and returns.
Restrictive environmental protection laws and the high costs of PGM bearing catalysts mean that spent catalysts must be processed in a manner that helps assure maximum recovery of their precious metals, while also protecting their owners from possible environmental consequences arising from their refiner’s recovery and refining procedures. Values of their remaining precious metals are high. For example, the current value of platinum is US$ 1606 tr. oz., and palladium is approximately US$ 694 tr. oz. Rhenium (not considered a PGM but nevertheless present in many spent catalysts) is valued at US$ 4500/kg; some precious metals refiners are now able to recover a significantly high percentage of this metal.
Depending upon process volume, catalyst cycle time, accumulated contaminants and precious metals content, the chances are that many thousands or hundreds of thousands of dollars of value could be recovered from a single spent catalyst lot. To obtain the most value from spent catalysts, thorough research should be conducted with the aim of establishing a mutually profitable relationship with a reputable precious metals refining organization.
High PGM values and their importance in the refining process mean that selecting and working with an established, reliable and reputable precious metals refiner is important for a number of reasons:
- Precious metal bearing catalyst owners must assure maximum returns of remaining precious metals from their process or product.
- The speed (turnaround time) at which precious metal bearing materials are processed will significantly affect costs, since catalyst users must either purchase or lease PGMs needed for production of new catalysts. Purchasing PGMs at the current high prices requires a significant outlay of capital, while leasing involves high (and in some cases, unnecessary) financing costs. Delays in processing cycles could possibly cost catalyst owners thousands of dollars weekly.
- Precious metals refiners must adhere to strict environmental code compliance with regards to atmospheric emissions and effluent discharge/disposal. Therefore, a catalyst owner’s relationship with a refiner must consider the possible legal implications associated with violations of environmental laws. This includes (but is not limited to) those affecting transportation of hazardous materials and the refiner’s handling of other customers’ materials.
- Crucially, a catalyst owner must work with a trustworthy refiner, since both organizations are essentially forming a ‘partnership’.
Precious metals refiners use a number of different techniques to recover PGMs and other precious metals from spent catalysts; some are different than others depending upon specific chemistry, application and other factors, However, all refiners must address certain key issues. These include point to point logistics and transportation (many times across oceans and continents), accurate materials documentation, process efficiencies, environmental compliance, and process turnaround times, amongst others.
While each of these functions is important in the overall recovery/refining process, sampling spent catalysts is the most critical element of the entire recovery/refining process. This is because it requires a virtually homogeneous mass to be achieved, from which individual samples are removed for laboratory analysis. Without accurate sampling methods it is virtually impossible for any precious metals refiner to accurately determine the precious metals content remaining in a spent catalyst lot.
Yet generating a homogeneous mass for sampling is much easier said than done: spent hydrocarbon processing catalysts and their carriers (typically soluble or insoluble alumina, silica/alumina or zeolites) are far from homogeneous because of accumulated process contaminants.
To that end, ‘pre burning’ spent catalyst materials to eliminate their contaminants (including moisture, which is critical) is often required. Most spent precious metal bearing catalysts typically exhibit high loss on ignition (LOI) characteristics (caused by high moisture content), in addition to high sulfur and/or high carbon content. Removal of these contaminants is a major first step to assure accurate downstream sampling: in fact, without this step, a suitably accurate sample cannot be obtained by the refiner (Figure 2). While most refiners pre burn these spent catalysts, many do not have the in house capability for this process. Instead, the spent catalyst materials must be trans shipped to an outside third party, adding direct costs and delays. This process increases costs for the catalyst owner, since new precious metals must be acquired to continue its processes. When a refiner sends customers’ materials outside of its facilities, there is also the possibility that other users’ materials may be mixed in with the refiners’ materials. Should this happen, the possibility of generating accurate and realistic samples for subsequent evaluation is virtually eliminated.
Sampling is a critical element in the overall refining/recovery process: thus catalyst owners should look carefully at a prospective refiner’s procedures, policies and equipment. One such policy that is absolutely essential for maximization of returns is the sampling of 100% of a spent PGM bearing catalyst lot, rather than only sampling a representative quantity.
Ideally, a continuous catalyst sampling system that produces consistent, reproducible, statistically valid samples should be located at the refiner’s facility (Figure 3). This system should generate samples that accurately represent multi ton lots of spent catalysts. Even specialized equipment for capturing dust should be available for subsequent sampling of remaining dust from this process. The sampling system should generate individual lot samples for the catalyst owner, the refiner, an umpire (essentially a mediator in case of disputes) and reserve samples. The refiner should also permit the catalyst owner or its representative to observe the sampling process at all times.
Once sampling procedures are completed, the representative samples must be assayed to measure their precious metals content. Precious metals refiners must perform assays with state of the art laboratory instruments and procedures in order to achieve the highest possible level of accuracy. Typical assaying equipment and techniques include atomic absorption spectroscopy and inductively coupled plasma (ICP) emission spectroscopy, x-ray fluorescence, and volumetric, gravimetric, and fire assay techniques. The types of materials being assayed should determine the combination of equipment and techniques to be used.
Petrochemical/chemical processors (in the Middle East or elsewhere) should determine which precious metals refiner to use by adhering to fundamental logic with regard to a refiner’s policies and procedures. Other than the obvious issues of how, where, and when materials will be processed, it is always wise to seek out other refiners’ customers for supplementary candid opinions.
At this point, many industry analysts are predicting an uncertain future at best for Middle Eastern petrochemical industries. In the near term, governments are trying to slow and/or prevent further recessions in their economies. This may be true for not only the US and European economies, but possibly China as well, which is now experiencing a slower growth rate in years past.
While recovering the values from remaining precious metals in spent process catalysts is not considered a major source of profit, there is no reason why it should not be considered a profit centre like any other income source, since it nevertheless remains a source of added profits. Prudent management should look to creating a mutually satisfactory relationship with an established precious metals refiner to maximize return values from an organization’s petrochemical/chemical catalytic processes.