The Study on Saudi Arabia NABAA Petrochemical Refinery Project Concept Design in Saudi Arabia

Transcription

1 Reproduction forbidden Commissioned by the Ministry of Economy, Trade and Industry The Study on Saudi Arabia NABAA Petrochemical Refinery Project Concept Design in Saudi Arabia January 2009 Japan External Trade Organization (JETRO) UNICO International Corporation

2 Chapter 1 Summary 1.1 Objectives and Background of Survey Because Saudi Arabia is rich in oil and gas and is equipped with oil refineries, naphtha which is the raw material for petrochemicals used to be exported partially as well as C 2 (ethane) in natural gas or gas associated with oil production are all allocated due to the booming petrochemical industry. As a result, it has become impossible to construct ethylene complexes with ethane as the starting ingredient that has been dominated by SABIC. Thus, it has become essential to produce starting ingredients of petrochemicals in other methods than dehydration of propane, butane and other petroleum products (saturated hydrocarbon products with no multiple bonding) and cracking (naphtha cracking, ethane cracking, etc.) of ethylene(ch 2 =CH 2 ), propylene(ch 2 =CH-CH 3 )and butadiene (CH 2 =CH-CH=CH 3 ) that serve as basic chemicals. Such tendency has appeared since the study was conducted with Saudi Aramco under its iso-butane cracker project(2004~2005) and Ras Tanura upgrading project(2005~2006)for Ras Tanura refinery, and has gradually become evident. In such a harsh situation of the raw materials for petrochemicals, NABAA repeatedly requested Saudi Aramco to supply raw materials for petrochemical projects. However, due to the situation surrounding the raw materials as explained above, it no longer has excess supply capacity, which hampered the progress of the plan. NABAA has been asked in a letter from Saudi Aramco to study a petrochemical complex of a new scheme that uses feedstock crude oil. This requires an unprecedented petrochemical project scheme of production of petrochemical products with raw materials it produces from crude oil by itself. No company has ever tried this petrochemical refinery (PCR) scheme. However, it has been an extremely difficult request as no company with no intention of conducting oil refining business will think of owning and operating a refinery, treatment of petroleum products (gasoline, light oil, heavy oil, residual oil, etc.) requires advanced technology and there is no other sales channel than selling to Saudi Aramco. But NABAA accepted this request and in FY06 it completed the study for the Olefin complex after agreeing to accept 80,000 barrels per day (bpd) of crude oil and 110,000 bpd of vacuum residues. However, further notice from Saudi Aramco revealed that VR can be supplied solely at international prices as it is a type of petrochemical products and, after August 2007, it resulted in formulation of the PCR concept, which is 100 percent dependent on crude oil as a feedstock, and necessitated the present study. The following chart helps understand the concept of petrochemical refinery. 1

3 Figure Petrochemical Refinery Concept Model Maximize CRUDE OIL 400,000 BPD PETRO - COKE 280~300KBPD 1,800~2,300KT/Y 750~1,540KT/Y (Non-conventional new scheme concept) Minimize Maximize CRUDE OIL 150,000 BPD PROCESSING FUEL PETRO- OILS & CHEMICALS + CONVENTIONAL PROCESSING FUEL PETRO- & OILS CHEMICALS + EVOLUTIONAL PETRO- COKE 6.3~28KBPD 2,900~3,300KT/Y 140~340KT/Y Consumed in the plant + Feedstock Gas for NH 3 /Urea Source: UNICO International Corporation Fuel oil generated by the oil refinery unit was considered within the scope of Saudi Aramco, necessitating negotiations between NABAA and the company for buyback. Since this could become a large bottleneck during the study, a new study was needed to consider combination of different processing units so as to produce world-scale basic chemicals including ethylene and propylene and to minimize fuel oil production. In meeting this condition, it was concluded that the newly devised PCR concept should be promoted as a project scheme of EVOLUTIONAL PETROCHEMICAL REFINERY to minimize buyback by Saudi Aramco with reduced fuel oil production and increased volume of petrochemical feedstock and products. To define the overall plant/ structure and capacities of respective conversion units, the project needed to perform a market analysis for detail technical assessment (assessment of process configuration) and for creation of a product slate, and to formulate project concept design (including Scope of Facilities, Utilities Plan, Integration Plan with Downstream plants) based on the analysis. Upon immediate completion of these tasks, a basic plan for project implementation (project concept design) will be formulated in time for completion of EPC contractor/ licensor selection in 2009 or the first half of

4 Chapter 1 Summary 1.2 Contents of Study As described in the previous section, this study is not simple verification of economic efficiency. It requires the assumption of petrochemical derivatives that lead to the downstream of the project and their production volume. Based on the assumption, the production volume of basic petrochemicals subject to this study or the yield pattern of the ethylene plant needs to be decided. This requires a huge task of combining the combustion unit (each cracking unit: cracking/catalytic cracking unit) after the distillation unit of the crude oil treatment section as well as the simulation to determine the unit capacity. This is the core of the study. There are a number of related studies as shown in Chapter 3 and the creation of a business scheme is one of the most important studies. In this study, attention needs to be paid that the business scheme is an integrated scheme of upper, mid- and downstream. The study was conducted with minimum contact with the outside for information management and contact with companies that are expected to participate in the project was limited to listening to their opinions with no provision of explanations about the contents from our side. We sorted out various assumable conditions and situations and reflected them in the business scheme. Furthermore, as an important issue, we also studied a system for operating and managing the plant by itself, including human resources development, in consideration of the peculiarities of Saudi Arabia, the maturity of the supporting industries, in particular. We simplified the outcome of the detailed examination of the facility plan to illustrate it in a chart to facilitate understanding. As for the market research, although the market environment is not ordinary, the peculiarities are excluded to focus on the analysis to predict its future. As a result, the product price for economic analysis was set at 60 dollars per barrel of crude oil, excluding too optimistic predictions. Although the study was conducted from the perspective of environmental assessment, it was not in the stage of deciding detailed specifications of the facility and thus it did not touch upon any specific facility for environmental protection measures. However, we fully studied related regulations and confirmed that they can be met. 3

5 We also examined concerned laws and regulations necessary to set up a joint venture and we studied the contents through meetings with the Saudi Arabian General Investment Authority. Because the form of joint venture can change, we will need to continue communication with the SAGIA. As for the financial plan, we have not reached the stage to contact bankers. Although we plan to meet with Saudi Arabian bankers through NABAA in the near future, this report was prepared based on the past experience. 1.3 Method, Organization and Schedule of Study The study was conducted based on publications on oil and petrochemical industry and their products in Saudi Arabia, the site of the project, information and data provided by the project partner of NABAA and study and hearings in the two field studies on the project site. We had support from chemicals headquarters of a trading firm to gather highly reliable detailed information on the chemical market that is hard to obtain from general publications and or NABAA. As for the soaring plant construction cost, we plan to have support from a plant project section of a trading company and a Japanese engineering company for highly accurate calculation and examine whether the Evolutional Petrochemical Refinery project is economically feasible or not. We prepared a project scheme through discussions with Saudi Arabian concerned parties and organizations and in reflection of voices of Japanese companies to create a project concept design. As for the environmental social impact of the project, we plan to find out the gap between Saudi Arabian applicable laws and regulations and international guidelines as well as the current environmental issues of the project site to clarify the focal points of an environmental impact assessment (EIA) to be carried out at an early stage of the project. 4

6 Chapter 1 Summary Figure Organizational Chart of Study Main study stuff Partner company Project manager Energy section Formulation of total PCR plan and basic business plan Formulation of process composition Formulation of product composition Study of product shipment facility Plant section, trading firm Engineering company Plant facility plan Overall process facility plan Estimate and verification of plant cost Support for verification of project economics Engineering company Environmental assessment and utility facility Environment, society Offsite/utility facility plan Offsite plan Offsite plan and product shipment port facility plan Project economics Financial and economic analysis Financial plan Market analysis Market analysis and marketing strategy Petrochemical division, trading firm Joint venture-related laws Collection of information on joint venture-related legal system and legal works for contract Project working-level plan Production/repair technology plan Production technology transfer plan Formulation of business plan Complex development plan Source: UNICO International Corporation 5

7 Table Study Schedule In Japan 1Work prior to formulation of business plan 2Individual verification of plans and development 3Finalization of total plan 4Work for finalization Sep. 08 Oct. Nov. Dec. Jan. 09 5Final revision and edition In Saudi Arabia 11st round of plan coordination 2Separate meetings on business plan 3Final reporting 20th 25th 20th 26th Source: UNICO International Corporation 1.4 Study Results The PCR project is a large-scale plant facility of crude oil treatment unit to the production unit of basic chemical products. Its total cost is estimated to be about 8 billion dollars, which is almost as big as recent major investment projects. Its profitability is confirmed to be about 20 percent after tax. However, although 5 to 6 dollars per barrel has been implied as the domestic price of crude oil for feedstock to domestic projects, whether this past domestic price of 5 to 6 dollars per barrel can be applied or not is unclear due to recent widely swinging fluctuations of crude oil prices even for the domestic project. It depends on the negotiations to be carried out in the future and the profitability is estimated based on 15 dollars per barrel, the intermediate value of the assumed fluctuation range of between 5 dollars and 30 dollars. (However, the market price of basic petrochemicals is based on the time when the crude oil price is 60 dollars per barrel.) In the downstream of the plant, there will be about 20 petrochemical derivatives plants (petrochemical complex (PCC)) and their total investment is estimated to be 7 to 8 billion dollars. The final business profitability will be examined in the future development plan. 6

8 Chapter 1 Summary 1.5 Use of Study Results and Expectations The study results are planned to be used as in the following flowchart. Figure Use of Study Results and Expectations Jan This report Jan Revised version (for presentation) (English ver.) Development in Detail & Addition with downstream section (Petrochemical Derivatives) Apr. to Aug Preliminary negotiations with Saudi Aramco Full-fledged negotiations with Saudi Aramco Full Range Report of Total Scneme of the Project English version with detailed plan of derivatives Full-fledged negotiations with core Japanese companies Preliminrary Petrochemical & Products Slates Plan Semi-Final Project Scenario (settlement of detailed plan of derivatives) 2010/mid-2011 Preliminary Feedstock Supply Agreement Internal coordination to decide overall organization of Japanese firms and production letter of understanding Source: UNICO International Corporation The flowchart clearly shows that there are two major flows and the study results are used for each as a critical starting point. As shown in the chart, preliminary negotiations with Saudi Aramco based on the study are the first important action, where we will be able to conduct hearings about its possibility of supplying the necessary volume of crude oil and assumed oil. The process composition is decided mainly for Arabian heavy (heavy oil API 27.4 average) that 7

9 has had relatively small demand. The facility has extra capacity to be able to handle cocktail crude (blended crude oil) of up to 50 percent light and 50 percent heavy so that it will be able to accommodate future changes. Because the Saudi Arabian government and Saudi Aramco have revealed a policy to increase heavy oil production and announced the allocation of 900 million dollars for it, it is fair to judge that there is no need to be concerned about the supply of heavy oil. Furthermore, heavy oil is the first choice as the cheaper raw material, based on the assumption that the supply price can rise to higher than 5 to 6 dollars per barrel and the gap between light and heavy oil can be widened to more than 2 dollars per barrel. We will be able to have full-fledged negotiations with Saudi Aramco with more accurate study results around August this year if the activities of the right-side flow progresses and Japanese core companies express their intention. 1.6 Environmental and Social Consideration The project site is Yanbu City, one of Saudi Arabia's industrial development districts. The project mainly consists of oil refining and ethylene production facility. The facility not only consumes a large volume of energy of electricity and fuel for the heating furnace and boiler but releases massive heat into the air and water system. The energy consumption has the potential of causing air pollution with sulfur dioxide (SO 2 ), nitrogen oxide (NOx) and particulate matters (PM) and release of heat into the natural environment may also lead to release of warm wastewater. The environmental laws and regulations applied to Yanbu are the Royal Commission Emission Regulation managed by the Royal Commission for Jubail and Yanbu. The RCER's air pollutant emission standards define the allowable emission limit of SO 2 per unit heat, equivalent to 0.7 percent of sulfur in fuel oil. Crude oil in Saudi Arabia contains slightly less than 2 percent of sulfur and the sulfur content in fuel oil after refining is slightly over 3 percent. The project does not include shipping of fuel oil and thus it has to be self consumed. As a result, it becomes impossible to meet the RCER's emission standards. Thus, the combustion unit that consumes fuel oil needs to be equipped with desulfurization unit. MARAFIQ that supplies utility in the industrial development district of Yanbu not only provides electricity, seawater, desalinated water and drinking water but treats wastewater discharged from the 8

10 Chapter 1 Summary complexes. The RCER defines the wastewater temperature released into the Red Sea within one degree Celsius above seawater temperature. Although it is difficult to meet the regulation when each complex discharges wastewater separately, this will be satisfied when ample cooling time is secured through MARAFIQ's long discharge channel. If the discharge channel cannot be used due to the distance, the issue of warm wastewater needs to be examined fully in the project implementation stage. As a global trend, an environmental impact assessment is often required before implementing an industrial project. The RCER also requires the permit of the Environmental Consent to Construct (ECC). The RCJY conduct review whether an ECC is necessary or not when an application for site allocation necessary for the project is filed in the planning stage. The ECC is a prerequisite of the project as its purpose is oil refining and production of basic raw materials for petrochemical products. The ECC is the application of environment-related permit to implement a project. After completion of construction, an Environmental Permit to Operate (EPO) becomes necessary to begin operation. The EPO is to confirm that the construction is completed in accordance with the ECC. The procedures from the application for site allocation to beginning of the operation are shown in Figure As clearly shown in the figure, the RCER's ECC does not require public notice, inspection or briefing for residents that is required in a regular EIA. There is no need to be concerned about the environmental impact assessment that may have a big impact on the construction schedule for some projects, as the project is planned in the industrial development district of Yanbu. 9

11 Figure1.6-1 Procedures of RCER Environmental Impact Assessment Application for PE site allocation RCJY environmental screening Type-I, II Type-III PE EIA Yes Need EIA or not PE ECC application RCJY review Need additional information or not Preparation of additional information on PE Yes No RCJY ECC approval No Yes Starting to completion of construction RCJY EPO inspection PE operation begins PE: Project Executor Source: Royal Commission Environmental Regulations Yanbu, formerly a lonely village, has been developed based on a national grand plan for industrial development districts formulated in the 1970s. Thus, the project does not have negative social impact or cause destruction of natural environment or removal or transfer of historical sites due to land development. The project greatly contributes to diversification of Saudi Arabia's economy that is heavily dependant on crude oil export. The project is also expected to create employment for young population in the country. 10