Where are domestic refining enterprises headed? From filling gaps to integrated refining and chemical processing

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In recent years, significant changes have taken place in the industrial chain of China’s petrochemical industry: oil refining and processing have expanded toward downstream chemical manufacturing, while fiber synthesis has moved toward upstream oil refining and processing, leading to a trend toward integration within the industry. Local refining companies are also undergoing a transformation from oil refining to petrochemical processing, and they are expanding their industrial chains by establishing new high-end petrochemical projects in order to increase added value and extract as much value as possible from various components in crude oil. 　　Experts believe that the competitive landscape of China’s petrochemical industry will undergo a complete transformation in the future. With the emergence of new barriers based on capital, technology, and brands, the position of companies within their respective industries will become more clearly defined. Emerging petrochemical giants such as Hengli, Tongkun, Rongsheng, Hengyi, and Shenghong, along with some forward-thinking local refining leaders in Shandong, will leverage more flexible raw material selection, flexible production methods, as well as a wider range of more diversified products as their competitive advantages, thereby forming enterprise clusters across the entire industrial chain. 　　Completing the infrastructure for advanced processing: In the early days, domestic refining companies relied mainly on imported fuel oil for production; some of them used heavy oil. The facilities in use were mostly atmospheric and vacuum distillation units, supplemented by units for delayed coking, catalytic cracking, and hydroprocessing of gasoline and diesel. In recent years, with the delegation of the \"two rights\" for imported crude oil, the processing of imported crude oil by local refineries has surged. To adapt to the adjustments in raw material composition and the requirements for improved oil quality, as well as to maximize profits, domestic refineries have invested heavily in upgrading their facilities by building new secondary processing units, advanced refining plants, and downstream chemical processing units, thereby advancing toward more sophisticated levels of processing and enhancing their own capacity for integrated operations. 　　Dongying is the area where the most refineries are located in Shandong Province. Most of these enterprises have additional deep-processing facilities following oil refining; projects such as Tianhong Chemical’s hydrocracking facility, Shenchili Petrochemical’s project for the hydrogenation and modification of light hydrocarbons to produce C3/C4 alkane chemicals, and Haikelerin’s comprehensive utilization project for liquefied gas have already been completed. 　　Data shows that in 2017, the processing capacity of primary refining units (atmospheric and vacuum distillation) in Shandong was 173.25 million tons per year, representing a 4.78% increase compared to the previous year. While the growth rate slowed down compared to the two years prior, the growth rate of secondary and tertiary refining units increased, with newly built hydrogenation and reforming units accounting for a significant proportion. According to statistics, in 2017, the capacity of catalytic cracking units in Shandong’s local refineries (including those for heavy oil catalysis) was 55.12 million tons per year, representing a year-on-year increase of 4.85%. Meanwhile, the capacity of hydrogenation units reached 76.57 million tons per year, with a year-on-year increase of 12.93%. The capacities of other units such as reforming, steam cracking, MTBE, and alkylation facilities have also increased. 　　Lu Xingjun, an analyst at Business Society who has long followed the development of local refineries in Shandong, pointed out that the secondary processing and deep refining facilities, along with a large number of fine chemical plants, have taken over the role of driving further expansion; degumming has become a top priority for many of these local refineries. 　　Integration of refining and chemical processing is becoming the standard. In recent years, Shandong has been working to upgrade its local refining industry. The \"Implementation Plan for Major Projects Related to the Transformation of Old and New Economic Drivers in Shandong Province\" released at the beginning of this year calls for accelerating the integration of refining and chemical processing. Among the first 35 high-end chemical projects included in the list of major projects, the total investment amounts to over 100 billion yuan. 　　Changyi, located on the coast of the Bohai Bay, is an important petrochemical hub in Shandong. Changyi Petrochemical has a processing capacity of 10 million tons per year for primary processing, and 6 million tons per year for comprehensive processing. Its projects for continuous reforming with a capacity of 1 million tons per year and diesel hydroprocessing with a capacity of 1.8 million tons per year were put into operation last year. The upgrade project for the Sinochem Shandong Chemical Raw Materials Base, which is being developed with the support of Changyi Petrochemical, is the only integrated refining and chemical processing project among the first batch of 11 high-end petrochemical projects; it is designed to produce 13 million tons per year of refined oil and 1.5 million tons per year of p-xylene. According to the plan, the company will also rely on ethylene and p-xylene to develop high-value, differentiated petrochemical products, thereby expanding further into the chemical industry. 　　In addition, many enterprises have set their sights on light hydrocarbons and aromatics. Those included in Shandong’s high-end petrochemical project portfolio are Luqing Petrochemical’s 1.2 million tons per year light hydrocarbon comprehensive utilization project, Dongming Petrochemical’s 1 million tons per year light hydrocarbon comprehensive utilization project, Jingbo Petrochemical’s 2.8 million tons per year aromatic compounds and related projects, Lihua Yi Lijin Refining & Chemical’s 1 million tons per year olefins and aromatics combined production project, and Sinochem Hongrun Petrochemical’s heavy aromatics project. 　　“Mega-sizing and intensification are the main characteristics of the petrochemical industry during its period of structural adjustment, while integration of refining and chemical production is an important way to enhance the competitiveness of refining bases. ”Da Zhijian, director of the Sinopec Research Institute of Petroleum and Chemical Technology, pointed out that over 50% of refineries in the United States are equipped with downstream chemical processing facilities, while 3/4 of the refineries in the Gulf of Mexico region have integrated processing units. In his view, due to the significant advantages of economies of scale, the world’s major suppliers of organic raw materials are expanding the capacity of their facilities; both the size of refineries and the capacity of their units is increasing, and the development of integrated refining and chemical production complexes has become a major trend. 　　Three development directions for oil-based refining Through continuous improvement and expansion, the development path for refineries in Shandong is becoming increasingly clear. As a large number of high-end petrochemical projects come online in the future, some refineries will shift from focusing on oil production to focusing on chemical production. 　　At present, the development of local refining enterprises in Shandong is focused on three main directions: The first direction is the traditional olefin route, which involves producing ethylene from naphtha or light hydrocarbons, with subsequent production of HDPE, ethylene oxide, ethylene glycol, etc.; a representative example of this is Luqing Petrochemical’s 1.2 million tons per year light hydrocarbon comprehensive utilization project. The second direction is the aromatic hydrocarbons – p-xylene route, with some projects also including PTA production; an example of this is Dongying Weilian Chemical’s 2 million tons per year p-xylene project. The third direction is integrated olefin and aromatic hydrocarbons projects that cover the production of polyethylene, polypropylene, triphenyl compounds, etc.; representative examples include Jincheng Petrochemical’s MZRCC project for the co-production of EPM and related facilities, Lihua Yi’s 1 million tons per year integrated olefin and aromatic hydrocarbons project, and Jingbo Petrochemical’s 2.4 million tons per year advanced catalytic cracking integrated refining project along with its associated facilities. 　　“The light hydrocarbon comprehensive utilization project of Luqing Petrochemical incorporates the most advanced patented technologies from Germany and the United States. The products possess outstanding mechanical properties such as high tensile modulus and resistance to environmental stress cracking, placing them at the international leading level. ”According to Wang Xueqing, chairman of Shouguang Luqing Petrochemical Co., Ltd., this project is capable of producing 1.13 million tons per year of products such as carbodiene, dienes, mixed butenes, C6 alkanes, and high-grade rubbers of the C12 type. It can utilize crude oil to the fullest extent, enabling full-chain production from crude oil to finished chemical products. 　　He Zongchang, head of the R&D department at Lihua Yi Group, explained that the group’s 1 million tons per year olefin and aromatic compounds production project adopts advanced catalytic processes developed by the American company KBR. By making use of existing light oil resources for further processing, this approach offers advantages such as lower reaction temperatures, greater flexibility in product distribution, as well as energy savings and reduced environmental impact – characteristics that are in line with the development trends of the green chemical industry in the future. 　　Analysts at Zhuochuang Information note that, considering the development strategies of major refining companies in Shandong toward integrated petrochemical operations, the investment costs associated with traditional olefin-based routes and aromatic xylene-based routes are relatively high. However, these routes will serve as key elements in the transition from oil refining to petrochemical production; once such projects are completed, they will fundamentally change the landscape of traditional independent refineries. As for the aromatics-olefins combined projects, aside from the MZRCC co-production EPM project at Jincheng Petrochemical, which has high investment costs due to the numerous supporting facilities, the investment costs for the catalytic cracking projects at Lihua Yi and Jingbo Petrochemical are relatively low; these projects are likely to be among the first petrochemical projects to come online in independent refineries. Source: China Chemical Industry News