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The Role of Innovation in US Gulf

Coast Competitiveness
The Future of the Gulf Coast
Petrochemical Industry
Global Energy Management Institute
University of Houston
April 29, 2005

James H. DAuria
UOP LLC

Agenda

The competitiveness gap


Potential for technology innovations to
improve competitiveness
Key technology innovations
Examples of options for the USGC
The integration conundrum
Final thoughts

The USGC Cost of Production Gap:


Ethylene Example

North American Ethane Crackers


Have Become the High Cost Producers

How Can Technology Innovation Help?

Technology can be developed to:


Make use of lower cost and/or unique

feedstocks
Create feedstock or product flexibility
Hedge
Reduce volatility
Reduce required capital investment
Make existing assets more efficient
Competitive
advantage
is
gained
Integrate existing assets to increase
whenefficiency
technology innovations are
Improve
quality
linked
withproduct
the right
market or

business circumstances

Alternative Feedstocks to Consider

Low Value Refinery/Cracker Streams


Light Gases
By Product Olefins
Pentanes
Light Cycle Oil
Resid

Remote Gas
Coal ?
Biomass ???

Basis for US Industry Advantage:


GC Refining Concentration
Atlantic Basin Stranded Gas
Coal Reserves
Biomass potential

Key Technology Innovations

Use of Alternative feedstocks


Stranded Gas to Olefins/Polymers
Mega-Methanol Plants
Methanol to Olefins
Clean Coal

Refinery- Petrochemical integration


Petrochemicals from FCC
Olefins Conversion
LCO Conversion
Naphtha optimization

Longer term Breakthrough Technologies

Methanol/MTO Economies of Scale


Constant IRR

Mega Methanol Plants Enable Gas to Olefins Projects

MTO on the USGC

MTO on the USGC

* Based on $85/MT methanol from Atlantic Basin Stranded Gas


** Based on $100/MT methanol

USGC MTO Becomes Attractive At High Oil Prices

Coal

Clean Coal Technology


Gasification

Synthesis Gas

Methanol
Alternative Gasification
Feedstocks:
Petroleum coke
Resid
bio-residue

Power
F-T Liquids
Steam, H2

Chemicals

Coal to Olefins in the US


(@ $40/BBL Crude)

* Based on correlation
of 97-05 CMAI data:
weighted avg. feedstock
** Assumes $125/MT
methanol from coal

High Oil Prices Improve Attractiveness of Coal To Olefins

Key Technology Innovations

Use of Alternative feedstocks


Stranded Gas to Olefins/Polymers
Mega-Methanol Plants
Methanol to Olefins
Clean Coal

Refinery- Petrochemical integration


Petrochemicals from FCC
Olefins Conversion
LCO Conversion
Naphtha optimization

Longer term Breakthrough Technologies

Propylene from Refineries


Crude
Column

C4 and Lighter

PRU

Propylene

Straight Run Gasoline

Fuel Gas

Kerosene
Crude
Oil

LPG

AGO

FCC
VGO

Downstream
Processing
Gasoline
Diesel

Vacuum
Column

Vacuum Residue

Heavy
Fuel Oil

Refinery FCC is an Important Source of Propylene

UOP 4288K-4

Propylene Yield

Petrochemicals from FCC

a
e
r
c
In

sing

h
c
o
Petr

Max. Gasoline
3 - 5 wt%
Gasoline

a
c
i
em

Enhanced
Propylene
5 7 wt%
C3 =
Gasoline

on
i
t
c
du
o
r
lP
High-Severity
FCC
10 -16 wt%
C2 =
C3 =

PetroFCC
20 + wt%
C2 =
C3 =
Aromatics

Gasoline

Unit Design and Operation


Challenge: Manage Across Traditional Boundaries
UOP 4399A-7

Olefins Conversion Technology


Naphtha

Naphtha Crackers

Furnace

Product
Recovery

C4/C5
Olefins

C5/C6
Paraffin-Rich

Olefin
Cracking

=
2

Refineries
Gas
Oils

Gasoline
Cycle Oils

FCC

FCC

=
3

C4-C8

Olefin
Cracking

C2=
C3=
Olefin
Recovery
Olefin
LPG
Light
Olefins

Metathesis: Converts ethylene + C4 olefins to propylene


Olefin Cracking: Converts C4 C8 olefin streams to propylene + ethylene
Utilize USGC refinery & liquid cracker capacity

UOP 4399A-22

Ring Opening to Upgrade LCO

New catalysis selectively


opens rings to upgrade Light
Cycle Oil to produce:
Clean fuels
BTX Aromatics

Environmental Benefits:

LCO
LCO Ring
Opening
ULSD

Petrochemicals

High Octane
Gasoline

Reduces HSFO production


ULS Diesel co-product
ULS Gasoline co-product

USGC Opportunity: Pool LCO Streams


UOP 4288A-18

Naphtha Optimization
C5-C11 n-paraffins
Full
Range
Naphtha

Ethylene yield 30%


higher than with
conventional naphtha

Same propylene yield

Increased octanebarrel production

Naphtha
Cracker

Iso/normal
separation
C7+

Catalytic
Reformer

Economic value of ~ $30 MM/year


Requires close integration of olefins & gasoline production
UOP 3994J-10

The Integration Conundrum

Concentration of refining capacity in USGC


provides basis for competitive advantage
Technology innovations that cross traditional
boundaries can create economic value and
cost advantage - On Paper
Barriers to integration are many:
Increasing complexity/Limiting flexibility
Conflicting objectives
Need todisparate
develop integration
Mixing
cultures enablers
Business management practices
Difficult
technical issues
Advanced process technology
Diffusing business focus (What business
Information technology
are we in?)

Longer Term Technology Outlook

Continuing investments are needed to develop


new chemistries
Example areas of focus:
Catalytic Naphtha Cracking
Paraffin Activation
Ethane + Benzene to EB
Direct Propane to PO, CAN, Acrylic Acid
Pentanes to Higher Value Chemicals
Direct Methane to Methanol
Renewables as Feedstocks (carbohydrates,

biomass)

The Role of Technology:


Final Thoughts

Technologies are available today to take advantage of


lower cost feeds
Remote gas, coal, refinery by-products

Future technology advances will continue to come via


process engineering & catalysis innovations
New technology needs to be matched with the right
situations to provide a competitive advantage. For
USGC:

Integration with refining, power


Ability to increase propylene production
Pooling of by-product streams
Access to Atlantic basis remote gas, US coal

Can we improve the risk-reward balance?

Cost to develop & commercialize new technology


First user risks & rewards
Government regulations & incentives
Market uncertainties

THANK YOU