Refining Community Logo

Shale Resources Empower Refiners to Expand into Petrochemicals

Instead of pursuing opportunities to innovate within traditional crude oil supply and processing, some refiners are leveraging core competencies to expand into new processing opportunities outside of refining. A recent example is Flint Hills Resources’ (FHR), a subsidiary of Wichita, Kansas based Koch Industries, closing on its $2.1 billion acquisition of Petrologistics and its 1.45 billion pound per year propylene producing unit near the Houston Ship Channel, firmly placing FHR further down the petrochemical value chain.

The propylene from the former Petrologistics propane dehydrogenation (PDH) unit converts cheap shale gas into polymer grade propylene (PGP), for use in the production of a wide variety of plastics. FHR’s businesses now include crude oil supply and refining to produce and market diesel, gasoline, jet fuel, asphalt, biofuels and petrochemicals, such as polypropylene (from PGP). FHR is the ninth largest producer of polypropylene (estimated at 947 million pounds per year).

FHR will also use the propylene from the PDH unit, as well as current propylene production from FCC operations to produce cumene, used industrially to produce two commercially essential chemicals, phenol and acetone. Expansion into the cumene chemical market puts FHR squarely in competition with global chemical giants like Aramco Services, Chevron Phillips Chemical Company, Mitsubishi Chemical, Sumitomo Chemical, Sinopec Group Ltd and numerous others. To be sure, while these mentioned companies’ also have strong risk management and process optimization programs similar to FHR, the important differentiator in this instance is FHR’s efficient access to cheap shale gas. The PDH unit is located just a short pipeline distance from the South Texas Eagle Ford Shale play.

Earlier this summer, Chevron Phillips Chemical Company announced the groundbreaking in Old Ocean, Texas, to engineer and build world-scale ethylene and derivatives facilities, based upon the successful development of shale resources. The mega-project in Old Ocean includes two world-scale polyethylene units, each of which can produce 500,000 metric tons of plastic resin every year. In addition, the company’s completion and start-up earlier this summer of the World’s largest 1-hexene plant at their existing Cedar Bayou Chemical Complex in Baytown, Texas is supported by the increasing supply of competitive feedstocks in the U.S. (i.e., from the development of shale resources).

The new 1-hexene unit is capable of producing 250,000 metric tons per year, used in the manufacturer of polyethylene, a plastic resin commonly converted into plastic pipe and food and beverage containers. Only a few years ago, the expectation was that the U.S. would become a significant importer of ethylene derivatives. However, the U.S. is now expected to become a major ethylene derivatives exporter, including 1-hexene. Because of shale resources, many U.S. refinery and petrochemical produced products are now competitive with any producing region in the world.

Leave a Reply

Your email address will not be published. Required fields are marked *

Posted by: The Refining Community

Refining Community