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MAY 2016 | HydrocarbonProcessing.com

MAINTENANCE

AND RELIABILITY

PROCESS ENGINEERING AND OPTIMIZATION

of bio-oil and diesel in a conventional hydrotreater

ENVIRONMENT AND SAFETY

Potential impacts on process safety from lifting of US crude export ban

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MAY 2016 | Volume 95 Number 5

HydrocarbonProcessing.com

SPECIAL REPORT: MAINTENANCE AND RELIABILITY

39 Take steps to achieve lubrication maintainability

M. Barnes

43 Apply a short-term, high-temperature carbon steel solution to piping systems

M. Chowdry and V. Tiwari

47 Failure prevention—The ultimate asset management strategy

B. Snider

PROCESS ENGINEERING AND OPTIMIZATION

53 Small-scale coal-to-chemicals can revitalize India’s petrochemicals industry, economy—Part 2

M. Marve, S. Sakthivel and P. V. Paluskar

59 Catalytic coprocessing of used cooking oil with straight-run gasoil in a hydrotreating pilot plant

H. de Paz Carmona, A. Brito Alayón, M. Romero Vázquez, J. Frontela Delgado and J. J. Macías Hernández

HEAT TRANSFER

67 Use computational fluid dynamic analysis to revamp fired heaters

A. Chilka and A. Garg

ENVIRONMENT AND SAFETY

75 Lifting of US crude export ban will impact process safety management

K. Molly

TERMINALS AND STORAGE—SUPPLEMENT

T-80 Optimize tank farm operations, safety and profitability

D. Rueda-Rojas

Cover Image: The Epsilon 3XLE benchtop energy-dispersive X-ray fluorescence spectrometer enables ultra-light element analysis for the petrochemical industry.

DEPARTMENTS

4 Industry Perspectives

12 Business Trends

23 Industry Metrics

25 Global Project Data

87 Innovations 90 Marketplace 92 Advertiser Index 93 Events 94 People COLUMNS 9 President’s Letter

A new day for you, a new day for us

11 Editorial Comment Maintenance spending to jump in 2016 as refiners catch up with turnarounds

27 Reliability

Principles are more important than strategies

31 Automation Strategies The “big picture” on ExxonMobil’s open system initiative

33 Petrochemicals

Fluctuations in GCC ethylene production encourage refinery-petrochemicals integration

37 Engineering Case Histories Case 90: Precautions when working near equipment

T-79

38

P. O. Box 2608

Houston, Texas 77252-2608, USA Phone: +1 (713) 529-4301 Fax: +1 (713) 520-4433

[email protected] www.HydrocarbonProcessing.com

Industry Perspectives

President/CEO John Royall

Vice President, Downstream and Midstream Bret Ronk

Vice President Ron Higgins

Vice President, Production Sheryl Stone Business Finance Manager Pamela Harvey

Publication Agreement Number 40034765 Printed in USA Other Gulf Publishing Company titles include: Gas Processing, Petroleum Economist and World Oil.

Over the past year, strong gasoline demand, particularly in the US, has been the saving grace for much of the down-stream industry. The crash in oil prices has made prices for oil-derived fuels, like gasoline, significantly lower, which has spurred an upswing in consumer demand.

While US refiners have generally seen lower year-on-year profits owing to the weaker pricing environment, the uptick in gasoline demand has kept margins relatively healthy. In fact, the high gasoline demand has even contributed to a small rally in upstream crude prices.

However, questions remain as to whether this model is sustainable.

Analyst sees recovery as temporary. _{Linda Giesecke,} di-rector of research for the Americas refining industry at con-sultancy Wood Mackenzie, believes 2016 is likely the peak for domestic gasoline use. She delivered her outlook in March at the Annual Meeting of the American Fuel & Petrochemical Manufacturers (AFPM).

“Despite low fuel prices and the recent upward trend, we see this as a temporary recovery in demand,” Giesecke said. “In our view, the peak in gasoline demand is real.”

Reasons for future decline. _{Giesecke expects US gasoline} demand to decrease starting in 2017, driven by sluggish GDP growth, rising fuel prices and continued improvements in the miles-per-gallon fuel efficiency of light vehicles, thereby re-quiring reduced overall volumes of gasoline.

Over the longer term, those trends could pick up even more, she said—citing a worsening US trade deficit, a more gradual increase in the working-age population and aggressive government mandates, such as the CAFE standards, dictating further fuel efficiency improvements. Overall, Giesecke ex-pects the fuel efficiency of vehicles to rise by 2%/yr over the long term.

As a result, the focus for refiners in the years ahead could shift from overall production volumes to advancements in cleaner technologies.

“Automakers will rely on a more rapid adoption of ad-vanced gasoline technology and the use of lighter materials to meet these targets,” Giesecke said.

View from the industry. _{Recent data from the US Energy} Information Administration (EIA) showed US gasoline de-mand falling in January for the first time in 14 months. It is unclear, however, whether this was a one-off event due to poor weather conditions, or the start of a prolonged slowdown.

To weigh in, we encourage readers to visit Hydrocarbon-Processing.com and vote in our latest poll on whether 2016 is indeed the peak year for US gasoline demand.

EDITOR/ASSOCIATE PUBLISHER Lee Nichols

[email protected] EDITORIAL

Executive Editor Adrienne Blume

Managing Editor Mike Rhodes

Technical Editor Bob Andrew

Digital Editor Ben DuBose

Reliability/Equipment Editor Heinz P. Bloch Contributing Editor Alissa Leeton Contributing Editor Loraine A. Huchler Contributing Editor William M. Goble Contributing Editor ARC Advisory Group MAGAZINE PRODUCTION / +1 (713) 525-4633

Vice President, Production Sheryl Stone Manager, Editorial Production Angela Bathe Dietrich

Artist/Illustrator David Weeks

Senior Graphic Designer Amanda McLendon-Bass Manager, Advertising Production Cheryl Willis

ADVERTISING SALES See Sales Offices, page 92.

CIRCULATION / +1 (713) 520-4440 / [email protected]

Manager, Circulation Alice Murrell SUBSCRIPTIONS

Subscription price (includes both print and digital versions): Print—One year $239, two years $419, three years $539. Digital format—One year $239. Airmail rate outside North America $175 additional a year. Single copies $35, prepaid. Hydrocarbon Processing’s Full Data Access subscription plan is priced at $1,695. This plan provides full access to all information and data Hydrocarbon Processing has to offer. It includes a print or digital version of the magazine, as well as full access to all posted articles (current and archived), process handbooks, the HPI Market Data book, Construction Boxscore Database project updates and more. Because Hydrocarbon Processing is edited specifically to be of greatest value to people working in this specialized business, subscriptions are restricted to those engaged in the hydrocarbon processing industry, or service and supply company personnel connected thereto.

Hydrocarbon Processing is indexed by Applied Science & Technology Index, by Chemical Abstracts and by Engineering Index Inc. Microfilm copies available through University Microfilms, International, Ann Arbor, Mich. The full text of Hydrocarbon Processing is also available in electronic versions of the Business Periodicals Index. ARTICLE REPRINTS

If you would like to have a recent article reprinted for an upcoming conference or for use as a marketing tool, contact Foster Printing Company for a price quote. Articles are reprinted on quality stock with advertisements removed; options are available for covers and turnaround times. Our minimum order is a quantity of 100. For more information about article reprints, call Rhonda Brown with Foster Printing Company at +1 (866) 879-9144 ext. 194 or e-mail [email protected].

Hydrocarbon Processing (ISSN 0018-8190) is published monthly by Gulf Publishing Company, 2 Greenway Plaza, Suite 1020, Houston, Texas 77046. Periodicals post-age paid at Houston, Texas, and at additional mailing office. POSTMASTER: Send address changes to Hydrocarbon Processing, P.O. Box 2608, Houston, Texas 77252. Copyright © 2016 by Gulf Publishing Company. All rights reserved.

Permission is granted by the copyright owner to libraries and others registered with the Copyright Clearance Center (CCC) to photocopy any articles herein for the base fee of $3 per copy per page. Payment should be sent directly to the CCC, 21 Congress St., Salem, Mass. 01970. Copying for other than personal or internal reference use without express permission is prohibited. Requests for special permission or bulk orders should be addressed to the Editor. ISSN 0018-8190/01.

Is 2016 the peak for the revival

in US gasoline demand?

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Register for IRPC and get the latest

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and petrochemical industry

The seventh annual International Refining and Petrochemical Conference (IRPC) will be held 6–8 June 2016 in Milan, Italy. IRPC provides a high-level technical forum where key players in the global petrochemical and refinery sector will meet to share knowledge and learn about best practices and the latest technology advancements being used to improve maintenance and reliability, maximize efficiencies, increase profitability, optimize processes, minimize emissions, treat wastewater, meet clean fuel specifications and much more.

If you haven’t already made plans to attend,

here are just a few reasons to join us:

1. Receive Valuable Insight from Real-World Examples + Case Histories from: • BayernOil (the BayernOil Neustadt Refinery)

• Vega (eni’s Slurry Technology Hydrocracker) • Petrobras

• Shell Global Solutions • Total

• CH2MHILL (Award-winning Bapco Wastewater Treatment Plant) • Engineers India Ltd.

2. Get answers to questions like: • How long will low crude prices last?

• Will the crude slate become lighter and sweeter due to US tight oil? • Will diesel ever return to being the premium fuel (on a crack-spread basis)? • What’s the value of petrochemical integration?

• How can the Internet of Things (IOT) be used to operate nearer constraints, improve maintenance and reduce the cost of shutdowns?

• How can automation and advanced process control successfully address the challenges for sustainable energy efficiency?

Keynote Speaker:

Juliette De Maupeou TOTAL SA

Pankaj H. Desai Shell Global Solutions

Carlos Fernando Machado Petrobras

Arnold Kleine Büning BayernOil Shailendra Mohite Kuwait Petroleum International Yulan Gao Fushun Research Institute of Petroleum & Petrochemicals SINOPEC Anurag Sharma Indian Oil Corp.

Dr. Arun Shukla Oil & Natural Gas Corp. Ltd. (ONGC)

3. Explore Innovative Technology and Learn About: • New ideas to save energy

• Creative ways to increase capacity or improve product quality

• How to get the best economic performance from existing and future compressors

• Actionable insights for plant monitoring and control, with data-driven optimization cutting across silos and positively impacting KPIs like plant reliability, capacity utilization and operational costs

• Refinery and petrochemical integration opportunities and drivers

• How to increase productivity, efficiency and profitability in the FEED process • How to optimize wastewater treatment

• How to identify discrepancies between expected and actual performance and fix issues before they escalate out of proportion, thereby avoiding unplanned shutdowns, risks and safety incidents

• The scope of air emissions compliance solutions and options in several important applications • And much more!

4. Network with the Industry’s Top Players:

Conference speakers, sponsors and delegates represent the hydrocarbon processing industry’s leading operator and service companies. Throughout the event, you’ll have numerous opportunities to network with professionals from around the world, who represent: Total, Shell, BayernOil, eni, Kuwait Petroleum International, Petrobras, Indian Oil Corp., SINOPEC, PDVSA–Intevep, Oil & Natural Gas Corp. Ltd. (ONGC), Sasol, OMV Refining & Marketing, Sandvik, KBR, Schneider Electric, Axens, and more.

5. Tour the SOLD OUT Exhibit Floor:

Learn about the latest innovative solutions from conference sponsors and exhibitors. Build relationships with new vendors and connect face-to-face with existing suppliers.

6. Participate in Exclusive IRPC Activities:

• eni’s Sannazzaro de’Burgondi Refinery Tour: IRPC delegates have the opportunity to register for this free, exclusive tour sponsored by eni on 6 June 2016. Seating for the tour is limited and is available on a first-come, first-served basis. To register for the tour, make sure to check the box next to the tour during registration.

• HPI Top Project Awards Luncheon: Now in its second year, Hydrocarbon Processing’s HPI Top Project Awards recognize those projects that will have the highest impact to the global or regional downstream industry. The 2015 winners will be formally recognized and presented with their trophies during this special awards luncheon held on 7 June. It is free to attend, but seating is very limited and you must RSVP. To RSVP for the luncheon, check the box next to the HPI Top Project Awards Luncheon during registration. Available on a first-come, first-served basis.

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A new day for you, a new day for us

The last thing you need right now is another dreary recitation of industry statistics that show how hard hit the global oil and gas industry has been in the last 18 months. So, I will spare you the gory details.

The fact is that, over the past two decades, new technologies have produced gluts of both oil and natural gas. With global oil production reaching nearly 94 MMbpd in 2016, the term “peak oil” has a whole new meaning. For the downstream industry, this has led to abundant and relatively inexpensive feedstocks for the refining, petrochemical, and gas processing/LNG industries.

Recently, we have seen a time of dislocation in the industry. This includes vast layoffs in the upstream sector, as well as the reduction of capital investments and abrupt changes in global production and consumption patterns. But, out of this time of change comes many opportunities.

For the industry, it means that we will emerge leaner, meaner and more profitable. To lower costs, operators will adapt new technologies to make crude oil and natural gas processing much more efficient, safe and clean. This includes the widespread application of data analytics, which is new and very exciting. From low-sulfur transportation fuels to power generation and plastics, these innovations will provide the world with the highest-quality products.

For Gulf Publishing Company, publisher of Hydrocarbon Processing, we have had the opportunity to buy the company from

the previous owners. During our 100th anniversary year, we are now an independent company with headquarters in Houston and offices in Houston and London. Our global media brands cover the entire market: Petroleum Economist for industry business and

strategy, World Oil for the upstream, Hydrocarbon Processing serving the downstream and Gas Processing in the midstream.

Hydrocarbon Processing is well-known for its annual HPI Market Data book, which provides major trends in downstream

project activity and spending in every region of the world for the coming year. Hydrocarbon Processing is also well-known for the

Construction Boxscore Database, which tracks and provides detailed information on thousands of downstream projects around the world. Over the years, our editors’ forecasts have proved to be very accurate in projecting downstream investment. As you know, a lot of forecasters have not fared well over the last few years.

Nevertheless, we at the new Gulf Publishing Company make these forecasts, which you can count on:

1. Global demand for transportation fuels, natural gas and petrochemicals will continue to increase. In turn, the industry will continue to process hydrocarbons in ever more efficient and safe ways.

2. New technologies and processes will be developed and applied to increase efficiencies, as well as produce high-quality products. 3. Hydrocarbon Processing will serve the industry for decades to come. We will continue to provide the latest advances in

technology and best practices, as well as lead the industry in providing executive, engineering and operating management with information to help oil and gas industry professionals do their jobs better.

So, dear reader, I thank you for your devotion to Hydrocarbon Processing. As I travel around the world, it is gratifying to hear

from readers about the publication, the website and our newsletters, and how the information is interesting and, more importantly, beneficial in their work. I also thank all of the advertisers who support this publication. During our 100th anniversary year, I invite you to dive deeper into Hydrocarbon Processing and HydrocarbonProcessing.com, and to let us know what you think. We highly value

your feedback. After all, our objective has been, and will continue to be, to help you do your job better.

P. O. Box 2608, Houston, Texas 77252-2608, USA|Phone: +1 (713) 529-4301|GulfPub.com

John Royall

President/Chief Executive Officer Gulf Publishing Company

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Editorial

Comment

ADRIENNE BLUME, EXECUTIVE EDITOR

INSIDE THIS ISSUE

12

Hydrocarbon Processing concludes its two-part series on the global petrochemical industry. Part 2 of this series provides new project developments and regional outlooks for Asia-Pacific, Canada, Europe and Latin America.

38

Since equipment failures can result in expensive unit or total plant shutdowns, as well as in environmental or safety incidents, best-of-class companies maintain the mindset that spending to improve reliability and equipment conditioning is a great benefit to the organization. Maintenance and reliability programs also create value. In the modern HPI, they should not be viewed as services, but rather as equal partners of operations in the creation of business value.

53

This conclusion of a two-part series analyzes and explores the economic viability of coal-based chemicals production in India, including key production development hurdles.

67

Computational fluid dynamic modeling has been applied to address issues like high tube metal temperatures and reduction in tube metal temperatures using patented inclined firing technology. The working philosophy is to first build a CFD model, for which results can be validated against field measurements and observations. Once a validated CFD model is achieved, various design modifications are evaluated to select the most feasible design option.

Maintenance spending to jump in 2016

as refiners catch up with turnarounds

proac-tive expense to maintain equipment and processing units. They play a pivotal role in maintaining plant efficiency and sound unit operation, maximizing facility profits and preventing accidents and breakdowns.

It is estimated that over 40% of a bud-get that is allotted for facility and unit maintenance is spent on equipment and materials. Equipment and infrastructure spending represent large portions of a facility’s capital budget (FIG. 1_{). These}

in-clude the costs for planned and unplanned plant turnarounds, retrofits and upgrades.

Companies must also set aside funds for the costs associated with adhering and complying with increasingly stringent environmental and safety requirements. Key factors influencing the selection and specification of equipment include engi-neering, licensing requirements and pro-cessing unit needs. Approximately 60% of a plant’s remaining maintenance bud-get is spent on the labor costs for these vital activities.

Higher maintenance expenditures forecast in 2016. _{Maintaining the}

re-liability and availability of refineries as they take advantage of higher margins, as seen in the US and elsewhere during this time of low crude oil prices, is im-perative. In mid-2015, US refinery utili-zation rates were in the mid-90% range, compared to the low-80% range in 2013 and 2014.

In the US and Canada, 2016 mainte-nance spending is forecast to be approxi-mately $1.3 B. The number of scheduled refinery turnarounds in North America is anticipated to rise this year after declin-ing sharply in 2015, as refiners delayed maintenance shutdowns to capitalize on abundant quantities of low-priced feed-stock. Despite low crude oil prices, how-ever, analysts expect refinery capital ex-penditures to increase over the next three

to five years as refiners in the US prepare to meet new Environmental Protection Agency (EPA) regulations, and as they export more oil products.

Gasoline prices are likely to remain low as long as crude prices are sup-pressed, which will spur fuel consump-tion and encourage refiners to invest in gasoline-related projects, particularly for reforming and alkylation units. Gasoline projects will also be motivated by up-coming EPA rules on naphtha content, octane loss and Corporate Average Fuel Economy (CAFE) standards. A signifi-cant portion of refinery budgets will be spent on projects to adhere to Tier 3 fuel regulations, which will begin in 2017 for larger refineries.

Combined, these factors are likely to invite a flurry of revamp, upgrade and construction projects at North Ameri-can refineries through the remainder of the decade.

Electrical (switchgear, cable, etc.) Process instrumentation Piping and valves Engineering services Building construction

Infrastructure (erection of equipment, piping, etc.) Major process equipment (pumps, pressure vessels, heat exchangers, etc.)

38% 10% 9% 5% 8% 4% 26%

FIG. 1. Equipment and infrastructure spending represent a large portion of a facility’s capital budget. Source: Hydrocarbon Processing’s HPI Market Data 2016.

| Business Trends

The global petrochemical sector will continue to see strong capacity growth through the end of the decade. However, the global petrochemical landscape varies significantly between regions. Part 1 of this series provided an overview on the present state of the petrochemical industry, a breakdown of new and active petrochemical project numbers, as well as major trends in Africa, the Middle East and the US. In Part 2 of this series, major petrochemical trends and projects in Asia-Pacific, Canada, Europe and Latin America are discussed.

LEE NICHOLS, EDITOR/ASSOCIATE PUBLISHER

[email protected]

Business Trends

Global petrochemical overview—Part 2

Through 2016, the global petrochemi-cal outlook varies significantly between regions. Part 1 of this series provided an overview on the present state of the petrochemical industry, a breakdown on new and active petrochemical construc-tion project numbers by region, as well as major petrochemical construction trends in Africa, the Middle East and the US. Part 2 examines the petrochemical land-scape in Asia-Pacific, Canada, Europe and Latin America.

Part 1. _{To summarize Part 1, many new} pet-rochemical construction projects remain in the works, despite the drop in oil prices. The most significant expansions will be in developing countries in the Asia-Pacific and Middle East regions. These regions are investing heavily in petrochemical produc-tion units to supply increasing demand and to diversify product portfolios. Some of the strongest growth is seen in the US, where cheap natural gas is fueling more than $135 B in new petrochemical capacity.

Meanwhile, a decline in the oil-to-gas spread is making even oil-based naphtha crackers in regions such as Western Eu-rope and Northeast Asia more viable than they have been in years. Ethane cracking operations in the Middle East and the US still maintain a price advantage against cracking naphtha, but the gap has shrunk considerably. This has provided naph-tha cracking operations with fresh life, as feedstock costs have dropped dramatically over the past 18 months.

New petrochemical project announce-ments have declined over the past three years, from nearly 170 in 2014 to just over 100 in 2016. This represents a 38% decrease in new petrochemical announce-ments globally during this period. Al-though new project numbers are down, the world has witnessed over 400 new petrochemical projects announced within that same time frame. This represents a to-tal capito-tal expenditure of more than $80 B.

Asia-Pacific. _{The region has seen a} slow-down in new project announcements over the past few years. Regardless, the region continues to dominate in total active construction projects in all sectors of the downstream industry. This includes new petrochemical capacity, as well. Over the past year, the Asia-Pacific region has led in new petrochemical project announce-ments (FIG. 1_{), followed closely by the US.}

China continues to invest heavily in chemical production capacity. According

to Hydrocarbon Processing’s Construction

Boxscore Database, total capital expendi-tures for announced petrochemical proj-ects in China have eclipsed $50 B through 2020. This includes the construction and expansion of new petrochemical facilities, such as China National Offshore Oil Corp. (CNOOC) and Shell’s Nanhai expansion project; Fujian Petrochemical Co.’s Fujian petrochemical complex; and SP Olefins’ Taixing ethylene facility (China’s first gas-cracking ethylene plant); as well as alternative/unconventional supply routes, such as coal-to-olefins (CTO), methanol-to-olefins (MTO) and propane dehydro-genation (PDH) projects. However, these plants were conceived and built during a time of high crude oil prices. Now that oil prices have fallen dramatically, MTO and PDH plants are facing fierce competition from naphtha-based petrochemical pro-duction. Regardless, China’s MTO capac-ity is set to increase from approximately 1 MMtpy in 2014 to over 6 MMtpy by 2017. The country has also begun operations on over 4 MMtpy of CTO plants, with an additional 6 MMtpy to 7 MMtpy going online by 2018. PDH plant construction is even more robust, with approximately 14 new PDH units planned or under con-struction. These units represent over 10 MMtpy of additional propylene capacity.

Although China is the largest consum-er of plastics in the Asia-Pacific region, the fastest demand growth is seen in India. Ac-cording to Vikram Sampat, vice president

and head of aromatics for Reliance Indus-tries, India’s petrochemical growth will av-erage between 8%/yr and 10%/yr through the end of the decade. With such immense demand growth, additional petrochemical capacity has been announced through-out the country. India plans to add over 3 MMtpy of new ethylene capacity by 2020. This would raise the country’s domestic ethylene capacity to just over 7 MMtpy. Total capacity could increase even higher by the early 2020s, should Hindustan Pe-troleum Corp. Ltd. and GAIL greenlight their $5-B greenfield petrochemical com-plex in Andhra Pradesh.

Additionally, Indian Oil Co. has an-nounced over $5 B in new petrochemi-cal investments through 2022. This in-cludes additional polypropylene capacity at Paradeep and the Baroni refinery, and an expansion of its Panipat cracker to 1.3 MMtpy by 2020. The country is also in-creasing polyethylene terephthalate and purified terephthalic acid capacity, as well as other downstream petrochemical derivatives. This increase includes the construction of billion-dollar fertilizer projects. Even with the additional petro-chemical capacity scheduled to be com-missioned, India will still need to rely on imports to satisfy demand. With the surge in demand for petrochemicals and refined fuels, along with the possibility of a major

0 5 10 15 20 25 30 35 40 US Middle East Latin America Europe Canada Asia-Pacific Africa Petrochemical projects

FIG. 1. New petrochemical projects by region, 2016. Source: Hydrocarbon Processing’s Construction Boxscore Database.

Business Trends

construction boom, it seems that India has become the new China—at least for the foreseeable future.

In Malaysia, work continues on the ambitious Refinery and Petrochemical Integrated Development (RAPID) proj-ect. The project, which is Phase 2 of the Pengerang Integrated Petroleum Com-plex project, will include a 300-Mbpd refinery, a petrochemical complex with a combined capacity of 7.7 MMtpy of vari-ous products, and an LNG regasification terminal. RAPID is estimated to cost $16 B, while the associated facilities will cost more than $11 B. Major contracts have already been awarded and operations are expected to begin by late 2019.

South Korea is investing in its down-stream sector, with a focus on petrochem-ical and refining expansion projects. One of the most notable projects is S-Oil’s Residue Upgrading Complex Project (RUCP). The project is part of the com-pany’s strategic growth initiative, which includes refining and petrochemical in-tegration. The RUCP will convert heavy fuel oil into high value-added gasoline and olefins. The project consists of the simul-taneous construction of the RUCP and an olefin complex. The two projects will act as an integrated complex. The RUCP will supply its production as feedstock to the olefins plant. The two projects are ex-pected to be completed in 1H 2018.

In 4Q 2014, SK Gas broke ground on an $830-MM PDH unit in Ulsan. The 600-Mtpy unit is being built by project partners SK Advanced (a subsidiary of SK Gas), Kuwait Petrochemical Industries Co. and Saudi Arabia-based Advanced Petrochemical Co. Commercial opera-tions are expected to begin in 1H 2016. Additional South Korean petrochemi-cal projects include Hyundai Chemipetrochemi-cals’

Daesan petrochemical complex expan-sion to produce 1 MMtpy of mixed xy-lenes, and Korea Petrochemical Industry Co.’s (KPIC) Onsan Naphtha Cracking Center (NCC) expansion in Ulsan. KPIC plans to nearly double ethylene produc-tion at the NCC, from 470 Mtpy to 800 Mtpy. Operations are expected to begin in 1H 2017. Once completed, KPIC’s eth-ylene production market share in South Korea will increase from 6% to 10%.

Vietnam is investing heavily in re-fining capacity to eliminate a domestic shortage of refined fuels. The country is developing several large-scale projects. The majority of these new refineries will incorporate petrochemical units. The $9-B Nghi Son refinery and petrochemi-cal complex will be Vietnam’s second do-mestic refinery. The 200-Mbpd refinery will integrate aromatics and polypropyl-ene facilities. Operations are scheduled to begin by 2018.

Nearly $35 B of additional refining ca-pacity is planned in the country, but work on these facilities has been moving slowly. These plants will also integrate multiple petrochemical units. The $3.2-B Vung Ro refinery and petrochemical complex will produce benzene, toluene, mixed xylenes and polypropylene, but the project is not on schedule to meet its 2017 startup date. The $22-B Nhon Hoi refinery and petrochemical project’s scope included nearly 5 MMtpy of olefins, polyolefins and aromatics production, but has been delayed indefinitely. In early 2016, Qatar Petroleum pulled out of the $4.5-B Long Son petrochemical complex project. The project partners will postpone the project until a new partner is chosen.

Canada. _{The majority of new capital} investment in Canada’s petrochemical

sector is focused on adding derivative ca-pacity to maximize existing crackers. The most notable petrochemical projects in the region are located in Alberta. These include Nova Chemicals PE1 facility in Joffre and Williams Energy Canada’s new PDH plant in Redwater.

The PE1 project is part of Nova Chem-icals’ NOVA 2020 growth strategy, which includes major projects at the company’s Joffre and Corunna sites. At the time of this publication, the $1-B PE1 project was nearly 80% complete. The project will ex-pand the Joffre site’s polyethylene facility by adding a third polyethylene reactor, which will produce between 475 Mtpy and 550 Mtpy of linear low-density poly-ethylene. This represents a 40% increase in the site’s polyethylene capacity. Startup is expected to take place in 4Q 2016.

Nearly 150 mi north of Joffre, Wil-liams is planning to build a 525-Mtpy PDH plant. The project, located at Wil-liams’ Redwater complex in Alberta, will be the first of its kind in Canada. The PDH plant will process offgas, a byprod-uct of the oil sands upgrading process, into polymer-grade propylene. If com-pleted, the project is expected to begin operations by 2020.

These two projects are examples of Al-berta’s efforts to incentivize petrochemi-cal producers to create a petrochemipetrochemi-cal industry in the province. Alberta has an-nounced financial incentives worth over $350 MM to operators for the construc-tion of petrochemical plants that utilize methane or propane feedstocks. The Al-berta government hopes that the new in-centives will help spur the development of new petrochemical capacity in the region. Time will tell if these new incentives will achieve the province’s goals of increasing new downstream investments.

21%

79%

FIG. 2. Total active petrochemical project market share comparison and breakout between Eastern and Western Europe. Source: Hydrocarbon Processing’s Construction Boxscore Database.

21%

21%

20%

Business Trends

Europe. _{Active petrochemical project} construction in Europe is led by petro-chemical capacity additions in Eastern Europe. As shown in FIG. 2, _Eastern

Eu-rope controls nearly 80% of active pet-rochemical project construction in the region. This is lead primarily by projects in Russia and the Commonwealth of In-dependent States (CIS).

The CIS has seen some of its ambitious petrochemical plans halted, however. This includes capital-intensive projects such as KPI’s Atyrau gas-to-chemicals complex in Atyrau, Kazakhstan; and SOCAR’s petro-chemical complex near Baku, Azerbaijan, which was part of the country’s OGPC mega-project. SOCAR has announced that it will instead spend approximately $1.3 B to upgrade the existing refinery and petrochemical complex, as well as con-tinue work on the Sumgait petrochemical plant revamp located north of Baku.

Regardless, the CIS is progressing with multiple projects to increase petrochemi-cal production capacity. This includes the Kiyanly petrochemicals complex and Garabogaz fertilizer plant in Turkmeni-stan, the Ustyurt gas chemicals plant in Uzbekistan (completed in late 2015), as well as additional ammonia-urea plant projects in Azerbaijan, Turkmenistan and Uzbekistan. In total, over $7 B will be in-vested to increase petrochemical capacity in the CIS by 2019.

The bulk of petrochemical capital ex-penditure in the region is located in Rus-sia. Russian chemical company Sibur has set its sights on completing the ZapSib-Neftekhim petrochemical complex (Zap-Sib-2) project. The project, located 3 km north of Sibur’s polymer site in Tobolsk, was greenlighted in early 2015. The proj-ect will consist of a 1.5-MMtpy ethane cracker and ethylene derivative plants. Once completed, the complex will be the largest polymer production site in Russia.

Rosneft subsidiary Far East Petro-chemical Co. (FEPCO) is planning to build the largest integrated refining and petrochemical complex in the country’s Far Eastern Federal District near the city of Nakhodka. The complex will consist of a 12-MMtpy refinery, which will supply feedstock to the grassroots petrochemi-cal complex. Once completed in the early 2020s, the facility will supply the local market in the Russian Far East, as well as utilize its proximity to Asian markets to satisfy demand for petrochemicals.

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According to the European Chemical Industry Council (CEFIC), EU chemical output in 2015 was nearly flat, register-ing only a 0.3% growth year-over-year. The CEFIC has forecasted a modest 1% growth in European chemical tion in 2016. EU petrochemical produc-ers witnessed good margins at the start of 2016 due to strong demand for ethylene derivatives, supply constraints and low feedstock prices. These trends have kept

EU petrochemical capacity utilization above 80% for the past six months, but the long-term forecast for EU’s petrochemical industry is wrought with challenges. This includes stiff global competition, and en-ergy and regulatory costs.

Latin America. _{Both Central and South} America saw tremendous growth over the past decade. From 2004–2015, the growth in Latin America’s middle class was

instru-mental to the region’s increased demand for refined fuels. Multiple forecasts show that the region will see a nominal increase in demand through the rest of the decade. Latin American countries have been hit hard by the drop in oil prices, especially the countries that depend heavily on oil export revenues. The drop in revenues has left little money to fund capacity expan-sions in the refining and petrochemical in-dustries. In the short term, these countries would rather satisfy demand through im-ports than invest in major expansions or grassroots facilities, which can be multi-billion-dollar endeavors.

This trend does not mean that the region is void of petrochemical projects. One of the most ambitious projects in the region has just begun production. The $5.2-B Etileno XXI project, a finalist for

Hydrocarbon Processing’s 2015 Top Project

award, represented the first major private sector petrochemical project in Mexico in 20 years. The greenfield complex, located in Nanchital near Coatzacoalcos, Vera-cruz, Mexico, was developed by Braskem Idesa and features a 1-MMtpy ethane cracker, two high-density polyethylene plants (750 Mtpy), one low-density poly-ethylene plant (300 Mtpy), and storage, waste treatment and utility facilities.

The facility began operations in March 2016, and will be instrumental in meeting the increasing demand for polyethylene in Mexico. A glaring gap exists between Mex-ico’s potential for polyethylene production and its inability to meet surging demand. Approximately 65% of polyethylene de-mand is satisfied through imports, and the gap continues to grow each year. The Etileno XXI project is forecast to replace $2 B of polyethylene imports used as a feedstock for the agricultural, automotive, construction and consumer industries.

Trinidad and Tobago is the world’s larg-est exporter of ammonia and the second-largest exporter of methanol. The country has 11 ammonia plants and seven metha-nol plants. The country is investing $1 B in the construction of a new methanol and dimethyl ether (DME) production com-plex. The project is being developed by a consortium consisting of Mitsubishi Gas Chemical, Mitsubishi Corp. and Mitsubi-shi Heavy Industries, along with Massy Holdings and state-owned National Gas Co. of Trinidad and Tobago. The project was greenlighted in September 2015 after additional financing was secured. The

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cility will be located in La Brea and have a total capacity of 1 MMtpy of methanol and 20 Mtpy of DME. The plant is expect-ed to begin operations by 1Q 2019.

Further south, Brazil’s petrochemical fu-ture looks bleak. Refining and petrochemi-cal expansion plans have been severely cut back due to cost overruns, downstream rev-enue losses, massive debt, economic weak-ness and government corruption scandals. According to the Brazilian Chemical

In-dustry Association (ABIGUIM), demand for chemical products in Brazil has de-creased nearly 8% over the past year. This represents the largest decline in 25 years. The drop in crude oil prices has decreased naphtha feedstock prices, but this has done little to spur new investment.

In Peru, there is continued support for a greenfield petrochemical complex to be located in the country’s southern region. The $3.5-B Arequipa petrochemical

proj-ect would process natural gas feedstock piped from the Camisea gas fields locat-ed in central Peru. The project would be supplied with feedstock from the $5-B natural gas pipeline presently being built by Odebrecht. If built, the petrochemi-cal complex will produce approximately 1.2 MMtpy of polyethylene.

Finally, Bolivia is the key natural gas supplier in the region. Domestic natu-ral gas production reached 21.4 Bcmy in 2014, according to BP’s Statistical Review of World Energy 2015. Production is more

than enough to satisfy domestic demand, making exports a national priority. The increased production of domestic natural gas is fueling the country’s ambitious plans to substantially increase petrochemical ca-pacity. Bolivia’s national oil and gas compa-ny, YPFB, has instituted a new expansion program to become self-sufficient in value-added hydrocarbon products by 2022. The country is nearly completed with Phase 1 of the strategic national plan. The nearly $2-B plan (Phase 1) included the:

• Rio Grande liquid separation plant—completed in 2014 • Valle Hermoso refinery

expansion—completed in 2014 • Rio Grande LNG plant—

completed in 2015

• Gran Chaco liquid separation plant—completed in 2015 • Bulo ammonia-urea plant—

under construction, completion set for 3Q 2016.

The Bulo ammonia-urea plant will be Bolivia’s first petrochemical complex. The plant will produce over 420 Mtpy of ammo-nia and 645 Mtpy of urea. These supplies are destined for the domestic market. Op-erations are expected to begin in July 2016.

Both the Rio Grande and Gran Cha-co liquid separation plants are crucial to provide feedstock to the country’s petro-chemical chain. The Gran Chaco separa-tion plant will be the main supplier to the country’s proposed $1.7-B Gran Chaco petrochemical plant. The complex will contain propylene/polypropylene plants, as well as an ethylene/polyethylene com-plex. If built, the propylene/polypropyl-ene facilities are likely to begin operations in the early 2020s, with the ethylene/ polyethylene plants to begin construction shortly thereafter. Additional petrochemi-cal projects, which are presently being evaluated for their feasibility, have been announced in Bolivia.

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The shale gas boom has established the US as the world’s leading gas producer and is responsible for billions of dollars of investments in the US gas processing industry. To address the need for information in this rapidly expanding market, Hydrocarbon Processing and Gas Processing are pleased to announce the second GasPro Americas (GasPro), which will be held September 13–14, 2016, in Houston, Texas.

GasPro 2016 will cover the gas processing industry from upstream to downstream. Confirmed participants include gas processing experts from: Chevron Energy Technology Company; Greyrock Energy; Wood Mackenzie; AspenTech; Atlas Copco; Bechtel Corporation, USA; Black & Veatch; Chart Energy & Chemicals; Deloitte; Emerson; Haldor Topsoe, Inc; DNV GL; Nexo Solutions; Optimized Gas Treating, Inc; SNC Lavalin; and many others to be announced.

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• Cryogenics: Rejection – Ethane, Methane, Nitrogen

• Syngas Production and Utilization • The Future of LNG in America

• IOT and the Future of Big Data for the Natural Gas Industry • NGL Recovery • Fractionation • LNG/FLNG • Liquefaction/Regasification • Metering/Custody • Alternative Applications • Policy: The Importance of Legislative and Regulatory Compliance – Managing Risk at the Plant Level

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Industry Metrics

[email protected]

US refinery margins recovered as product markets were supported by strong domestic gasoline demand and temporarily tight sentiment fueled by the switch to summer-grade gasoline. In Europe, the lack of gasoline and fuel oil export opportunities caused margins to continue falling. Asian margins saw a slight recovery on the back of stronger regional demand and the onset of refinery maintenance.

Pr oduc tion, Bcf d Gas pric es, $/Mcf 0 20 40 60 80 100 0 1 2 3 4 5 6 7

Monthly price (Henry Hub) 12-month price avg. Production M F J D N O S A J J M A M F J D N O S A J J M A M

Production equals US marketed production, wet gas. Source: EIA.2014 2015 2016

Monthly price (Henry Hub) 12-month price avg. Production

US gas production (Bcfd) and prices ($/Mcf)

Oil pric es, $/bbl 2014 2015 2016 20 30 4050 60 70 8090 100110 120 Dubai Fateh W. Texas Inter. Brent Blend M F J D N O S A J J M A M F J D N O S A J J M A M Source: DOE

Selected world oil prices, $/bbl

Global refining margins, 2015–2016*

Margins, US$/bbl 5 WTI, US GulfBrent, Rotterdam Oman, Singapore 0 10 15 20 Mar.-16

Mar.-15 April-15 May-15 June-15 July-15 Aug.-15 Sept.-15 Oct.-15 Nov.-15 Dec.-15 Jan.-16 Feb.-16

Global refining utilization rates, 2015–2016*

60 70 80 90 100

Utilization rates, % US_{EU 16} Japan_Singapore

Mar.-15 April-15 May-15 June-15 July-15 Aug.-15 Sept.-15 Oct.-15 Nov.-15 Dec.-15 Jan.-16 Feb.-16 Mar.-16

US Gulf cracking spread vs. WTI, 2015–2016*

Feb.-16

Cracking spread, US$/bbl

Prem. gasoline Jet/kero Diesel Fuel oil -20-10 0 10 20 30 40 50 60 Mar.-16

Mar.-15 April-15 May-15 June-15 July-15 Aug.-15 Sept.-15 Oct.-15 Nov.-15 Dec.-15 Jan.-16

Rotterdam cracking spread vs. Brent, 2015–2016*

Prem. gasoline Jet/kero GasoilFuel oil -20 -10 10 20 40 30

Cracking spread, US$/bbl

0

Mar.-15 April-15 May-15 June-15 July-15 Aug.-15 Sept.-15 Oct.-15 Nov.-15 Dec.-15 Jan.-16 Feb.-16 Mar.-16

Singapore cracking spread vs. Oman, 2015–2016*

-20 -10 0 10 20 30

Cracking spread, US$/bbl Prem. gasolineJet/kero GasoilFuel oil

Mar.-15 April-15 May-15 June-15 July-15 Aug.-15 Sept.-15 Oct.-15 Nov.-15 Dec.-15 Jan.-16 Feb.-16 Mar.-16

Supply and demand, MMbpd

Stock change and balance, MMbpd

Source: EIA Short-Term Energy Outlook, April 2016. 82 84 86 88 90 92 94 96 98 100 -3 -2 -1 0 1 2 3 4 5 6 Stock change and balance

World demand World supply

Forecast

2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 2016-Q1 2017-Q1

World liquid fuel supply and demand, MMbpd

* Material published permission of the OPEC Secretariat; copyright 2016; all rights reserved; OPEC Monthly Oil Market Report, April 2016.

An expanded version of Industry Metrics can be found online at HydrocarbonProcessing.com.

Brent dated vs. sour grades (Urals and Dubai) spread, 2015–2016*

Light sweet/medium sour crude spread, US$/bbl

Dubai Urals -4 -2 0 2 4 8 6 April-16

Global Project Data

[email protected]

According to Hydrocarbon Processing’s Construction Boxscore Database, nearly 300 new downstream projects have been announced around the globe over the past year. The Asia-Pacific region maintains the greatest number of new downstream project announcements, with nearly 33% of new project announcements since May 2015. The US is a close second, with approximately 28%

of new announced downstream capacity additions within that same time frame. Both regions are continuing their downstream capacity buildout. The US is maximizing cheap, readily available natural gas feedstocks to fuel its petrochemical and LNG industries, and the Asia-Pacific region is building new capacity to satisfy demand for transportation fuels, petrochemicals and power generation.

Boxscore new project announcements, February 2015–present 9 5 7 ₃₂ 23 37 26 22 31 21 6 25 Africa 7 8 ₆ 6 3 4 3 ₂ 3 Asia-Pacific Canada Latin America Refining Petrochemical Gas processing/LNG Middle East Europe US

Detailed and up-to-date information for active construction projects in the refining, gas processing and petrochemical industries across the globe | ConstructionBoxscore.com

Market share breakdown of active downstream projects by region

April-16 Mar.-16 Feb.-16 Jan.-16 Dec.-15 Nov.-15 Oct.-15 Sept.-15 Aug.-15 July-15 June-15 May-15 April-15 Mar.-15 27 20 ₁₈ 27 18 21 24 26 25 30 22 17 18 26

30%

21%

8%

15%

13%

10%

3%

New petrochemical project announcements by region and sector, May 2015–present

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Reliability

HEINZ P. BLOCH, RELIABILITY/EQUIPMENT EDITOR

[email protected]

Principles are more important than strategies

re-cently asked the question, “When should an equipment repair be classified as re-work?” At one major facility, if a pump or motor is taken to the shop for repairs and the asset is thereafter returned to service, a 45-day observation period commences. By that facility’s definition, a “good re-pair” is proven if, after recommissioning, an asset runs for at least 45 days without mechanical problems. If issues develop on Day 1 through Day 44, then the equip-ment is taken back to the shop, and the second repair is classified as rework.

Since rework does not count as a fail-ure, their statistics look good: Eight 44-day runs might equate to eight repair events, but they would be counted as only one fail-ure. A refinery with fewer failures achieves approving key performance indicator numbers (KPIs) and moves up in surveys conducted as for-profit services by process consulting and benchmarking firms.

Since the entire 45-day observation strategy seems to violate the principle of common sense, a reliability staffer at this major refinery had a few questions. In an e-mail, the staffer asked:

“I cannot find a rational basis behind the 45 days; why not 45 minutes? If it runs 45 days but develops a mechanical issue that requires it to again be taken to the shop, even for the same issue that caused it to require a repair in the first instance, then we simply identify it as a second repair.”

A second repair for what, however? Normal wear? End of life? This 45-day criterion seems to have been pulled out of thin air, so to speak. Which begs the ques-tion: Are there any standards, best prac-tices or practical guidelines that help de-termine what is considered rework? How did you address this issue in your consult-ing assignments over the past decades?

What best-of-class performers do. _In

the 1960s and 1970s, before the invention

of fancy footwork with KPIs, the answer was quite simple: After shop work had been done at a true best-practices plant (BPP), the machine was reinstalled, started up and remained online for at least a full month. BPPs never use the term “spare”; they sim-ply have “A” pumps and “B” pumps.

After running for two full days without defect, a repair event file at these BPPs was closed. Failures on or after Day 3 were con-sidered new, and a different event file was opened. Failure on Day 3 would have au-tomatically meant two failures in any run-ning 12-month period. Two-in-12 would require placement of the machine on the “bad actor list”—the roughly 7% of process pumps that failed with excessive frequency.

More importantly, the obviously ailing “bad actors” at BPPs were no longer given the standard repair or “get-it-done” treat-ment of the maintenance departtreat-ment. A computerized maintenance management system (CMMS) assigned these repeat-edly failing machines to the jurisdiction of the plant’s reliability group. The reliabil-ity group was then tasked with finding the true root causes of repeat failures. They had to determine what needed to be done to avoid these events from recurring.

Science-based explanations and en-gineered solutions replaced the usual quickly-voiced, unsubstantiated opinions and trial-and-error approaches. Writ-ten work processes and procedures were compiled for, and pursued, on bad actors at these BPPs. From that time on, the fail-ure frequencies at such facilities quickly disappeared into the general average fail-ure population.

No new initiatives needed. _{It seems}

that the staffer’s managers were seeking progress by coming up with new initia-tives or new ways to tackle reliability is-sues. Why should that be necessary? The staffer’s facility has the same machines, and his plant is processing the same flu-ids as others, including many best-of-class (BOC) performers.

It may be of interest to note the reasons why these BOCs are continually near the top in ranking surveys conducted by professional benchmarking firms. BOCs never compromise principles; instead, they adjust their strategies to capitalize on technology advancements. In the staffer’s case, common sense should tell us that copying the equipment upgrade steps and work processes diligently implemented by BOCs would move his refinery closer to becoming a BPP.

The staffer’s analysis is compelling.

When we pointed out the old experiences listed previously, the staffer sent us an im-mediate and very perceptive reply. Here it is, condensed into four points:

• The problem has been a progressive one. Plants often degenerate to the point of losing the ability to understand the difference between principles and strategies. Coupled with a working environment where every manager rises to a certain point of incompetence, workers can end up on a train that does not know where it came from, where it is going or how it is going to get there.

• Principles are foundational, tried and tested approaches that have proven successful and should be maintained at all costs. If not maintained and managed, however, they can drift away. In an environment of not knowing what works or why it works, there exists a temptation to fix recurring problems with the next “new thing” in the hope that, eventually, something will work.

• A real hesitation seems to exist to look outside the reliability group for ideas and strategies that have been proven successful. In other words, there is reluctance to reach outside the “family” for help and guidance