Crude Oil-to-Chemicals and Other Disruptive Technologies Will Have a Significant Impact on Chemical Industry, IHS Markit Says

The convergence of two significant and revolutionary technological
developments in the petrochemical industry -- crude oil-to-chemicals
(COTC) and oxidative coupling of methane (OCM) -- are poised to have a
very significant impact on the chemical industry, according to new
analysis from IHS
Markit (Nasdaq: INFO), the leading global source of critical
information and insight.

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Ethylene & propylene production from Siluria Technologies' direct oxidative coupling of methane. (Source: IHS Markit 2018)

This analysis from Don Bari, vice president of chemical technology at
IHS Markit, follows on an announcement made earlier today by Siluria
Technologies, which has joined forces with Saudi Aramco Technologies: Siluria
Technologies and Saudi Aramco Technologies Company join forces to
maximize chemical production.

In the past decade or so, disruptive technology development and
deployment have been dominant on a global basis in the petrochemical
industry and largely driven by the extreme pricing dynamics of the
energy industry, translating directly to fundamental petrochemical
feedstocks; where such new technology has enabled deployers of capital
and technology to use low-cost and locally abundant feedstocks.

One of the most significantly disruptive technologies or categories of
technologies being developed, based on their sheer volume, is crude
oil-to-chemicals. These projects, in effect, merge a refinery and
petrochemical plant into one, and thus, go well beyond the
state-of-the-art refinery petrochemical integration by the
implementation of new/reconfiguring unit operations into a refinery.

The objective is to shift the product slate derived from a barrel of oil
to a range of 40 percent to 80 percent chemical feedstocks and non-fuel
products, up from the traditional range of 15 percent to 25 percent, in
order to significantly increase the value of crude oil reserves. For
example, Saudi Aramco Technologies Company publicly announced (in a
joint news release with Siluria Technologies issued earlier today, Siluria
Technologies and Saudi Aramco Technologies Company join forces to
maximize chemical production):
“Maximizing the output of high-value chemicals products from our future
crude-oil processing projects is one of the key objectives in our
downstream technology strategy, said Ahmad Al Khowaiter, chief
technology officer of Saudi Aramco.”

The Siluria Technologies process, which produces olefins directly from
natural gas through oxidative coupling (chemistry) of methane (OCM), is
expected to further allow Saudi Aramco’s future crude oil-to-chemicals
facilities to create more value by converting the very low-value
off-gases (largely methane) into higher-value olefins products, which
improves carbon efficiency and increases the volume of the barrel of oil
directed to valuable fundamental petrochemicals.

Competitive and sustainable advantages of such a fully integrated crude
oil-to-chemical facility:

• Upgrades a lower-value stream into a higher-value product through
  greater operational efficiency and optimization of assets. Greater
  capital efficiency--leverages a well-integrated upstream (refinery)
  with the downstream (chemicals) operations to increase efficiency of
  deployed capital (maximum investment-per-ton of production capacity)
  through scale; and decreases operating costs through carbon efficiency
  and low fixed operating costs. (In a Reuters News article
  published Jan. 18, 2018, Aramco chief technology officer Ahmad
  Al-Khowaiter said the process called thermal crude-to-chemicals
  technology “would cut capital costs by 30 percent compared to
  conventional refining.”).
• Sustainability gains through the reduction in the overall carbon
  footprint of a facility due to integration and optimization of assets,
  which become more efficient.

The “disruption” to conventional petrochemical producers would likely be
the loss of market position due to COTC’s immense petrochemical volume.
For example:

• The global demand for ethylene and propylene are 160 million metric
  tons (MMT) and 111 MMT per year, respectively, and at approximately 4
  percent annual growth rate, the required global annual capacity
  additions would be 6.4 MMT and 4.4 MMT of ethylene and propylene,
  respectively.
• These volumes could nearly be supplied from two large-scale 200,000
  barrel-per-day COTC complexes (see analysis below and note that
  multiple FCCs, cracking furnaces and cracked gas compressor/separation
  trains would be required); instead of four conventional
  state-of-the-art naphtha-cracking light olefins plants.
• If multiple COTC facilities are eventually built, the export dynamics
  would, over time, change significantly and put pressure on olefin and
  feedstock-related derivative exports from the U.S. According to our
  IHS Markit estimates, U.S. exports of these olefin and
  feedstock-related derivatives will reach approximately 14 MMT by 2020.

Siluria Technologies: Addressing sustainability through carbon
efficiency—A new operational metric?

Siluria Technologies’ oxidative coupling of methane to ethylene (and
propylene) process converts methane to olefins in the presence of a
catalyst in an oxygen-rich environment. The catalyst reaction “diverts”
roughly half of the carbon to the undesirable co-products of carbon
monoxide (CO) or carbon dioxide (CO₂). In this
highly exothermic (heat generating) reaction. Siluria exploits this
exotherm by injecting ethane or propane into a second reaction chamber,
where the light alkane is thermally cracked to the olefin.

Moreover, to enhance the overall carbon efficiency of the process, a
catalytic methanation step is embodied in Siluria’s process. This
reaction converts all generated CO and a portion of the CO₂ oxidative
coupling reaction co-product back to methane by using the hydrogen
generated in both the OCM and the ethane/propane-cracking reaction in
the post-OCM section of the reactor.

In fact, the Siluria process design philosophy is all about less total
carbon (methane) consumed per unit of light olefins produced, because
the process is “indifferent” to methane as a feedstock, or as energy
(process utility). Therefore, one would expect that a design philosophy
that equates British thermal units (BTU) of energy savings to a
reactor-conversion-per-pass percent increase should drive that most
optimum overall process design.

Significant carbon reduction through process design

The Siluria OCM process also delivers significant reduction in carbon
emissions over traditional ethylene production processes. IHS Markit
evaluation of total carbon dioxide emissions to the production of
ethylene by various feedstock types shows that the Siluria technology is
expected to be a net-negative CO₂ producer per ton of
ethylene/olefins produced because of the heat generation for the OCM
exotherm, and methane production (partly) from CO₂ is
considered in our methodology as an offset to CO₂ emissions.
IHS Markit estimates that the Siluria Technologies OCM process generates
negative 1 ton of carbon dioxide emissions equivalents per ton of
ethylene produced as compared to the more conventional naphtha-cracking
process for converting crude to olefins, which is estimated at greater
than 1.4 tons of CO₂ produced per ton of ethylene produced.
This is a significant improvement in carbon emission reduction, while at
the same time capturing greater value from the molecules.

How can Siluria Technologies add to the impact of crude
oil-to-chemicals mega complexes?

Independent and detailed technical analysis by IHS Markit of a Saudi
Aramco-type COTC approach (as described in Saudi Aramco’s patent
literature) projects that crude oil feedstock will be converted to
chemicals at a higher intensity than conventional processes, increasing
the yields of crude oil feedstocks converted to chemicals to 72 percent.
(Note that a January 18, 2018 Saudi Aramco announcement by Reuters
states that it expects, with its developing COTC technology, “70 percent
to 80 percent of the crude intake will be converted into chemicals….”).

With the recent cooperation announcement by Siluria Technologies and
Saudi Aramco Technologies Company to work together in the COTC process
to maximize the production of chemicals from a barrel of oil, IHS Markit
speculates that if the methane off-gas and a portion of the ethane in a
hydrocracked Arab Light crude oil feedstock were to be fed to the
Siluria OCM technology, then a net increase of 300 thousand metric tons
(TMT) to 350 TMT of ethylene and 200 TMT to 250 TMT per-year of
propylene, would be generated (based on 10 million metric tons (MMT) per
year (200,000 barrels per day) of crude feed). With methane valued at
U.S. $1.25 per MMBTU in the Middle East, the Siluria OCM technology
appears to be an attractive approach to enhance the value of a barrel of
oil.

Direct oxidative coupling of methane to ethylene has been an elusive
goal

The oxidative coupling of methane (OCM) to ethylene has attracted
significant attention since its discovery in the early 1980’s.
Compelling efforts to produce ethylene directly from natural gas have
been made, yet no OCM process has been commissioned at commercial scale.

The two major companies that tried to commercialize OCM, ARCO and Union
Carbide, did extensive catalyst screening studies in the 1980’s and
early 1990’s. ARCO reviewed several transition metal oxides as oxidative
coupling catalysts. Manganese oxide catalysts on silica support where
found to be the most attractive for methane conversion to ethylene.
However, high-product yields required operating temperatures above
800°C. Higher operating temperatures led to methyl radicals forming
higher-carbon number products, and undesirable products (CO, CO₂,
and coke) formed.

A similar conclusion was reached by Union Carbide. The Union Carbide
research showed that the development of more active (and selective)
catalysts potentially operating in the 400°C to 600°C range might permit
industrial operation. Although those catalysts showed promising yield
and selectivities, they were significantly hampered by long-term
catalyst stability issues, largely due to the required high-reactor
inlet temperatures.

Siluria has developed and scaled-up a proprietary commercial,
low-temperature OCM catalyst that can operate adiabatically with fewer
stages at several hundred degrees °C lower inlet temperatures, and at
higher pressures. This catalyst produces a favorable yield and has a
standard lifetime for a commercialized process; and it has a relatively
high-space velocity. According to U.S. provisional patent applications,
Siluria’s proprietary catalyst is based upon mixed-metal oxide nanowires.

The heart of Siluria’s process technology is a two-stage adiabatic
reactor. Within the reactor, heat recovery is a significant technology
feature, where the exothermic heat from OCM is used to thermally crack
the by-product and fresh ethane and propane to ethylene and or
propylene. As previously mentioned, a methanation step is employed to
convert co-product CO, CO₂ and H₂ back to methane,
and to enhance overall carbon and energy efficiency of the process.

To enhance the overall carbon efficiency of the process, a catalytic
methanation step is included in Siluria’s process. This reaction
converts all generated CO, and a portion of the CO₂ OCM, back
to methane by using the hydrogen generated in both the OCM and
ethane-propane cracking-reaction sections of the post-OCM section of the
reactor.

The product gas from the OCM reactor moves downstream to the generally
conventional olefins cracking separation, recovery and fractionation
steps. However, Siluria has developed proprietary separation and
recovery technology, including optimizing system hydraulics,
thermodynamics (pressures and temperatures) and heat integration, to
minimize energy consumption.

This is especially necessary given that the methane-per-pass-conversion
is relatively low due to the thermodynamic limitations of the OCM
adiabatic-reaction design. The low methane-conversion-per-pass means
that a large amount of methane must be recompressed and cryogenically
cooled at great capital and energy expense, to recover the olefin
products.

In short, the intersection of a global hydrocarbon resource powerhouse
such as Saudi Aramco, with Siluria Technologies, a small, but
innovative, process-technology company, is expected to yield significant
returns for both entities, but also drive the industry forward in
process improvements, greater carbon efficiency, capital efficiency and
value creation. While these technologies are capitally intensive, the
commercial application of these two revolutionary technologies not only
enables greater carbon efficiency, flexibility and value to the
petrochemical producers, but also a significant route to greater carbon
emission reduction, which has an untold value to chemical producers and
to the sustainability of the industry. This sustainability value will
likely only continue to increase as more consumers, investors and
regulators seek greater environmental stewardship from petrochemical
producers.

For more information on the Siluria Technologies OCM process, the crude
oil-to-chemicals technologies, the IHS
Markit Process Economics Programs (PEP) covering these and other
disruptive technologies, or to speak with Don Bari, please
contact: melissa.manning@ihsmarkit.com.

About IHS Markit (www.ihsmarkit.com)

IHS Markit (Nasdaq: INFO) is a world leader in critical information,
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