Cutting edge technology that could turn excess oil supply into petrochemicals shows promise to more than double profits for operators, an economic assessment by IHS Markit has found.

Crude oil-to-chemicals (COTC) process technology using a design by Saudi Arabian Oil Co., aka Aramco, is seen increasing net margins to about $17/bbl from the typical $8.50 now earned by refining/petrochemical companies, a scenario analysis by the consultancy said.

“This innovative new COTC-process technology is still in its infancy, but, according to our independent analysis, if commercially proven and built to world-scale, it has the potential to more than double the value refiners can unlock from a barrel of oil,” said the report’s co-author Don Bari, vice president of chemical technology at IHS Markit.

The firm’s Michael Arné, executive director of emerging technologies research, co-authored the report.

“This process is both transformative in terms of its potential, and timely, as refiners face declining future demand for gasoline and fuel production due to carbon emission mandates, greater vehicle fuel efficiency, and an increasing penetration of electric vehicles,” Bari said.

Global chemicals demand is growing at a significantly higher rate than fuel demand, he noted, so the desire to produce higher-value chemicals from lower-value feedstocks like crude and ethane is spurring interest in disruptive technologies.

COTC is seen as one of the most disruptive of the new technologies underway because projects could fuse volumes from a refinery and petrochemical plant together in a fundamentally new way.

“This goes well beyond the state-of-the-art refinery petrochemical integration by implementing new reconfigured unit operations into a refinery,” Bari said. “The objective is to shift the product slate derived from a bbl of oil to a range of 60% to 80% chemical production and nonfuel products, up from the traditional range of 10% to 15% or so, in order to significantly increase the value of crude oil reserves and provide demand security in Aramco’s case.

“This transformative COTC technology goes beyond even the most ”highly’ integrated sites today that are pushing 30-40% chemicals production with traditional approaches,” he said.

The research team was motivated to embark on a deeper analysis of COTC following an announcement last year by San Francisco-based Siluria Technologies, which produces olefins from natural gas.

Aramco invested in Siruria, and the companies are working to maximize chemical production.

Bari said the Siluria process, which produces olefins through oxidative coupling of methane (OCM), is expected to further allow Aramco’s future COTC facilities to create more value by converting low-value off-gases that are mostly methane into olefins products.

“One of the reasons these crude oil to chemicals technologies are of such great interest is because they are potentially so disruptive to the industry’s current processes and capabilities,” Arné said. “This is due, largely, to the scale involved and what it will deliver in terms of volumes.

“In time, COTC could literally disrupt the global chemical balance. For that reason, everyone in the industry is interested in this technology — energy producers, refiners, chemical producers, technology providers, and, of course, investors.”

Aramco in March agreed to take a 70% stake in Saudi Basic Industries Co., the state-run chemical arm, combining the world’s largest oil producer by volume, with the world’s fifth-largest chemical company by sales.

Aramco plans to increase its global refining capacity to 8-10 million b/d by 2030 from the current 4.9 million b/d.

“If you consider that of the increased refining capacity Aramco proposes, 2-3 million b/d will be used to produce chemicals, the potential additions to the global chemical balance are quite extraordinary to contemplate,” Bari said.

In its current analysis of the COTC technologies, researchers assessed only the potential economics of the Aramco COTC process because of its near-term viability at scale. The Siluria process is considered too early in development to determine economics. The assessment, however, took the OCM process into consideration to determine increased yields through integration.

IHS Markit’s base case shows a 48% yield to prime olefins, Bari said, using 3Q2018 Saudi basis. “The results of the analysis significantly exceeded what we initially expected. It was one of those ”wow’ moments as a researcher and chemical engineer, when you have to run the numbers again to believe what your eyes are seeing.

“While the technology is still new, in my 40 years in the industry, I haven’t witnessed any technology that has the potential to unlock such value and truly revolutionize the refining and chemical industries as this COTC technology. At the same time, it does so in a manner that is less carbon intensive.”

IHS Markit noted that the process analysis is “consistent” with some Aramco patents, but the COTC process concept remains speculative. Additionally, the Siluria OCM design basis “represents a next-generation conceptual process with conversion that is higher than that currently understood to have been demonstrated by Siluria.” The process concept was developed independently of Siluria.