Links with petrochemicals & other industries

The EU refining industry ensures a reliable supply of feedstock material for the petrochemical sector, which represents more than €240 billion in annual sales and employs close to 800,000 people. More so, the exchange of feedstock and by-products between refineries and petrochemical plants has the added benefit of stimulating competitiveness within large industrial clusters.

REFINING IS CLOSELY INTEGRATED WITH PETROCHEMICALS, CONTRIBUTING TO THE WIDER EUROPEAN ECONOMY

Enlarge imageThis is a symbiotic relationship, as the petrochemical sector “sells back” products to refineries, including hydrogen (used for desulphurisation) and other components used for blending fuels. This interdependence is reinforced by logistical links. For example, many intermediate components like gases are difficult to transport, making short distance exchanges via direct pipeline connections the only economically viable solution. Given their interdependency, many of the EU’s petrochemical complexes are located at or near refining complexes. Out of the 58 steam cracker petrochemical units located in the EU, 41 of them are integrated with refineries located, on average, less than two kilometres away. This close proximity facilitates many other synergies, such as product pipeline interconnectivity, shared ports and common utility services – including energy optimisation.

REFINERS PROVIDE IMPORTANT VALUE TO THE WIDER EU INDUSTRIAL CHAIN

Enlarge imageIn addition to transportation fuels and petrochemical feedstock, the European refining industry also plays an important role in the specialised industrial value chain.

For example, EU-based refineries produce the bitumen used in road construction and roofing, the lubricants used in transportation and industry, the high-quality petroleum coke used in the metals industry, and the many waxes, solvents and other products for which there is both regional and global demand. Many of these specialty products are difficult to manufacture, highly specialised and are typically produced by only a small number of refineries worldwide.

This is why refineries are frequently found at the centre of regional business hubs, with many small and medium-sized businesses located around them. These businesses are often highly dependent on specialty products created by the local refinery, and their proximity to the source ensures secure and easy access to feedstock. If a supplying refinery closes, many of these businesses face a difficult future as purchasing and shipping the necessary feedstock from further away is often impractical or uneconomic.

Although in the industrial, construction and agriculturalmarket segments oil demand is relatively small, it nonetheless plays a valuable role. However, demand is expected to decline moderately in absolute terms from 62 Mt/year in 2010 to 56 Mt/year in 2030 (according to the oil industry research group CONCAWE).

Construction products, such as bitumen

Bitumen is a very technical and sophisticated construction product. Its best known for its high level of viscosity and elasticity, high performance as a glue, being waterproof and 100% recyclable. 80% of all bitumen is used in road asphalt (a mix of 5% bitumen and 95% aggregate). Concrete is its only competitor, but its high maintenance costs and lack of waterproofness limits its competitiveness. About 20% of bitumen is used for roofing and other industrial uses.

Around two-thirds of EU refineries produce bitumen, many of them with specialist units for running particular crudes. Shipping and storing bitumen is expensive because it has to be kept hot to remain fluid. It therefore is dependent on refineries being close to customers. Demand is highly seasonal, with consumption peaking in the summer. There is some intra-Europe bulk shipping, with limited coastal logistics, but most transportation occurs by truck traveling over relatively short distances and directly from the refinery, with “just in time” delivery to the customer.

Annual bitumen consumption in Europe is currently about 20 Mt. Following a limited economic recovery, Eurobitume expects consumption to reach approximately 21 Mt/year, with the demand eventually stabilising at around the 20 Mt level (less than 4% of total refined product).

Other industrial products, such as lubricants, solvents and waxes

On average, lubricants and special products (sulphur, solvents, waxes, coke, etc.) represent approximately 7% of the whole production of an average refinery. CONCAWE’s 2010 figures for special products (excluding lubricants) estimated a demand of 38 Mt/year, with an expected decline to 30 Mt/a by 2030. Lubricants, however, remain relatively stable, enjoying a slight increase from 5 Mt/year in 2010 to 6 Mt/year in 2030.Despite its low volumes, bitumen can significantly contribute to a refinery’s operations. It uses heavy crude components that would otherwise be blended with such distillates as heavy fuel oil or would require expensive, energy-intensive cracking or coking to upgrade into other products.

Lubricants, waxes, solvents and petroleum coke are not produced at all refineries, although they can be of major importance for some speciality refineries. They are often very technical products with high added-value and therefore rely on a value chain with downstream industrial consumers for further processing. The demand for these special products will depend on the continued economic viability of the EU’s downstream consumption industry.

Agriculture

While oil demand in the agricultural sector of OECD countries has remained relatively steady or even declining slightly, over the past decades, in the developing world it has doubled. The IEA definition of agriculture includes energy used in farms, forestry and fishing. Oil in agriculture is a relatively insignificant part of EU oil consumption and is expected to represent an estimated 15 – 12 Mt (2%) of the EU’s total oil product demand between 2009 and 2030.