With the Middle East’s ethylene business under threat from US competition, we talk to AspenTech to find out how focussing on operational excellence could safeguard profit margins for the region
As the world’s population soars past the seven billion mark, global demand for plastics is booming. Surges in demand in Africa and Asia are placing significant demand on global supplies, and the Middle East is well placed to take advantage of this fact, as Ron Beck, engineering director at AspenTech, points out.
“Ethylene is one of the crucial building blocks of the petrochemical industry. The increasing requirement for packaging, piping, plastic coatings, paints and similar goods means that low cost production for polyethylene and other ethylene derivatives is in demand. By 2017, the Middle East could add almost six million tonnes per year of ethylene capacity,” he said.
While demand is booming and investment in increased capacity is being made throughout the region, the Middle East is facing one problem; increased US competition. For years the region enjoyed a mighty feedstock advantage over its transatlantic competitors, by virtue of its easy access to cheap, reliable feedstock supplies.
Speaking exclusively to RPME at the recent Ethylene Middle East Technology Conference in Bahrain, AspenTech’s senior vice president for the Middle East and North Africa said that the threat to the Middle East’s market share of ethylene sales from US producers was a real one.
“The big change has been that until 2005-2006, the Middle East had a significant advantage in ethane feedstock pricing over the rest of the entire world, including the US. With the advent of the US shale gas production and the price of natural gas falling, that advantage is not as pronounced as it was.
This has given birth to a whole new chemical industry based on gas crackers in the US, so the construction levels there are approximately matching the construction levels here in the Middle East’s ethylene production sector,” he said.
The Middle East currently produces around 20% of the world’s ethylene. The US shale revolution has effectively levelled the playing field in terms of feedstock price advantage. While the cost of obtaining ethane feedstock may have been around 50% cheaper in the Middle East versus prices in the US in 2005, that cost advantage has now been diminished to as little as 10%.
It now behoves upon the Middle East’s ethylene producers to become more competitive and squeeze every last drop of profit from their endeavours.
“This region has a great advantage in that the plants are newer and they are coming onstream with the latest technology on board. At the same time, however, they have to get their operational excellence ironed out and they have to operate them reliably, consistently and optimally and that is the challenge for the Middle East region going forward,” said Hague.
A huge part of streamlining the ethylene production process is selecting the right feedstock. The majority of the Middle East’s plants can process a wide range of feedstocks including LPG, propane, naphtha and ethane, with each feedstock being suited to the production of a particular end product. Increasing the region’s production of higher value products means switching from lighter feedstocks such as ethane, to heavier ones such as naphtha.
Inevitably, technologies are being developed that optimise feedstock blending and selection processes. Process automation can go hand in hand with raising operational excellence in the region.
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“To gain an edge in ethylene production, the ability to design, manage and control an ethylene facility to optimise feedstock, energy use and conversion is critical.
Middle Eastern companies are embracing advanced technologies to maximise production, reduce costs and energy consumption, whilst establishing facilities that yield high-value petrochemical derivatives that deliver less volatile margins,” explains Beck in his recent paper The Crucial Building Blocks of the Middle East’s Petrochemical Sector.
However, implementing operational excellence across the sector is not as simple as purchasing a software solution, as Hague points out. Companies need to ensure that their staff are sufficiently well trained to manipulate the software to its peak levels of performance.
“The Middle East is investing a tremendous amount in technology. The challenge is to develop the internal cultures and the personal expertise of applying the technology to get the most out of them. Producers can’t just throw money at the situation, buy the tool and expect it to do everything for them.
It requires people to understand the use of the tools. It requires people to understand the uses of the plant and then merge those two sets of information. It also requires a set of continuous business processes that demonstrate that you are not doing this as part of a one off solution. You are doing this as part of an ongoing process that you are going to repeat over and over again,” he said.
Driving operational excellence in the region is a key challenge across the full spectrum of the downstream oil and gas sector, and ethylene production is no exception. It is crucial that new recruits are given the highest standards of training so that operational excellence is implemented at the beginning of a graduate’s career, rather than being added as an afterthought.
“There is a lot of new ethylene capacity coming online throughout the Middle East. The combination of the newness of these operations and the organisations tasked with operating these plants as well as the influx of recently graduated local engineering staff presents operators with a sizeable challenge in terms of gaining understanding of the facility, developing strategies to optimise production and educate and train new teams to become the best in their class,” said Beck.
Ethylene producers are not only looking at ways to provide new staff with the highest quality training but are also trying to ensure that knowledge and best practice are not lost when career technicians approach retirement age.
“A big part of the capabilities that we provide with our tools is that the knowledge that has existed in the greying workforce is captured in the software tools automated processes, based on how the company sets up its business practices. As people are retiring from the industry, you still have your scheduling systems and planning systems that have captured that knowledge over time and can help to transfer the knowledge to the next generation,” said Hague.
In this way, AspenTech believe that operational excellence and knowledge preservation and retention can be driven by innovations in technology. Recently voted the 11th most innovative company in the world by Forbes, AspenTech are at the forefront of delivering that innovation.
“I am proud of the way that we have focused our business around a specific set of customers. Just about every chemical company and every refining company in the world is our customer. Right from the beginning, our vision at AspenTech was that very process plant in the world would use our software to optimise their performance and that’s the objective that we have been pursuing ever since,” said Hague.
When asked about the region’s prospects for defending its market share against producers in the US, Hague remains optimistic.
“I think that we will continue to see significant expansion in the region. The expansion in chemicals is probably going to slow down a bit but I think you will continue to see pretty aggressive expansions taking place. I think that you will see more integration between refineries and chemical plants, which will result in a greater degree of operational complexity.
I think we will continue to see the operations side of things getting better and better. There is definitely a focus on that in the region right now. That that needs to happen and you’ve got some pretty significant people in place who have a real vision about where they want the region to go.”
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Check out Ron Beck’s full article The Crucial Building Blocks of the Middle East’s Petrochemical Sector at
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