CONTENTS The Aromatics-benzene, toluene, xylene, naphthalene___. Synthesis gas-hydrogen and carbon monoxide_____. (V) INTRODUCTION Petrochemicals are a group of materials made from oil, coal, or natural gas. Some are used as is-ethylene glycol for antifreeze, for example-but most are processed further into a tremendously wide range of products. The most important product categories derived from petrochemicals are: Plastics and resins. Fertilizers. Pharmaceuticals, Pesticides, Dyes. Solvents, plasticizers, and specialty organic chemicals. Although petrochemicals can be made almost interchangeably from coal, oil, or natural gas, the fact is that they are not. Some 95 percent are derived from oil and natural gas, and about 80 percent of that is from oil. What comes from coal comes as by-products of coking of coal for iron and steel production. Fifty years ago, when the organic chemicals industry was young, some 80 percent of the organic chemicals produced came from coal. Given enough lead time that could happen again, provided that the economic forces involved could be modified to favor coal. Today, it is not economically feasible to process coal primarily for chemical feedstocks. Petrochemical processing The thousand or more petrochemical products are pyramided from a relatively small number of basic feedstocks derived from the raw material-coal, oil, or gas. The basic feedstocks are carbon monoxide, hydrogen, ethylene, acetylene, propylene, the butylenes, and the aromatics-benzene, toluene, xylene, and naphthalene. The first two are made by cracking natural gas and as by-products in several oil refinery cracking processes. The next four are made by cracking components found in both natural gas (natural gas liquids, for example) and in oil (light ends and naphtha). The last four are derived directly from coking of coal and indirectly (for the most part) from oil by the process of catalytic reforming. Every petrochemicals plant takes in some or all of these 10 basic feedstocks and reacts them with each other and with additional raw materials to make its products. The product mix from plant to plant varies widely, depending on its owner (is its major product synthetic rubber, for example, or synthetic fibers?), its location, and its raw materials mix. Thus, each petrochemicals plant is different in some major ways from all others, although it uses similar process steps and makes similar products. Most petrochemicals plants are owned by oil companies (seeking to use oil refinery by-products), chemical companies (seeking to integrate backward toward raw materials), or major end product com panies (tire makers, for example). The industry is capital intensive; the process units are large and must run near capacity to be profitable. Figure 1 is a simplified depiction of how petrochemicals are derived from coal, oil, and natural gas through the 10 basic feedstocks. The petrochemicals industry The U.S. petrochemicals industry has annual sales of more than $20 billion. It employs about 300,000 people in about 2,000 plants. It is concentrated near the oil refining industry and is thus heavy along the Gulf Coast and the middle Atlantic States. The significance of this industry is larger, however, than these numbers would indicate. The thousand or more petrochemical products are used as input in more than a hundred thousand fabricated products. During the height of the petroleum embargo last year, Arthur D. Little, Inc., estimated that a sustained 15 percent reduction in the output of one component of the petrochemicals industry, organic chemicals, could result in a loss of 1.6 to 1.8 million jobs in consuming industries and a loss of domestic production value of $65-70 billion annually. Although this specific estimate includes many assumptions that might be argued, it demonstrates the pervasiveness of petrochemical products and the important role they play as components of a host of industrial and consumer products. During the Arab oil embargo last winter, supplies of raw materials available to the petrochemicals industry were seriously affected, both by the curtailment of oil imports and by the government's allocation programs operating on top of a very complex set of interrelationships among petroleum companies, chemical companies, and users of petrochemicals. Currently, the petrochemicals industry is essentially recovered from the crude oil shortage problems and is back in the more-familiar, but historically unusual (for it), position of capacity shortages resulting from market growth coupled with a recent reduction in capital investment for expansion. Over the short term, some of the shortages can be handled via international trade, while demand can be dampened by increases in prices. These mechanisms are currently working. Over the long term, however, the petrochemicals industry faces new problems deriving from oil price increases, inflation, and shifting economic forces. Its response includes large portions of traditional industry wisdom-invest in expansion, turn to the petroleum industry for raw materials, relate to European programs. But it is also tentatively testing some departures from past practice-sharply raising product prices, concentrating primarily on high-profit items at the expense of volume, turning to the mid-East for both new sources of crude oil and plant locations for new capacity. And it is recognizing that it will have to accept increased processing costs from now on, despite its long history of economy through scale of operations plus new process technology. The following sections of this analysis examine six petrochemical groups and outline their relationship with the petroleum industry. The concluding section briefly describes the outlook for petrochemicals. |