By Fu Xiangsheng, Vice Chairman of China Petroleum and Chemical Industry Federation
Editor's note: Recently, the High-tech Development Conference of Petroleum and Chemical Industry & 2023 China Downstream Technology and Markets International Conference was held. Fu Xiangsheng, Vice Chairman of China Petroleum and Chemical Industry Federation (CPCIF), delivered a report entitled "High-quality Development, Transformation and Upgrading of the Petrochemical Industry". Blow for readers’ reference is an excerpt and edition from the report.
A solid foundation set for the high-quality development of the petrochemical industry
Since the “13th Five-Year Plan” period (2016-2020), China's petrochemical industry has seized new opportunities of the new economic cycle brought by the global economy and petrochemical industry. On the one hand, China has been accelerating the elimination and orderly withdrawal of backward production capacity. On the other hand, state-owned, private, and multinational companies have been racing ahead together, accelerating the transformation of old equipment, constructing new refining and chemical integration equipment and new bases. Thereby, the performance of petrochemical industry has been continuously improved and optimized in many aspects including the overall scale, industrial concentration, technical level, layout structure, industrial structure, and product structure; China’s position as a big petrochemical nation has been further consolidated; and the position and role of petrochemical industry, as an important pillar industry of the national economy, have become more prominent. Mainly manifested in:
First, the operating performance reached a new high. The petrochemical industry and enterprises have highlighted high-quality development, and have made significant progress in industrial layout optimization and structural adjustment, implementation of innovation-driven strategies and green and low-carbon development, deepening and expanding international cooperation and exchanges, and cultivating modern petrochemical industry clusters.
Last year, the economic operation of China's petrochemical industry achieved another success amidst complex international environment, Covid-19 pandemic and significant economic slowdown globally. The entire petrochemical industry achieved operating income of RMB16.56 trillion, a year-on-year increase of 14.4%; the total import-export volume was US$1.05 trillion, a year-on-year increase of 21.7%, creating a new record high after 2021. The total profit, last year, was RMB1.13 trillion, a slight decrease of 2.8% year-on-year. Nevertheless, it was the second consecutive year with profit remaining above RMB1 trillion, maintaining a historically high level. It was not easy to achieve such operating performance under multiple challenges, uncertainties and extremely difficult circumstances.
Second, the scale of volume had a leapfrog development. China, for many years, has ranked first in the production capacity and output of bulk basic chemicals, and with the commission of the refining and chemical integration units of Hengli (Dalian Changxing Island) Industrial Park, Zhejiang Petrochemical (Zhoushan) Co., Ltd., Shenghong Refining & Chemical (Lianyungang) Co., Ltd. and refining and olefin units of Sinopec Fujian Gulei Petrochemical Co., Ltd., Sinopec Hainan Petrochemical Co., Ltd., Sinopec Ningbo Zhenhai Refining & Chemical Co., Ltd. Phase II, as well as PetroChina Guangdong Petrochemical Co., Ltd., China achieved new leapfrog developments in the concentration of petrochemical industry, the clustering of petrochemical bases, the overall technical level and core competitiveness.
On October 26, 2022, as PetroChina Guangdong Petrochemical Co., Ltd. started production, China’s total refining capacity reached 920 million t/a. Among the units, the number of refineries above 10 million tons increased to 32.
According to the statistics of the Olefin Special Committee, China's ethylene production capacity has reached 46.75 million t/a with the common development of refining and chemical integration, coal-to-olefins, and ethane cracking units.
Third, the international influence has been further enhanced. The global petrochemical industry and petrochemical peers in developed countries such as the United States, Europe and Japan are all very concerned about the development of China's petrochemical industry. China's petrochemical industry has an increasing influence and voice on the global petrochemical stage. In particular, China’s increase in major petrochemical products has become a major contributor to the Asia-Pacific and world petrochemical industries, accounting for more than 40% of the world's chemical market share over the years.
Fourth, the competitiveness of enterprises has been increasing. In recent years, a group of key petrochemical companies such as PetroChina, Sinopec, CNOOC, and Sinochem have made headways every year on the world's top 500 list. A group of new entrants such as Hengli Group Co., Ltd., Zhejiang Petrochemical Co., Ltd., and Shenghong Holding Group have strong market striving spirit; enterprises such as Wanhua Chemical Group Co., Ltd., Zhejiang NHU Co., Ltd., and Shandong Dongyue Chemical Co., Ltd. have outstanding main business, strong innovation ability and core competitiveness, high management level, and sufficient development potential. All of them have achieved remarkable result in reinforcing the main business and core competitiveness, strengthening innovation and international operation.
Fifth, the fruits of petrochemical base, industrial park and industrial clustering have emerged. According to the latest statistics from the CPCIF Chemical Park Committee, there are 643 petrochemical bases and chemical parks across the country, of which 593 have been certified by provinces, autonomous regions and municipalities, and 53 have an output value of more than RMB50 billion. The revenue of the enterprises in the park accounts for more than 50% of the industry's total revenue. Petrochemical parks are playing an increasingly important role in industrial agglomeration and industrial chain coordination, intensive use of land, resource recycling and energy mutual supply, centralized management and sharing of public works, etc. At the same time, significant results have been achieved in the construction of smart chemical parks and green chemical parks, and the chemical park has become an important platform for the high-quality development of the petrochemical industry.
According to the national planning, the eastern coast has formed petrochemical bases and chemical parks based on seven major petrochemical industry bases and the integrated refining and chemical industrial chain; the northwest region with rich coal resource has formed modern coal chemical industrial parks based on four modern coal chemical demonstration bases; other riverside, coastal and inland areas also scatter a group of professional chemical parks that have been certified by provinces, autonomous regions and municipalities. The scale concentration, industrial chain coordination and overall management of chemical parks have been significantly improved. Many chemical parks are exploring a high-quality development path of industrial clustering, intelligent management, green development, and integrated operation.
Challenges amid the high-quality development of petrochemical industry
1. The bottleneck of resource constraints is tightening. China is rich in coal, poor in oil and short in gas, while crude oil is the raw material for the petrochemical industry. In 2022, China's crude oil production, for the first time, reached 200 million tons in six years, and its import volume exceeded 500 million tons. During the 13th Five-Year Plan period (2016-2020), China ramped up the import volume of crude oil and natural gas year by year. The dependence on foreign crude oil continued to rise. In 2020, the import exceeded 540 million tons, and the foreign dependence hit a new high of 73.5%. In 2022, the dependence fell back to 71.2%; in 2022, the dependence on foreign natural gas dropped from the high point of 44.4% to 40.2%. However, the dependence on foreign crude oil remains high, so the bottleneck of resource constraints still exists.
2. The shortcoming in weak innovation capability is becoming more and more apparent. It is the biggest shortcoming and constraint for high-quality development and the realization of the goal of becoming a petrochemical power. In recent years, a number of major achievements have been made in key fields such as oil and gas exploration technology, new chemical materials, special chemicals, and modern coal chemical industry, and a series of core technologies in new coal gasifier and gasification technology, million-ton ethylene complete set technology, organic silicon and fluorine materials, etc. have made breakthroughs one after another. However, we should also notice that the innovation capability of the industry is not strong enough, especially in the R&D investment, new chemical materials and high-end chemicals where we have more evident gaps.
3. Structural contradictions are difficult to fundamentally change. On the one hand, the raw material structure leans too much on one resource. China so far still has a considerable proportion of chemical products using coal as the raw material, such as more than 70% of synthetic ammonia and methanol uses coal as raw material; more than 70% of polyvinyl chloride uses calcium carbide acetylene process which uses coal as raw material; 43% of ethylene glycol uses modern coal chemical industry route, so does acetic acid, formaldehyde and polyoxymethylene, 1,4-butanediol (BDO), polyvinyl alcohol (PVA) and so on. Thus, the leaning problem of raw material structure has long been related to the resource itself.
One the other hand, the product’s structural contradictions are more prominent. China has more than 20 bulk basic chemical products ranking first in the world for many years in the production capacity and output, while special chemicals and functional chemicals, new chemical materials and the high-end composite materials, high-performance fibers, and high-end membrane materials have been relying on imports for many years.
4. The "dual carbon" goals and tasks are challenging. In 2020, the total energy consumption of China's petrochemical and chemical industries was 685 million tons of standard coal, and the total carbon emissions was about 1.384 billion tons of carbon dioxide equivalent, accounting for about 13% of the total emissions in the industrial sector. Coal chemical industry accounts for a large proportion in China's petrochemical industry. In the process of synthesizing oil products or producing chemicals from coal, the carbon emissions are much higher than those from natural gas and petroleum. Taking synthetic ammonia and methanol as an example, 1 ton of synthetic ammonia generates 4.5 tons of the carbon dioxide and 1 ton of methanol generates 2.9 tons of the carbon dioxide when taking coal as raw material, while they will be 3.0 tons and 1.1 tons of carbon dioxide emissions respectively if taking natural gas as raw material. That is to say, synthetic ammonia and methanol will discharge 50% and 1.6 times more respectively. According to calculations, the carbon dioxide emissions of several representative products of modern coal chemical industry are also high: the carbon dioxide emission of direct coal-to-oil is 5.8 tons/ton, the indirect coal-to-oil is 6.5 tons/ton, and coal-to-olefins is 11.1 tons/ton, coal-to-ethylene glycol is 5.6 tons/ton. It can be seen that the carbon emission of chemicals produced with coal as raw material is higher than that of natural gas or petroleum. Therefore, coal chemical industry is facing more severe pressure and challenges in the implementation of the "dual carbon" strategy.
High-quality development, transformation and upgrading of petrochemical industry
1. High-quality development of the petrochemical industry and transformation and upgrading of traditional industries
The first is the high-end transformation and upgrading of traditional industries. High-end manufacturing and strategic emerging industries are inseparable from the support and guarantee of new chemical materials and their composite materials, as well as functional chemicals. And most of the high-performance materials and functional chemicals have benefited from the transformation and upgrading of traditional products. On May 5, the first meeting of the 20th Central Finance and Economics Committee, General Secretary Xi Jinping emphasized that it should insist on promoting the transformation and upgrading of traditional industries and should not be simply withdrawn them as low-end industries.
The second is the digital and intelligent transformation of traditional industries. With its rapid development, wide range of radiation and unprecedented influence, the digital economy is becoming a key force in reorganizing global factor resources, reshaping the global economic structure, and changing the global competitive landscape. The digital economy has become an important starting point for countries to seize the leading strategic position of development and create new advantages amid international competition.
The urgency and reality of accelerating digital and intelligent transformation are even more critical for the high-quality development of the petrochemical industry, especially the traditional basic petrochemical products, traditional petrochemical bases, old petrochemical enterprises and equipment.
The third is the biochemical transformation of traditional petrochemical raw materials and products. That is to say, the production of petrochemical products and materials should be transformed from petroleum, natural gas, coal and other fossil resources to biomass resources as raw materials, and the producing process of petrochemical products and materials should be transformed into biotechnology.
2. Transformation of raw material structure to light-weight
The first is to lighten the raw materials of hydrogen production. With the advancement of technology, it can be further advanced to green hydrogen, and then the carbon emission problem will be fundamentally improved.
The second is to lighten the raw materials of the refining unit.
The third is to lighten the raw materials of olefin. Ethane cracking to ethylene has attracted many domestic enterprises’ attention and has been included in the scope of proposed construction and expansion. However, due to the resource constraints, only two units, PetroChina in Bazhou and Changqing, were included in the pilot demonstration. At present, only seven plants have been completed and put into operation including PetroChina, SP Chemicals (Taixing) Co., Ltd., Wanhua Chemical Group Co., Ltd., and Zhejiang Satellite Petro Chemical Co., Ltd. The production capacity of ethylene produced from ethane or mixed light hydrocarbons is 6.18 million t/a, accounting for about 13.2% of China's total capacity.
The oxidative dehydrogenation of propane (ODP) and other light hydrocarbons to propene has been rapidly constructed and there are more than 20 sets of units having been built and put into operation, with a production capacity of 15.341 million t/a, accounting for 27.1% of China's total propylene production capacity. In the next five years, it is planned to build 57 new propylene units, with a total new capacity of 36.04 million t/a. Among them, the newly-added units with propane or light hydrocarbons as raw materials will account for 59.6% and their production capacity will account 65.4% of the total.
3. The product structure is undergoing transformation during the process of reducing oil and increasing chemicals
The current situation of "surplus of bulk basic products and shortage of high-performance materials and specialty chemicals" in the petrochemical industry requires to pay attention to the following matters:
The first is the major principles in reducing oil and increasing chemicals. Specifically, when selecting technical routes and designing plans for oil refining units, the product plan must "produce less refined oil and more new chemical materials and fine chemicals". According to the current situation of the refined oil consumption market, "oil reduction" should not only be based on the unified large market, but also based on the regional consumer market. Efforts should be made to reasonably regulate gasoline, coal and diesel; produce less amount of diesel; moderately produce gasoline, and reasonably produce more jet fuel and low-sulfur bunker fuel. Therefore, the Action Plan for Carbon Peak in Industrial Sector has made it clear that by 2025, positive progress should be made in reducing oil and increasing chemicals, and the output of refined oil for new refining and chemical integration projects should be reduced to below 40% in the crude processing volume.
The second is the important path to achieve the goal of reducing oil and increasing chemicals. The refining and chemical units must first produce more olefins, because olefins are the basic raw materials for the synthesis of chemical materials and a series of organic chemicals. Judging from the latest production of Hengli (Dalian Changxing Island) Industrial Park, Zhejiang Petrochemical (Zhoushan) Co., Ltd., Shenghong Refining & Chemical (Lianyungang) Co., Ltd.’s refining and chemical integration units, the output rate of refined oil can be controlled below 40%.
The third is how to reduce oil and increase chemicals in the refining and chemical units and old petrochemical bases that have been put into operation. The eastern coastal petrochemical bases and some old petrochemical bases with more than 10 million tons of oil refining, high concentration of scale and high management level should base on the existing scale of refining and chemical integration and the industrial chain, make full use of the light hydrocarbon raw material which is the by-product of the established and to-be-built refining and chemical integration unit, carefully study and demonstrate the paths and measures of reducing oil and increasing chemicals, enhance the supply capacity of natural gas, ethane, propane and other raw materials, and increase the proportion of low-carbon raw materials.
4. The production process is undergoing transformation in a green and low-carbon environment
First, energy-saving is a primary measure for green and low-carbon in the process.
Petrochemical enterprises should vigorously promote clean production technology transformation and recycling transformation, promote advanced and applicable technologies in energy-saving, low-carbon, water-saving and comprehensive waste utilization technologies, and attach great importance to the economical and intensive use of various resources.
Second, electrification is one of the paths that can lead to green and low-carbon process. That is to replace coal and gas power with green electricity, or replace traditional steam cracking with green electricity cracking, and replace steam turbine with green electricity drive. These are all effective measures for the green and low-carbon production process, and are currently being demonstrated and explored at home and abroad.
Third, process-simplification is an important path to green and low-carbon process.
In recent years, the process-simplification technology that has received the most attention from colleagues in the industry and has gained important achievements is: microchannel continuous flow reactor and its technology which has been applied in the industrial production of many fine chemicals and pharmaceutical chemicals during the nitrification, diazotization, hydrogenation and chlorination. In the future, microchannel reaction technology will have wider applications in the preparation and reaction of fine chemicals, pharmaceuticals and their intermediates.
5. Transformation of high-quality development driven by innovation
The first is to innovate for the self-reliance and self-improvement of science and technology.
It is necessary to give full play to the leading and supporting role of backbone enterprises, not only to pay attention to the actual needs of the industry, enterprises and industrial development, but also to grasp the frontier of world scientific and technological progress, and the needs of major national projects and key projects, power up to organize and carry out breakthroughs in original and leading technology, resolutely win the battle of key and core technologies. At the same time, backbone enterprises and innovative enterprises should also strive to undertake major national scientific and technological projects with strategic, overall and forward-looking perspectives, not only to enhance independent innovation capabilities, but also to make more contributions to the country's self-reliance and self-improvement in high-level technologies, and to take full advantages of being the central role in the high-quality development.
The second is to innovate for "double carbon" goals. In order to achieve this strategic goals, the current international and domestic are putting much more of a focus on the innovation of resource utilization of carbon dioxide, which is to realize the carbon capture, utilization and storage (CCUS) of industrial carbon dioxide emissions through innovation, and then take carbon dioxide as raw material to synthesize methanol and its organic chemicals, polymers, etc.
The third is to innovate for the future. The innovation of green hydrogen is also a focus at home and abroad.
Innovation is the key to truly realize the industrialization of green hydrogen and make it economical. The focus of innovation is wind & solar energy to produce hydrogen where Mitsubishi Chemical, the University of Tokyo, and the University of Science and Technology of China have all achieved phased results. These innovations will surely play a key role in the high-quality development, transformation and upgrading of the petrochemical industry in the future.
