Refinery Catalysts–Growth Acceleration Strategies in

the Current Downturn

Christina Priya Dhanuja

Rajaram Vijayan
Technical Insights–Chemicals, Materials, and Food
May 2009
Focus Points

1 The Economic Crisis and the Refinery Catalyst Industry

2 Major Product Suppliers and the Market Scenario

3 Strategic evaluation of the Current Market Dynamics

4 Stimulus Packages–Hope for Recovery?

5 Growth Strategies and Future Directions

2
The Economic Crisis and the Refinery Catalyst
Industry

3
Impact of Crisis on the Global Chemicals and Materials
Market
Europe
Europe
Decline in consumer demand resulted
Decline in consumer demand resulted
in scaling-down of production and
in scaling-down of production and
redundancies across all industries.
redundancies across all industries.
Construction. automotive and real
Construction. automotive and real
estate industries and the finance and
estate industries and the finance and
banking sectors have already been hit,
banking sectors have already been hit,
affecting the chemicals and materials
affecting the chemicals and materials
markets
markets
Russia
Russia
Russia is affected by the
Russia is affected by the
economic downturn but its
economic downturn but its
strong position in oil and
strong position in oil and
gas reserves suggest a
gas reserves suggest a
quick comeback
quick comeback

USA
USA
Housing market collapse affected a wide
Housing market collapse affected a wide
range of chemicals and materials markets Japan
range of chemicals and materials markets Japan
Significant job losses in the industry and Automotive giants are hit
Significant job losses in the industry and Automotive giants are hit
plant closures (Dow, BASF, Rohm & Haas hard by economic recession
plant closures (Dow, BASF, Rohm & Haas hard by economic recession
and others) and resulting drop in global
and others) and resulting drop in global
demand; this directly affects
Decline in consumer demand affects end- demand; this directly affects
Decline in consumer demand affects end- all dependent chemicals and
market pricing, which in turn led to all dependent chemicals and
market pricing, which in turn led to materials markets
volume reduction materials markets
volume reduction

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Impact of recession on the Refinery Catalyst Industry

Decrease/Cancellation
in the number of refinery projects.
Lesser effect on
diesel demand
• Sluggish Oil Demand in US and Europe
has led to refining margins facing short-term pressure.
Global Economic Crisis

• Demand is likely to decline by around1.1 million b/d in US and Europe;

-
Utilization cuts: US refiners (Gulfcoast 2.5%, East coast–5%), EU refiners (0.5%)

Investment in new
refinery capacities doubtful.
Opportunities for catalytic technologies
aimed at higher refinery throughputs
Lower cash flow for
R&D investment

• Credit Crunch-substantial reduction of throughputs

in the US and Europe will become necessary and
this could lead to an additional reduction in utilization of 5%.
• The smaller and more vulnerable refineries will be severely
Opportunities for sulfur
affected by the credit crunch.
removal and aromatics saturation.
Increase in number
of hydroprocessing units.
No effect on Opportunities to develop
Fuel specifications cost-effective catalysts

5
Poll Question

Which of the following strategies do you think will work best for refinery catalyst
companies in the current economic downturn

Collaborations and Technology Partnerships

Investments

Customer Support

R&D and Innovation

Others

6
Major Product Suppliers and Market Scenario

7
Refinery Catalysts–Major Suppliers by Product Types

Suppliers FCC and Additives Reforming Hydro-cracking Hydro-treating Isomerization

Albemarle

Chevron Lummus

BASF

Johnson Matthey

Haldor Topsoe

Criterion

UOP LLC

Sud Chemie

Grace Davison

Strong Market
Low-Market
Presence
Presence Source: Frost & Sullivan

8
Strategic evaluation of the Current Market Dynamics

9
Force Field Analysis–A Strategic evaluation

Current Scenario
Desired Scenario

• Exxon Mobil’s reformate alkylation

Demand for Maintaining
technology coverts benzene-rich
High Octane Number
reformate and light FCC off gas olefins to
high octane gasoline.

Need to improve Manufacture of catalysts for • Albemarle has introduced Ketjenfine

refinery throughput
Increased need for
diesel over gasoline
Regulative and
Legislative standards
specific application segments
Catalyst design challenges
Higher catalyst production costs
770, hydrodesulphurization catalyst to
produce ultra-low sulfur diesel (ULSD).
• BASF has introduced the Prox-SMZ
technology for maximizing distillates to
higher olefins.
• The development of Australian and
Canadian companies to start the mining
process for the production of rare earth
metals.

Poorer accessibility of raw

Use of heavier feedstock
materials for rare earth catalysts

Push Forces Pull Forces

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Challenge Assessment

Recommendations Implementation
Challenges

• Process optimization.
• Improvement on process economics
• Develop alternatives for precious
Higher Production Cost • Develop effective regeneration technologies
metal-based catalysts.
• Enhance the performance characteristics
• Better surface characteristics.

• Structural modification for effective

• Alternating surface properties pore size distribution.
Catalyst Design • Good poison resistant characteristics • Novel chemistry concepts for
Challenges • Better availability of acidic and basic sites on the enhancing activity and selectivity.
surface • Resistance to metals and gases to suit
any type of feedstock.

• Higher selectivity and activity.

• Improvement on process economics
Catalysts for specific • Resistance to metals and gases.
• Suit the needs of different feedstocks
applications • Investment on hydrogen network
• Optimize utilization of hydrogen
optimization.

• Australian and Canadian companies

• Develop other sources of rare earth metal suppliers. have already started mining for rare
Poor accessibility of rare
• Develop alternate materials for replacing rare earth earth metals.
earth metals
metals. • Investment on R&D for futuristic
materials.

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Stimulus Packages–Hope for Recovery?

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Global Response: Massive Government Stimulus

USA
$787 bn American Recovery and Reinvestment Bill
$700 bn bailout rapid interest rate cuts
$23bn support for top three auto companies;
Plan to create 2.5 million jobs by 2011

EUROPE 900
UK: £250 bn bailout
Germany: $67 bn relief package 800
Belgium and Switzerland: Capital infusion Size of Stimulus Packages
ECB: Interest rate cuts
700
France: $50 bn stimulus package U
S B
RUSSIA 600
D i
Support for Russian ruble
l
$20bn stimulus package 500
A l
BRAZIL m i
400
Infrastructure development under PDP (more o o
than $64bn into country’s financial system) u n
300
n s
CHINA JAPAN
Interest rate cuts Interest rate cuts t 200
$586bn stimulus 447bn yen stimulus
(infrastructure, rural) package 100
INDIA SOUTH KOREA
Interest rate cuts Interest rate cuts and 0
$4bn stimulus package efforts to keep currency Brazil China India Japan Korea Saudi UK US
(infrastructure, stable. $11bn stimulus
exports, textiles) package Arabia

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 Stimulus Packages –Drivers for Growth
USA Rest of the World
Opportunities with
$800 million for Biomass projects
• China is expected to announce a 500-billion-yuan
Biorefining
stimulus package for the struggling petrochemical
• Efficient catalytic
industry. The stimulus package includes 100-billion-
technologies for
yuan investment in 2009 and 2010 for oil products
biorefineries–thermochemical
upgrade, and investment of 400 billion Yuan for
platform.
construction of 20 new large-scale petrochemical
$6.3 billion Refining and • Integration concepts with projects.
for energy Energy Efficiency
efficiency biorefining.
• India--The government is working on a plan to
Grants
• Hydrogen production from provide a major stimulus to the chemicals and
• Incentives for
ethanol and biofuels. petrochemicals industry by revising customs/excise
energy efficiency.
• Production of biodiesel from duty on inputs required by the industry.
• Catalysts that resist heavy
contamination. vegetable oil. • The European Union has committed 59% of its
• Technologies for hydrogen • Technologies for stimulus funding to green programs. The Commission
network optimization. conversion of biomass voted a package on renewable energy in December
• Cost-effective techniques derived oxygenates in 2008 setting the 10% renewable fuel goal in the
for energy efficiency. transport sector by 2020. Countries such as
existing petroleum refineries.
• Opportunities for enzyme Belgium, Germany, Poland, and UK also have

production/development. some funds for green investment, hinting at a

• $1 billion energy efficient futuristic, but potential opportunity for large scale
Other Drivers
programs biorefining.
for Rebound
- Alternative fuel vehicles
• Emerging use of underutilized
refinery feedstock (syn gas, castor
$787 billion Stimulus Package oil and glycerin)

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Growth Strategies and Future Directions

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Growth Strategies
Collaborations and
Technology Partnerships
• Collaborations between various entities to develop and
protect new technology-lesser individual investments for all the
entities.
• Benefuel and Seymore Biofuels LLC plan to build the 10
MMgy using Benefuel’s solid catalyst technology.
• Albemarle with UOP and Petrobas to provide FCC catalysts.
• Selective optimization of catalyst design-utilized for different
catalytic activities.
• Decline in base metal prices warrants increase in Research
activities.
• Research for biorefining-for instance, in Canada, Syntec
Biofuels announced the launch of a $2.5 million R&D program
to develop new catalysts for producing biobutanol and
biopropanol from biomass.
Innovation and R&D
Customer Support
• State-of-the-art catalyst technical support systems and technology
help attain a competitive edge–on-site technical support, pilot plant
studies and software supported catalyst performance/lifecycle
predictions.
• Criterion’s CENTINEL & ASCENT Technology–a customized
catalyst system.
• UOP’s quick fix solutions.
• Increase investments
• Feasibility studies for the futuristic investment plans should be
undertaken (heavy feedstocks, hydrogen, LPG conversion, and bio-
fuels).
• Grace has increased its investment in R&D by 61% since 2000 and
introduced a variety of new and next generation refinery catalysts that
help maximize the yield and efficiency of resid feedstock.
Investments
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 Prioritization of R&D Strategies

Objective R&D Positioning

Level 0
Criteria

Industry Degree of Degree of Growth

Requirement Challenge Innovation Potential

Level 1
Criteria

Legislation/ Catalyst Number of Industry Non-Industry Return on

Criticality Time Frame
Regulation Performance Challenges Initiative Initiative Investment

Alternatives

Hydrogen Conversion
Maintain Maintain Conversion of
network of Heavy
Low Sulfur Low aromatics Excess LPG
optimization Feedstock

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 Final Priorities

Level 0 Criteria
Industry
Requirement
R&D Priorities

Growth
Potential

37.6%
Degree of
C hallenge
C onversion of
Heavier Feedstock
8.1%
Degree of
Level 1 Criteria Innovation C onversion of
Excess LPG
13.5%
Legislation/Regul
ation
Hydrogen Network
Optimization
13.4%

Removal of
Revenue
Aromatics
Generation Performance of 27.4%
the catalyst

Removal of Sulfur

0.0% 10.0% 20.0% 30.0% 40.0%

Criticality

Number of
Industry Initiative Challenges
Time Frame Non-Industry
Initiative

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Future Directions and R&D Opportunities

Energy-efficient Conversion of
catalysts and cost- Multi-tasking heavy feedstock–a
effective catalyst high- key industrial
regeneration performance measure
techniques catalysts

Hydrogen Hydrogen network

production from optimization–Long-term
biofuels goal for the refiner

Stringent fuel
specifications– Protocoled biorefineries
Green gasoline Conversion of underutilized
Continued innovation –chemical catalyzed
from bio-oils– feedstock such as castor oil
for sulfur removal and biorefinery processes
existing HT and and glycerin
aromatics saturation HC catalysts

STRATEGIC DIRECTIONS

Current 2030

Green efforts Current industrial measures Long-term opportunities

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What Next!

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Join us at a Growth, Innovation and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth
(www.frost.com/gilglobal)

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company.

Relevant Reports:

Refinery Catalysts--A Strategic Assessment of R&D Trends and Developments

Alert Services: High-Tech Materials Alert, Performance Materials Alert, and Advanced Coating and Surface
Technologies

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For Additional Information

Steve Lee
Strategic Account Manager
Chemicals, Materials and Food, Asia Pacific
(65) 6890 0914
steve.lee@frost.com

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