Chemical Engineering Industries #2: Petrochemicals
Happy Eid al-Fitri 1442 AH and Happy 80th Anniversary of Chemical Engineering Education in Indonesia. Let’s keep on walking together with passion and integrity to develop Indonesia as ‘the world’s barometer of economic growth’ and key player in a cornucopia of industries.
Take a look at the headline. Petrochemical industry is a major part of its manifestation. Why? Well, according to Merriam Webster, petrochemical is:
a chemical isolated or derived from petroleum or natural gas
Therefore, petroleum and natural gas with all their components can be developed into a bounty of different petrochemical products — and by ‘can be’ I mean ‘have already been’. The petrochemical market is a huge market with its upstream industry alone valued at US$441 billion in market size with demand of 61.8 million tons. At the end of the line we also have plastics industry with a market size of US$500 billion at a minimum, reaching up to US$1 trillion.
According to production sequences and raw material, the petrochemical industry can be divided in three: upstream, intermediate, and downstream. The sequence is depicted in something called industry tree chart. Some of these can be accessed here (English) and here (Indonesian).
Industry tree charts are to explain that these industries are connected sequentially: products from upstream industry will be raw materials for intermediate industry and products from intermediate industry will be raw materials for downstream industry.
First up: upstream industry. This starts from raw materials generated by the oil and gas industry (cough Chemical Engineering Industries #1 and #1X cough). These raw materials are then processed into separate molecules with two main groups: olefin (alkene) such as ethylene, propylene, and butadiene; and aromatics such as benzene, toluene, and paraxylene. Other products would be methanol and synthesis gas (hydrogen + carbon monoxide).
Therefore, some key players in this upstream industry are vertical integration efforts of oil and gas key players. For example, Pertamina recently acquired Trans-Pacific Petrochemical Indotama and its parent company, Tuban Petrochemical Industries. Pertamina itself is a veteran in this industry, especially in ethylene, propylene, benzene, and refrigerant production.
The upstream industry generates raw materials for intermediate industry. In this case, this industry comprises products not naturally present in large amount while also not specialized end-use products. This industry’s key players are dependent on the specific products sold considering the variety. Some of them are Polytama Propindo, Sucofindo, Asahimas, AGC, and Dow Chemicals in the vinyl chloride monomer (VCM) industry; Chevron Philips Chemical Company and ENI in the styrene production; also Shell and Lotte Chemical in ethylene glycol industry.
After that, intermediate industry creates products for downstream and end-use industry. This stream also generates variety of products, such as plastics from polymers, synthetic rubbers from butadiene and styrene, and fertilizers from carbon dioxide, ammonia, and other substances. Key players in these industry includes Chandra Asri, Lotte Titan, Asahimas, Mitsubishi Chemicals, Pertamina, and many others in the plastics industry; and also Pupuk Indonesia Holding Company in the fertilizer industry.
Besides the sequence-based grouping, petrochemicals can also be grouped based on molecule types. In this review, for example, we can find groups of ethylene, propylene, butadiene, benzene, toluene, xylene, and methanol. Regarding methanol: it is derived from synthesis gas commonly present in natural gas and coal industries. It will be derived in turn to produce fuel ingredients (dimethyl ether to replace LPG, MTBE to increase octane number), acetic acid, and polymers such as Terylene.
This industry’s huge numbers and development can’t be separated from its birth in 1835 when a Frenchman named Henri Regnault discovered that vinyl chloride under the burning sun can turn into a polymer: polyvinyl chloride — PVC. Subsequently, other petrochemical compounds were to be discovered left, right, and center such as polystyrene, bakelite, polyurethane, and Kevlar. Simultaneously, the industry starts to grow in the 20th century, one of those being acetylene commonly used in welding, and turbocharged by the Second World War which increased synthetic rubber demands.
In conclusion, petrochemical is an industry (or collection of, depending on how you’d view it) producing materials derived from oil and gas industries. Petrochemical was found in 1835 with the discovery of PVC and developed in war times. Because of the definition, petrochemical industry becomes a huge market, both in size and coverage. This industry would then be categorized based on sequence of production (upstream — intermediate — downstream) and chemical types (ethylene, propylene, butadiene, benzene, xylene, toluene, butadiene, methanol, etc).
Upstream industry produces basic chemicals such as ethylene, propylene, butadiene, benzene, xylene, toluene, butadiene, and methanol to be further developed by the intermediate industry. It has a market size of US$441 billion and demand of 61.8 million tons. The intermediate industry subsequently produces substances not commonly present in nature such as vinyl chloride monomer (VCM), MTBE, and dimethyl ether. Finally, downstream industry creates end-use products such as synthetic rubber, plastic, and fertilizer. The plastic industry has a huge market on its own with US$560 billion and would continue in current times as petrochemical usage increases.
