This brief introductory chapter provides general information about the LVOC industry in terms of its integration with the upstream and downstream chemical processes, macro-economics and some the main factors that affect the sector.
Industrial organic chemistry is characterised by the production of a huge variety of compounds in a step-wise manner from a few natural sources of carbon. This production pyramid is shown schematically in Figure 1.1 using typical chemical industry nomenclature.
Fine products & polymers Intermediates & Monomers
Base Materials Raw Materials
Natural Sources
Generic activity
Separation
Transformation
Functionalisation
Synthesis 3
10
50
500
70000 Approximate Number of Substances
Figure 1.1: Structure of Industrial Organic Chemistry Based on figure by Griesbaum in [CITEPA, 1997 #47]
The initial separation steps are carried out in refineries where a few natural sources of carbon (crude oil, natural gas and coal) are used to produce a limited number of high volume raw materials for the chemical industry (e.g. naphtha). Some 95 % of organic products are today obtained from oil and gas. Relatively few organic products come from the (declining) coal route and the (expanding) area of renewable biomass.
Refineries export these raw materials to petrochemical plants where they are transformed by a complex combination of physical and chemical operations into a variety of base materials (e.g.
ethylene, C3-C4 olefins, BTX aromatics, synthesis gas and acetylene).
The base materials are subjected to further sequences of processing which introduce functional groups to produce an even greater number of intermediates and monomers (e.g. alcohols, aldehydes, ketones, acids, nitriles, amines, chlorides).
The intermediates are converted into in a large variety of fine products and polymers with high levels of functionalisation and high commercial value (e.g. solvents, detergents, plastics, dyes, and drugs).
This production pyramid covers the whole spectrum of the organic chemical industry and the distinction between the tiers is often very subtle. However, the BREF on LVOC can be generally considered as covering the middle three tiers of the pyramid in Figure 1.1 (i.e. taking raw materials to produce base materials, intermediates and monomers). They may also be known as ‘commodity’ or ‘bulk’ chemicals.
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2 Production of Large Volume Organic Chemicals
The complexities of actual production mean that this simple delineation of ‘LVOC’ scope can be more complicated. The upstream interface with refining is blurred since the sectors often occupy the same site and have common products (e.g. olefins and aromatics). However, refineries produce fractions (made up of groups of hydrocarbons) that are primarily used as fuels (or fuel modifiers), whilst the petrochemical industry produces specific hydrocarbons for use as basic building blocks in the wider chemical industry. The refinery separation processes are covered by a dedicated BREF. This interface is represented schematically in Figure 1.2.
Figure 1.2: Interface between petrochemical and hydrocarbon industries [EC DGXI, 1993 #8]
Downstream from the production of LVOC there is again integral association with the rest of the chemical industry and it is difficult to establish definitive boundaries. For the purpose of IPPC information exchange there will be separate BREFs for the production of ‘Organic Fine Chemicals’ and ‘Polymers’.
Figure 1.3 further illustrates the complexity of the industry by showing the range of products that result from the basic hydrocarbon raw materials. Many of the products are intermediates for the rest of the chemical industry and have limited use in their own right.
As a consequence of this complex step-by-step synthesis of products, there are rarely stand-alone manufacturing units producing just one product. Instead chemical installations are usually large, highly integrated production units that combine many diverse plants. The integration of production units can confer significant economic and environmental benefits; e.g.:
- there is a high degree of process flexibility that allows operating regimes to be fine-tuned to produce chemicals in the most efficient manner
- energy use can be optimised by balancing energy sources and sinks
- by-products may be used as feedstock in other plants (e.g. crackers, furnaces, reactors) thus negating the need for disposal or allowing their use as fuel
- there are economies of scale in the treatment of waste streams and - the loss of intermediates during transportation is reduced.
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Production of Large Volume Organic Chemicals 3
Figure 1.3: Pathways in the organic chemical industry [EC DGXI, 1992 #23]
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4 Production of Large Volume Organic Chemicals
But integrated production sites can also create problems when it comes to the determination of BAT. Integrated production sites almost always have unique process configurations and unique operating regimes. Therefore it can be difficult to compare like-with-like because the consideration of local conditions is always such an important factor. This may be particularly pronounced in considering the environmental performance of common abatement systems, although some inter-site consistency is introduced by the common use of international technology contractors to design and build their licensed processes for LVOC producers.
Sector economics. The production of LVOC has significant economic importance in Europe.
Although there are a large number of chemicals produced in Europe, the production figures are dominated by a relatively small number of chemicals manufactured by large companies.
Germany is Europe’s largest producer, but there are also well-established LVOC industries in The Netherlands, France, the UK, Italy, Spain and Belgium. Production in the other Member States is significantly lower. Production data for the most important chemicals within each LVOC sub-sector are given in Chapter 3.
It is difficult to provide specific economic data on the LVOC industry because there is no absolute definition of the sector and there is considerable variation in the business background to different production processes. Eurostat’s Panorama database [Eurostat, 1997 #31] provides data on the general chemicals sector, with sub-set data on ‘basic industrial chemicals’ and further sub-set data on ‘Petrochemicals’.
Global position. In overall terms, the European Union is the world's largest producer of chemical products and accounts for nearly one third of estimated world production. In financial terms, the European chemical industry in 1998 had a turnover of 441 billion Euro, of which 367 billion Euro came from EU countries. This exceeds the turnover of equivalent industries in the USA (343 billion Euro) and Japan (159 billion Euro), and compares with a world figure of 1224 billion Euro (CEFIC publication ‘Facts and Figures November 99’). The European chemical market is dominated by the production of organic chemicals and their turnover is some four times the turnover generated by the production of inorganic chemicals [CEFIC, 1999 #17]. In 1995 the European Union was an exporter of basic chemicals, with the USA and EFTA countries being the main recipients. This trade balance is expected to sway towards imports as the industry faces competition from revitalised Eastern European producers, expanding Far East and Middle East capacities, and a highly organised US industry.
Competition. Basic petrochemical products are usually sold on chemical specifications, rather than brand name or performance in use. Within any region different producers have different costs of production due to variations in scale, in feedstock source and type, and in process plant.
There are few possibilities for product differentiation and so economies of scale are particularly important. Like other commodities, the basic petrochemical business is therefore characterised by competition on price, with cost of production playing a very large part. The market for bulk chemicals is very competitive and market share is often considered in global terms.
Integration. Process integration is a significant factor in the economics of the primary chemical industry. The integration is both upstream (many processes are linked to refining) or downstream (many LVOC products are intermediates for associated production processes).
This integration can improve the competitive position of companies, but it complicates any cost comparisons between installations. The price of LVOC is strongly determined by the economic status of downstream users and their demand, and it is generally difficult to pass price increases onto purchasers.
Profitability. The profitability of the European LVOC industry is traditionally very cyclical (see Figure 1.4). To some extent this cyclical nature reflects the normal cycles of commercial demand. However, the cycle is accentuated by the high capital investment costs of installing new technology and operators only tend to invest in additional capacity when their cash flow is good. Projects to increase capacity have long lead times and when they come on-line they
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Production of Large Volume Organic Chemicals 5
produce over-capacity that temporarily depresses margins [Environment Agency (E&W), 1999
#7]. As a result, reductions in manufacturing costs tend to be incremental and many installations are relatively old.
Figure 1.4: Cycle of cash cost margin in the basic petrochemicals industry [Environment Agency (E&W), 1998 #1]
The LVOC industry is also highly energy intensive and profitability is therefore strongly linked to oil prices. The further downstream a process is from basic hydrocarbons, then the more attenuated the effects of the petrochemical cycle.
Trends. There was low demand for products in the periods 1986 - 87 and 1990 - 91, due to the general state of the European economy, and the growth of chemical production was very low.
The ensuing period has seen a stronger demand for products and a tendency for major chemical companies to create strategic alliances and joint ventures. This has produced rationalisation in research, production and access to markets, and an accompanying increase in profitability.
Employment in the chemicals sector continues to decline and dropped by some 23 % in the ten-year period from 1985 to 1995. In 1995 there was a further drop of 3.8 % [Eurostat, 1997 #31].
In 1998, a total 1677000 staff were employed in the EU chemicals sector (CEFIC publication
‘Facts and Figures November 99’).
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Production of Large Volume Organic Chemicals 7