Refinery Catalysts–Growth Acceleration Strategies in the Current Downturn

Christina Priya DhanujaRajaram Vijayan

Technical Insights–Chemicals, Materials, and Food May 2009

2

Focus Points

The Economic Crisis and the Refinery Catalyst Industry1

2

Strategic evaluation of the Current Market Dynamics 3

Stimulus Packages–Hope for Recovery?4

Growth Strategies and Future Directions 5

Major Product Suppliers and the Market Scenario

3

The Economic Crisis and the Refinery Catalyst Industry

4

Impact of Crisis on the Global Chemicals and Materials Market

JapanAutomotive giants are hit hard by economic recession and resulting drop in global demand; this directly affects all dependent chemicals and materials markets

JapanAutomotive giants are hit hard by economic recession and resulting drop in global demand; this directly affects all dependent chemicals and materials markets

USA

Housing market collapse affected a wide range of chemicals and materials markets

Significant job losses in the industry and plant closures (Dow, BASF, Rohm & Haas and others)

Decline in consumer demand affects end-market pricing, which in turn led to volume reduction

USA

Housing market collapse affected a wide range of chemicals and materials markets

Significant job losses in the industry and plant closures (Dow, BASF, Rohm & Haas and others)

Decline in consumer demand affects end-market pricing, which in turn led to volume reduction

Europe

Decline in consumer demand resulted in scaling-down of production and redundancies across all industries.

Construction. automotive and real estate industries and the finance and banking sectors have already been hit, affecting the chemicals and materials markets

Europe

Decline in consumer demand resulted in scaling-down of production and redundancies across all industries.

Construction. automotive and real estate industries and the finance and banking sectors have already been hit, affecting the chemicals and materials markets

RussiaRussia is affected by the economic downturn but its strong position in oil and gas reserves suggest a quick comeback

RussiaRussia is affected by the economic downturn but its strong position in oil and gas reserves suggest a quick comeback

5

No effect on

Fuel specifications

Impact of recession on the Refinery Catalyst Industry

• Sluggish Oil Demand in US and Europe

has led to refining margins facing short-term pressure.

• 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%)

• 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

affected by the credit crunch.Opportunities for sulfur

removal and aromatics saturation.

Increase in number

of hydroprocessing units.

Opportunities to develop

cost-effective catalysts

Global E

co

no

mic

Crisis

Decrease/Cancellation

in the number of refinery projects.

Lesser effect on

diesel demand

Investment in new

refinery capacities doubtful.

Opportunities for catalytic technologies

aimed at higher refinery throughputs

Lower cash flow for

R&D investment

6

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

Poll Question

Collaborations and Technology Partnerships

Investments

R&D and Innovation

Customer Support

Others

7

Major Product Suppliers and Market Scenario

8

Refinery Catalysts–Major Suppliers by Product Types

Strong Market

PresenceLow-Market

Presence Source: Frost & Sullivan

Grace Davison

Sud Chemie

UOP LLC

Criterion

Haldor Topsoe

Johnson Matthey

BASF

Chevron Lummus

Albemarle

IsomerizationHydro-treatingHydro-crackingReformingFCC and AdditivesSuppliers

9

Strategic evaluation of the Current Market Dynamics

10

Force Field Analysis–A Strategic evaluation

Demand for Maintaining High Octane Number

Need to improverefinery throughput

Increased need fordiesel over gasoline

Use of heavier feedstock

Regulative andLegislative standards

Manufacture of catalysts for specific application segments

Catalyst design challenges

Poorer accessibility of rawmaterials for rare earth catalysts

Higher catalyst production costs

• Exxon Mobil’s reformate alkylation

technology coverts benzene-rich

reformate and light FCC off gas olefins to

high octane gasoline.

• Albemarle has introduced Ketjenfine

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.

Desired ScenarioDesired ScenarioDesired ScenarioDesired ScenarioCurrent ScenarioCurrent ScenarioCurrent ScenarioCurrent Scenario

Push Forces Pull Forces

11

Challenge Assessment

ChallengesRecommendations Implementation

Higher Production Cost• Improvement on process economics• Develop effective regeneration technologies• Enhance the performance characteristics

• Process optimization.• Develop alternatives for precious metal-based catalysts.• Better surface characteristics.

Catalyst Design Challenges

• Alternating surface properties• Good poison resistant characteristics• Better availability of acidic and basic sites on the surface

• Structural modification for effective pore size distribution.• Novel chemistry concepts for enhancing activity and selectivity.• Resistance to metals and gases to suit any type of feedstock.

Catalysts for specific applications

• Improvement on process economics• Suit the needs of different feedstocks• Optimize utilization of hydrogen

• Higher selectivity and activity.• Resistance to metals and gases.• Investment on hydrogen network optimization.

Poor accessibility of rare earth metals

• Develop other sources of rare earth metal suppliers.• Develop alternate materials for replacing rare earth metals.

• Australian and Canadian companies have already started mining for rare earth metals.• Investment on R&D for futuristic materials.

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Stimulus Packages–Hope for Recovery?

13

Global Response: Massive Government Stimulus

0

100

200

300

400

500

600

700

800

900

U

S

D

A

m

o

u

n

t

B

i

l

l

i

o

n

s

Brazil China India Japan Korea Saudi

Arabia

UK US

Size of Stimulus Packages

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 UK: £250 bn bailoutGermany: $67 bn relief packageBelgium and Switzerland: Capital infusionECB: Interest rate cutsFrance: $50 bn stimulus package

RUSSIASupport for Russian ruble$20bn stimulus package

CHINAInterest rate cuts $586bn stimulus(infrastructure, rural)

INDIA Interest rate cuts $4bn stimulus package(infrastructure,exports, textiles)

JAPANInterest rate cuts447bn yen stimuluspackage

SOUTH KOREAInterest rate cuts andefforts to keep currencystable. $11bn stimuluspackage

BRAZILInfrastructure development under PDP (morethan $64bn into country’s financial system)

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Stimulus Packages –Drivers for Growth

$800 million for Biomass projects Opportunities with

Biorefining

• Efficient catalytic

technologies for

biorefineries–thermochemical

platform.

• Integration concepts with

biorefining.

• Hydrogen production from

ethanol and biofuels.

• Production of biodiesel from

vegetable oil.

• Technologies for

conversion of biomass

derived oxygenates in

existing petroleum refineries.

• Opportunities for enzyme

production/development.

$6.3 billion for energyefficiency

Refining and

Energy Efficiency

Grants

• Incentives for

energy efficiency.

• Catalysts that resist heavy

contamination.

• Technologies for hydrogen

network optimization.

• Cost-effective techniques

for energy efficiency.

Other Drivers

for Rebound

• $1 billion energy efficient

programs

- Alternative fuel vehicles

• Emerging use of underutilized

refinery feedstock (syn gas, castor

oil and glycerin)$787 billion Stimulus Package

USA Rest of the World

• China is expected to announce a 500-billion-yuan

stimulus package for the struggling petrochemical

industry. The stimulus package includes 100-billion-

yuan investment in 2009 and 2010 for oil products

upgrade, and investment of 400 billion Yuan for

construction of 20 new large-scale petrochemical

projects.

• India--The government is working on a plan to

provide a major stimulus to the chemicals and

petrochemicals industry by revising customs/excise

duty on inputs required by the industry.

• The European Union has committed 59% of its

stimulus funding to green programs. The Commission

voted a package on renewable energy in December

2008 setting the 10% renewable fuel goal in the

transport sector by 2020. Countries such as

Belgium, Germany, Poland, and UK also have

some funds for green investment, hinting at a

futuristic, but potential opportunity for large scale

biorefining.

15

Growth Strategies and Future Directions

16

Growth Strategies

Collaborations and Technology Partnerships

Innovation and R&D

Customer Support

• 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.

• 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.

• 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.

Investments

• 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.

17

Prioritization of R&D Strategies

Legislation/Regulation

R&D Positioning

IndustryRequirement

Maintain Low Sulfur

Conversion of Excess LPG

Maintain Low aromatics

Hydrogennetwork

optimization

Conversion of Heavy Feedstock

Degree of Challenge

Degree of Innovation

GrowthPotential

CatalystPerformance

CriticalityNumber ofChallenges

IndustryInitiative

Non-Industry Initiative

Time FrameReturn onInvestment

Objective

Level 0 Criteria

Level 1 Criteria

Alternatives

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Industry

Requirement

Degree of

Challenge

Growth

Potential

Degree of

Innovation

Final Priorities

Performance of

the catalyst

Criticality

Revenue

Generation

Number of

Challenges

Time Frame Non-Industry

Initiative

Industry Initiative

Legislation/Regul

ation

27.4%

13.4%

13.5%

8.1%

37.6%

0.0% 10.0% 20.0% 30.0% 40.0%

Removal of Sulfur

Removal of

Aromatics

Hydrogen Network

Optimization

Conversion of

Excess LPG

Conversion of

Heavier Feedstock

Level 0 Criteria

Level 1 Criteria

R&D Priorities

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Future Directions and R&D Opportunities

STRATEGIC DIRECTIONS

Conversion of heavy feedstock–a key industrial measure

Multi-tasking high-performance catalysts

Hydrogen network optimization–Long-term goal for the refiner

Stringent fuel specifications–Continued innovation for sulfur removal and aromatics saturation

Protocoled biorefineries –chemical catalyzed biorefinery processes

Energy-efficient catalysts and cost-effective catalyst regeneration techniques

Conversion of underutilized feedstock such as castor oil and glycerin

Hydrogen production from biofuels

Green gasoline from bio-oils–existing HT and HC catalysts

Green efforts Current industrial measures Long-term opportunities

Current 2030

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� 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 LeeStrategic Account ManagerChemicals, Materials and Food, Asia Pacific(65) 6890 0914steve.lee@frost.com