Hydrocarbon Residue Recycling Could See Development in Japan

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Researched by Industrial Info Resources (Sugar Land, Texas)--The rise of alternative energy, including renewable energy, and the use of natural gas has the potential to plunge Japan's Chemical Processing Industry (CPI) into a state of rapid restructuring in the next few years. Japan, following the gradual global movement, is determined to reduce its dependence on oil in the wake of the renewable energy revolution and the rise of electric vehicles. Demand for oil has fallen sharply in recent years due to a number of different factors, and the capacity utilization of Japanese refineries has plunged from 90% to 70%. While the decline of the oil industry and the rise of alternative energy are good news for the environment and innovation, what about the petrochemical industry and goods like plastic and rubber?

Natural gas, which burns cleaner than oil and coal, can be cracked into hydrocarbons C1 through C4. C2 can be further refined to make ethylene, which has a myriad of applications in the chemical industry. Domestic natural gas production in Japan, which occurs primarily in the Minami-Nagaoka Gas Fields west of Tokyo, goes to residential cooking and water heating. Japanese petrochemical plants, however, are not equipped for light refining of natural gas, and imports are consumed by the power sector.

Oil production in Japan is virtually nonexistent, although the country is the third-largest oil consumer in the world and has the second-largest refining capacity in the Asia-Pacific region after China. However, the oil refining industry is on the decline in Japan, thanks to insufficient demand for fuel oil and an overcapacity in refineries.

Japan's Ministry of Economy, Trade, and Industry has set forth new rules and regulations to guide Japan's major oil refiners toward a more realistic future that could raise the price of naphtha for the chemical industry. Naphtha, consisting of hydrocarbons C5 through C7, is derived from oil refining and has proven to be the most beneficial source of ethylene through the cracking process. Importing is an option, although some companies are importing hydrocarbons like C9 to make synthetic resins, but that is already expensive. China's own C9 production may slow down as it turns back to natural resins. Naphtha, which serves as a feedstock for ethylene, is likely to become expensive domestically as the oil refining industry wanes and supplies grow thin.

Another option is recycling. Mitsui Chemicals Incorporated (TYO:4183) (MCI) (Tokyo, Japan) has plans to incorporate a recycling regimen at its Ichihara chemical complex this year. The $15 million recycling unit, which is scheduled to come online in 2012, will focus on recycling C5 hydrocarbon residue. Once combined with hydrogen, MCI will reintroduce the mix to the naphtha cracker to produce a chemical that is similar to ethylene. MCI is hoping to recover at least 11,000 metric tons of the chemical per year through cracking 10% of its C5 hydrocarbon residue. Recycling has the potential to be very effective in the mid-term and may keep the petrochemical industry afloat as the domestic oil refining, electric power, and automotive sectors find balance.

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