Chemical Industry Integration

By McCann, T. J. | Journal of Business Administration and Policy Analysis, Annual 1999 | Go to article overview

Chemical Industry Integration


McCann, T. J., Journal of Business Administration and Policy Analysis


INTRODUCTION

Clustering of chemical plants to maximize interchange of feedstocks and utilities has long been a practice. However, similar integration amongst most other industries has been slow in development. While we consider only Canadian examples in this chapter, U.S. Gulf Coast and Dutch chemical industry examples are much more advanced and larger in scale. Through eco-industrial (economic sustainable) development activities, similar interchanges are being developed in light industrial parks and between various industries often of quite different nature and philosophies. [1]

Many regions are promoting integration to improve regional economics following losses of one or more major industries. This is especially true in at least five well-defined European chemical clusters. In several cases, divestiture and even shutdown of certain operations has opened the way to new synergies with existing industry and utilities.

In this chapter, our emphasis is on Shell Canada and Shell Chemicals/Air Liquide complexes in Alberta. Data for this case are largely from the public domain, but comments and interpretations are those of the writer, who is solely responsible for the contents.

CHEMICAL INDUSTRY AND INTEGRATION

Chemical companies are continually redefining their core products and spinning off non-core production and services, often to new companies fitting many such pieces together. There have been so many of the latter and so many changes in ownership and corporate names that it is often difficult to decipher articles in the major industry journals such as Chemical Week unless one has kept up to date on the specific industrial sector.

The chemical industries have been leaders in the process of integration. Sometimes this includes competitors, but more usually incorporates suppliers of non-core services and selected processing of feedstocks and products. [2] Cogeneration of steam for at-site use and electricity for at-site and sale to others is a typical example where chemical companies are 'farming out' activities to other companies specializing in such facilities. Supply of industrial gases - oxygen, nitrogen, carbon monoxide and hydrogen -- are almost invariably purchased from others today. Even waste treatment services are being provided by municipal and other agencies serving numerous plants in a given area.

Sarnia

In Canada, the Sarnia refining/chemical cluster started in 1942 with the construction of the Polymer synthetic rubber complex. That complex of five groups of integrated units, with a common coal-based utility core, was operated by different U.S. chemical companies based on feedstock from the existing Imperial Oil refinery, then the largest in the British Empire. Imported benzene and coal were received by Great Lakes ships. The Sarnia area provided a well-trained process-plant-oriented working force and construction labour came mostly from northern Quebec. (By that time, local crude supply had dropped to a low level and U.S. crude was the primary supply for the refinery.)

For many years, Dow Chemical used the vast salt beds under Sarnia and other local feedstocks to produce a variety of chemical and plastic products. Over the years, there have been many changes in ownership, number of plants and products produced. The availability of feedstocks and trained labour brought in DuPont and Nova (both now NovaChem). Canadian Oil (now Shell) and Sunoco built refineries and Imperial added a variety of chemical and polymer operations. In recent years Dow reduced its operations by over 1,000 staff, and Imperial and Dow Canada head office operations were ultimately transferred out of the area.

In the past, utility interchange was not economic except on the original Polymer site. Even there such interchanges dropped over time, but is now picking up again with a 500-MW cogeneration facility to be operated by TransAlta, expanding upon a smaller system based on surplus Dow generating facilities.

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