EAST GERMAN REFINERS FACE RISKY FUTURE

L.R. Aalund
Managing Editor-Technology

East Germany, now part of a unified Germany, has 22 million tons/year or 435,000 b/d of refining capacity at two major refining centers (Schwedt and Leuna) and at three relatively minor operations.

They refined some 20 million tons of Russian crude in 1989 plus 765,000 tons of lignite tar and lighter oils. But the amount of Russian crude processed is dropping this year because of problems in the Soviet Union. Also, the volume of lignite tar and light oils processed is being phased out rapidly because this is antiquated technology and a major cause of pollution.

The lignite tars are produced when the lignite, which comes from large reserves in the region near Leipzig, is coked.

To understand the structure of the existing refining industry, it is necessary to look at the situation that existed before July 1 this year, when the East and West Germany currency union occurred.

Until then the German Democratic Republic owned all enterprises and they were designated "Volkseigene Betriebe, or VEBs" the "People's companies." Almost immediately after the currency union these were converted into stock companies, either Ags or GmbHs, with the stock held by the Treuhandanstalt. This entity is a fiduciary trust headed by West German executives from major companies. It is charged with streamlining the former state-owned companies, making them profitable, attracting participation in them, or shutting them down (see OGJ, Oct. 1 p. 46).

Also at that time, the giant VEB Petrolchemisches Kombinat Schwedt was broken up. This was a combine that controlled a number of refining and petrochemical concerns and the East German pipeline authority.

Schwedt and the former sub enterprises then got their own managements.

Schwedt is now known as PCK AG Schwedt and is the largest refiner in East Germany, with a capacity of 218,000 b/d (based on 7.3 bbl of crude per metric ton). It is on the Polish border northeast of Berlin at the terminus of the Russian "Friendship" line in East Germany. The refinery was built as a grassroots plant early in the 1960s as far east of the western border as possible, apparently for military reasons.

Following are some details on the larger, now independent, sub enterprises, all of which are located west and south of Leipzig.

Hydrierwerke Zeitz GmbH-This company at Zeitz has 3.2 million tons, or 64,000 b/d, of refining capacity. It has been producing raw gasoline, fuel oils, bitumen, and lubricating oils. Its output is partially based on lignite tars, so its operations are in the process of being curtailed.
Addinol Mineraloel GmbH Ltzkendorf-This company at Krumpa was formerly a sort of subsidiary of Zeitz. It has only 10,000 b/d of refining capacity devoted to lubricating oil.
Deutsche Shell is now working closely with Addinol in marketing a wide variety of lubricants and hydraulic fluids. It is not a joint venture, Shell says, but there may be some transfer of technology later.
Schsiche Olefinwerke AG-This ethylene complex at Bhlen, formerly known as "VEB Otto Grothewohl," is a major spinoff of the PCK combine. With some 300,000 metric ton/year of ethylene capacity, it is the only near world-scale ethylene plant in East Germany.
Czechoslovakia formerly sent ethylene to East German plants in the Bhlen area through an ethylene line (see map), but the Czechs now keep this ethylene for their own use. The Saechische Olefinwerke plant can crack feeds from LPGs to vacuum gas oil. It gets its feedstocks from Schwedt and Leuna Werke AG, which was not part of the former PCK combine.
Leuna makes a wide variety of chemicals and has been described as a museum of chemical technology. But it has 5.3 million or 105,000 b/d of refining capacity. Its hydrotreating/hydrorefining is based on pre-World War II reactors used to liquefy coal. Leuna was founded in 1916 as a subsidiary BASF operation to take advantage of the lignite reserves in the area and make ammonia with the then breakthrough Haber process. Leuna subsequently became part of the I.G. Farben cartel prior to WW II.

SCHWEDT AND LEUNA

Under the communist regime, Schwedt and Leuna were saddled with output that few if any refineries outside the state-owned blocs had to cope with. Both had to turn out finished, packaged consumer products, such as dishwashing soap, cleaners in aerosol cans, plastic buckets, etc.

A spokesman at Leuna says this is a sore subject. The state planners dictated that 5% of Leuna's turnover be in such consumer products. He said this was difficult since 50% of the turnover was in refined products and the planners would not consider gasoline a consumer product. Both Schwedt and Leuna now want to shed some of these operations, which are partially the reason these two complexs and their related enterprises had nearly 63,000 employees.

Schwedt is equipped with modern refining technology and has caught the eye of a number of western refiners as a possible acquisition. Veba Oel is displaying the most interest and had developed a special relationship there even before the Berlin Wall was toppled.

Veba has sent instructional teams there and brought Schwedt engineers and administrators at no cost into its own operations for training. However, observers believe no single company, rather a group, will buy the refinery.

The Russian crude delivered to Schwedt comes from fields in the Ural region. Called Soviet Export Blend, it is not a high-quality crude. During 1989, it had an average gravity of 32.5 API and sulfur content of 1.4 wt %. It has a high bottoms content, yielding 58 vol % at 662+ F.

Another line carries crude from Schwedt to Leuna. Paradoxically, both refineries have had plenty of experience making West German-type, lead free, high octane gasolines. They have been the major suppliers of West Berlin for years.

This single crude supplier doesn't leave much room for crude oil price negotiations. There is a crude oil line from Schwedt to the North German port of Rostock. This has now been converted to pipe diesel fuel to the region from Schwedt. The most attractive idea to diversify crude supply is to extend the Trans Alpine Line from Ingolstadt in Bavaria to Leuna. This would open the door for Middle Eastern and African crudes into East Germany.

PCK AG recently released its first 6-month 1990 operating figures. It processed 5.2 million tons of crude the first 6 months of 1989 compared to 4.84 million tons for the same period this year. This reveals the Soviet crude supply problem. However, a refinery spokesman says the refinery is cracking more and making a noteworthy shift to meet West German gasoline standards.

PCK AG has stopped producing leaded 88 RON gasoline, which was burned in the famous Trabant automobiles that carried many East Germans to freedom. Trabant drivers will now have to go with a higher octane unleaded gasoline.

PCK Schwedt made 68,400 tons of lead-free gasoline of all types in July vs. only 100,000 tons the first 6 months of this year. Both PCK and Leuna are not strangers in supplying the high-octane unleaded market because they were major suppliers to the West Berlin market for years. However, PCK says it needs an MTBE plant to meet the coming octane needs. But it doesn't have the money to build one. Leuna has an MTBE plant but says it also needs an isomerization unit for octane.

Both PCK Schwedt and Leuna-Werke are trying to sell or license all knowhow, technology, and services they have developed. The state-planned philosophy was that each company stand on its own feet because there was no outside network of suppliers. Everything that could be made or supplied internally was. This led to major in-plant fabrication, such as heat exchangers, and to shops and huge construction and maintenance organizations. Schwedt is now offering to send its construction and engineering organization out to work.

Leuna has developed and makes some 50 catalysts, including catalysts for catalytic reforming (bimetallics too), isomerization, hydrocracking, and sulfur-recovery catalysts (see table in accompanying article). Leuna is of course attempting to license all these catalysts, including bimetallic reforming catalysts.

Leuna has a special relationship with Deutsche BP, which has set up offices in Berlin and Dresden. The two companies recently concluded an agreement under which BP will provide consultancy services to Leuna concerning the manner in which the Leuna refinery can be modernized to cope with new product and quality requirements.

CHEMICALS

The petrochemical industry is shutting down obsolete units. Leuna Werke AG has in the past several weeks shutdown its nearly 75-year-old Haber ammonia plant. It has also shutdown an antiquated Winckler synthesis gas plant, based on lignite, and a high-pressure methanol plant.

Lignite and coal-based chemistry that led to a revolutionary industrial era in the 1920s and 1930s is now practically dead in East Germany.

The burning of lignite with its attendant soot, nitrogen, and sulfur pollution has therefore been somewhat lessened. However, much electricity is still being generated with lignite, and many houses and dwellings use lignite briquettes as heating fuel.

Buna AG, which made the world's first synthetic rubber in 1937, recently shutdown the last of its plants at Schkopau based on acetylene chemistry. This also goes a long way in cleaning up the air.

The company is switching to ethylene-based chemistry. It has two polyethylene plants with a combined capacity of 58,000, one of which is a gas-phase unit which it wants to increase to at least 80,000 tons/year capacity. It also has 300,000 tons/year of PVC capacity which is being reduced. The company makes other polymers too.

Arthur D. Little is now advising the company on its reorganization while Hls AG is advising it on optimizing its existing structure. It has even engaged a public relations firm to help establish corporate identity. The West has arrived in East Germany.