30 September 2011 16:56 [Source: ICB]
"Every company should be considering the option of a closure or a new world-scale cracker, with all the cost advantages it would bring"
The product mix available from European naphtha-based crackers serves the European market perfectly, says Diercks, because of the availability of propylene for the important C3 value chain as well as C4-olefins including butadiene (C4s). Although, from a feedstock price perspective, Europe is disadvantaged against US ethane-based production, our product slate will ensure our future viability, he believes.
"Most European crackers serve entire industries based on the product streams that ethane crackers do not produce. The shift to lighter feeds in the US is putting pressure on other value chains in North America. Feedstocks are not our main challenge in Europe, it's the size and age of our crackers.
"In Europe, we have a lot of relatively old crackers which are far below world scale and therefore have a negative production cost structure and require more maintenance measures. In the long term, crackers under 300,000 tonnes/year will have to be shut down or replaced with world scale facilities," he argues.
More than 70% of Europe's crackers are over 30 years old, whereas in Asia, more than 70% are less than 20 years old. Although several 100,000-250,000 tonnes/year crackers have already been shut down, much more rationalization remains to be carried out.
Diercks believes that debottlenecking is not a long-term solution. With some crackers now nearly 50 years old, "every company should be considering the option of a closure or a new world-scale cracker with all the cost advantages it would bring."
In North America, changing feed-slates from naphtha to ethane has a strong influence on olefin market prices. In the US, value chains are now being put under pressure by unprecedented hikes to butadiene and propylene prices. Butadiene prices have rocketed to historic highs in all regions this year, with US prices showing the biggest gains.
Diercks does not expect ethane to become a major feedstock for chemicals in Europe for the foreseeable future. This is because there are no large sources available plus the product is expensive to ship. He sees US downstream consumers really struggling to cope with high co-product prices with little likelihood of relief from on-purpose production in the next few years.
"Technologies such as propane dehydrogenation are helping, but the plants which have come on stream so far have not had any impact on prices. We will need substantially more, but it takes time to build a world-scale plant. For the next few years, shale gas is going to be a big challenge for those downstream industries in the US that depend on propylene and butadiene."
He says the situation for butadiene is even worse because there are no processes for on-purpose production which are accepted by the market. It is possible to dehydrogenate butane to produce butadiene (BD), but there are few examples of this technology at commercial scale.
In August, the US TPC Group approved funding for further engineering work to restart an idled dehydrogenation unit at its Houston, Texas, site to produce up to 270,000 tonnes/year of on-purpose BD. The project will be based on TPC Group's Oxo-D butadiene technology, which it developed in the 1960s, and will use butane as its primary feedstock.
Diercks does not think renewable feedstocks will play a significant role for petrochemicals for the foreseeable future. "Renewables have not reached development stage yet, and they are competing with the food sector, so I don't see them becoming important for at least 10 years. However, there is pressure from customers, so it is a topic we have to discuss."
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