INSIGHT: BASF makes strong bet on methane for its US propylene

09 May 2014 16:23 Source:ICIS News

By Nigel Davis

LONDON (ICIS)--Having lightened the feed to its joint venture cracker in Port Arthur, Texas, BASF is shorter on propylene in North America than perhaps it would like to be. And having looked at its options, the company has plumped for methane, or natural gas, as its feedstock of choice.

BASF needs propylene for products like coatings, detergents and super absorbent polymers. But propylene has looked as though it could become tight as more chemical producers have geared up to produce more ethylene from ethane rather than liquids feed – and as refiners have started to refine lighter crudes from shale.

Producers have been tempted to build propane dehydrogenation (PDH) units to secure propylene supplies. They foresee advantaged propane prices and ready domestic supply. Yet natural gas looks as though it will be cheaper, and certainly more plentiful, over the longer term.

PDH plants are not easy to operate effectively. But currently there are eight new PDH plants planned in the US – and one PDH expansion.

BASF, meanwhile, is looking to make its most significant investment to date in a single plant, on a methane to propylene facility on the US Gulf Coast.

These are early days, but the plant will cost more than the €1bn 300,000 toluene diisocyanate (TDI) plant project currently underway in the company’s home town of Ludwigshafen in Germany.

BASF says that the methane to propylene plant in the US could be on-stream in 2019.

There is no detailed information yet on what process technology the company wants to use. Lurgi has methanol to propylene (MTP) technology and plants using this process are being built in China, using coal-based methanol as feedstock.

BASF CEO, Kurt Bock, told shareholders on 2 May that the company would make propylene in the US via methanol. But he added: “We are using a new technology.”

“Propylene is one of the most important basic chemicals,” he said. “We want to further process this basic product in North America and significantly expand our business.”

The company has also stressed that it has a large joint venture ammonia project planned with Yara in the US. The partners are looking at a 750,000 tonne/year plant to be located at BASF’s production site in Freeport, Texas. BASF wants to strengthen its backward integration.

There is no official link between the two projects. And a BASF spokesperson added: “We are not disclosing any further details on [the methane to propylene] technology at the moment”.

BASF, though, is steeped in methanol and ammonia knowhow and theoretically integrating ammonia and methanol plants can result in lower overall investment costs.

As far as the comparative production economics for propylene, it certainly looks as though MTP running costs can trump PDH in the US.

“MTP margins are significantly more favourable than those for PDH,” says ICIS consultant Regan Hartnell. As natural gas prices have fallen in the US in line with the shale revolution, the gas has become relatively cheaper than propane.

“Essentially, it’s always going to be cheaper and easier to export propane than methane. Even if they are priced perfectly at international parity, methane will be much cheaper than propane. This will give both a margin and competitive barrier to MTP over PDH in the US, Hartnell adds.”

Propane is already widely exported from the US, while methane would be exported as liquefied natural gas as LNG export terminals come on-stream from 2015.

The variable margins, historic and projected, for the two propylene processes, show the relative advantage of the C1 feed. An average oil price of $90/bbl has been assumed.

PDH plants use about 1.25 tonnes of propane to make one tonne of propylene. The methane to methanol to propylene route would use 1.93 tonnes of methane. One tonne of methane produce about 1.8 tonnes of methanol.

So if BASF can get the project economics right, it looks as though it is on to a winner.

MTP variable margins vs PDH in US

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By Nigel Davis