Propylene solution goes beyond the cracker

The increasing use of natural gas feedstock for ethylene production is causing a shortage of coproducts. The future will depend on new technologies

Considerable doubt is being raised about the future of coproducts from steam crackers as the increase in the proportion of light feedstocks in the world’s ethylene capacity accelerates.

Total Petrochemicals started up its methanol-to-olefins demonstration unit last year at its research center in Feluy, Belgium

First there has been a long-awaited massive rise in ethane-based ethylene capacity in the Middle East.

However, the surprise has been the surge in use of shale gas in the US during the past few years, which could ultimately have the greatest impact on the global coproducts market – in particular propylene (C3), 60% of which goes into polypropylene (PP) production.

Output of shale gas, typically rich in ethane and other natural gas liquids, accounted for 17% of US natural gas production last year, driving down natural gas prices and ethane costs for US petrochemical producers.

As a result, there has been a squeeze on availability in the US of coproducts from naphtha-derived ethylene capacity, such as propylene and butadiene (BD).

“Shale gas looks like it is bringing about the biggest change in petrochemical feedstocks for a long while,” says one Europe-based analyst.

“It has created a huge amount of uncertainty about future supplies of propylene, the most important of the coproducts, as well as butadiene and to a lesser extent, benzene.

The longer-term impact on the PP and the other main propylene derivative markets is too difficult to call at the moment.”

US AND THEN THE WORLD
The technologies and supply chain being developed in the shale gas sector in the US are seen as opening the way to the exploitation of shale gas reserves throughout the world, in particular in Europe and China.

Shale gas reserves are estimated to have the potential to increase worldwide natural gas reserves 900%, according to figures from Texas A&M University. The US experience has also shown the effects of shale gas output on the markets for petrochemical feedstocks. Greater supplies of shale gas have widened the gap between ethane and naphtha prices in the US to such an extent, producers in the country have stepped up the transfer of their crackers from naphtha to ethane, from which there is no propylene output.

The volatility in propylene prices in the US stemming from the tightness in the supply/demand balance was demonstrated in January when, as a result of a number of unplanned outages of propylene-production capacity, contract propylene prices soared to almost four times higher than two years ago. Polymer-grade propylene contracts for January shot up by 28% to 77.5 cents/lb, as assessed by ICIS.

The effects of the high cost of US propylene have been felt across the Atlantic, where rising amounts of propylene from naphtha-based crackers and refineries have been exported to North America.

By January this year, European propylene contract prices were more than double those in early 2009.

“During 2010, propylene prices in Europe for the first time rose above those of ethylene,” notes Paul Hodges, chairman of London-based consultancy International eChem.

WHAT IS THE PROPYLENE SOLUTION?
With global demand for propylene still gaining strength – mostly driven by increased consumption of PP, which is expected to expand by an average 5-6% for the next several years – there is now much debate about where all the additional propylene will come from.

There is “no clear prediction how the propylene gap will be closed,” Thomas Wurzel, vice president market groups at Germany-based engineering firm Lurgi, a subsidiary of France-based industrial gases company Air Liquide, said at a feedstocks conference in Berlin last year.

Lurgi. like many chemical engineering companies, hopes alternative technologies for making propylene, or olefins with a much higher output of propylene than naphtha crackers, will help make up the supply deficit.

“New olefin conversion technologies may impact the supply situation significantly,” Wurzel said.

The most prominent of the on-purpose propylene production alternatives is propane dehydrogenation (PDH). Among others are metathesis systems, which increase the output of propylene in relation to C2.

Then there are emerging technologies for making olefins directly from new feedstocks without the need for steam crackers, such as methanol-to-olefins (MTO) and methanol-to-propylene, a technology developed by Lurgi.

Before the recession, German chemical major BASF, which has developed PDH technology with German process engineering company Linde, estimated PDH, handicapped by high capital costs, and other alternative technologies accounted for only 5% of global demand for propylene compared with 66% for steam crackers and 29% for refineries.

However, the BASF/Linde technology has not gone beyond pilot plant stage, even though BASF had been forecasting growth rates in total PDH capacity of 10-20% between 2007 and 2012.

There are now signs of a revival in PDH projects. US-based PetroLogistics, a start-up firm, opened a 1.2bn lb/year (545,000 tonne/year) PDH plant last year, which it claims is the world’s largest using the technology.

The PetroLogistics facility uses the CATOFIN process developed by Lummus Technology, part of US-based engineering company CB&I, which was contracted last year by China’s Tianjin Bohua Petrochemical to build a PDH unit with the same technology in Tianjin.

When it is scheduled to come on stream next year, the 600,000 tonne/year facility will be the first PDH plant in China and the largest in the world, according to Lummus.

Lummus Technology also has a partnership with SYN Energy Technology of China in an MTO technology being applied in a plant opened last year at Baotou, China. It is the world’s first commercial-scale MTO unit.

France-based Total Petrochemicals started up an MTO demonstration unit last year at its research center in Feluy, Belgium.

It uses technology developed by US-based catalyst company UOP using Total’s metathesis Olefin Cracking Process (OCP).

Soon after the opening of the Feluy demonstration unit, Total signed a memorandum of understanding with China Power Investment to build a coal-based MTO/OCP facility in China.

“We are absolutely convinced that our MTO/OCP technology is the answer to the current demand for propylene,” says Eric Duchene, Total’s MTO project manager. “The technology is very competitive,. It guarantees a high propylene output and can run on the future promising resources – in particular coal and natural gas.”

ALTERNATIVE TECHNOLOGIES SPREAD

Just how quickly the alternative technologies are adopted within the petrochemical sector could depend on the pace at which shale gas production spreads throughout the world.

In the US, shale gas output is likely to continue to expand at a fast rate. UK-based energy consultancy Wood Mackenzie estimates that by 2020 shale gas will have doubled its share of US total gas supply to 35%.

Exploration for shale gas has already started in Europe. However, the start of European shale gas production may be a lengthy procedure because of its technological complexities and the environmental dangers of hydraulic fracturing (fracking) in densely populated areas.

“Shale gas production outside North America is unlikely to happen as quickly as it has in the US because of the absence of the supply chain needed for drilling and fracking horizontal wells [and] worries about the environmental impact of operations will also slow developments,” says Robert Clarke, unconventional gas research manager at Wood Mackenzie’s Houston office.

The consultancy predicts that in China, where shale gas reserves could amount to as much as 20% of the global total, production of unconventional gas, which also includes coal bed methane, will not take off for several years because of lack of infrastructure.

By 2030, however, it could amount to a quarter of the country’s total gas supplies, according to Wood Mackenzie.

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