FOCUS: Dow’s European crackers switch to propane from naphtha

HOUSTON (ICIS)–Dow’s crackers in Europe are relying on their flexibility to switch to propane feedstocks in response to the sharp rise in naphtha prices, the CFO said on Thursday.

“Region by region and furnace by furnace, we are able to mitigate higher raw material and energy costs,” said Howard Ungerleider, CFO. He made his comments during an earnings conference call.

The increase in naphtha costs followed Russia’s invasion of Ukraine.

Dow’s ethylene plants in Europe have two to three times more propane flexibility than its peers have in the region, Ungerleider said.

Over the years, Dow and LyondellBasell have taken advantage of the feedstock flexibility of their crackers to switch to propane and liquefied petroleum gas (LPG) when those raw materials held a cost advantage over naphtha, the predominant feedstock in Europe.

The US had started exporting LPG following the advent of shale gas, making the feedstock more attractive to those crackers around the world that have the flexibility to use it.

Dow has long been able to crack LPG at its site in Terneuzen, the Netherlands. Early in the 2010s, the company expanded LPG cracking to its site in Tarragona, Spain.

Crackers using lighter feedstock like LPG produce a larger share of ethylene. That comes at the expense of heavier products such as propylene, butadiene (BD) and aromatics.

RESPONDING TO HIGH NATGAS
Feedstock flexibility will help Dow and other producers deal with the rise in naphtha costs in Europe, but it will do little to address the increase in prices for natural gas, which crackers use as a fuel source to create process heat.

As a longer-term solution, Dow is contributing land and access to infrastructure services as part of the stake it acquired in the Hanseatic Energy Hub (HEH), a consortium that is building a liquefied natural gas (LNG) import terminal at the company’s Stade site in Germany.

The complex is on the Elbe river about 40 minutes upstream from Hamburg, said Jim Fitterling, CEO. He made his comments during the earnings conference call.

Dow has a port there and the capability for a berth that could accommodate an LNG ship, Fitterling said.

HEH has plans to build the terminal by 2026, he said. If built, it would satisfy 15% of Germany’s demand for natural gas.

Dow has divested other midstream assets – notably its rail assets at six sites – but Fitterling said it was unlikely that the company would acquire a stake in the Hanseatic Energy Hub just to monetise it some time in the future.

That said, the company’s equity interest in the hub is relatively low. The project is not far enough along to get into offtake agreements, Fitterling said.

FUTURE OF EUROPEAN CHEMICAL INDUSTRY
The sharp rise in European energy and feedstock costs has once again raised questions about the competitiveness of the region’s chemical industry. Europe has had higher energy costs for quite some time, Fitterling said.

So far, Dow’s crackers in Europe are operating well, and the company is still earning margins, Fitterling said.

Dow itself is investing in the region, not only in the Hamburg Energy Hub but in expansion projects. It is increasing alkoxylation capacity in Europe as well as the US to meet rising demand for surfactants.

“There will be a chemical industry in Europe, but I think we have to continue to look at how it evolves and how we are going to continue to make Europe more energy competitive to support that industry longer term,” Fitterling said.

Focus article by Al Greenwood

Thumbnail shows polyethylene, which is made from ethylene. Image by Al Greenwood