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Comment: Strategies for olefins production

by Guest on May 10, 2017

Valentin Kotlomin, director, strategic studies and downstream economics, Euro Petroleum Consultants.
Valentin Kotlomin, director, strategic studies and downstream economics, Euro Petroleum Consultants.

It is widely acknowledged that the petrochemical industry has, of late, been going through turbulent times. A common driver of uncertainty is the process of choosing an optimal feedstock for production of key olefins, such as ethylene and propylene. At that, the concept of optimal feedstock includes its cost, feedstock transportation expenses, target product yield, operating expenses as well as feedstock availability in the region of the plant.

Conventional feedstocks such as ethane, LPG and naphtha still hold their leading position in olefins production. However, the last few years have presented a new direction – the US shale gas boom, the decade of high crude oil prices (until the slump in 2014), the growth in China’s domestic petrochemical production, the intensification of public attention towards the environmental impact of the petrochemical industry – pushing petrochemical companies all over the world towards developing alternative production routes.

Alternative feedstocks

Without a doubt, one key milestone to alternative feedstocks was the active development and application of multistage hydraulic fracturing technology in the US. Eventually, it provided the North American petrochemical industry with a powerful advantage – cheap shale gas, which has led in turn to an increased supply of natural gas liquids (NGLs).

The price advantage, as well as availability of this feedstock, prodded the local petrochemical companies to increase the share of NGL in the feedstock mix of their steam crackers. For instance, LyondellBasel announced that up to 90 percent of its total ethylene in the US could be produced from NGLs. The company plans to invest three billion dollars in coming years to achieve this goal.

The idea of using cheap shale gas gained popularity on the other side of the Atlantic as well – INEOS, one of the largest olefin producers in Europe, is developing the Ethane Supply Project, including construction of pipelines from a shale field in western Pennsylvania to the Marcus Hook gas terminal near Philadelphia. It commissioned a fleet of tankers for ethane transportation by Atlantic Ocean and built two new import terminals, one at Grangemouth, UK, and the other at Rafnes, Norway. In total, INEOS has invested two billion dollars into this project.

In September 2016, the first batch of ethane from the US successfully reached the shores of Scotland and the imported ethane is expected to feed INEOS’ ethylene cracker at Grangemouth – the aim is to bring its throughput back from less than half of its present capacity to 100 percent.

Alternative olefins production routes

Other alternative olefins production routes, encoura-ged by the high crude oil prices, were coal-to-olefins (CTO), methanol-to-olefins (MTO) and methanol-to-propylene (MTP). These processes are being actively developed particularly in China – the region that has to import vast amounts of hydrocarbons to feed domestic chemical industry, while having major reserves of rather poor quality coal.

Obviously, after the energy price decline, these alternatives look less attractive but they do offer competitive economics, especially in coal-rich regions.

It was interesting to see BASF’s attempt to implement the MTO process in the US. In May 2015, the company announced that they were planning to construct a petrochemical complex on the US Gulf Coast using methanol-to-propylene technology. It was a first in the world; methanol-to-olefin technology combined with methanol production from shale gas.

However, in June 2016 the company announced it was putting the final investment decision ‘on hold’ for the time being – BASF affirmed that production of propylene based on favourable US shale gas is interesting for the company and they plan to regularly review the development of raw material prices and the relevant market conditions to determine the right point in time to commence such a major investment.

Another alternative route to produce olefins – arguably one of the most widely discussed issues at the recent Middle East Technology Forum (ME-TECH 2017) held by Euro Petroleum Consultants in February in Dubai – is oxidative coupling of methane (OCM). This technology was developed by a US-based company Siluria Technologies as a way to directly convert methane to ethylene.


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