As steam cracker feedslates trend lighter, propylene production
not able to keep pace with demand growth
The increasing use of cost-advantaged natural gas liquids over
oil as a feedstock means that by North American petrochemical
producers means that are using less propylene is being produced as
a co-product by the region’s steam crackers. This trend is driving
greater global need for on-purpose production of propylene, which
is a key chemical building block second in demand only to ethylene,
according to new research from IHS (NYSE: IHS), the leading global
source of critical information and insight.
“The increasing need for on-purpose production of propylene is
primarily being driven by two factors: first, the changing
feedslates in North American petrochemical production, which are
getting lighter due to more ethane being used versus naphtha; and
second, the decline in North American gasoline demand as automobile
CAFÉ standards are implemented,” said Chuck Carr, senior director,
global olefins at IHS Chemical and principal author of the IHS
study.
“Ethane is a cheaper feedstock than naphtha, but it produces
minimal amounts of propylene as a co-product,” Carr said. “Since
global demand for propylene is increasing, on-purpose production of
propylene has become increasingly significant in the last 10 years,
and this trend will continue through 2023.”
In 2003, less than 3 percent of global propylene production —
just 2 million metric tons (MMT), was considered on-purpose
production, but according to the IHS Chemical North American
Propylene Supply Study, in 2013, that number had increased to
nearly 12 MMT or 12 percent of global production. By 2023, IHS
says, nearly 30 percent, or approximately 38 MMT of global
propylene supply will be on-purpose production.
In 2013, North America produced slightly more than 20 MMT of
propylene (including fuels). By 2023, IHS expects North American
demand for propylene into chemicals to exceed 20 MMT, and the
region is expected to produce approximately 15 percent of global
supply. Of that production, Carr expects 5 MMT will be on-purpose
production from North America. Just 4 percent of the region’s
current propylene production, he said, is on-purpose production
derived from technologies such as metathesis and propane
dehydration.
According to the IHS report, current global propylene demand is
approximately 90 MMT, and is expected to increase to 130 MMT by
2023. Propylene is produced from naphtha, natural gas liquids in
refinery units, and to a much smaller extent, coal, and is
essential for the production of polypropylene plastics such as
films and packaging, and a wide variety of other uses.
Polypropylene accounts for 67 percent of total demand. Propylene is
mainly produced as a co-product in steam crackers and a by-product
in refineries. The second largest source of propylene supply has
been production of refinery grade material in fluid catalytic
cracking units and other refinery units.
“The source of propylene supply varies significantly by region,
and North America is unique compared to the rest of the world,”
Carr said. “Forty-eight percent of the world’s production comes
from steam crackers, but in North America, the majority of
propylene, or 70 percent of production, is produced by refineries.
Just 26 percent of North American production is derived from steam
crackers because of their shale gas-based natural gas liquid
feedstocks.”
In terms of North American propylene production, 5 MMT is
consumed for fuels, while the remaining nearly 16 MMT are consumed
to produce chemical derivatives. More than 60 percent of region’s
production is produced and consumed in the Texas Gulf Coast. Other
Gulf Coast regions, including East Texas, Louisiana and
Mississippi, account for nearly 20 percent of the region’s
additional propylene production.
Steam crackers, Carr said, account for 67 percent of propylene
supply in Western Europe, 56 percent of supply in Northeast Asia,
49 percent of Middle East production, and 45 percent of propylene
production for the rest of the world. While other regions have some
on-purpose production of propylene capability, the Middle East is
the most significant region for on-purpose production. The leading
technologies employed for this on-purpose production in the region
are propane dehydrogenation, metathesis and high-severity
fluid-catalytic cracking.
Said Carr, “Looking forward, propane dehydration is expected to
be the most significant source of increasing global on-purpose
propylene production, and will be the process most likely employed
in the United States, the Middle East and Asia for this production.
Currently there is one propane dehydrogenation unit operating in
the region (Flint Hills near Houston), but plans are under way for
six more to be built by late 2018. In response to this new
dehydrogenation capacity, pipeline service changes and expansions
are expected in North America. We are going to see significant
investments being made in terms of pipeline capacity and
storage.”
The U.S. and Middle East additions will be based on local,
low-cost propane, while China will use imported propane, which
competes with the fuels market, Carr said. “Coal-to-olefins
technologies in China are also expected to be a significant source
of on-purpose supply growth. However, this technology faces water
and environmental challenges, and has very high capital costs as
well.”
Regardless, he said, “China will add significant on-purpose
capacity, which will result in global oversupply, leading to the
weakening of Asian (and therefore, global) propylene prices, which
will increase the cash-costs of ethylene from naphtha crackers
around the world.”
To speak with Chuck Carr, please contact
melissa.manning@ihs.com, or press@ihs.com. For more information on
the IHS Chemical North American Propylene Supply Study, please
contact mark.mendelson@ihs.com.
About IHS
(www.ihs.com)
IHS (NYSE: IHS) is the leading source of information, insight
and analytics in critical areas that shape today’s business
landscape. Businesses and governments in more than 165 countries
around the globe rely on the comprehensive content, expert
independent analysis and flexible delivery methods of IHS to make
high-impact decisions and develop strategies with speed and
confidence. IHS has been in business since 1959 and became a
publicly traded company on the New York Stock Exchange in 2005.
Headquartered in Englewood, Colorado, USA, IHS is committed to
sustainable, profitable growth and employs more than 8,000 people
in 31 countries around the world.
IHS is a registered trademark of IHS Inc. All other company and
product names may be trademarks of their respective owners. © 2014
IHS Inc. All rights reserved.
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IHS Inc.Melissa Manning, +1
832-458-3840melissa.manning@ihs.comorPress Team, +1
303-305-8021press@ihs.com
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