A Gas Future for Petrochemicals?
A Look at Global Investment Projects in the Face of Diversifying Petrochemical Feedstocks
Technology - Growing chemicals demand from Asia and the need to reduce exposure to fluctuating oil prices continue to drive petrochemicals expansion in the Middle East. In the past decade, countries such as Saudi Arabia, the UAE and Qatar have moved downstream to establish world-scale chemical facilities. In other parts of the world, petrochemical companies look at diversifying their feedstock base due to the availability of new sources and technologies.
In Saudi Arabia, Saudi Aramco and Dow Chemical announced last year that they will build a huge chemicals complex in Jubail Industrial City. The $20 billion Sadara Chemical Company project, expected on-stream in 2016, will be the largest integrated chemical facility ever built in a single phase, with 26 units producing over 3 million metric tons/year.
By 2016, Qatar may be producing 6 million metric tons/year of ethylene, analyst Business Monitor International has said. At Ras Laffan, an expansion will take the Qatari RLOC cracker to 1.6 million metric tons/year, while a joint venture between ExxonMobil and Qatar Petroleum (QP) will create a new cracker of the same size, as well as polyethylene and ethylene glycol plants. A QP joint venture with Shell at Ras Laffan will create the world's largest ethylene glycol plant, at 1.5 million metric tons/year. At Mesaieed, Qatar Petrochemical Co. (QAPCO) has a new 300,000 metric tons/year low density polyethylene (LDPE) plant, while Qatofin plans to raise its linear low density polyethylene (LLDPE) capacity from 450,000 to 600,000 metric tons/year.
More radically, two projects in the Middle East have proven the technical feasibility and large-scale economics of gas-to-liquids (GTL), which converts methane and natural gas liquids (NGLs) into high-quality synthetic fuels, lubricants and chemical feedstocks. Shell's Pearl GTL project at Ras Laffan started up smoothly last year and is showing a good return despite its massive $19 billion cost, with a capacity of 140,000 barrels/day of synthetic liquids and 120,000 barrels/day of NGLs.
Sasol, Shell's main competitor in GTL technology, is also doing well after a rocky start. Teething problems at Qatar's first GTL project, the Oryx joint venture between Sasol and Qatar Petroleum, are now fixed. Escravos in Nigeria, a joint venture between Chevron and Nigerian National Petroleum Corporation using Sasol GTL technology, is finally expected to start up next year after serious delays.
India and China
Rising prosperity in many Asian nations will require huge growth in chemicals such as plastics and detergents, while imported oil should become cheaper thanks to the US shale gas boom (see below).
India's 12th Five-Year Plan (2012-2017) sets a 12% annual growth target for basic organic chemicals, well ahead of current 7% GDP growth. Indian polyethylene production will rise from the current 2.8 million metric tons/year to 4.71 million metric tons/year in 2015, according to Indian Oil. Olefins demand will be met by a slew of projects such as the cracker awarded to engineering company Technip by Reliance Industries in June. The world-scale plant will be built at Reliance's Jamnagar refining and petrochemical complex in Gujarat.
China too will scarcely be able to keep pace with demand for ethylene during its 12th Five-Year Plan (2011-2015), says the China Petroleum and Chemical Industry Association (CPCIA), and even by 2020 the country will still have to import 48% of its ethylene needs. With its large coal reserves, China is building on existing success in coal-to-methanol (CTM) plants by developing methanol-to-olefins (MTO) technology. China has three demonstration CTO projects totalling 1.56 million metric tons/year, with another nine expected by 2013 and more than 30 CTO projects proposed.
Brazil's success with bioethanol as a transport fuel makes the country a natural testbed for the emerging concept of biorefineries. In September 2010, Braskem opened a plant to make 200,000 metric tons/year of "green" polyethylene from sugarcane ethanol at its Triunfo complex in southern Brazil. Braskem says the product has the same processing characteristics as traditional polyethylene, and that it is considering ethanol-based ethylene and polypropylene too.
USA and Canada
In the USA, the shale gas boom is shaking up petrochemicals as much as it is the energy sector. "Wet" shale gas provides ethane that can be used locally or even exported, while "dry" gas (methane) could potentially be used for GTL projects.
Drillers facing low natural gas prices have tried to increase profits by focusing on wet gas, to the extent that the price of ethane has collapsed, the Wall Street Journal noted earlier this year. In May, Chevron Phillips Chemical chief executive Peter Cella said it could take US chemical companies four or five years to catch up with the oversupply of NGLs, with three or four new crackers needed in the next decade. Analysts at energy investor Tudor Pickering Holt estimated the potential for new petrochemical investment at $20 billion.
Chevron Phillips Chemical plans to invest $5 billion in a new cracker and two polyethylene plants in Texas, for start up in 2017. Formosa Plastics USA says it will spend $1.7 billion on an 800,000 metric tons/year cracker, a 300,000 metric tons/year LLDPE plant and a 600,000 metric tons/year propane dehydrogenation plant scheduled for 2016. Occidental Petroleum, Braskem of Brazil and Saudi Arabia's SABIC are all considering new crackers in the USA. So too is new entrant Aither Chemicals, which claims its catalytic ethane cracking technology uses 80% less energy than a conventional steam cracker of the same size.
Last September, Sasol said it was starting an 18-month feasibility study for a GTL plant in the USA. The plant, with a capacity of either 2 or 4 million metric tons/year, would be built at Sasol's existing Westlake site in southwestern Louisiana. Shell, too, has indicated that it is considering a GTL plant in the Gulf of Mexico.
Taking the more conventional option, in March this year Shell signed an option on a site near Pittsburgh, Pennsylvania, for a petrochemical complex based on an ethane cracker plus polyethylene and ethylene glycol plants. If this goes ahead, it will start up in 2019-2020. "Building an ethane-fed cracker in Appalachia would unlock significant gas production in the Marcellus region by providing a local outlet for the ethane," said Ben van Beurden, Shell Executive Vice President Chemicals.
Nova Chemicals has had the same idea, announcing in September 2011 that it would upgrade its Corunna cracker near Sarnia, Ontario, to run entirely on NGL by the end of 2013. Nova also plans to use ethane from the Bakken shale in North Dakota at its Joffre complex in Alberta, which has an ethylene capacity of 2.2 million metric tons/year.
Some ethane will travel further. The 2,000 km Appalachia-to-Texas (ATEX) Express pipeline, expected to start up in 2014, will carry ethane from the Marcellus and Utica shales to the petrochemical plants of the Gulf Coast. In September, Ineos Europe signed a 15-year deal to buy US ethane transported by pipeline to a terminal at Marcus Hook, Pennsylvania, and from there by ship to Europe. Supply is expected to start in 2015. Although Ineos has not said how much it will buy, at full capacity the pipeline is expected to provide 70,000 barrels/day of ethane and propane combined.
European ethylene is traditionally made from naphtha and other relatively heavy feedstocks, so the decision by Ineos to import US ethane is ground-breaking. Ineos produces more than 40 million metric tons/year of petrochemicals at Grangemouth (UK), Cologne (Germany), Lavéra (France, in a joint venture with Total), and Rafnes (Norway). Other companies may follow Ineos's lead: with US ethane priced at around $240/metric ton and European naphtha prices above $800/metric ton, importing ethane is likely to be profitable even after processors have paid shipping costs and taken an efficiency hit from running their naphtha crackers on ethane, analysts say.
For the moment, however, high oil prices are continuing to hinder the recovery of European petrochemicals. The Brussels-based Association of Petrochemicals Producers in Europe (APPE) puts European ethylene consumption in 2010 at 20.3 million metric tons/year, still down 10% from the peak of over 22 million metric tons/year in 2007.
In Germany, a 400,000 metric ton/year ethylene pipeline was finally completed this summer after considerable legal delays. Ethylen-Pipeline Süd (EPS) connects BASF's site at Ludwigshafen and the MiRO refinery in Karlsruhe with users in Bavaria, including LyondellBasell, Borealis, Clariant, OMV, Vinnolit and Wacker Chemie.
The UK's chemical industry has been hit especially hard by the financial crisis. CHEManager Europe reported recently that UK sales of basic organic chemicals, mainly petrochemicals, fell by 31% between 2008 and 2010, from a base of around €7 billion. Analyst IBISWorld confirms an average annual shrinkage of -11.3% since 2008. Lack of investment during the previous decade led to the closure of several ageing plants in north-east England, the heartland of UK organics manufacturing, once the recession struck.