Whilst ethylene retains the number one spot as the largest produced basic chemical, propylene is the industry’s number two. Propylene, also known as is propene, is considered the second simplest member of olefin products. A colourless, flammable gaseous hydrocarbon, propylene has been cheaper than other polymer feedstocks because it is mainly produced as a by-product of steam cracking to make ethylene and fluid catalytic cracking (FCC) producing gasoline.
“Propylene is a very versatile building block and is the feedstock for a wide range of important monomers, polymers, intermediates, and chemicals,” says Alastair Hensman, senior consultant at Nexant ChemSystems.
“Propylene is not as advantaged as ethylene in general, but it does open some interesting derivative opportunities” adds Hensman. “It is better for producers in the Middle East to produce ethylene as it is more profitable to convert it to polyethylene and mono ethylene glycol (MEG) and then export it directly to Asia, than producing propylene.”
In the Middle East, propylene production is entering a phase of rapid expansion following a long period focused on ethylene production. The production of propylene in the region became a necessity as it helps governments to create more job opportunities than the ethylene production. “Despite this it can still be a good idea to do something different when everyone is developing ethylene based business in the region” says Hensman.
The cost of production of propylene in the region is not as competitive as ethylene. For ethylene producers the cost is fixed, and in many Middle Eastern countries the cost is less than US$200 per tonne as companies in the region receive ethane feedstock very cheaply, while the majority of propylene is sourced from liquid-fed steam crackers. These feedstocks are not as competitive as the pricing of these liquid is based on a formula of naphtha prices which is strongly linked with oil prices.
With many of the Middle East petrochemical projects based on ethane crackers only producing ethylene, additions to propylene capacity in this region have been minor. However, this will change from 2009 when the Middle East will become a more significant player in the global propylene market.
“The region has been traditionally focused on ethylene production, but propylene production is growing as more propane dehydrogenation plants and mixed feed steam crackers start up” says Paul Cherry, monomer management, LyondellBasell.
Larger steam crackers using heavier feedstocks are also under development in the region, and will contribute increasingly to propylene supply. Pure ethane-based crackers that were previously the norm will become less common as the region seeks to diversify and exploit propane and liquid feedstocks.
Increasing production
The annual production of propylene capacity in the region reached 2.3 million m.t/year in 2006, almost double the capacity of 1.3 million m.t/year in 2000. Nexant ChemSystems anticipates total capacity in the region to triple by 2010, to 7.2 million m.t/year. Much of this increase will be in Saudi Arabia and Iran.
According to the Japanese Ministry of Economy, Trade and Industry, the global demand for propylene derivatives (propylene conversion) is expected to rise at an average annual rate of 5.0% from the 2003 level of 58.8 million tons to 78.9 million tons in 2009. The average annual rate of demand growth for this period is expected to be 6.3% in Asia, 4.0% in North America and 2.8% in Western Europe. Demand from China is expected to remain strong (increase of 6.0 million tons compared to 2003 level).
Global production capacity of propylene derivatives came to 66.1 million tonnes as of the end of 2003 (propylene conversion). Based on the current plans for production increases, this level is expected to reach 82.8 million tonnes by the end of 2009, representing an increase of 16.7 million tonnes over the 2003 level, and an average annual growth rate of 3.8%; The average annual production growth rate during the 2003-2009 period is expected to be 3.8% in Asia, 1.7% in North America, 0.8% in Western Europe and a massive 27.4% in the Middle East.
Production capacity of propylene, the raw material, is expected to rise from the end of 2002 level of 72.9 million tons to 88.9 million tonnes in 2009, which would be an average annual increase of 3.4%.
“Supply/demand for propylene in the region is generally balanced as all new projects have both C3 production plants and C3 consumption plants,” says Cherry, as the majority of plants in this region produce propylene, and then use in the production of propylene like Saudi Advanced Polypropylene and Saudi Olefin and Polyolefin.
Technology options
The kind of feedstock used in the production of propylene is an important factor to determine the kind of technology used. The feed availability reduces the number of viable options.
Operators needing propylene and having a source of low cost propane should consider Propane Dehydrogenation (PDH) technology, comparing to Olefins Conversion technology, High-Severity Fluid Catalyst Cracking (FCC) and Methanol-to-Propylene (MTP) technology, according to Texas- based international energy consultant, Barnes & Click.
A number of propane dehydrogenation plants are being developed in the region, but heavier cracker feed slates and development of refinery sources will provide the bulk of capacity in the long term. All new propane dehydro projects are in Saudi Arabia, thanks to the Kingdom’s current advantageous feedstock prices (calculated on a formula of naphtha price in Japan multiplied by a conversion factor – currently 0.685, estimated to rise to 0.700 in 2011.
Saudi Arabia dominates the capacity additions with most of its projects starting up in 2009. While some new propylene capacity will come from five steam cracker projects, three PDH plants are also being built. In addition, there is a metathesis project at Jubail. According to Hensman the Petro Rabigh project will include a deep catalytic cracking (DCC) unit with a capacity for 900 000 m.t./year of propylene, the first of its kind in the region. DCCs have a higher propylene yield per unit of feedstock than conventional FCCs. Output at Rabigh is destined for PP production.
In other Middle East countries, the UAE’s Borouge plans to start-up a huge metathesis unit in Abu Dhabi during 2010. In Qatar, a joint venture between Qatar Petroleum (QP) and Korean Honam Petrochemical will produce 216 000 m.t/year of propylene directly from a planned ethane-naphtha cracker at Mesaieed – plus 484 000 m.t./year at an associated metathesis unit. Persian Gulf Petrochemical will add significant capacity with a revised 1.06m m.t./year available from a planned naphtha-gasoil cracker in Iran.
Much of the propylene will be converted to PP, mainly for export with Asia the target market. CMAI expects the Middle East to move from a slight net importer to a large exporter as capacity comes on-stream from 2009.
Bearish or bullish
Propylene prices have swung sharply in 2008. Last year the price per tonne peaked at $1820 in July, before declining drastically to $310 per tonne in November, due to the economic crises. The propylene market is set for a bumpy ride during the current year of 2009as projections of muted spot pricing and oversupplied downstream markets are expected to weigh on sentiment.
