December 2017

Trends and Resources

Business Trends: Propane dehydrogenation technology is transforming the propylene business

Propylene demand has been increasing rapidly in recent years, and traditional processes are struggling to keep up.

Propylene demand has been increasing rapidly in recent years, and traditional processes are struggling to keep up. Propylene demand has increased at an average rate of nearly 5%/yr in the past 5 yr, with some developing countries growing at two to three times that rate. In China, for example, average annual propylene demand grew by 15.5%/yr between 2012 and 2016. 

The majority of the world’s propylene supply comes from coproduct processes, which are run primarily to make a product other than propylene. As demand for those alternate products—either ethylene or gasoline—grows more slowly than propylene, alternative processes must be implemented to ensure that supply could satisfy demand. Out of the few processes that have emerged that focus on propylene production, propane dehydrogenation (PDH) has proven to be the most effective tool. At present, 26 PDH plants are operating worldwide, with a 27th plant scheduled to begin operations in Abu Dhabi in early 2018.

High demand for polypropylene (PP) has been a major driver for the rapid expansion in propylene production processes. PP is a versatile plastic that has fundamentally transformed the use of plastics in many applications. Worldwide, approximately two-thirds of propylene is used to make PP. As demand for PP grows, propylene producers have had to look to alternate processes to ensure adequate monomer supply.

The preference for PP in many applications in China has driven PP capacity expansion, which has increased propylene demand. Chinese units account for approximately one-third of global PP capacity, growing about 14% in the last 5 yr. Due to the growth in PP demand, the country has invested heavily in new propylene capacity. At present, China holds 28% of global propylene capacity and 14% of global ethylene capacity.

In 2016, approximately 48% of propylene was produced from steam crackers as a coproduct with ethylene. This percentage has dropped in recent years as some steam crackers move to lighter feedstocks that yield less propylene. This trend is particularly strong in the US, where NGL and LPG prices remain low. Most of the new steam crackers coming online are designed to use ethane as the primary feedstock, which typically produces less than 2% of propylene compared to ethylene production.

The use of NGL feedstocks in Europe and Asia-Pacific crackers is growing, primarily due to increased international trade in the feedstocks. More than half of European cracker capacity can now run lighter feedstocks than naphtha, and significant infrastructure has been added at ports to manage incoming feedstock cargoes.

Approximately one-third of propylene production is sourced from refineries. In recent years, moderate crude prices have kept gasoline demand strong and refinery operating rates high. This supply boost has helped fill the gap of lost propylene production resulting from lighter steam cracker feedslates. Moderate crude prices are forecast to persist, which will generally keep gasoline demand and refinery utilization rates strong, although the supply impact varies by region. However, even with strengthening economies worldwide, gasoline demand growth remains below that for propylene.

To mitigate the growing propylene supply gap, the industry is investing in on-purpose propylene production technologies, such as PDH and processes based on coal and methanol feedstocks. These technologies have been critical in addressing the supply gap that emerged as propylene derivatives grew at faster rates, and continues as crackers move toward lighter feedstocks. Additionally, the anticipated oversupply outlook for ethylene in 2019 and 2020—due to significant capacity expansion in the US and China—and possible reduced operating rates at steam crackers, further supports a need to source propylene from processes that are not dependent on the economics of another product.

The dehydrogenation of propane is an endothermic reaction that proceeds in the presence of a heterogeneous catalyst. The products are propylene, hydrogen and small amounts of methane, ethane, ethylene and other light hydrocarbons. Propylene is the most valuable product, but hydrogen can also be useful for local refineries as a tool for removing sulfur from fuel. Conversion of the propane feedstock yields a 1.1–1.2 ratio to propylene produced, depending on the catalyst and reactor conditions. The cost of a new, world-scale PDH unit can be as high as $1.5 B.

Of the PDH plants in operation worldwide, approximately 60% utilize Honeywell UOP’s Oleflex technology. The remaining PDH plants use CB&I Lummus’ Catofin technology, with one installation that uses ThyssenKrupp Industrial Solutions’ STAR technology.

These units can be challenging to operate since the high heat input can facilitate various side reactions and limit selectivity; feedstock impurities can create significant problems. Additionally, coke deposits form readily and require frequent catalyst regeneration. Initial commissioning and startup after outage have proven difficult in various regions. Outages of these units can have a significant impact on the market due to their very large size. World-scale units have a capacity of 750 Mtpy, which is typically several times larger than the production capacity of a steam cracker or refinery, or the consumption of a single downstream derivative unit.

Northeast Asia has been the fastest to adopt these new technologies, and on-purpose propylene production accounts for 30% of regional capacity. Coal- and methanol-based propylene production capacity has grown quickly in recent years. However, this growth is forecast to slow as short-term overcapacity pressures margins and new environmental regulations increase investment costs.

FIG. 1. Global PDH capacity (12.4 MMtpy) by region. Source: Argus Consulting.
FIG. 1. Global PDH capacity (12.4 MMtpy) by region. Source: Argus Consulting.

Global PDH production capacity is more than 12 MMtpy (FIG. 1). China has shown a preference for PDH units and accounts for more than half of PDH capacity worldwide. The country’s first PDH unit began operations in Tianjin in 2013. At present, the country has 12 PDH plants in operation, with many that have integrated downstream derivative production units. Since domestic propane does not meet the required specifications, all Chinese PDH units are supplied by imported propane originating from either the US or the Middle East.

Among these 12 units, four are mixed-dehydrogenation units (often referred to as MDH), which use LPG feedstock (propane/butane mix) to produce propylene and butylenes. These units are typically further integrated to MTBE production. In contrast to PDH units, many of these MDH units can use domestic feedstock.

The US has continued to build PDH production capacity. The region has taken advantage of cheap propane to support the construction of PDH units, and has recovered from an earlier decline in capacity when several steam crackers shifted to ethane feedstock. The third US PDH unit began production in November, following previous units that started production in 2010 and late 2015.

New PDH units are expected to begin operations in Canada in the next few years, as midstream companies Pembina and Inter Pipeline plan new PDH/PP complexes in Alberta. Both companies have announced new units, but final investment decisions have not been concluded. In Western Europe, two small PDH units have been operating for several years. More are expected to begin operations as steam crackers produce less propylene and because several refineries have ceased operations, which is likely to continue. INEOS and Borealis are studying the feasibility of a new, world-scale PDH plant. The companies are expected to announce their final plans in 2018.

FIG. 2. Weekly operating rates of Chinese PDH units, May 2015–October 2017.
FIG. 2. Weekly operating rates of Chinese PDH units, May 2015–October 2017.

PDH unit operations in China have been particularly problematic. Significant swings in operating rates have been common, especially in 2015 and 2016, when operators were learning how to run their new installations. Average utilization rates have increased from 76% in 2015 and 2016 to nearly 90% this year (FIG. 2), except for 1Q–2Q cuts for regional environmental inspections. Lower production from these units can have a significant impact on local product availability and regional prices, which then cascade to global volatility.

Due to the growing production capacity of these new units, propylene production is now much more than what a single derivative plant can consume. A typical new PP unit has a capacity of 450 Mtpy–500 Mtpy. With other derivative production lines having a much smaller processing capacity, the mismatch of size can be a problem for some countries.

On the US Gulf Coast, which has an extensive pipeline system and many offtakers, production from a large PDH plant can be absorbed by the total system. However, for more isolated units, such as those under consideration in northern Alberta or Europe, constructing a global-scale PDH unit may require discussions with several other companies to ensure that the new production can be used in the region. Even in China, PDH units typically are major sources for merchant propylene, as producers can maximize margins with partial integration to some downstream products and some exposure to the spot market.

PDH technology offers an important tool for petrochemical companies to fill the gap that is emerging between the supply of the primary olefin products of ethylene and propylene. Although global ethylene supplies are beginning to swell due to major capacity additions, these units will add little propylene supply due to the nature of their feedstocks. Establishing a new, reliable source for propylene production will be critical to support ongoing demand for propylene derivatives, as well as to ensure that the final product is cost-competitive. HP

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