APIC 2005APIC 2005
George M. IntilleVice President, SRI Consulting
Propylene in AsiaGrowing Demand and Issues in SupplyAsia Petrochemical Industry ConferenceAsia Petrochemical Industry ConferenceYokohama, Japan Yokohama, Japan May 19,May 19, 20052005
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APIC 2005APIC 2005
Propylene: “The other olefin”
• Worldwide production in excess of 65 million tons per year
• Worldwide production valued in excess of $25 billion per year
• Demand growth expected will exceed 4.5 - 5.0% per year in the next five years
• Demand in Asia will be even stronger, growing at nearly 6% per year
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APIC 2005APIC 2005
Often considered a byproduct
• About 61% produced in “ethylene” plants• About 34% produced in petroleum refineries• Only than 3% produced by on-purpose
propylene-only production plants
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APIC 2005APIC 2005Recent events challenging historical
perceptions
• Ethylene / propylene price relationships
Olefin Prices Polymer Grade Contract Prices
400
600
800
1000
Jan
Mar
May Ju
l
Sep
Nov Ja
n
Mar
May Ju
l
Sep
Nov Ja
n
Mar
Year
Dol
lars
/Ton
EthylenePropylene
2003 2004
5
APIC 2005APIC 2005Propylene Price Surpasses
Ethylene Price
• Ethylene / propylene price relationships
U.S. Olefin Price Ratios
108%987916200598%728745200476%4896422003
RatioPropyleneEthyleneYear
6
APIC 2005APIC 2005Situation Existed Even Longer in
Asia
• Propylene prices have been at or above parity with ethylene for several years
Asian Olefin Price Ratios
104%1,0551,015200593%8479112004
118%5784912003
Ratio%
Propylene$/Ton
Ethylene$/Ton
Year
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APIC 2005APIC 2005What Is Driving Propylene’s
Increasing Value?
• Strong demand for propylene derivatives is one of the keys– Polypropylene– Acrylonitrile– Oxo chemicals– Propylene oxide– Cumene– Isopropyl alcohol– Polygas chemicals.
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APIC 2005APIC 2005Polypropylene Is Most Important
Derivative ….
• PP accounts for more than 60% of propylene demand due to its due to favorable properties in end use products– very low density– good mechanical properties– optical clarity– low moisture transmission
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APIC 2005APIC 2005Making PP Competitive In Fast
Growing Applications ….• PP injection molded products
– Container caps and closures– Appliance parts– Disposable syringes– Household and miscellaneous products.
• PP fibers– Carpets – Non-woven market– Agricultural uses
• PP Films– Snack food packaging– Pressure-sensitive tape – Shrink-film overwrap– Electronic applications
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APIC 2005APIC 2005Making Polypropylene The Fastest
Growing Thermoplastic
• Unlike other thermoplastics worldwide polypropylene consumption is expected to grow at nearly twice GDP growth rate.– About 6-7 percent in industrialized regions– More than 10 percent in China, Asia and Mideast
• Worldwide growth for polyethylene will average only about 4 percent over same period
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APIC 2005APIC 2005
Olefin Demand Comparison• Driven by high polypropylene and other propylene derivative
demand, propylene growth rate will exceed ethylene growth rate
Worldwide Olefin Demand
40
80
120
160
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2014
Year
Thou
sand
Ton
s/Ye
ar EthylenePropylene
5.1% growth
4.3% growth
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APIC 2005APIC 2005Olefin Mismatch Even Greater In
China And Asia
Olefin Growth Comparison
0
2
4
6
8
World Asia
Gro
wth
Rat
e (%
)
ethylenepropylene
P/E Ratio = 1.20
P/E Ratio = 1.39
• Propylene demand growth in Asia outpaces world
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APIC 2005APIC 2005Small Difference In Demand Has Large Impact on Supply Options
• Demand ratio is increasing with time• Production ratio is somewhat fixed by cracker
feedstock mix
Propylene/Ethylene Demand RatioYear P/E (%)
2005 632010 652015 66
Steam Cracker Production RatioFeed P/E (%)
Ethane <1LPG 33 - 46Naphtha 40 - 57Gas Oil 53 - 622005 Average 40
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APIC 2005APIC 2005Cracker Additions Will Not Meet
Increased Propylene Demand • Based on announced cracker projects olefin expansions will
fall short of increased propylene demand for next few years
Propylene Capacity Additons
0
1
2
3
4
5
2005 2006 2007 2008 2009Year
Mill
ion
Tons
/Yea
r
New Capacity NeededAvailable From Crackers
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APIC 2005APIC 2005Mideast Gas-Based Crackers
Produce Lower Propylene Yields
• Future additions of predominately gas based crackers in Middle East, motivated by low NGL prices will reduce worldwide average of propylene yield from steam cracking even further
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APIC 2005APIC 2005Propylene Shortfall Will Have To
Be Meet From Other Sources
• Potential other sources of propylene– Refinery cat cracker recovery– Increase steam cracker severity– Increase use of heavier feeds for steam cracking– Metathesis (recent)– Propylene from methanol (new) – Propane dehydrogenation
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APIC 2005APIC 2005
Refinery Cat Cracker Recovery
• Worldwide, propylene extracted from refinery catalytic crackers (FCC) units is the second largest source of propylene
Worldwide Propylene Supply
On Purpose
Other By-Product
Steam Crackers Refinery Sources
34%
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APIC 2005APIC 2005
Less Important In Asia
• Lower gasoline demand• Different octane needs• Higher heating oil
demand• Less chemical/fuels
integration
Asian Propylene Supply
On Purpose
Steam Crackers Refinery Sources
17%
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APIC 2005APIC 2005
Refinery Supply Considerations
Actual percentage of propylene in the off-gases from any particular refinery depends on several variables– Type of refinery– Type of FCC reactor– FCC feedstock composition– Type of catalyst– Operating conditions– Gasoline production level– Crude oil processed– Propylene use in other fuel conversion processes (alkylation)
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APIC 2005APIC 2005Asian Refinery Propylene Options
Are Limited
• Fewer gasoline-mode and high octane operations on Asia than in the United States
• Cat cracker propylene yields from distillate mode refineries is significantly lower
Typical Propylene YieldsDistillate mode 5%Gasoline mode 8%High octane mode 12%
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APIC 2005APIC 2005
Increasing FCC Severity Can Help
• Gasoline mode FCC units can increase propylene yields by increasing severity
Typical Propylene YieldsLow severity (510 oC) 7%High severity (560 oC) 10%
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APIC 2005APIC 2005
New FCC Catalysts and Processes
• New FCC catalysts now in development can be aimed at increased propylene production
• Modified FCC processes, known as “Deep Catalytic Cracking” or DCC combine catalyst and operating condition changes to raise propylene yields to as high as 16%
• Acceptance of such novel processes has been slow due to refiner’s reluctance to “experiment” with processes as centrally important as FCC
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APIC 2005APIC 2005
Limits On Refinery Propylene
• Few new refineries• Few new FCC units growing at only 1%/yr • Refinery extraction limited by availability, not capacity• FCC catalyst additives and DCC will increase available
propylene • Most optimistic scenario suggests 3000 M tons of additional
propylene from refineries worldwide by 2014
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APIC 2005APIC 2005Half of Announced Refinery
Propylene Projects Are In Asia
• Asian projects to upgrade refinery propylene will add 1.4 million tons of propylene by 2009
• Worldwide announced projects for entire world will add slightly less than 3 million tons of propylene in next five years
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APIC 2005APIC 2005Un-Extracted Refinery Propylene Is Most Economical Refinery Choice
• Since increasing FCC severity reduces gasoline yield, most economically attractive incremental sources of refinery propylene are refineries with existing un-extracted propylene
• Significant investment in new FCC or DCC technologies is not anticipated
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APIC 2005APIC 2005On-Purpose Production Will Be
Required Before 2009
• Either metathesis. propane dehydrogenation, or methanol based olefin olefins will be needed
• Metathesis has potentially lower, cost, but is less well proven technology
• Propane dehydrogenation requires a low cost source of propane and is important only in Middle East
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APIC 2005APIC 2005500,000 Tons Of Metathesis
Expected - All in Asia
• Plans for 500,000 tons of new capacity for metathesis by 2009 could grow even higher as the technical certainties are demonstrated in recent new plants in Asia
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APIC 2005APIC 2005900,000 Tons Of PDH Expected
- All in Mideaast
• Plans for 900,000 tons of new capacity for PDH by 2009, all of which is in Middle East and use propane feed at extremely low cost.
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APIC 2005APIC 2005No MTO/MTP plants planned
before 2009
• Although a great deal of interest has been shown in methanol based production of both ethylene and propylene, there are currently no firm plans to use this technology before 2009
30
APIC 2005APIC 2005Summary of New Propylene
Sources • Most new propylene capacity will be built in Asia
Announced Propylene Projects
0
1
2
3
4
5
Crackers Refineries PDH Metathesis
Mill
ion
Tons
/Yea
r AsiaRest Of World
31
APIC 2005APIC 2005Propylene Will Remain Tight Due To Shortfall in New Firm Projects
Announced Capacity Additions Shortfall
0
10
20
30
40
50
2005 2009 2014Year
Mill
ionT
ons/
Year
Announced CapacityExpected Requirement
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APIC 2005APIC 2005
Conclusions
• Propylene demand will remain strong• Imbalance between ethylene and propylene growth
rate creating a propylene supply gap• Asian gap is substantial and is causing very strong
propylene pricing• New propylene from crackers must be augmented by
refinery extraction and on-purpose production• Metathesis and MTO will help close the gap
