Natural Gas based Petrochemical Industry

Natural Gas

• Methane is the main constituent of natural gas. (64% to 99%)

• Other constituents include ethane, propane, butane, pentane & hexane and non hydrocarbon gases such as hydrogen sulfide, carbon di oxide and nitrogen.

• The composition of natural gas varies from source to source. There is no one composition or mixture that can be referred to as natural gas. Even two gas wells from the same reservoir may have different compositions.

• The hydrocarbons propane, butane and pentane when condensed and separated from methane and ethane forms liquified natural gas (LNG).

Historical Perspective

• The commercial petrochemical production started with isopropanol and other C3s from propylene.

• In the 1920s, Union Carbide began to make ethylene by cracking ethane in its Tonowanda, New York, site

• The origin of Indian Petrochemical Industry was about 70 years ago, with the first production of organic chemical compounds from propane

Growth potential of Petrochemicals

• In India, Petrochemicals have low per capita consumption which offers significant potential for the growth of this sector.

• For instance, the per capita consumption of polymers, synthetic fibres, synthetic rubber and plastics in India is very low - at 2.5 Kilograms, 1.6 Kilograms, 0.2 Kilograms, 3.0 Kilograms respectively (whereas the global consumption is 17.3 Kilograms 3.9 Kilograms, 2.1 Kilograms, 17.0 Kilograms respectively).

• Also, the growth rate of the Indian industry during last four years has been around 15 percent whereas it was 4 percent in the global industry during the above period.

Petrochemicals-Per capita Consumption

Polymers

412

24

0

10

20

30

India China World

Country

Kg

/ Per

son

Per capita consumption in India is much lower than world average – Ample potential for growth

Main Uses of Natural Gas

• Energy Source• Petrochemicals

Energy Source• Natural gas competes with petroleum products, i.e. fuel oil, diesel

and LPG. It offers certain advantages i.e. it is less expensive, burns cleaner, possess higher energy efficiency and has greater environment friendliness.

• Natural Gas is currently the source of half of the LPG produced in the country. Power Sector accounts for around 40% of Indian gas market. Though, at present, natural gas has low share of 8% ( as compared to 25% globally) in India’s primary energy basket, there is significant potential for the gas business in India.

Petrochemicals

• Natural Gas is used as feedstock to chemical and petrochemical industries to manufacture a gamut of intermediate chemicals and finished products such as ammonia, oxoalcohols, chloromethanes, methanol, fertilizer, etc.

• Natural Gas offers following advantages over Naptha as feed stock:– Lower capital investments– Higher ethylene yields – Lower prices of the feedstock

• The main end-use products of the petrochemical industry in India are: – Plastics and Resins – Pharmaceuticals – Automotive Chemicals including Antifreeze Agents – Detergents, Solvents, Plasticizers, and Paint Varnishes – Agricultural Chemicals such as Fertilizers, Pesticides, and

Herbicides– Synthetic Elastomers

• Inorganic Petrochemicals Of the inorganic petrochemicals, ammonia is by far the most

common. : N2 + 3H2 2NH3

Ammonia production requires hydrogen from a hydrocarbon source which can be supplied from natural gas after steam reforming. The ammonia is used predominantly for the production of ammonium nitrate (NH4NO3) as well as other ammonium salts and urea which are major constituents of fertilizers

• Fertilizer sector consumes an appreciable amount of natural gas. Total requirement of natural gas by existing gas based urea units is 32.79 MMSCMD, against which actual supply during April-December 2003 was only 20.50 MMSCMD, revealing a shortfall of 37%.

• Other Industries and Uses India became the largest producer of sponge iron in 2002 with 6.5

million tonnes. Three large gas based-units account for 44% of the production

Manufacturing Process of Petrochemicals

Petrochemicals can be produced from Natural gas by two routes:• Steam Reforming of Natural Gas

Natural Gas Syngas Methanol Ethylene(Olefins) Petrochemicals

• Cracking of Natural Gas

Natural Gas Olefins Petrochemicals

Steam Reforming of Natural Gas:• In Steam Reforming, first Synthesis gas is produced which is later

converted into Ethylene either via methanol or by oxidative coupling. Out of these methanol route is most common

Syngas Production

• Natural Gas (methane) reacts with steam at 750-800°C (1380-1470ºF) and 3–25 bar pressure to produce synthesis gas (syngas), a mixture primarily made up of hydrogen (H2) and carbon monoxide (CO).

• Subsequently, in "water-gas shift reaction,", the carbon monoxide produced in the first reaction is reacted with steam over a catalyst to form hydrogen and carbon dioxide (CO2). This process occurs in two stages, consisting of a high temperature shift (HTS) at 350ºC (662ºF) and a low temperature shift (LTS) at 190-210ºC (374-410ºF).

Steam-Reforming ReactionsCH4 + H2O (+heat) → CO + 3H2

Water-Gas Shift ReactionCO + H2O → CO2 + H2 (+small amount of heat)

Steam reforming of natural gas offers an efficient, economical, and widely accepted process and provides near- and mid-term energy security and environmental benefits. The efficiency of the steam reforming process is about 65% to 75%,

Syngas to Methanol

• Industrially, methanol is produced catalytically on copper-containing catalysts such as Cu/ZnO/Al2O3 and Cu/ZnO/Cr2O3 from synthesis gas in a gas-phase process at high pressures and temperatures i.e. 523-573 K and 50-100 bar.

• Methanol synthesis is an extremely exothermic reaction. The purified gas mixture of CO & H2 in the required mol ratio is compressed and mixed with hot recycled gas and then fed to the reactor from the top. In the gas phase process, syngas reacts on the surface of the catalysts in a fixed bed reactor. Initial heating of the reactor through external agency will sustain the reaction.

CO + 2H2→CH3OH

Methanol to Olefins

• The process of converting methanol into olefins, has recently been introduced by UOP and HYDRO of Norway. This process provides an economical means to convert methanol to olefins primarily into ethylene and propylene.

• The process uses crude methanol as a feedstock at a rate of more than 0.75 MT per day. It utilizes a fluidized bed reactor with a continuous fluidized bed regenerator. The reaction is catalyzed by the silico aluminophosphate synthetic molecular sieve based catalyst

Cracking of Natural Gas

• In a petrochemical complex, crackers are used to break larger molecules into smaller ones, resulting in the production of the basic building blocks of chemicals such as ethane or propane. There are two types of plants producing base chemicals, olefin plants and aromatic reformers. Olefin cracker produces the base chemicals, ethylene, propylene and butadiene. Aromatic plants produce benzene, toluene and xylenes.

• The thermal cracking of natural gas proceeds at very high temperature resulting in olefins (Mostly ethylene/propylene). The temperature in gas cracker exceeds 1000oC. For ultimate decomposition of gas into elements more than 1500oC is required.

Demand & Supply of Natural Gas• Domestic supply of natural gas is inadequate to meet demand.

• The demand potential is expected to increase from 162 Million Metric Standard Cubic Meters per day (MMSCMD) at present to 296 MMSCMD in 2009-2010. Revised estimates of domestic production show a figure of 87.5 MMSCMD in 2003-2004. Recent gas finds can add another 25-30 MMSCMD to the supply.

• Even under most optimistic scenarios, there exists a huge demand-supply gap, which can be compensated by import of LNG.

• Indian Petrochemical industry is growing at a CAGR of 18%. The supply demand gap for C2/C3 is projected to further increase in the next few years. Assurance of long-term supplies at competitive prices could create a large and stable market for natural gas as it has both price and technological advantages over Naphtha.

• Recently (April 02, 2009) Reliance has started producing natural gas from deep sea Krishna Godavari basin. This has been seen as a landmark in the history of oil and gas production.

• Unlike the practice around the world of a minimum nine years, the RIL just took seven years from the date of discovery to begin gas production from the deep-sea KG-D6 block.

• According to Petroleum Secretary, India will save USD nine billion in oil import bill annually with the beginning of this gas production. The output at Reliance Industries is at 2.5 million cubic metres per day.

Allocation of Natural Gas

• The main producers of natural gas are Oil & Natural Gas Corporation Ltd. (ONGC), Oil India Limited (OIL) and JVs of Tapti, Panna-Mukta and Ravva. Under the Production Sharing Contracts, private parties from some of the fields are also producing gas. Government have also offered blocks under New Exploration Licensing Policy (NELP) to private and public sector companies with the right to market gas at market determined prices.

• Gas is allocated to consumers by the Ministry on the recommendations of Gas Linkage Committee (GLC) which is an inter-Ministerial Committee with representatives from the Planning Commission and the Ministries of Finance, Power, Chemicals & Fertilizers and Steel.

• In order to ensure efficient allocation of gas to various sectors, the allocations are based generally on the Imputed Economic Values (IEVs) of gas use in the various sectors, subject to preference to the power and fertilizer sectors.

• The gas produced by ONGCL & the JV consortiums is marketed by the Gas Authority of India Ltd.(GAIL). The gas produced by OIL is marketed by OIL itself, except in Rajasthan where GAIL is marketing its gas. Gas produced by Cairn Energy from Lakshmi fields and Gujarat State Petroleum Corporation Ltd. (GSPCL) from Hazira fields is being sold directly by them at market determined prices.

Recent Happenings

• Reliance has taken over IPCL. As a result of the takeover, Reliance gains control of IPCL's two gas-based crackers with a total capacity of 700 lakh tonnes per annum and one naphtha-based cracker with a capacity of 130 lakh tonnes per annum.

• For instance, the merged entity holds two-thirds of the ethylene manufacturing capacity in India.

• According to investment analysts such as J.P. Morgan, Reliance is now the largest producer of ethylene in Asia.

Future Scenario

• The natural gas and crude reserves are depleting and the country is dependent excessively on International sources to meet its requirements. This means that Indian petrochemical industries are severely vulnerable to the international supply and price pressure.

• The country imports 70 % of its crude oil requirements and is able to meet half of its gas demand of 170 mm cmpd via its domestic production.

• The deficit in gas consumption is covered by LNG imports from countries such as Qatar. India is to source 1.25 mm tons of LNG from Algeria by 2009. Also India plans to join the $ 13 Bn trans-Saharan gas pipeline. Turkmenistan also recently said it is interested in building a gas pipeline across Afghanistan to Pakistan and India. The talks are also in progress on the Iran-Pakistan-India pipeline

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