THE CHANGING LANDSCAPE OF US PROPYLENE AND · PDF fileTHE CHANGING LANDSCAPE OF US PROPYLENE...

Pat Whalen Managing Editor, PetroChem Wire

June 19, 2012

THE CHANGING LANDSCAPE OF US PROPYLENE AND

PROPANE MARKETS

About PetroChem Wire

• Formed in 2007 in response to growing spot market liquidity in the ethylene and propylene monomer markets.

• PCW publishes daily spot prices for NGLs, olefins and polymers, connecting the supply chain from energy down to manufacturing. In addition, PCW publishes a daily Propylene Focus along with other reports.

• Is used by the NYMEX as benchmark for monomer & polymer futures contracts.

www.petrochemwire.com

Agenda

I. The current landscape: production II. The current landscape: costs III. The changing landscape: investments IV. The changing landscape: production V. The changing landscape: costs VI. The future landscape: transparency


• Most propylene in the US is produced by upgrading “refinery grade” propylene, which is a crude grade of propylene.

• Refinery grade propylene (RGP) can be produced in the refining process OR as a byproduct of steam cracking during the ethylene production process.

• During the steam cracking process, RGP is produced when cracking “heavy” feeds.


The current propylene landscape: production

Feed slate options for steam crackers: Ethane (C2)

Propane (C3) Butane (C4)

Natural Gasoline (C5) Naphtha (C6-8)

The higher the number, the “heavier” the hydrocarbon.

Naphtha is the heaviest. The heavier the feedstock, the less ethylene yield and the greater “co-product” yield,

such as pyrolysis gasoline (pygas) or RGP.



Historically, US steam crackers have been: • Light - using mostly ethane or propane • Heavy - using mostly butane, natural gasoline

or naphtha • Flexible - having a large number of furnaces to

accept every type of feedstock



• However, with the shale-fueled “ethane craze” in recent years, nearly every US steam cracker has changed its furnace slate to be light.

• As a result, co-product production such as pygas and RGP have been dramatically reduced.

• For RGP, this has meant that most production now comes from refineries.





RG propylene PG propylene CG propylene BASF/Total (JV) Braskem Chevron Phillips Eastman Enterprise ExxonMobil Flint Hills Formosa Ineos LBI/Equistar PetroLogistics Phillips 66 Pinnacle Sunoco Westlake Williams

BASF Dow Eastman Enterprise ExxonMobil Flint Hills Ineos LBI/Equistar PetroLogistics Sunoco Westlake Williams

Alon BP Chalmette Chevron Citgo ExxonMobil Flint Hills LaGloria LBI Marathon Motiva Murphy Pasadena PBF Phillips 66 Shell Total Valero

RGP uses

• Upgraded (split) into purer grades of propylene – chemical grade (94% purity) and polymer grade (99% purity).

• Combined with benzene to produce cumene (which is used to produce phenol).

• Combined with isobutane to produce alkylate (a gasoline blendstock)



• RGP supply has decreased but demand from its three major uses has not decreased.

• As a result, RGP supply can become tight and its price relatively high.

• This has, at times, crushed margins for the chemical industry, particularly PGP producers.


The current propylene landscape: costs

The current propylene landscape: costs


$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

PGP RGP

• Every major chemical company in North America has announced investments to build or expand ethylene production using ethane feedstock.

• The second wave of announcements were about “on-purpose” propylene production, using propane as a feedstock rather than RGP.

• The technology of propane dehydrogenation is currently only used at one US facility … but that will become the dominant method of production in coming years.


The changing propylene landscape: investments

North American PDH Plants Owner Location Capacity Start Date PetroLogistics Houston, Texas 600,000 mt/yr Operating Enterprise Mt Belvieu, Texas 750,000 mt/yr 3Q 2015 Dow Freeport, Texas 750,000 mt/yr 2015 C3P/Ascend Alvin, Texas not disclosed 2Q 2016 Williams Redwater Alberta, Canada 500,000 mt/yr 2Q 2016 Formosa Point Comfort, Texas 600,000 mt/yr 2016 PetroLogistics Houston, Texas 544,000 mt/yr 2017 (expansion) Enterprise Mt Belvieu, Texas not disclosed 2018 (planning) Dow not disclosed not disclosed 2018 (planning)


The changing propylene landscape: production


The changing propylene landscape: lower costs

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00Ju

l-10

Oct

-10

Jan-

11

Apr-

11

Jul-1

1

Oct

-11

Jan-

12

Apr-

12

Jul-1

2

Oct

-12

Jan-

13

Apr-

13

PGPPropane

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2001 2003 2005 2007 2009 2011 2013 2015 2017 20190

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

NGL Extraction Capability Forecast(1000 BPD)

2013 Base Case Forecast

2013 High Case Forecast Possible Additional

Marcellus/Utica


0

200

400

600

800

1000

1200

1400

1600

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Forecast of US Propane Supplies(1000 BPD)

Gas Processing Propane Refining Propane Imports




Propane currently is used in several markets:

• Heating/cooking fuel • Petrochemical production • Crop drying • Vehicle fuel



Propane trades at several hubs: • Mont Belvieu, Texas • Conway, Kansas • Hattiesburg, Mississippi

It is also easily transported internationally

The changing propylene landscape: production Operating US NGL Export Terminals Company Location

• Enterprise Houston Ship Channel

• Targa Galena Park, Texas

• Sunoco Logistics Marcus Hook, Pennsylvania (Philadelphia)




Propylene is used in many markets: • PGP – to produce polypropylene • CGP – to produce solvents and

intermediate chemicals – Solvents include acetone, isopropanol – Intermediates include propylene glycol,

butanols, acrylonitrile



Polymer grade propylene is currently traded at Mont Belvieu, Texas. Like propane that trades at Mont Belvieu, futures contracts have developed around these hub prices (CME, ICE). RGP does not currently have a corresponding futures contract.

• With corresponding futures contracts and comparable liquid spot markets trading at the same hub, RISK MANAGEMENT is finally possible for the propylene supply chain.

• This will attract more players to the propylene market, and it will become more like the propane market over time.


The future propylene landscape: transparency


Thank you!







Date post:	07-Mar-2018
Category:	Documents
Upload:	buinhan
View:	223 times
Download:	3 times

THE CHANGING LANDSCAPE OF US PROPYLENE AND · PDF fileTHE CHANGING LANDSCAPE OF US PROPYLENE...

Documents