Report evaluates emerging 'on-purpose' propylene production techniques

The shift to ethane feedstocks, especially in North America, has benefited producers, but it is also precipitating a shortfall in the supply of propylene, which is essential for plastics production. Ethane feedstocks, derived from natural gas, produce very low yields of propylene compared with crude-oil-based naphtha feedstocks. As demand for so-called “on-purpose” propylene continues to escalate, new production techniques have been developed that are emerging as the market cornerstone and global price setter for the propylene market. Business analyst IHS Markit (London) has published a report that assesses the technical and economic merits and challenges of these on-purpose technologies.

With the decline of steam crackers and oil refineries, which used to be the traditional sources of propylene as a derivative or co-product of crude oil processing, chemical producers have turned to chemical engineers and chemists to develop and commercialize on-purpose propylene production technologies.

“The market is hungry for adequate sources of propylene supply and is investing in technologies that will deliver that supply,” said Don Bari, Vice President of IHS Markit and lead author of “Competitive Processes and Cost Tracker (CPCT)—On-Purpose Propylene Production.”

“Our IHS Markit research sought to examine the strengths and benefits, from a technical and regional economic perspective, of the six on-purpose propylene production technologies currently gaining traction in the commercial marketplace,” Bari said.

The six principal technologies include propane dehydrogenation (PDH); coal-to-olefins/coal-to-propylene (CTO/CTP); methanol-to-olefins/methanol-to-propylene (MTO/MTP); gas-to-olefins (GTO); metathesis; and high-severity fluidized catalytic cracking (HS-FCC). Each of these processes uses a different feedstock and has specific advantages and challenges.

PDH units dominate the global market, Bari said, with about 40% of global on-purpose propylene capacity today. Stakeholders for those facilities expect they will remain competitive because of attractive propane feedstock cost and abundant supply in and from the United States.

”Nevertheless, the challenge is that when companies invest in process technologies, they are making multi-billion dollar investments, which must be sustainable for a 30-year period,” Bari said. “During that time, market conditions, feedstock prices and availability will vary, often significantly, so companies really want to be able to interrogate the cost data against a host of variables over time, to minimize investment risk.”

With that in mind, Bari and his fellow researchers used the company’s CPCT analytical model to assess the multiple on-purpose technologies over nearly a 20-year period, which accounted for a large fluctuation in feedstock prices. “When we assessed the various technologies over time and at many different feedstock prices represented during the past 16 years, we found that the PDH process would have been the most economically competitive in the U.S.,” Bari said. “For example, since the year 2000, we estimate that PDH would have had an average production cost (including depreciation) of production advantage over naphtha cracking of $405 per metric ton (with feedstock and co-products taken at market price). By contrast, a metathesis-based plant would have had an average $47 per metric ton disadvantage over naphtha-cracker-based propylene.”

Moreover, the IHS Markit report said, a hypothetical GTP facility also would have been at an advantage over a naphtha-based technology by $202 per metric ton, on average. An interesting aspect for the GTP route is that, according to IHS Markit, estimates for the four-year period of fourth-quarter 2010 to third-quarter 2014, GTP-based propylene production was the most competitive on-purpose propylene technology. The process delivered an estimated $215 per metric ton production cost advantage over the PDH route.

“So a time-based analysis is a very critical part of the technology selection, which is also exemplified by the propylene production technology situation in China—a different and more complex story than in many other parts of the world,” Bari said. “China is in a very deep propylene monomer and derivatives-deficit position. Therefore, during the last decade, China has developed and deployed on-purpose propylene in significant volumes based on technology that takes advantage of its indigenous low-cost coal.”

According to the IHS Markit analysis, during the three-year period of fourth-quarter 2005 to third-quarter 2008, and then again in the four-year period  of first-quarter 2011 to fourth-quarter 2014, coal-based technology, on average, (based on North China coal prices) had a $100 per metric ton production cost advantage over the PDH route (see figure below). Owing to this advantage is the low and relatively stable price of coal.

IHS Markit

For the MTP process (with methanol at market prices), raw material costs are estimated to have been continually higher than for the PDH route, but generally tracking PDH raw material costs.

However, in contrast to very competitive raw material cost for Chinese coal-to-propylene technology, the technology comes with investment, logistical and sustainability challenges. Specifically, these processes are very capital intensive (they require five times the capital investment to construct as compared to a PDH plant, for example). In addition, coal transport costs are an issue since Chinese coal fields sit in central China, while the consumers of propylene derivatives sit predominantly on the east coast, where PDH plants are located. In terms of sustainability challenges, coal-based propylene plants have low carbon efficiency (resulting in relatively high carbon emissions) and very high water consumption, which is problematic, especially in arid climates.

MTO/MTP in China had high financial expectations when the first wave of investments were made ahead of the crude oil crash in 2014/2015, but future competitiveness is now questionable, as methanol (market) prices have become unattractive in China due to the drop in crude-to-gas spreads and attractive alternative uses for methanol. There are exceptions, however, where methanol feedstock can be acquired at below-market costs.

“Perhaps, once all is considered, particularly weighting the importance of access to inexpensive feedstocks, which is a majority of the cost for on-purpose production, PDH is favored in nearly all regions, with the exception of China. In China, relative on-purpose technology competitiveness varies, largely due to feedstock dynamics, as demonstrated using our analytical model,” Bari said. “It must also be noted that even with its fairly rapid commercial success, PDH is still a relatively young technology and has been plagued with operations stability issues, because of the complexity of the reactor-control systems. Moreover, new licensors are continuing to introduce ‘improved’ PDH processes, which are discussed in greater detail in our report.”

For more information about the report, go to the IHS Markit website.

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