propane dehydrogenation

Fast-rising NGL supplies during the early years of the Shale Era fueled excitement about the potential for new petrochemical plants in the U.S., especially ethane-only crackers to make ethylene and other byproducts, along with propane dehydrogenation (PDH) plants to make propylene. While 11 new ethane-fed crackers have come online in the U.S. since the mid-2010s and the world’s largest — Chevron Phillips Chemical and QatarEnergy’s 4.8-billion-lb/year facility — is under construction in Texas, only three of the many PDH projects proposed over the same period were actually built. In today’s RBN blog, we’ll look at why the initial rush of new PDH project announcements resulted in so few new U.S. plants. 

In the past three years, two major commitments were made to construct propane dehydrogenation and polypropylene plants in Alberta to take advantage of the rising bounty and generally low cost of propane supplies in Western Canada. Two Calgary-based midstream companies, Inter Pipeline Ltd. and Pembina Pipeline, each started developing PDH-PP plants in Alberta’s Industrial Heartland area northeast of Edmonton. But then came COVID-19, which set back the timeline for one of the projects and put the other on ice. All this comes as Western Canada’s propane market is in greater flux than usual, and facing a tightening supply/demand balance as exports to Asia ramp up. Today, we provide a status check on the development of these two plants, and what the increase in demand might portend for propane balances in the next few years.

Global demand for propylene is rising, but lighter crude slates at U.S. refineries and the use of more ethane at U.S. (and overseas) steam crackers has reduced propylene production from these plants. That has led to the development of more “on-purpose” propylene production facilities — especially propane dehydrogenation (PDH) plants — in both the U.S. and Canada. More than 2 million metric tons/year of new PDH capacity has come online in North America since 2010, another 1.6 MMtpa is under development, and propane/propylene economics may well support still more capacity being built by the mid-2020s, maintaining the U.S. and Canada’s position as propylene and propylene-derivative exporters. Today, we begin a series looking at “on-purpose” production of propylene by PDH plants and what the development of these facilities will mean for U.S., Canadian and overseas markets.

Well, it finally happened. After several years of assessing the possible development of a large, integrated propane dehydrogenation (PDH) plant and polypropylene (PP) upgrader unit, a joint venture of Canada’s Pembina Pipeline and Kuwait’s Petrochemical Industries Co. (PIC) earlier this week announced a final investment decision (FID) for the multibillion-dollar project in Alberta’s Industrial Heartland. The new PDH/PP complex won’t come online until 2023, but when it does, it will provide yet another new outlet for Western Canadian propane, which has been selling at a significant discount in recent years. Today, we discuss Pembina and PIC’s long-awaited PDH/PP project, Inter Pipeline’s development of a similar project nearby, Western Canadian propane export plans — and what they all mean for propane prices.

Several new propane dehydrogenation (PDH) plants are coming online along the U.S. Gulf Coast. Now developers in Alberta are making plans for the province to become the next hot spot for PDH plant development. Final Investment Decisions (FIDs) are due over the next year or so on two projects aimed at taking advantage of the increasing volumes of propane being produced in western Canada—propane so plentiful, in fact, that they are paying to have it hauled off.  But what if propane prices rise due to increasing U.S. demand, more exports and lower U.S. production?  What might such developments do to PDH economics?   What could make Alberta different? Today, we consider the drivers behind two (maybe three) prospective PDH projects in Alberta, and look at how they may affect the propane market on both sides of the 49th parallel.

Production growth, new processing infrastructure and increased use of rail are shifting traditional flow patterns in the propane industry. New production and processing is adjacent to historic centers of consumer demand in the Northeast and Mid-Continent – reducing seasonal risks of shortage. Rail distribution improves delivery flexibility. The supply chain has to be flexible enough to balance seasonal consumer demand with increased chemical processing and high export volumes. Today we describe improved regional interconnectivity.

Up until a few years ago, propylene production was mostly a derivative of the petroleum refining and olefin cracking industries. But that is changing big time. Nowadays propylene demand in Asia is booming, US propane supplies are abundant and propylene output from refineries and olefin crackers is declining. Time to get serious about making propylene on purpose! As a result three new propane dehydrogenation (PDH) plants are expected online at the US Gulf Coast in 2015 and 2016 that will produce 4.3 billion pounds/year. These plants will help close the gap between increasing world propylene demand and declining “by-product” production from olefin crackers and refineries. They will also help soak up growing US propane supplies. Today we examine the recent rapid growth in PDH plant projects.

Growing propane production from the NGL surge is building up inventories and pushing down prices because it can’t reach markets where demand is increasing. That story probably sounds familiar to crude and natural gas producers actively looking for opportunities to export their way around production overhangs. However, unlike crude and natural gas (or condensate) there are no regulatory barriers to prevent US propane exports. Today we look at how exports will balance growing supplies in the propane market.