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.
propylene
Every day, about 1.8 million barrels of NGLs, naphtha and other ethylene plant feedstocks are “cracked” to make both ethylene and an array of petrochemical byproducts. And every day, decisions are made for each steam cracker on which feedstock—or mix of them—would provide the plant’s owner with the highest margins. Within each petchem company, these decisions are optimized by staffs of analysts and technicians using sophisticated and complex mathematical models that consider every nuance of a specific ethylene plants’ physical capabilities. Fortunately for us mere mortals, it is possible to approximate these complex feedstock selection calculations for a “typical” flexible cracker using a relatively simple spreadsheet model. Today we continue our series on how the raw materials for ethylene plants are picked with an overview of RBN’s feedstock selection model, a review of feedstock margin trends, and an explanation of how the model also can be used to indicate future NGL and naphtha prices and to assess the prospects for various industry players.
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.
Falling crude oil prices and other factors have crushed margins in the steam cracker/olefin unit segment of the petrochemical industry. Margins per pound of ethylene have declined from more than 60 c/lb in October 2014 to less than 20 c/lb today (November 2015) for NGL feedstocks, including ethane. We expect some petrochemical companies might be feeling a chill in the air. That’s because five new Gulf Coast world scale steam crackers and a couple of smaller units are under construction or being developed to add still another 20 billion/lbs of capacity by the end of 2018. In today’s blog, we assess NGL feedstock margin declines.
A proposed BASF plant in Freeport, TX - that would make propylene from natural gas – is expected to be the subject of a final investment decision in 2016. If the plant is built it will have a similar purpose to another 6 Gulf Coast plants being built or planned in the next few years to make propylene from propane. All these plants are designed to make up for lower propylene output from U.S. petrochemical steam crackers using ethane, which yields less propylene from the cracking process. Today we discuss why using natural gas as a feedstock instead of propane might make sense.
Between 2015 and 2018 five new U.S. propane dehydrogenation (PDH) plants are expected online – producing over 9 billion pounds a year of propylene. Williams are building another new PDH plant in western Canada. Five of these plants will be located on the Texas Gulf Coast – the center of the world’s chemical industry. Once they are up and running they should have a profound impact on U.S. and international markets for propane and propylene. Today we describe plans to develop these new plants.
On September 19, 2014, the operating margin for a representative Gulf Coast steam cracker running ethane hit a record high – an astonishing 70.4 cents per pound. Steam cracker margins depend not only on the spread between feedstock costs and the market price of ethylene but also on the varying amounts of propylene, butadiene and other byproducts that result from using different feedstocks. Understanding steam cracker profitability in the context of recent market developments is critically important, and it is the subject of RBN’s latest Drill-Down Report. In today’s blog we provide highlights of the report, which examines what is behind the ongoing shift from heavier to lighter NGL feedstocks, unveils RBN’s downloadable Steam Cracker Feedstock Selection Model, and discusses how new U.S. cracker capacity, NGL exports and other factors will impact these markets.
Starting at the end of 2015 six new North American propane dehydrogenation (PDH) plants are expected to come online. These new plants will have the capacity to convert up to 170 Mb/d of propane into much more valuable propylene. If all the plants are built, these new supplies of propylene should more than replace declining output from olefin crackers and refineries. These on-purpose PDH plants should also make propylene supply more directly responsive to feedstock prices. Today we describe how PDH plants are likely to impact the propane market.
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.
Of the five natural gas liquids (NGLs), isobutane stands apart in its sources and markets. Isobutane comes from gas processing plants and refineries, but it is also the only NGL intentionally made from another NGL – it’s cousin, normal butane. It has a variety of exotic uses, such as aerosol propellant for everything from hair spray, to cooking sprays to shaving cream and since the early 90s as a replacement for Freon in refrigerators. A refinery process called alkylation is the largest market for isobutane, producing a high-octane gasoline blending component called alkylate. Even though it has robust markets, isobutane supply/demand balances are not immune to the growing volumes of high-BTU, “wet” shale gas and the resulting torrent of NGL production. And as gas plant isobutane volumes increase, there are changes coming to isobutane balances and the demand for merchant isomerization. Today we begin our series on isomerization by exploring what it is, why it’s valuable, and how it’s done.
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.
In just over a month, purity ethane prices in Mont Belvieu are off 41%, falling from 50 cnts/gal on 4/30 to 29 cnts/gal on Friday, 6/8. During the same period, non-TET propane was down 35% from 116 cnts/gal to 75 cnts/gal (see left graph, below). Last week when we looked at petrochemical feedstock economics, propane was the preferred feedstock for the first time in years. But a couple of days later that relationship flipped back to ethane. At first glance, that seems strange. Both ethane and propane increased during the first half of the week, then came back off (see right graph). But feedstock economics went from favoring propane by more than a nickel per pound of ethylene to favoring ethane by just over a penny on Friday. To understand how and why this shift happened we’ll need to break out the spreadsheets again.