Changing Dynamics of Petrochemical Feedstocks

1. “Non-Conventional” and “Emerging” feed stocks for
petrochemicals – Drivers, Options, Competitiveness
of Selected Processes
Noor Jivraj
Group Manager, Refining & Petrochemicals
Jacobs Consultancy Ltd., London
noor.jivraj@jacobs.com
Petrochemicals Asia 2012
20-21 June 2012

2. Agenda
• Drivers for Alternatives to Refined Crude for petrochemicals
manufacture
• Topical Alternative Feed Stocks – Shale Gas, Coal and
Agricultural Feed Stocks
• Coal Chemicals – Methanol to Olefins via Synthesis Gas
• Coal Chemicals – Mono-Ethylene Glycol
• Coal Chemicals - Acetylene Based Chemicals - VCM for PVC –
competitive economics and prospects
• Shale Gas – Reserve Judgment ??
• Conclusions

3. Drivers for Alternatives to Refined
Crude for petrochemicals
manufacture

4. Drivers that are changing the feedstock horizon
• Crude Oil demand has been growing much slower than
petrochemicals demand
• Growing demand for lighter feed stocks C2,C3,C4 than aromatics
– will continue as benzene demand slows further
• Mid East associated gas C2 and C3 allocation has peaked
• Emerging Economic powers have limited crude and gas reserves
but large coal reserves (China, India)
• Shale Oil and Tar sands still have an uncertain future despite
huge investments – extraction costs and environmental
challenges not yet resolved
• Newer exploitation technologies have led to new possibilities in
shale gas

5. Outlook: Crude Oil extraction peaks, petrochemicals
demand grows
• Conventional Crude Oil
extraction expected to start
a downward trend later this
decade
• Naphtha sources such as
GTL cannot replenish
growing demand
• Coal, Natural Gas, and “Bio”
feed stocks will continue to
gain prominence
Source: ExxonMobil Energy 2012 Outlook

6. Alternative Feed Stocks Possibilities -
Coal and Agricultural feed stocks

7. China leads coal chemicals resurgence
Coal Chemicals
emphasis (lead by
China):
• Coal to acetylene
based chemicals
– VCM mainly
• Coal to olefins
(CTO) – MTO,
MTP Processes
• Coal to Mono-
ethylene Glycol
(MEG) and
Ethanol

8. “Bio-feedstocks” petrochemicals now a reality and
growing
• Ethanol feed stock based ethylene (sugar cane and molasses) :
o “Green Polyethylene” – Ethylene fro Ethanol Dehydration - Braskem, Brazil –
200 kta plant came on-stream in 2010
o “Green PVC” – EDC from Ethanol Ethylene – TCI-Sanmar plans 185 kta bio-
ethylene for its chlor-alkali integrated 400 kta PVC complex at Port Said,
Egypt. Chemplast-Sanmar operates a 32 kta ethanol-ethylene plant in Tamil
Nadu, India – 6 kta plant started more than 40 years ago
o Solvay considering 60kta ethylene unit in Brazil for PVC production. Other
projects under development
o Braskem planning 30 kta plant for “green” Polypropylene (also ethanol based
feedstock)
o Dow-Mitsui Brazil venture ( 350 kta green PE??) will get feedstock from Dow’s
sugar cane investments
Green Plastics can command premiums of up to 10% on ecofriendly image

9. Global BioChem making major waves in Mono-
Propylene Glycol (MPG) business
• Sorbitol feedstock (from Corn via starch breakdown) Mon-
Propylene Glycol:
– Global BioChem already has in excess of 400 kta MPG capacity
and is to add at least another 400 kta in the next 2-3 years – this
in a 2.5 Million ton marketplace
– Global BioChem has shaken the dynamics of the MPG industry
and will drive the profitability dynamics based on low cost feed
stocks
• Not commonly appreciated is that Global Biochem’s process
yield roughly 50% MPG, 25% MEG, and 25% 1,2-Butanediol
and 2,3-Butanediol

10. Other Bio-based routes to petrochemicals are
now being explored
• Polylactic Acid now a viable commercial proposition, largely for
niche fibre applications – 130 kta plant operational in Nebraska,
USA, and another similar plant planned for Thailand
• Numerous R&D programs for a wide range of bio-based
petrochemicals including routes to propylene, butanol, acrylic acid,
butadiene etc. - Not all of these will succeed
• Routes via succinic acid appear to be promising since the
conversion of glucose to succinic acid by GM bacteria is reasonably
selective
• Routes from succinic acid to BDO, adipic acid and caprolactam look
promising

11. Coal Chemicals – Coal to Olefins via
Synthesis Gas and Methanol

12. Coal to syngas and methanol is well proven
process and widely practiced
More than 32% of China’s methanol production is already coal based

13. Methanol to Olefins (MTO) and Methanol to
Propylene (MTP)
• DICP has commercialized its MTO technology at Shenhua Baotao, further plants are
underway including an olefins cracking process to improve selectivity
• Shanghai Research’s S-MTO technology is now commercialized at Zhongyuan
• LURGI’s MTP process yields propylene, gasoline, ethylene and LPG – 2 plants operating
with ~1 Million tons Propylene
• UOP’s HYDRO process has “tunable” C2:C3 ratio between 0.45:0.55 to 0.55:0.45 allowing
customization to downstream derivatives – UOP’s first plant is due in 2013

14. Competitiveness – Cash Cost C-MTO Ethylene
versus Naphtha Cracker in China
• For both the naphtha cracker
and the C-MTO plant, by
product credits are significant
• The cash cost of production
of ethylene is lower for a coal
to ethylene plant than a
naphtha cracker
o mainly due to the low cost of
coal compared with naphtha
o partly due to the high ratio of
propylene co-product that
MTO produces
Production Cash Cost
for Ethylene ($/ton)
Thermal Coal to MTO
Ethylene - Thermal
Coal @ $120/ton
Full Range Naphtha
Cracker - Crude Oil
=$100/bbl
Location China Capacity: 400 kta Capacity 1100 kta
Raw Materials
142 644
Utilities
228 412
Fixed Costs 72 25
Total ($/ton) 441 1081

15. Coal Chemicals – Mono-Ethylene
Glycol

16. Coal Route to MEG
• First patents by Ube in early 1980s
• Fujian Institute of Research on the Structure of Matter and the Chinese Academy
of Sciences have developed the process over 30 years
• First 200kta Coal to MEG plant commissioned at Tongliao, Mongolia by Jinmei
Chemicals
• Ube (Japan) to license Coal-MEG technology to Qianxixian Qianxi Coal Chemical
(300 kta)
• 2.75 Million tons Coal-MEG capacity announced !!!!

17. If Coal-MEG is truly successful product quality wise,
it will change the industry dynamics

18. Competitiveness – Cash Cost Coal MEG versus
Naphtha Cracker to Ethylene to MEG in China
• As most MEG production
today is cracker integrated,
the Cost of Production
comparative versus Coal
MEG is a naphtha cracker
(1100 kta Ethylene, China)
integrated 600 kta MEG plant
• Coal MEG is more
competitive than cracker C2
MEG by about $150/ton cash
cost per ton for a Crude Oil
scenario of $100/bbl, and
thermal coal price of $120/ton
Production Cash Cost
for MEG ($/ton)
Thermal Coal to MEG
- Thermal Coal @
$120/ton
Full Range Naphtha
Cracker Ethylene to
MEG - Crude Oil
=$100/bbl
Location China Capacity: 200 kta Capacity 600 kta
Raw Materials
265 710
Utilities
313 71
Fixed Costs 74 19
Total ($/ton) 653 800

19. Coal Chemicals - Acetylene Based
Chemicals - VCM for PVC –
competitive economics and prospects

20. Key Acetylene based petrochemicals
China accounts for 97% of the world’s acetylene demand
More than 95% of China’s acetylene demand is for VCM

21. CHCH
H
Cl
CH2ClH
• Mercuric chloride catalyst
• Exothermic reaction and high
selectivity
• Product purity and yields generally
high
• VCM converted to PVC to
produce film sheets, flooring and
pasts etc
• Global VCM demand ~35 million
tons per year with China now in
excess of 10 Million Tons
Coal/Carbide/Acetylene Route to VCM

22. Acetylene VCM technology has mercury disposal,
as well as acetylene safety issues
• Currently for one ton PVC produced in China 1.2 kg of
HgCl 2 catalyst consumed on average (as 11% of HgCl 2
content)
• For 5.8 million tons of PVC produced in 2009, around
7000 tons of mercury catalyst used, comprising 770 tons
of HgCl 2 and 570 tons of mercury were used
• Carbide-based PVC production consumes around 60％
of China’s total annual mercury use
• A new catalyst (gold dispersed on activated carbon) is
now available as an alternative to mercury

23. Coal VCM plants tend to be relatively small and
very numerous in China
• Acetylene VCM was the feedstock of choice in the early fifties – high energy
costs and EHS issue lead to ethylene route becoming dominant
• Acetylene based VCM now accounts for just over 20% of the worlds total VCM
demand – with China accounting for almost all of this
• More than 90% of VCM plants in China are acetylene based, but these plants
contribute to less than 70% of the total PVC produced
• The average size of the Acetylene based VCM is around 110 kta versus 650
kta that today’s world scale via the ethylene route
• More than 80% of the acetylene based VCM capacity in China has been
added since 2002

24. Coking Coal price determines Acetylene VCM
competitiveness
• Competitiveness of Acetylene VCM versus Chlor-Alkali
integrated and balanced Oxy-EDC VCM is very dependent on
the price of coking coal
• A coking coal price of $120/ton makes Acetylene VCM very
competitive
• Raw materials dominates Cash Cost of Production of Acetylene
VCM even more than ethylene based VCM
Production Cash Cost
Coal Carbide
Acetylene VCM
Coking Coal @
$240/ton
Coal Carbide
Acetylene VCM
Coking Coal @
$120/ton
Balanced Oxy-EDC
Chlor-Alkali
Integrated VCM Crude
Oil =$100/bbl
Location China Capacity: 150 kta Capacity 150 kta Capacity 600 kta
Raw Materials
883 732 756
Utilities
59 59 79
Fixed Costs 28 28 46
Total ($/ton) 970 819 881

25. Shale Gas – Reserve Judgment ??

26. Where is the shale gas? Is it economical long term?
North American shale gas finds have been well publicized but the phenomenon is
global, with significant reserves in China, South America, and North and South Africa

27. Where is the shale gas? Is it economical long term?
• Most recent “technically
exploitable” shale gas
statistics indicate
biggest possibilities for
shale gas long term are
away from the US
• Will China, Mexico,
Argentina, South Africa,
Canada etc. also be
successful in building
shale gas based
petrochemicals
industry?
Source: Financial Times Shale Gas Special Supplement, April 2012

28. Shale Gas extraction requires breaking through
shale by “fracking”
• Hydraulic “Fracking”
requires a slurry of water,
sand, silica, gels and
surfactants and
pressurized gases used
to break through shale
rock at high pressures

29. Shale Gas – some unanswered questions on
economics and sustainability
• How big are the commercially exploitable
reserves ?
• What are the depletion rates of the
reserves – very little data to support the
various proposed depletion models
• At current US gas price ($2-2.5/mmBtu)
only wet shale gas wells are economic –
with the liquids credit justifying operation
• Shell recently announced that it was using
a medium term US gas forecast of $4 to
$6/mmBtu
• Shale Gas will have truly arrived when a
major commits to a world scale cracker in
the shale gas reserve belt – e.g. Marcellus
Field in Pennsylvania
2011 2012
Technically Exploitable
Shale Gas reserves (EIA
estimate)
827 482
trillion
cubic feet
Marcellus Field Reserves
(EIA)
410 141
trillion
cubic feet
Marcellus Field Reserves
(US Geological Survey)
84
trillion
cubic feet
Available Gas per
Marcellus well (EIA)
3.5 2
billion
cubic feet
• EIA will be revising its figures
later in 2012

30. Conclusions

31. Conclusions
• “Peak-Oil” and abundance of alternative feed stocks in emerging economies
driving diversifying from naphtha as choice for petrochemicals building blocks
production
• Agricultural feed stock leading to “green” PE, PVC and MPG
• Bio-based succinic acid is a potential future key intermediate chemical
• Coal feedstock already dominates VCM production in China – these producers
will broaden out into other products – BDO is attractive in the near term
• MTO and MTP processes, integrated into natural gas or coal are now a
commercial proposition
• Coal based MEG has the potential to significantly change the source of supply
for this product
• Shale Gas has been widely publicized as a competitiveness game changer –
however there are a lot of unanswered questions regarding reserves, depletion
and long term economic viability

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