Could coal be the answer to global plastics shortages
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The document discusses the potential for coal-to-olefins (CTO) and methanol-to-olefins (MTO) processes to produce ethylene and propylene as alternatives to traditional naphtha cracking. It provides an overview of the CTO and MTO processes, current projects in China, the economics and challenges of these processes compared to naphtha cracking, and the potential impact on global ethylene and polyethylene markets if numerous planned CTO/MTO projects come online by 2020.
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Could coal be the answer to global plastics shortages
- 1. © 2014 Platts, McGraw Hill Financial. All rights reserved. Could coal be the answer to global plastics shortages? Ben Gonzalez May 7, 2015 1
- 2. • The CTO/MTO process • CTO/MTO Economics • Current Status – Projects • Impact on the global ethylene feedstock slate • Impact on PE and PP fundamentals • Conclusions 2 Outline
- 3. 3 Petrochemical Value Chain Refining Gas Processing Olefins Aromatics Cracker Feedstock CrudeOil Associated Gases Ethane LPG Propane Butane Methane Naphtha Steam Cracking Ethylene Propylene Butadiene Raffinate-1 Pygas Benzene Toluene Xylene Naphtha Catalytic Reforming Reformate Gas Oil Natural Gas NGLs Ethane Propane Butane Natural Gasoline Methane StyreneEthylbenzene Polypropylene Cumene Polystyrene Polyethylenes Methanol MTBE ABS PVC Vinyl Chloride Monomer Ethylene Dichloride Phenol Acetone P-Xylene EthyleneOxide PET PTA EthyleneGlycol LDPE LLDPE -46% -42% -39% -38% -42% -40% -39% -38% -1% -33% -22% -26% -5% -35% -33% -13% -18% -18% -14% -23% -13% -5% -15% -12% -17% -30% -35% -25% -36% Petrochemical Value Chain - Price Deltas Avg Asia Monthly Prices Current vs. June 2014 HDPE Coal Syngas C4 Stream Polymers -11% CTO/MTO -38% -29% Source: Platts, Platts Analytics
- 4. © 2014 Platts, McGraw Hill Financial. All rights reserved. China’s Position – CTO/MTO 4
- 5. • China’s shortage of ethylene and propylene • Difficulty of importing olefins • Demand growth for PE and PP • Naphtha crackers too dependent on imports • Coal price advantage • CTO process proven successful in 2011 5 Why CTO/MTO?
- 7. © 2014 Platts, McGraw Hill Financial. All rights reserved. CTO/MTO Process 7
- 8. • Coal gasification, syngas cleaning, methanol synthesis, olefins polymerization. • Coal is synthesized in a gasifier to produce the synthetic gas • Syngas is then converted into methanol • Transformation into olefins 8 CTO/MTO Process
- 9. History • In the 1990’s UOP and Norsk Hydro developed the MTO technology and was integrated with the Total/UOP olefin cracking process for the basis for advanced MTO. • In 2009, TOTAL constructed the first fully integrated MTO demo plant in Belgium. • In 2011, Wison (Nanjing) Clean Energy Corp announced that they would use the UOP MTO process to produce ethylene and propylene, started up in 2013 Process • Methanol feed is preheated and introduced into the reactor. The catalyst (proprietary) is circulated to the fluidized bed regenerator. • Reactor effluent is quenched to separate water from the gas stream. • Gas is compressed • Effluent is processed in fractionator and purifier removing contaminants and separating olefins (ethylene and propylene) from byproducts (C4 and C6). 9 UOP/Hydro MTO Process 2011 2009 1990s 2013
- 10. History • The DMTO technology was developed by the Dalian Institute of Chemical Physics (DICP), Chinese Academy of Science (CAS) in 1991. • In 2006, DICP, Lyoyang Petrochemical Engineering Company of Sinopec, and Shaanxi Xinxing Coal Chemical Industry constructed a 16.7 k mt demo plant. • In 2009, an agreement was signed between CAS and LUMMUS to allow LUMMUS to act as the exclusive agency of DMTO marketing and licensing. • DMTO-II, based on DMTO technology, was developed by Shaanxi Coal (SCCTEC) joinlty with Sinopec Lyoyang. Testing was completed in 2009. • In 2010, the Shenhua Baotou plant successfully started up its DMTO plant. • In 2014, the first DMTO II plant was started by Pucheng Clean Energy. Process • Involves two reactions of methanol conversion and the reconversion of by products, both using the same catalysts. 10 DMTO Process 2010 2006 1991 2014
- 11. History • Sinopec S-MTO was developed by Sinopec and Beijing Yanshan Petrochemical • In October 2011, a plant using the S-MTO process was set up in the 600k mt/year Sinopec Zhongyan plant Process • Methanol feed is preheated and introduced into the reactor. The catalyst (proprietary), based on SAPO-34, is circulated to the fluidized bed regenerator. • Reactor effluent is quenched to separate water from the gas stream. • Gas is compressed • Effluent is processed in fractionator and purifier removing contaminants and separating olefins (ethylene and propylene) from byproducts (C4 and C6). • Converts methanol to ethylene and propylene at above 80% carbon selectivity 11 Sinopec SMTO Process
- 12. • CTO – High return on investment – Larger projects result in more jobs – CO2 and water resource challenges • MTO – Provides private entry into olefins market – Viable at smaller capacities – C02 implications relatively small – Exposure to merchant methanol pricing 12 CTO v MTO
- 13. • Movement away from oil feedstock – Oil imports account for about 60% of China’s demand • Coal mining diversification as traditional downstream coal demand levels off – More than 70 per cent of China's miners are losing money (China Coal Industry Association) • Power generators looking for non-regulated investments with higher margins • Job creation in poor regions 13 Reasons For China MTO/CTO Investment
- 14. © 2014 Platts, McGraw Hill Financial. All rights reserved. CTO/MTO Challenges 14
- 15. Water Issues Source: MEDIUM-TERM COAL MARKET REPORT 2013, IEA - Theoretical consumption: 15-20t water/ton of ethylene (4x that of traditional refinery routes) - Actual consumption in Shenhua Baotou CTO: 31t water/ton of ethylene - Most coal rich regions are water scarce - Must consider the availability and cost of water Source: MEDIUM-TERM COAL MARKET REPORT 2013, IEA
- 16. 16 Far from Markets 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Production Consumption China Methanol Production and Consumption by Region Source: World Energy Council- Survey of Energy Resources
- 17. 17 CO2 Price Could Hit CTO Margins (Ethylene Output Only) Source: Platts
- 18. Challenges •High Capital Costs •Consumes ~40 mt of fresh water to produce 1 mt of olefins •Water depleted in production regions •Near coal mines away from coast •MTO projects relies on imports Benefits • Lower Feedstock (Coal) Prices • Lower cash cost for producing 1 mt of ethylene • Higher return on investment • Abundant feedstock for CTO projects 18 Challenges to CTO/MTO
- 19. © 2014 Platts, McGraw Hill Financial. All rights reserved. CTO/MTO Economics 19
- 21. Inner Mongolia Self-owned mine Apr-15 Jun-14 Eastern China naphtha cracker Apr-15 Jun-14 Feedstock Cost Naphtha Feedstock Cost Coal Price ( ex-plant) $ 40.71 $ 45.60 Naphtha price (ex-plant) $ 574.88 $ 991.63 Coal Consumption per/ton MeOH 1.4 1.4 Naphtha consumption per ton olefins 2 2 Methanol Consumption per/ton olefins 3 3 Total Feedstock Cost per ton olefins $ 170.97 $191.50 Feedstock cost per ton olefins $1,149.76 $1,983.26 Co-Products Co-Products Total co-product credits $ 111.55 $162.95 Total co-product credits $ 644.28 $ 872.67 Electricity Electricity Total electricity cost per ton olefins 109.2 109.2 Total electricity cost per ton olefins $ 22.15 $ 22.15 Depreciation and Labor Depreciation and Labor Total depreciation and Labor $ 96.00 $ 96.00 Total depreciation and Labor $ 54.40 $ 54.40 Water cost Water Cost Total water cost $ 33.60 $ 33.60 Total water cost $ 4.99 $ 4.99 Effluent treatment cost Effluent treatment cost per ton olefins $ 18.24 $ 18.24 per ton olefins $ 2.50 $ 2.50 Others Others others $ 132.80 $132.80 others $ 159.36 $ 159.36 Transportation cost for olefins product Transportation cost for olefins product Transportation cost per ton olefins $ 91.20 $ 91.20 Transportation cost per ton olefins 0 0 Total production cost per ton olefins $ 540.45 $509.59 Total production cost per ton olefins $ 748.88 $1,353.99 Coal vs. naphtha: A comparison 21
- 22. Cost Curve 22 Based on Average April Price $/MT Thousand MT/Year Olefin Ethylene Capacity
- 24. 24 Global Ethylene Prices Source: Platts
- 25. © 2014 Platts, McGraw Hill Financial. All rights reserved. Current Status 25
- 26. 26 What Currently Exists in China? Ethylene MT Cracker 19,061,000 CTO/MTO 3,250,000 22,311,000 Propylene Cracker 9,066,453 PDH 1,500,000 CTO/MTO 3,135,000 13,701,453 Total Olefin 36,012,453 Ethylene MT Cracker 20,061,000 CTO/MTO 5,601,000 25,662,000 Propylene Cracker 9,066,453 PDH 3,350,000 CTO/MTO 5,745,000 18,161,453 Total Olefin 43,823,453 Non-Refinery base Olefin Capacity - 2014 Non-Refinery base Olefin Capacity - 2015
- 27. © 2014 Platts, McGraw Hill Financial. All rights reserved. Future Projects and Outlook 27
- 28. CTO/MTO Projects 28 • In our forecast we are tracking around 32 CTO/MTO projects scheduled to come on stream by 2020 • Most starting up in 2014, 2015, and 2016 • The bulk of the CTO/MTO ethylene projects are expected online by 2018 • ~34% of future production of ethylene is at risk
- 29. 29 What Could Happen? Source: Platts
- 30. 30
- 31. 31
- 32. © 2014 Platts, McGraw Hill Financial. All rights reserved. Impact of Ethylene Production and Feedstock 32
- 35. 35 China’s Feedstock Landscape Will Change If Projects Come To Fruition Source: Platts 12.3 million mt of propylene 18 million + mt of ethylene Ethylene Produced from - 2014 Chinese Ethylene Capacity Additions by Feedstock Ethylene produced from - 2024
- 37. 37 Impact on Feedstock Globally
- 38. © 2014 Platts, McGraw Hill Financial. All rights reserved. Impact On The PE and PP Market 38
- 40. • We expect demand for PE in North America to reach 16.2 million mt in 2015. • We expect production to reach ~19 million mt, resulting in a surplus of 2.8 million mt. • The largest surpluses will reside in HDPE and LLDPE • The major destination will be South America, followed by Asia and then Western Europe • Largest PE Plants – CP Chemical Pasadena, Texas, US – 990 k MT/Yr HDPE – LyondellBasell La Porte, Texas, US – 555 k MT/Yr LDPE – Dow Fort Saskatchewan, Alberta, Canada – 880 k MT/Yr LLDPE 40 North America • Trade Partners – South America • Brazil • Colombia • Peru • Chile – Asia • China • Singapore
- 41. 41 New Capacity Total 7,915 HDPE 3,312 LDPE 1,420 LLDPE 3,183
- 42. • We expect demand for PE in Europe to reach 16.7 million mt in 2015. • We expect production to reach ~15.2 million mt, resulting in a deficit of 1.5 million mt. • LLDPE to show the strongest growth in Western Europe • LDPE will switch to a deficit market in the medium term • Western Europe will be the driver to the PE deficit in Europe • HDPE and LLDPE will remain in a deficit market • The major capacity additions will be in Russia • Largest PE Plants – LyondellBasell Wesseling, Germany 770 MT/Yr HDPE – SABIC Geleen, Netherlands – 480 k MT/Yr LDPE – Dow Terneuzen, Netherlands – 655 k MT/Yr LLDPE 42 Europe • Trade Partners – Middle East • Saudi Arabia • Qatar • Iran – Americas • US • Brazil
- 43. 43 New Capacity Total 5,760 HDPE 3,205 LDPE 800 LLDPE 1,755
- 44. • We expect demand for PE in the Middle East to reach 5.7 million mt in 2015. • We expect production to reach ~15.9 million mt, resulting in a surplus of 10.1 million mt. • Major capacity additions will be in Iran, Oman and Saudi Arabia • The region’s surplus to remain above 10 million mt post 2014 • The largest surpluses will reside in LLDPE • The main export markets will be Asia, Europe, and Africa • Largest PE Plants – Yanpet Yanbu, Saudi Arabia 535 kMT/Yr HDPE – Qapco Mesaieed, Qatar – 700 k MT/Yr LDPE – Sharq Eastern Petrochemical Al Jubail, Saudi Arabia – 1,150 k MT/Yr LLDPE 44 Middle East • Trade Partners – Asia • China • India – Western Europe • Turkey • Italy • Belgium • Spain
- 45. 45 New Capacity Total 9,830 HDPE 3,820 LDPE 2,520 LLDPE 2,540
- 46. • We expect demand for PE in Asia to reach 40.7 million mt in 2015. • We expect production to reach ~34.6 million mt, resulting in a surplus of 6.1 million mt. • Asia is expected to be in growing deficit driven by China and India, the majority by China • The majority of capacity additions will be via coal in China, capping deficits in the short to medium term • The Middle East will remain the dominant supplier to Asia, especially China • Largest PE Plants – Thai Polyethylene SCG, Map Ta Phut, Thailand 1,280 (980 + 300) k MT/Yr HDPE – BASF-YPC Nanjing, China – Sinopec Beijing Yanshan PC, Beijing, China – 400 k MT/Yr LDPE – ExxonMobil Jurong Island, Singapore – 1,900 (600+650+650) k MT/Yr LLDPE 46 Asia • Trade Partners – Middle East • Saudi Arabia • Iran • Qatar • UAE – North America • US
- 47. • Production expected to be 15 million mt • Demand expected to be 22 million mt, resulting in a deficit of ~7 million mt. • Largest PE Plants – PetroChina Fushun PC 350k MT/Yr HDPE – SINOPEC Maoming PC 350k MT/Yr HDPE – BASF-YPC – 400 k MT/Yr LDPE – SINOPEC Beijing Yanshan PC– 400 k MT/Yr LDPE – PetroChina Daqing PC – 625k MT/Yr LLDPE • Trade Partners – Middle East • Iran • Saudi Arabia • UAE • Qatar – Asia • South Korea • Thailand • Malaysia • Japan – North America • US 47 China
- 48. 48 New Capacity
- 49. 49 New Capacity Total 15,322 4,945 HDPE 5,330 2,075 LDPE 2,712 180 LLDPE 7,280 2,690 CTO/MTO
- 51. • Production expected to be 7.9 million mt • Demand expected to be 7.6 million mt, resulting in a small surplus. • Rextac Odessa PP plant scheduled to come online in 2017 is expected to be the only new plant in NA • US largest producer with capacity of 8 million mt/year. • Largest PP plant – ExxonMobil Baytown, Texas, United States – 800k mt/year – Braskem Sao Paulo, Brazil – 800k mt/year 51 North America PP • Trade Partners – Asia • China
- 52. • Production is expected to be 10.5 million mt • Demand is expected to be 10.4 million mt, resulting in a small surplus. • Eastern Europe will account for all of the new PP capacity. • Germany is the largest producer with a capacity of 2 million mt/year. • Largest PP plant – Total Feluy, Belgium – 910k mt/year 52 Europe PP • Trade Partners – Middle East • Saudi Arabia – Asia • India • S. Korea
- 54. • Production is expected to be 8.2 million mt • Demand is expected to be 3.8 million mt, resulting in a massive surplus of roughly 4.4 million mt • The majority of PP will go to Asia • Oman, Qatar, Saudi Arabia and Iran will see PP investments • The laregest producer in the region is Saudi Arabia with roughly 5.3 million mt/year • Largest PP plant – Ibn Zahr Al Jubail, Saudi Arabia – 1,220k mt/year 54 Middle East PP • Trade Partners – Asia • China – Western Europe • Turkey • Italy • Belgium
- 56. • Production expected to be 31.6 million mt • Demand expected to be 34.4 million mt, resulting in a deficit of roughly 2.8 million mt • China accounts for most of the new PP projects followed by India and Indonesia • China accounts for more than half of Asia PP demand • South East Asian countries will experience higher demand increases. • The largest producer in the region is China with a capacity of 18.6 million mt/year • Largest PP plant – ExxonMobil Pulau Ayer Chawan, Jurong Island– 885k MT/Year 56 Asia PP • Trade Partners – Middle East • Saudi Arabia • UAE • Oman • Kuwait – North America • US
- 57. • Production expected to be 15.8 million mt • Demand expected to be 20.2 million mt, resulting in a deficit of roughly 4.4 million mt • Largest PP plant – Shenhua Group Ningdong, Ninxia– 1,000k MT/Year • Trade Partners – Asia • South Korea • Singapore • India • Thailand • Japan – Middle East • Saudi Arabia • UAE • Oman • Qatar 57 China PP
- 59. • The economics show the feasibility of building CTO/MTO projects • We are currently tracking 32 CTO/MTO plants, 9.9 million mt of ethylene and 9.8 million mt of propylene. • All of these should be operating by 2018. • Coal will account for the highest growth of ethylene production on a percentage basis. • For Polyolefins, the Middle East and the US are the world suppliers. The global demand centers are in Asia, Europe, and South America. 59 Conclusions Source: Platts, EIA
- 60. 60 Global Polyolefins Report (GPO)
- 61. © 2014 Platts, McGraw Hill Financial. All rights reserved. Thanks! Ben.Gonzalez@platts.com 61