To diversify its petrochemicals portfolio, GCC needs liquid feeds

DOWNSTREAM IN THE PERSIAN GULF-Conclusion

Abdullah M. Aitani, Syed Halim Hamid
King Fahd University of Petroleum & Minerals
Dhahran, Saudi Arabia

The utilization of condensates and refinery-derived feedstocks will fill the gap in the GCC's current petrochemical slate. But numerous opportunities exist for further development of the region's petrochemical industry during the next 20 years, especially in products derived from benzene, paraxylene, and propylene.

In the search for a competitive advantage in petrochemical feedstocks, identification of suitable NGL sources will be a critical question for the Gulf Cooperation Council (GCC) countries. The issue is likely to have a significant influence on the future diversification of the region's petrochemicals portfolio.

The first article in this three-part series detailed refinery capacity, planned expansions, and projected demand increases (OGJ, Sept. 15, 1997, p. 36). The second examined the petrochemical industry in GCC countries (OGJ, Sept. 22, 1997, p. 73). This concluding article looks at the outlook for petrochemical feedstock sources in the region.

Background

The GCC countries, listed in Table 1 [25,789 bytes], are a dominant energy-producing region. By the end of 1996, the region held 466 billion bbl of crude oil and 22,545 bcm of natural gas, representing about 45% and 15%, respectively, of the world's proven reserves.

The majority of GCC oil reserves are in Saudi Arabia (56%), followed by U.A.E. (21%) and Kuwait (20.7%). The majority of gas reserves are in Qatar (40%), U.A.E. (26%), and Saudi Arabia (24%). Table 1 and Table 2 [31,860 bytes] present data on GCC hydrocarbons reserves and production as well as the area and population of each country.^{1 2}

Current NGL production is estimated at about 37.5 million metric tons/year (mty), and the contribution of gas processing to total NGL supply is close to 95%, leaving 5% from refinery operations. With increased crude production and the commissioning of several new projects, NGL production is projected to increase significantly. The availability of such large quantities of NGL in most GCC countries is one of the most important criteria for establishing a profitable petrochemical industry.

Petrochemicals feeds

The petrochemicals industry is extremely raw-materials intensive. Three or more tons of hydrocarbon feedstock are required to produce each ton of petrochemical product.

Globally, this feedstock consists mainly of C₂-C₇

hydrocarbons and naphtha. In the GCC region, methane, ethane, and more recently LPG, are the dominant feedstocks, although the low historical price and future availability of ethane may limit production increases. For this reason, expansions using higher-hydrocarbon feedstocks may offer the GCC petrochemical industry end-product diversification and long-term feedstock availability.

The GCC petrochemical industry is based predominantly on associated gas. About 95% of the region's basic petrochemicals is derived from methane and NGL, and 5% is derived from refinery streams. By contrast, gas-based capacity accounts for only 30% of petrochemicals output in the U.S., compared to 12% in Europe and 4% in Japan.

It is therefore not surprising that the most developed product chains in the GCC are based on methane and ethane. This, in turn, creates an unbalanced product mix, which is reflected in the underdevelopment of product chains based on propylene, butadiene, and aromatics (benzene, toluene, and xylenes, or BTX).

Such a shortfall is being remedied by the steam cracking of condensates, which will provide GCC producers with the flexibility to produce a broader product mix (see Part 1, OGJ, Sept. 15, 1997, p. 36).

An early sign of trends towards liquid feedstocks is the commissioning in 1994 of a 500,000 mty condensate (light naphtha) ethylene cracker at the complex of Saudi Basic Industry Corp. (Sabic) subsidiary Arabian Petrochemical Co. The cracker produces 300,000 mty propylene, 100,000 mty butadiene, and 70,000 mty benzene.^{3 4}

Moreover, GCC producers will employ propane dehydrogenation to meet the shortage in propylene for polypropylene production.

Currently, the refinery relationship with petrochemical feedstocks in the GCC is negligible, because one of the objectives of establishing the petrochemical industry was to utilize the large amount of associated gas that was flared until the early 1980s.⁵ But a few examples can be cited on the current relationship between refinery and petrochemical feedstocks, as shown in Table 3 [22,143 bytes].

One of these examples is the use of benzene derived from naphtha reforming at the Saudi Aramco-Shell refinery in Jubail. The other is the use of butenes from fluid catalytic cracking unit (FCCU) LPG for the limited production of methyl tertiary butyl ether (MTBE) at the Saudi Aramco-Mobil refinery in Yanbu. In addition, the polypropylene and paraxylene plants planned by Kuwait's Petrochemical Industries Co. (PIC) will use propylene recovered from the Mina Al-Ahmadi FCCU and excess naphtha produced at Kuwaiti refineries.

Most likely, therefore, both natural gas and a portion of NGL will continue to be the primary source of competitive advantage for the GCC petrochemical industry. But refinery-derived feedstocks do not have to be the lowest-cost feeds available in order to be economical for producing a variety of petrochemicals to satisfy GCC demand.

Although crude oil is not a major feedstock source for the GCC petrochemical sector (at least not directly), it is important in terms of export revenues and, to a lesser degree, domestic refining. Crude oil price is also important, with respect to the competitiveness of the GCC petrochemical sector, because the region's natural gas or ethane-based ethylene industry competes directly with the largely naphtha-based production facilities in western Europe and Asia.

Feedstock limitations

The gas-based GCC petrochemical industry has encountered three limitations, with respect to the production of a wider spectrum of products. These limitations are related to the production of propylene, butadiene, and aromatics:⁶

Large-scale production of economically competitive propylene from gas-derived feedstocks is difficult to achieve. This is because propane typically cracks primarily to ethylene, rather than propylene. Propylene yields from gas cracking depend on the amount of propane in the ethylene unit feed. Moreover, propylene derived from catalytic dehydrogenation of propane must compete with typically low-cost propylene produced from refinery-derived sources such as cracking of naphtha or recovery from FCC offgas.
Butadiene must be produced by catalytic dehydrogenation of gas-derived n-butane. And this approach requires large dehydrogenation plants to be economically competitive.
Large-scale production of competitively priced BTX-particularly xylenes-can be difficult to achieve from gas-derived feedstocks. This limitation is being addressed, however, in emerging process technologies such as the Cyclar LPG-based aromatization processes discussed in Part 2 of this series.

Feedstock trends

The feedstock base of the GCC petrochemical industry is dictated by the availability of natural resources and the development of efficient processes, among other factors. A large proportion of the region's gas reserves are in gas condensate fields, which are rich in NGL. This potential resource has clearly grown in importance.

The associated gas feedstocks, however, are tied in with oil production, so any decline in oil production may lead to an interruption in gas availability. This will significantly alter the petrochemical production rate.

Methane

Methane-rich natural gas produces only ammonia, methanol, and their derivatives.

Ammonia derivatives include urea (used to make nitrogen fertilizers), melamine, melamine-formaldehyde resins, urea-formaldehyde resins, acrylonitrile, nitric acid, and ammonium nitrate. Methanol derivatives include acetic acid, vinyl acetate monomer, polyvinyl acetate, polyvinyl alcohol, vinyl latex paints, formaldehyde, acetyl resins, polyvinyl formal resins, and methyl amines.

The major proportion of GCC's methane is either used as fuel for power generation or exported as LNG.

Ethane

Ethane has a low value at the wellhead, thereby making the GCC region the lowest-cost ethylene producer in the world. Ethylene can be converted to a variety of derivatives, including ethylene glycol, low-density polyethylene (LDPE), high-density polyethylene (HDPE), and ethylene dichloride.

Conventional steam cracking of ethane will remain the dominant olefins technology despite worldwide research and development efforts during the last two decades. The olefins industry will probably not adopt new technologies because they either substitute new problems for ones they solve, or have high capital costs that generate unacceptable low returns on investment.

Another ethylene derivative is ethylbenzene, which is used to produce styrene and then polystyrene. Ethylene can be dimerized or oligomerized to butene-1, or to other linear alpha olefins such as hexene-1 and octene-1, which are widely used as co-monomers for the production of linear low-density polyethylene (Lldpe).

The C₁₀-C₁₄ alpha olefins can be alkylated with benzene for the synthesis of linear alkyl benzene (LAB), which is an intermediate for the production of biodegradable detergents.

LPG

LPG offers interesting opportunities, especially in Saudi Arabia, which is the dominant global LPG exporter. The supply/demand balance, and particularly the future development of LPG as a feedstock in Saudi Arabia (and the region), will remain key to future competitiveness.

Increasing domestic petrochemical consumption will reduce the availability of the lowest-value LPG exports. Pricing will continue to be influenced by domestic policy (such as discounts in Saudi Arabia) and by global trade (such as winter purchasing of LPG as a thermal fuel by Japan and summer distressed sales to Western Europe and the U.S. as a petrochemical feedstock).

Petrochemical processes based on gas-derived LPG have gained wide acceptance for the production of olefins, ethers, and, recently, aromatics. Flexible crackers that use ethane or LPG feedstocks to produce ethylene have been installed recently in Saudi Arabia (see Part 2 of this series).

On the other hand, large isobutane dehydrogenation plants are being used widely for the production of MTBE. The dehydrogenation of propane will be used to produce feedstock for a polypropylene complex planned by the private sector in Saudi Arabia.

Moreover, an aromatics plant using LPG aromatization will start up at the Yanbu complex of Arabian Industrial Fibers Co. (Ibn Rushd).

Condensate

Condensate is assuming an increasing importance as a petrochemical feedstock and will feature strongly in, for example, the development of petrochemicals in Abu Dhabi and Qatar.

Being a liquid, condensate is less expensive to transport than natural gas. As a result, it has a lesser price advantage. As a naphtha-rich stream, however, condensate has the advantage of producing a more diverse petrochemical portfolio than ethane.

Aromatics plants are in the planning stage in Saudi Arabia (Saudi Chevron Petrochemical Co.), Kuwait (PIC), and U.A.E. (Abu Dhabi National Oil Co.). These will be based on light-naphtha reforming using conventional or new technologies.

Emerging processes

The ever increasing feedstock demands in the petrochemical industry and the anticipated vigorous increase in the use of ethers in motor gasoline require the greatest care in the use of light hydrocarbon resources. Most of the GCC refinery gases are used as either refinery fuel or gasoline blend stock, and very little is recovered for petrochemicals production.

Nowadays, both the petrochemical producer and the independent refiner have to evaluate the best return on these molecules. Several technologies are available or being developed to overcome the limitations of gas-based petrochemicals, with respect to the production of propylene and BTX. These processes can be grouped into two categories:

Dehydrogenation of individual hydrocarbons for the production of the main monomers used in the synthetic rubber industry-divinyl, isoprene, and concentrated isobutylene. This process is experiencing a revival for the production of propylene and isobutylene by converting propane and isobutane.
Aromatization or dehydrocyclodimerization of C₃-C₄ hydrocarbons for the production of BTX using high-silica zeolite catalysts. One of the important advantages of this route is that it uses previously unutilized refinery gases as petrochemical feedstock.
The dehydrogenation route is well established. Many commercial processes are used worldwide for the production of lower olefins from paraffins.

Petrochemical demand for light olefins-in particular propylene-has outpaced production from steam crackers, which provide about 70% of global propylene supplies. Refineries supply 28% of global propylene production; propane dehydrogenation supplies the remaining 2%.

Given current and anticipated demand for propylene, relative to ethylene, and the fact that steam crackers do not offer the necessary flexibility to modify yields, it is likely that refinery propylene will grow in importance.

The aromatization route is being investigated, but only a few processes have reached the commercialization stage. Currently, C₃-C₅ hydrocarbons are used as feed for alkylation units, as blend stock for gasoline after partial hydrogenation, or as fuel in petrochemical complexes and refineries. Rarely are they used for chemical production.

The process features of the major C₃-C₆ aromatization processes are summarized in Table 4 [61,356 bytes].

References

Hamid, H., and Aitani, A., "Plentiful natural gas headed for big growth in Mideast," OGJ, Jan. 23, 1995, p. 51.
Al-Harazy, A., "Overview of the Saudi gas industry," Natural Gas Utilization for Power and Industrial Development Conference, Jubail, April 1995.
Al-Mutaz, I., "Feedstock limitations in Saudi Arabian petrochemical plants dictate products," OGJ, Sept. 4, 1989, p. 66.
Lee, A., and Aitani, A., "Saudi ethylene plants move toward more feed flexibility," OGJ, Sept. 10, 1990, p. 60.
Al-Ubaid, A., "Integrating refinery and petrochemical plants to maximize value added," Oapec Seminar on Refining Industry in the Arab Countries and the Challenges of the 21st Century, Cairo, October 1996.
Crawford, C., "Planning a Modern Integrated Petrochemicals Industry," Middle East Petrotech Conference, Bahrain, 1996, p. 643.