ASIA/PACIFIC ETHYLENE CAPACITY TO MORE THAN DOUBLE BY 2000

May 8, 1995
The tremendous growth of Asia's petrochemical industry is expected to continue into the next century. This rapid expansion has redirected many Asian nations' energy resources to the petrochemical industry, according to an advisory report by Ronald E. Hagen of the East-West Center, Honolulu. Petrochemical producers throughout the region are planning to build a number of new, world-scale ethylene plants, and expand and upgrade existing facilities.

The tremendous growth of Asia's petrochemical industry is expected to continue into the next century.

This rapid expansion has redirected many Asian nations' energy resources to the petrochemical industry, according to an advisory report by Ronald E. Hagen of the East-West Center, Honolulu.

Petrochemical producers throughout the region are planning to build a number of new, world-scale ethylene plants, and expand and upgrade existing facilities.

In the East-West Center's energy report titled, "Ethylene Capacity in the Asia-Pacific Region and Feedstock Requirements," Hagen says that, historically, petrochemical producers in the region have consumed only a fraction of their energy production. The products consumed by the petrochemical industry-mainly naphtha and ethane-have been by-products of markets for transportation fuels and natural gas.

Feedstocks used to produce ethylene include: ethane, LPG, naphtha, kerosine, gas oil, and ethanol. Traditionally, usage of ethanol and kerosine in the region has been small, and gas oil usage is centered mainly in China.

Imports of LPG and naphtha from the Middle East have been available in Asia. But, said Hagen, "The Middle East is finding new uses for these materials and the production of ethylene and related products in Asia is soaring."

Can yields of ethane and condensate from gas fields and production of naphtha and LPG from refineries keep up with Asian feedstock demand? According to Hagen, feedstock markets will remain balanced only if the relative price of Far East naphtha rises.

ETHYLENE CAPACITIES

Table 1 (113402 bytes) shows the East-West Center's predictions for ethylene capacity through 2000, on a country-by-country basis, along with the feedstocks used by each cracker. The values reported for feedstock usage are the Center's conclusions based on general knowledge.

JAPAN

Japan's ethylene demand is expected to continue its slow growth, while other ethylene-producing nations supply export markets. This situation produces a situation in Japan wherein planning strategies involve determining which plants should be mothballed.

Assumptions for the predictions regarding Japan include:

  • Tosoh's second cracking unit at Yokkaichi will be built, even though the project is in doubt.

  • Showa Denko's Ohita 1 unit will be restarted, but eventually will be replaced by the planned Ohita 3 facility.

Hagen cautions that it is possible Ohita 1 will never be restarted.

KOREA

"Korea's ethylene capacity exceeds domestic demand and is probably overbuilt," said Hagen. Continuous debottlenecking is causing "capacity creep." As a result, large quantities of ethylene are available to the highest bidder, causing many firms to lose money.

"We expect a complex process of plant upgrading after 1996 and have allowed for this by [including] ,upgrades' that are not specified by plant."

Hagen said Korea's ethylene industry is not likely to find many new entrants willing to build new plants in a saturated market. "We have not allowed for feedstock changes," said Hagen, "but would not be surprised if Korean producers were to investigate natural gas (here ethane) sources from Russia toward the end of the period."

CHINA

China has a relative scarcity of naphtha. And because many of the country's ethylene plants use gas oil and some kerosine (feedstocks which are not estimated here) predicting China's feedstock usage is difficult. The report, therefore, assumes usage of 67% gas oil and 33% naphtha in Chinese plants.

Hagen says newer plants located far from oil sources will use naphtha increasingly. The report assumes that coastal plants (marked with an asterisk in the table) will shift to a 50:50 gas oil/naphtha split in 1998, and to 33% gas oil and 67% naphtha in 2000. This assumption is based on projected oil import requirements for China, rather than on announced plans.

The following factors should be taken into account when viewing the figures for China:

  • The size of the small ethylene plant at Fushun is unknown.

  • The planned 450,000 metric tons/year (mty) plant at Liaoyang will replace older facilities.

  • The planned 300,000 mty expansion at Yangzi, scheduled to come on stream at about 2000, is not included.

  • Debottleneckings are assumed to increase capacity at many plants by 50,000100,000 mty between 1998 and 2000 (based on the Center's judgments).

  • Three 350,000 mty "speculative" plants were included at unspecified locations.

TAIWAN

Several "megaprojects" involving some of the largest naphtha crackers ever built are planned for Taiwan. These plants are not expected to come on stream until 2000 or later. Although several firms already have agreed to take the output from these plants, the volumes involved dictate that construction be timed carefully.

Hagen said assumptions for Taiwan's numbers

The 900,000 mty Tainan cracker will be built in 1999-2000.

  • The 900,000 mty Mailiao 2 plant and Chinese Petroleum Co.'s eighth (900,000 b/d) cracker will be built after 2000.

He added, however, that this sequence may vary.

In terms of feedstock estimates, the Center has assumed no upgrading, given the considerable capacity slated for construction.

THAILAND

Thai Olefins' naphtha cracker at Map Ta Phut (NPC2), the country's second ethylene plant, started up last year. Almost immediately, an accident damaged some of the plant's boilers. The study assumes the problems were corrected by year-end.

A new 300,000 mty plant is scheduled for start-up in 1996 at Thai Petrochemical Industry's new refinery at Rayong. It is possible, however, that the start-up at Rayong will delay the planned NPC3 facility. The East-West Center assumes the 600,000 mty NPC3 plant will not be built until after 2000, if at all.

The forecasts for Thailand in Table 1 (113402 bytes) assume that the capacities of both Map Ta Phut plants will be increased by 100,000 mty by 2000.

OTHERS

A number of other countries in the region have plans for new ethylene facilities:

  • Malaysia

"Malaysia is one of the few ethylene producers in Southeast and East Asia with significant quantities of ethane available for ethylene production," said Hagen. Malaysia's plans for ethylene production probably will require export markets, at least for derivative products.

  • Singapore

Singapore's petrochemical industry depends on exports. Published plans are included in these numbers, but the Center does not expect any other new units to be completed before 2000. Upgrading and debottlenecking of existing facilities, however, is expected.

  • Philippines

This country's first ethylene plant is expected to come on line shortly before 2000. Delay is possible, as is an earlier opening. Because there are rivals for the project, and because new ideas have been suggested, it is possible, said Hagen, that two plants will be built by 2000.

  • Indonesia

Plans have been published for a new unit at Cilegon. Of the additional speculative projects being discussed, plans involving Taiwan's Chinese Petroleum Corp. (CPC) are the most viable, according to Hagen. Among the possibilities raised is moving CPC's 20-year-old cracker at Kaohsiung, Taiwan, to Indonesia. The study assumes a second plant will be built by 2000, although no assumption is made about who will do it. Similarly, naphtha feedstock is projected for the plant, although ethane is a possibility.

  • Australia

If scheduled pipeline construction is completed, Australia's Botany Bay ethylene plant will switch to ethane feed after mid-1996. Upgrading and debottlenecking also are expected at the plant toward the end of the decade. Although the small size of the plant at Melbourne makes continued operation unlikely, said Hagen the report has not adjusted for this possibility.

  • India

Although many of India's ethylene plans have been rescheduled because of financial difficulties, Reliance Industries' plans are becoming more firm. Other plans under discussion involve moving ethylene plants to India, namely BP's 330,000 mty Baglan Bay cracker and another a Houston plant, although details on these discussions are sketchy.

Another plant has been discussed for Haldia and the Punjab government has mooted a 300,000 mty plant. The Center took these possibilities into account by including a speculative cracker in India's numbers before 2000.

  • Pakistan

Pakistan has one known ethylene plant-a 30,000 mty unit that is "somewhat experimental." The country is short of refining capacity and much of its gas is used for electricity generation. "We expect that Pakistan will soon join the ethylene producing nations," said Hagen, "but perhaps not before 2000 at world scale."

No other nations in the region are expected to become ethylene producers during the study period. Viet Nam plans to develop a petrochemical industry, but major investments are not expected until after 2000.

FEEDSTOCKS

The East-West Center's predictions for feedstock requirements among ethylene-producing countries in the region are shown in Table 2.(30555 bytes)

  • Ethane

Because except in China, most Asian refineries lack substantial catalytic cracking units, significant heavier olefins are not produced. And demand for these heavier olefins is increasing more rapidly than ethylene demand in many countries.

Ethane is a suitable feedstock for ethylene production only when sufficient quantities of ethane-rich natural gas are available. Thus, ethane cracking is limited, especially in East Asia, where there is little natural gas.

With regard to the ethane-usage values in Table 2,(30555 bytes) India is considering a pipeline to bring in ethane from Oman. Australia's ethane capacity at Cooper Basin is likely to be sufficient for this country's plans. Hagen added that Indonesia and Viet Nam mty investigate further use of ethnic.

  • LPG

Although the East-West Center predicts LPG use to remain flat over the study period, this forecast may be inaccurate because producers sometimes mix unreported small amounts of LPG into their feedstock mixtures. The predictions depend heavily on usage in Japan, Singapore, and Australia.

"We have not seen any of these markets as rapidly growing before 2000," said Hagen, "and Australia's switch of Botany Bay to ethane will free some LPG. Alternatives to petrochemical feedstock uses for LPG are important to future market trends."

  • NAPHTHA

Naphtha is the key petrochemical feedstock in Asia. In Japan, growth in other nations could absorb available naphtha supplies. China's crude oils and markets are unsuited for naphtha production. In addition, demand for gasoline, naphtha's alternative disposition, is increasing rapidly in China, while domestic crudes are becoming more scarce. The report's projected growth in naphtha feedstock for China is based on increased imports of naphtha-rich Middle Eastern crudes.

Southeast Asia has little impact on naphtha markets because some of the projects there involve ethane, and because much of the growth in this area will come after 2000. The situation in India is similar, although growth after 2000 is expected to be oriented more toward use of naphtha and ethane. Hagen is unsure about the naphtha/ethane ratio in Southeast Asia after 2000.

  • GAS OIL

Hagen said cracking gas oil may become more attractive in the future, when naphtha supplies tighten toward the end of the century. The anticipated trend in China, however, is in the opposite direction. The regional forecast for gas oil usage includes some cracking of kerosine. In any event, the quantities of gas oil under discussion constitute a small share of regional gas oil demand.

  • Ethanol

The process of cracking ethanol is not used very widely, although it is growing, and existing plants are small. The estimates in the report are crudely made, said Hagen, and the use of ethanol as a petrochemical feedstock is trivial at this time.

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