SPECIAL REPORT: CMAI: Wave of new Mideast olefins capacity coming on line

Aug. 25, 2008
An “unprecedented” wave of new olefins capacity is starting up in the Middle East, according to Chemical Market Associates Inc. (CMAI), Houston.

An “unprecedented” wave of new olefins capacity is starting up in the Middle East, according to Chemical Market Associates Inc. (CMAI), Houston.

“An additional 20 million tonnes of new ethylene capacity is expected by 2012, more than doubling current capacity in this region,” according to Tony Potter, director of olefins studies, Europe, Middle East, and Africa, speaking at CMAI’s World Petrochemical Conference in March.

Potter said that 2008 would be a pivotal year because 9 million tonnes of capacity will start up; this will lower global operating rates towards bottom-of-cycle conditions in 2009 (Fig. 1).

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“A staggering 9 million tpy of new ethylene capacity will start up” by second-quarter 2009, Potter said. “To put this in perspective, global ethylene demand growth is around 5 million tpy.”

In 2008, two world-scale crackers in Iran started up and several are imminent in Saudi Arabia, Kuwait, and Qatar. Other than Iran, most petchem projects are on or ahead of schedule.

By yearend 2012, total regional ethylene capacity in the Middle East will be about 31 million tonnes/year (tpy), Potter told OGJ in July.

Because many of the new crackers will start up at yearend 2008 and early 2009, the average global operating rate in 2008 should not be much less than in 2007.

The Middle East and Africa will build 8.6 million tpy of new propylene capacity, Potter said. This will account for 38% of global capacity additions during 2007-12.

Asian demand for olefins will be insufficient to absorb the full increase in Middle East olefin derivative production. North America’s net equivalent ethylene export position will decrease significantly; all other regions will become larger net importers, according to Potter.

In addition, the Middle East will become a significant net propylene-derivative exporter for the first time. This will result in Europe becoming a net importer.

Although Middle East projects’ costs have risen due to capital-cost inflation, high oil prices have increased the general level of petrochemical and polymer prices, which has increased substantially the profit margins of low cost, ethane-based complexes.

“The higher the oil price, the more profitable will be the Middle East olefins industry, a situation likely to attract further investments wherever attractively priced feed is made available,” Potter said. “There is huge potential for further olefins investment post-2012.”

Saudi Arabia olefins

Most new cracker capacity will be commissioned in Saudi Arabia, according to Potter. Total installed capacity will increase to more than 18 million tpy by 2012, from a current level of 10 million tpy (Fig. 2).

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Saudi Arabia’s projects will set new precedents in the coming years. Saudi Ethylene Polyethylene Co., a Tasnee-Sahara-Basell joint venture, will commission the first non-Saudi Basic Industries Corp. (SABIC) cracker. And Saudi Aramco will make its first move into petrochemical production via its partnership with Sumitomo in the Petro-Rabigh project.

According to Potter, the current round of new cracker projects will be completed when the Saudi Kayan project is commissioned beginning at the end of 2009.

After that, the next phase of projects includes:

  • Saudi Polymers, formerly known as the National ChevronPhillips project, has awarded engineering, procurement, and construction contracts, and the project is scheduled to come on stream in 2011.
  • Saudi Aramco and Dow have a massive joint-venture development at Ras Tanura, which will include an ethane-naphtha cracker currently scheduled for start-up in 2013.

Iran olefins

Potter said that Iran will add another 4.3 million tpy of capacity by yearend 2012, more than half of which has achieved commercial operations, although is not fully loaded because derivative capacity is lagging the crackers. Iran has plans for significantly more new capacity.

National Petrochemical Co.’s (NPC) Arya Sasol (Olefins 9) and Jam (Olefins 10) crackers have been commissioned at Bandar Assaluyeh. The Arya Sasol cracker actually produced ethylene commercially in December 2007, but its full market effect is a 2008 event due to delays in associated derivative units.

After 2008, Iran will have relatively little effect on the global capacity utilization curve, according to Potter:

  • Morvarid (Assaluyeh Olefin) cracker will start up in 2009, followed by the Ilam cracker in 2010. Combined, they amount to less than 1 million tpy of ethylene capacity, small by Middle East standards.
  • Gachsaran Olefin, formerly the Arvand (Olefins 8) cracker, has pushed back its realistic start-up date to 2011 due to its relocation.
  • The next round of “megacrackers,” Olefins 11, 12, and 14, will not start up until after 2012.

Other areas

Outside of Iran, project delays are “largely a myth.”

The Saudi, Kuwaiti, and Qatari projects are on or ahead of schedule. Potter said, it is possible “there will be minor variations as start-up deadlines approach, but it is equally likely we will be surprised by slightly early start-ups.”

In Abu Dhabi, Borouge is building a 1.4-million-tpy ethane cracker, expected to start up in 2010. The net ethylene production in this plant, however, will only be 600,000 tpy, according to Potter. Ethylene product will be dimerized to butene; butene and more ethylene will be metathesized to propylene, ultimately producing 800,000 tpy of polypropylene.

In Qatar, a QP-Honam venture has awarded contracts for an ethane-naphtha cracker complex that will also use dimerization and metathesis to boost propylene-polypropylene production to 700,000 tpy. QP and ExxonMobil are developing an ethane-propane based complex.

“One day a cracker will no doubt be built in Oman, probably some time next decade,” Potter said.

Although there will be little effect by 2012, there are also projects in North Africa that could eventually lead to significant export-oriented capacity, according to Potter. The only firm project is a joint venture of Sonatrach and Total to build an ethane cracker due to start up in 2013.

In Libya, Dow is working with National Oil Corp. to study the expansion of an existing naphtha cracker and explore the possibilities of a world-scale ethane cracker. According to Potter, the existing naphtha cracker has never been debottlenecked and a relatively inexpensive expansion of 100,000-200,000 tpy is possible by 2012. The world-scale ethane cracker idea, if implemented, would start up in 2015 at the earliest.

Egypt’s petrochemical industry master plan is progressing slowly; companies are still exploring ethylene capacity options. A project of significance would appear to be a mid-next decade start-up also, Potter said.

Propylene

The Middle East will become a significant propylene region for the first time. According to Potter, the Middle East and Africa accounted for only 6% of global propylene capacity in 2007, but during the next 5 years, 38% of all new propylene capacity will be built there (Fig. 3).

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More than 8.6 million tpy of additional propylene production capacity will be built in the Middle East, nearly tripling current capacity and bringing these regions’ share of the global total to almost 13%.

Propylene capacity additions are concentrated in Saudi Arabia, where more than 4 million tpy will come on stream in 2008-09 (see table). According to Potter, “this new propylene capacity will include significant volumes of steam cracker coproduct, but more than half will be produced via on-purpose routes propane dehydrogenation, metathesis, and high-severity FCC.”

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In other Middle East countries, Borouge in Abu Dhabi is developing the world’s largest metathesis unit, slated for a 2010 start-up; and further metathesis capacity will start up in Qatar in 2012 (Fig. 4).

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In Iran, new propylene capacity is essentially restricted to the Jam cracker, which is designed to process a mixed feed slate of ethane to aromatic raffinates and also C3+ streams from other crackers planned for the Bandar Assaluyeh site, according to Potter.

Egypt’s Oriental Petrochemicals is building an integrated propane dehydrogenation-polypropylene facility scheduled to start up in 2010.

Post-2012 forecast

After 2012, Saudi Arabia will have fewer new ethane projects. The recovery of NGLs from Shaybah field could produce enough ethane to produce another 1 million tpy of ethylene, which, if spread over two or three feed-flexible crackers with ethane as a minority feedstock, could yield several million tons of additional production, according to Potter.

Qatar’s progress depends on the rate of development of North field. There is the potential for an additional ethane cracker in Kuwait if and when its own North field is developed. In Abu Dhabi, there could be a Borouge 3.

In North Africa, there could be new crackers in each of Algeria, Libya, and Egypt.

In Iran, Olefins 11, 12, 14, 15, and 16 are planned. And in Iraq, Potter assumes that any new capacity will start up after 2020.