Chemical Industry Summary
Recent news for global chemicals has been dominated by M&A. This week, Westlake Chemical announced that the board of its acquisition target Axiall has agreed to sell the company for the significantly improved offer of US$33 per share representing an enterprise value of US$3.8 billion. This valuation is a 31% increase from the initial offer made in late January. Bayer’s offer to acquire the Ag chemical and seed company Monsanto is in the early stages, but if completed could fetch a valuation of over US$42 billion. This would be in the same area as ChemChina’s bid for Syngenta. The pending Dow/DuPont merger is scheduled to be completed by the end of the summer. If approved by regulatory authorities and stockholders, all of these transactions could result in significant industry re-structuring and re-alignment.
Macroeconomics and Geopolitics
North America
The US economy remains spotty with some positive signs, but overall exhibiting sluggish growth. The second official estimate for Q1 GDP growth in the US was raised to 0.8% from the initial estimate of 0.5%. The Conference Board forecast calls for 2016 US GDP growth at 2%. US retail sales grew 0.5% in May on top of the strong April showing of 1.5%. Consumer spending is the largest segment of the economy.
In May, the US jobs report indicated very poor results with only 38,000 jobs added, the lowest rate in several years. This result followed a poor April showing of only 160,000 jobs added. As a result, during its June meeting, the FED decided not to raise US interest rates, but indicated that future boosts are likely.
The May, the US manufacturing PMI index softened to 50.7 from the 50.8 recorded in April. This result was the lowest rate of expansion seen since September of 2009. The US PMI index has declined five of the last seven months. In May, US auto sales of light cars and trucks were 17.37 million vehicles, down 2% from a year ago and essentially flat with March. On, a year-to-date basis, US auto sales through May are up 2.5% from 2015, a year that saw a 5.6% improvement from 2014.
In April, US housing starts totaled 1.077 million, down 1.5% from last year. Sales of existing US houses in April were 5.45 million, up 6% from 2015 and 2% over March. Average prices for existing homes was US$232,500 up 6% from last year. In its May forecast, the NAR (National Association of Realtors) estimates 2016 starts at1.227 million (up 10.3% from 2015), and for 2017 it is forecasting 1.31 million starts (up 6.5% from the 2016 forecast).
Brazil’s PMI is in major contraction territory with the May PMI coming in at only 41.6. The IMF expects Brazil’s GPD to fall about 4% in 2016, near the same result as 2015. The economy reflects the current political crisis in with President Dilma Rousseff and other major governmental officials caught up in a corruption scandal.
Europe
It appears that the decision for UK to leave the EU may prove closer than previously anticipated, and the markets are watching the results of the June 23 referendum closely. The bond markets have reacted to the uncertainty, and interest rates are approaching record lows. Although estimates for the economic impact to the UK vary, the overall effect is considered to be negative for Britain’s economy. However, Britain could potentially save €12 billion that it currently contributes to the EU budget.
In its April forecast, the IMF forecast that annual European GDP growth will stay very near 1.5% for the remainder of the decade. The quantitative easing program of the ECB continues to be implemented. The program, launched in early 2015, includes the purchase of €1.5 trillion of debt in order to inject cash into the economy and to promote growth-related borrowing. Targets currently approved include increasing bond purchases by €10 billion per month.
The reported May PMI index for the Eurozone was reported at 51.5, down from 51.7 in April and at a 3-month low. On balance, most of the Northern European countries are showing slow but improving manufacturing activity, as are Spain and Italy. France (the second largest economy) and Greece are showing contraction of manufacturing activity.
Manufacturing activity in Eastern Europe continues to be soft. Russia’s PMI moved up in May to a level of 49.6, a slight improvement from April’s 48.0, but still in contraction territory. The Czech Republic’s growth has cooled with an index of 53.3 in May, and was at a 3-year low. However, after a drop in April, Poland’s PMI rebounded to 52.1 in May.
Asia
China’s manufacturing sector remained in contraction with a PMI of 49.2 in May. This was down slightly from April’s result of 49.4. This was the 15thconsecutive month for the PMI to be in contraction territory. As part officials attempt to re-balance the economy away from exports and investment-related growth and towards domestic consumption and consumer demand, calls for stimulus spending represent a return to the old approach.
China’s production of light vehicles is up 5.8% through April 2016 on a year-to-date basis. Sales of light vehicles is also up 6.2% from 2015. Both numbers are in-line with recent trends that saw a downshift of demand growth from the low-teens seen in 2012 and 2013.
Feedstock – Crude Oil
In early June, WTI crude oil prices topped US$50per barrel in nearly one year, but the price has stalled in part due to a strengthening dollar. Leading indicators are somewhat mixed with inventories down incrementally, but rig count stabilizing and showing a mild recovery. For the week ending June 3, Baker Hughes reported oil-directed rigs increased 9 to 325. The EIA has reported US crude oil production has been reported for the first quarter at 9.15 million barrels per day, down 2.7% from 2015. According to the DOE, US crude production in May was 8.77 million barrels per day, down from 8.9 million barrels per day in April. However, despite reduced crude production, US crude inventories are not dropping dramatically. For the week ending June 10, the EIA reported that US crude oil stocks not in the SPR (strategic petroleum reserve) hit a record level of 531.5 million barrels, up 13.6% from a year ago. In the last four months, the year-on-year comparison has remained in the positive 10% to 14% range as compared to 2015.
Fatih Birol, Executive Director if the IEA (International Energy Agency) has recently stated that his organization sees global supply and demand of crude oil coming back into balance in the back half of 2016 or by 2017 at the latest, primarily due to an expected decline of 700,000 barrels per day of production resulting from low oil prices. The bulk of this decline will be seen in the non-OPEC countries.
Feedstock – Natural Gas & NGLs
In the first two weeks of June, US natural gas prices have rallied somewhat with Henry Hub natural gas spot prices now trading near US$2.50 per million BTU. Pricing pressure has been due to high storage inventories, but is easing as the storage surplus (compared to the 5-year average) has declined for the 9thconsecutive week, according to the EIA. Still, the working gas stocks were 76 billion SCF above the prior 5-year maximums. At 2,972 billion SCF, the amount of underground gas storage is 32% above the prior 5-year average and 28% ahead of last year. Spot prices for gas in the Marcellus area are near US$1.50 per million BTU. NYMEX future gas prices for January 2017 are near US$3.27per million BTU.
With the strengthening of US natural gas prices, the current oil-to-gas price ratio has recently dropped to near 20:1 after seeing levels from levels of around 27:1 seen in May. Natural gas sets the floor pricing level for ethane and strengthening gas prices have incrementally lifted ethane. Spot ethane prices in the US had been range-bound in 2016 to a level below US$0.20/gallon. However, in June prices have eased up a few cents per gallon with near-month future prices in the area of 24cents/gallon. Enterprise’s new ethane export terminal is expected to be completed by the late Q3 of this year, and will ship approximately 200,000 barrels per day (Bpd) of ethane at full capacity. These quantities are well below the currently rejected ethane volumes of 500-600,000 Bpd, but cumulatively should put upwards pricing pressure on this cracker feedstock.
For the week ending June 10, the EIA reports that US propane/propylene inventories have increased to 78.35 million barrels, up 7% from last month, but down 3% from a year ago. Inventories are down substantially from the all-time record of 106 million barrels set last November due to increased industry export capacity. Spot prices near US$0.50/gallon are near year-ago levels.
US Olefins & Polyolefins
The big news this month was Shell’s announcement that the company would proceed to build an ethylene cracker in Monica, PA in the Marcellus shale area. The fact that the company was developing this project has been known for the past three years, but the FIF (final investment decision) kept being delayed. The cracker will produce feedstock for 1.6 million tons per year of polyethylene and will start up sometime after 2020. The location of the cracker will place it in the proximity of Midwest converters that consume approximately 70% of US polyethylene.
US contract ethylene prices for May settled down 0.5cents/lb to 26.5cents/lb on a net transaction price basis. This is up 5.25cents/lb from the January price of 21.25cents/lb that was at a 13-year low. Spot ethylene prices have recently been relatively flat in the area of 25.0cents/lb. In addition to the normal heavy turnaround season in Q2, the Westlake Petro #1 and the LyondellBasell Corpus Christi ethylene crackers are undergoing expansions. Barring additional unplanned outages, it appears that US cracker unavailability will average about 8.5% in Q2.
US propylene prices settled flat in May with contract pricing at 31.0cents/lb for chem grade and32.5cents/lb for polymer grade. Propylene prices have remained in a narrow range of US$0.28-US$0.31per pound since August of last year.
This month, BASF announced that it was delaying indefinitely its proposed on-purpose propylene MTP plant. Enterprise has announced the delay of its new 1.65 billion pound per year PDH project. This project is now expected to come online in the second quarter of 2017 instead of the end of the year 2016.
US contract butadiene prices have settled up 3cents/lb for June, following a similar increase in May. Current benchmark contract pricing is 35.5cents/lb.
After a cumulative increase of 9.0cents/lb in March/April, US polyethylene pricing was flat in May. PE producers not involved in outages are running at strong operating rates. Producer PE inventories that were accumulated ahead of the turnarounds help bridge demand. Margins for integrated PE producers are in the range of US$0.20-US$0.25 per pound, depending on grade. On a year-to-date basis through April, US PE exports are 27% ahead of last year’s total. At an average of 472,000 metric tons (MT)/month, exports are equivalent to 28% of US capacity. Import volumes for all PE grades are relatively flat, so that on a net basis, exports are up 86% from 2015 and 54% over 2014.
In May, US contract PP prices were down 4cents/lb following a drop of 3-5cents/lb in April. One producer has reportedly announced a decrease for PP prices in June of 3 to 5cents/lb. The exceptionally strong PP pricing and large regional arbitrage seen in Q1 and Q2 resulted in a surge of PP imports to the US with imports averaging 86 million pounds per month February through March. This was nearly triple the import levels seen in 2015. With flat propylene monomer prices in May, the propylene-to-propane spread has decreased 8.5cents/lb in the period March through May.
US contract PVC prices were flat in May following a cumulative 6cents/lb increase for March and April. The recent firming of prices reflects stabilization of ethylene pricings as well as a slight improvement in chlorine pricing. In May, US polystyrene prices rolled over after increasing 5cents/lb in April. Prices for US contract benzene for June are down US$0.08 per gallon in addition to a US$0.10/gallon decrease in April. June contract is US$2.00 per gallon.
European Olefins & Polyolefins
For June, European the contract ethylene price increased by €25/metric ton (MT)to a level of €935/MT. This was primarily due to recent crude oil price strengthening by also was spurred by improving demand for derivatives. HDPE prices are currently €1,500/MT, up about 2% in the last month.
European contract polymer grade propylene settled improved €17.5/MT in May, to a level of €652.5 per MT. Contract butadiene prices for June settled at €650 per MT, up €30/MT from May.
Global Chlor-alkali
The Chlorine Institute reported that effective operating rates for US chlor-alkali in April averaged 80.3%, down from83% in March. The average daily production rate, was 6.5% below the March rate reflecting lower capacity due to shutdowns. The Q2 turnaround season tightened supply and reduced availability resulted in higher domestic caustic prices in each month in Q2. In total, caustic pricing was up about US$50/short ton (ST). For the second quarter, producers have announced three successive caustic price increases for April, May and June that total US$85/ST. For chlorine, a US$20/ST increase has been proposed for April.
European chlor-alkali operating rates in April were 70.3% of industry capacity, 16.5% below March primarily due to planned regional maintenance outages. In addition, rated European capacity has been reduced and was 6.1% below the March number.
On June 10, Westlake Chemical announced that Axiall has agreed to be acquired in an all-cash acquisition for US$33 per share and assumption of US$1.4 billion in debt, leading to an enterprise value of US$8 billion. The transaction is subject to approval by Axiall’s shareholders and is expected to close in Q4of this year. The EV/EBITDA multiple, based on the TTM EBITDA is near 8x. However, the company estimates that the transaction multiple, including US$100 million per year synergies is 6.1x on a cycle average margin basis. WLK says that the acquisition will be accretive to earnings in the first year.
The combined company will be the #2 PVC producer in North America and the #3 chlor-alkali producer with over 3 million short tons per year. Including the Olin acquisition of Dow Chemical’s chlor-alkali assets in 2015, the North American market is undergoing significant consolidation. Westlake will inherit Axiall’s position on the new ethylene cracker JV whose groundbreaking ceremony was held in early June.
AMERICAS
Shell Chemical moves forward with Pennsylvania petrochemical project
Shell Chemical has decided to build a shale-based petrochemical complex near Pittsburgh, Pennsylvania. The complex will be built on the former zinc smelter and comprise a 1,500KTAcracker and associated polyethylene facilities with a capacity of 1,600KTA. Construction work is expected to begin in 18 months with scheduled commercial operation in early 2020s.
Comments: Growing supplies from Marcellus/Utica formation has made some petrochemical producers consider northeastern United States as an alternative location for ethane cracking projects over US Gulf Coast. However, several proposed ethane crackers in this region have been put on hold for reconsideration due to plummet in oil prices. Shell Chemical is the first to move ahead with ethylene production in Eastern US, partly because of US$1.7 billion tax credit incentives offered by Pennsylvania state government. Apart from tax incentive, the location of the complex is within 700miles of a majority of North America polyethylene customers, which will give Shell Chemicals logistic advantages over USGC producers. In spite of above advantages, increasing shale gas exports from the United States to Europe might raise feedstock prices in Marcellus/Utica formation and impose challenges to Shell Chemical in future years.
Westlake Chemical to take over Axiall Corporation
Westlake Chemical has agreed to acquire Axiall Corporation with US$2.4 billion in cash. The deal is totally worth aboutUS$3.8 billion including debt. The acquisition, which is expected to close in the fourth quarter of 2016, will make Westlake the second largest PVC producer and the third largest Chlor-alkali producer in North America.
Comments: The Axiall deal aligns with Westlake’s growth strategy for vinyls business via acquisition. Westlake acquired CertainTeed’s PVC pipe business in 2013, German specialty PVC maker Vinnolit Holdings GmbH in 2014, Chinese PVC fabrication firm Suzhou Huasu Plastics Co. in 2015. The pursuit of Axiall Corporation that began in January with several bids finally came to end shortly after Axiall’s JV ethylene project partner, Lotte Chemical, stepped into the takeover battle in early June. The transaction will help Westlake Chemical enhance vertical integration of chloro-vinyl production in North America, broaden product portfolio and improve globally competitive cost structure.
BASF postpones final decision on methanol-to-propylene(MTP)project in Texas
BASF has deferred its final decision of building an on-purpose propylene unit in Freeport, Texas. The combination of the raw material price volatility and current economic environment. In announcing the delay, BASF mentioned that it will continue to monitor raw material prices and market conditions to determine the appropriate timing to continue with this project.
Comments: The delay in final investment decision is a result of uncertain crude oil prices and decreases in expected profit margins. Following the path of several other major petrochemicals producers in the region, BASF announced the on-purpose propylene plant to take advantage of abundant and low-cost shale gas feedstock in North America. At the announcement time, the company had projected higher profit margins as compared to other competitors that primarily use crude oil as feedstock. The drop in crude oil prices lowered profit margins of shale gas-based petrochemicals producers and elevated the competitive edge for crude oil-based competitors. If this project had continued as scheduled, the plant would have been the first MTP project in North America.
Sasol to start up Louisiana chemical complex by 2019
Currently, Sasol is more than 40% complete with its Lake Charles Chemicals Project. The petrochemical complex comprises a 1,500KTAcracker, a 450KTALDPE unit, a 450KTALLDPE unit, 300KTAEO/EG plant, and three other derivative facilities with smaller capacity. The cracker is expected to reach beneficial operation in late 2018, while derivative plants are scheduled to become commercially operational in late 2019.
Comments: The chemical manufacturing complex initially planned for 2018 start-up could be delayed by a year due to construction delays and drop in company’s profits. The delay may result in a project cost escalation of US$2 billion. Though the project will move forward, but slower than original plan, yet Sasol could speed up the construction if the market witnesses a rebound in oil prices.
Bolivia selects LyondellBasell technology for its PP project
Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), Bolivia’s state-ran petrochemical company, has chosen LyondellBasell Spheripol PP Technology for its 250KTApolypropylene facility. The planning facility will be located in Tarija, Bolivia and is expected to become operational in 2021.
Comments: With rich natural resources, Bolivia is a major natural gas exporter in Latin America, along with Argentina and Brazil. The propylene/polypropylene facility is part of Bolivia’s national strategy to modernize its oil &gas industry in response to Brazil and Argentina expectedly increasing self-sufficiency on natural gas in the long-term. The national plan started with building a natural gas liquid separation unit at Gran Chaco complex in country’s most gas-rich area of Tarija. Valuable components in gas, such as ethane and propane, will be extracted out for selling and potential captive use. Additionally, YPFB plans to set up an ethylene/polyethylene complex adjacent to Gran Chaco complex with scheduled start-up in 2022. Once these downstream production units are running, polymer output is expected to focus on export markets in other Latin American nations. These long-term investments would help Bolivia add value to its natural resources and upgrade its oil &gas industry.
INEOS Oligomers to build a new LAO unit in Texas
INEOS Oligomers has decided to build a new linear alpha olefin (LAO) facility at Chocolate Bayou, Texas site. The plant will have production capacity of 420KTA, which is 20% larger than originally announced, with scheduled start-up by the end of 2018. Once the LAO unit comes on-stream, INEOS Oligomers’ LAO capacity will be approximately 1,000KTA.
Comments: Linear alpha olefins (LAOs) are raw materials of making polyethylene copolymers, polyalphaolefins (PAOs) and synthetic lubricants. North America is a major consuming region for LAOs. Since 2013, INEOS has been working to expand its LAOs and PAOs production capacity through debottlenecking and establishment of new production facilities in response to coming US federal regulation of lubricant reformulation. The Lubricant Reformulation, scheduled to be effective in the second half of 2017, is meant to reduce CO2emission and attain better fuel economy. The LAOs facility is a part of INEOS’ effort to catch the anticipated growth for PAOs predominately due to Lubricant Reformulation, as well as to support new PE capacity to be built in USGC in years to come. Major producers of global PAOs market include INEOS, CP Chem, ExxonMobil and Chemtura. The market segmentation is split into low viscosity PAOs (LV-PAOs) and high viscosity PAOs (HV-PAOs). ExxonMobil and Chemtura lead high viscosity segment; while INEOS is dedicated to LV-PAOs production and maintains a leading position in low viscosity segment. INEOS has been strategically working to expand portfolio into HV-PAOs through a 200KT capacity metallocene-based HV-PAOs plant with scheduled start-up in early 2017.
EUROPE
Repsol launches new metallocene LLDPE plant in Spain
Repsol has begun commercial operation at its new metallocene LLDPE (m-LLDPE) facility in Tarragona, Spain. The plant is a swing HDPE/m-LLDPE unit with capacity of 150KTA. The output will be marketed under the tradename of Repsol Resistex with a main focus in film applications.
Comments: Repsol’s facility will be the first outside the US to manufacture m-LLDPE using the Chevron Phillips Chemical technology. The US$22.5 million m-LLDPE project is part of an overall investment of US$71million that Repsol had earmarked to spend on the chemical plants of its Tarragona complex between 2014 and 2016. This is dedicated to improvements aimed at enhancing the group’s competitiveness. m-LLDPE offers properties such as high transparency and high gloss when used for film applications. It also offers extraordinary tear and puncture resistance which is ideal for packaging applications. Repsol’s m-LLDPE will add to the wide range of products it is offering along with LDPE, HDPE, EVA and EBA copolymers along with PP grades.
MIDDLE EAST & AFRICA
Iran to expand ethylene capacity
Arya Sasol Polymer Company, a subsidiary of National Petrochemical Company (NPC), plans to debottleneck ethylene capacity at Asaluyeh site by 12.5% to 1,250KTA. The expansion project has been awarded to Technip and is scheduled to be completed by the end of 2017
Comments: The Arya Sasol Petrochemical project is part of National Petrochemical Company’s ninth olefins project. South African company Sasol formed the joint venture in 2003 and left in 2013. The company now completely owned by Iranian firms, plans to set up downstream plants in the coming years. Majority of the intended products is for domestic use and the not meant for exports.
ASIA PACIFIC
Sinopec targets 2019 to start up Fujian JV cracker
Sinopec and Taiwanese petrochemical consortium are expected to launch a mixed-feed cracker with capacity of 800KTAin Gulie, Fujian in late 2018 or early 2019. The cracker is currently underway as part of a vertically-integrated petrochemical complex that will include several downstream production units. The details of downstream plants are still being finalized, but PE, styrene monomer (SM) and EVA are likely to be included.
Comments: Low oil prices and high water usage/carbon emissions have dampened government enthusiasm for coal-to-olefins (CTO) projects. Several have been delayed and no new plants were approved in 2015. Sinopec owns the largest CTO unit in the world that is due to finish construction this year, but has put on hold or cancelled most of its remaining CTO projects. Sinopec’s decision to start construction of the Fujian cracker signals a shift back to naphtha and LPG feedstock for new capacity expansions. A few other companies have also announced new crackers to reduce imports and fill the gap in olefins production. The CNOOC/Shell JV took FID in March to double their existing cracker capacity and build new downstream styrene, ethylene glycol and polyol plants. Zhejiang Petrochemical, a subsidiary of Rongsheng Holding Group, is looking to build the first privately-owned large refinery and petrochemical complex in China, but that project is still in early planning stages.
Mitsui Chemicals, Prime Polymer planto boost PP compound capacity
JX Nippon Oil & Energy Corp plans to build a 5KTA polyisbutylene (PIB) unit at its existing PIB facility of 70KTA in Kawasaki, Japan. The project is at the front end engineering design (FEED) stage and plans to begin construction in Q1 2017 with scheduled start-up in October 2019.
Comments: Mitsui Chemicals and Prime Polymer Co. are one of the leading suppliers of PP for automotive applications. In United States, the company has facilities in Ohio and Tennessee; in Aguascaliente, Mexico and in Neemrana,India. All three sites will have augmented line by 2017, which is an increase of 5% of overall production capacity for the company. The increased capacity coupled with sales and technical service will strengthen the company in different for the ever growing automotive market.
Saudi Aramco withdraws from Vietnam petrochemical project
Saudi Aramco has decided to exit its JV petrochemical project with PTT in Vietnam that was designed to process 400,000 bpd of crude oil and produce 12,000KTA of refined products and 5,000KTA of petrochemical products. PTT will be transferring the project to its affiliate IRPC for further development.
Comments: Vietnam has become magnet for petrochemical projects with intent to catch up growing demand in Southeast Asia. Vietnam’s strategic location has favorable domestic and export markets because of several FTAs (Free TradeAgreements) with ASEAN, Russia and Asia-Pacific economies. This hotspot attracted more than five proposed mega petrochemical projects to be built, including Victory Nhou Hoi project, Long Son project (by PetroVietnam, SCG and Qatar), Vung Ro project (by PetroVietnam), Nam Van Phong refinery project (by Petrolimex and JX Nippon) and the Nghi Sob refinery (by PetroVietnam, KPI, Idemitsu and Mitsui). However, low oil prices coupled with political uncertainty have triggered a domino effect with foreign investors for petrochemical projects that slowed project development. The bright side of the current market conditions, Vietnam can review all projects to avoid potential production capacity redundancy that resulted from rapid but unconsidered development. Vietnam has recently called for consumption plan for Nghi Sob project, which is expected to be operational in 2017.
Taiwan’s USI Corp begins trial production of its new EVA units
Taiwan’s USI Corp has begun trial runs at its two new 45KTA EVA/LDPE swing plants in Kaohsiung, Taiwan. The company targets 2H 2016 for commercial production.
Comments: USI Corp. and Formosa Plastic are the only two suppliers of EVA in Taiwan, which together make up for 80% of Taiwanese EVA market. USI Corp. offers EVA resins for foams, hot-melt adhesivesand solar encapsulant films. Due to limited domestic demand in Taiwan, EVA is an export-oriented type of business, mainly to China. The two 45KTAEVA plants will be separately operated by USI Corp. and Asia Polymer Company, which is USI’s subsidiary with main focus on foam grades. Despite China’s slowing economy, the increasing usage of EVA in solar films and hot-melt adhesives is still anticipated to drive the consumption of EVA in China. The new capacity will to allow USI Corp. to boost production of higher margin EVA grades in response to strong demand from solar encapsulant application. (Solar encapsulant grades have an estimated US$200–250/metric ton higher profit margin than conventional EVA grades.)
PTTGC to launch a new cracker in Thailand by 2020
PTTGC is working to expand petrochemical capacity in Thailand with a new naphtha cracker to be built in Map Ta Phut. The cracker is design to produce 500KTAof ethylene and 261KTAof propylene. Construction of this project is expected to begin in 2018 and to be completed in 2020.
Comments: One of corporate strategies that PTTGC has deployed in recent years is to reduce external sales and exports of its upstream products, such as naphtha, polypropylene, benzene and para-xylene, by integrating toward more downstream production with higher value addition. The Map Ta Phut retrofit project is switching cracker feedstock from natural gas to naphtha, allowing PTTGC to develop more downstream petrochemical plants with a wider range of chemical outputs. Currently, about 80% of naphtha produced by PTTGC is sold to its domestic competitor, SCG Group. With China’s economics getting slow, PTTGC is expected to explore new markets where demand for plastics is higher, such as Cambodia, Laos, Myanmar and Vietnam, for growth in years to come.
Lotte chemical completes Uzbekistan gas chemical complex
Lotte Chemical and Uzbekneftegaz National Holding Co. (UNG) have commenced the Surgil project, which is Uzbekistan’s first petrochemical complex. The complex is built with a gas processing facility that can process up 1.5 billion cubic meters of natural gas, a 390KTA HDPE unit, and 80KTA PP facility.
Comments: The chemical complex is a joint venture between Uzbekistan’s Uzbekneftegaz National Holding Co. (UNG), Korea Gas Corp. (KOGAS), Lotte Chemical and GS E&R Corp. The project is part of a national program on modernization and technological renovation of the oil &gas industry. In addition to Ustyurt gas chemical complex, Uzbekistan is also partnering with China National Petroleum Cooperation (CNPC) to build a gas pipeline to China in four stages, with LUKOIL for gas production projects, and with Sasol for gas to liquid facility. For the counterpart, commercial production at this facility will allow Lotte Chemical access to serve polyolefin markets in Russia, North Africa and Central Asia.
India’s OPAL commissioning mega petrochemical complex
India’s ONGC Petro additions Ltd (OPAL) is commissioning its US$4.5 billion mega-petrochemical project in city of Dahej in Gujarat, with expected start-up in late 2016. The project is designed to build a dual-feed cracker that can produce 1,100KTA of ethylene and 400KTA of propylene, various associated processing units and several polymer facilities. These polymers plants include two 360KTA of HDPE/LLDPE swing units, one 340KTAof dedicated HDPE unit and one 340KTAof PP unit.
Comments: OPAL was established as a joint venture between Oil and Natural Gas Corporation Limited (ONGC), Gas Authority of India Limited (GAIL), and Gujarat State Petroleum in 2006 specially for the construction of OPAL’s Dahej complex. The long delayed petrochemical complex will be a boost to the stakeholders once started. The petrochemical complex will be the largest olefins unit in India upon completion. The downstream units will produce 350KTAof PP, using the INEO Sprocess, 350KTAof HDPE, based on the Mitsui process, and two LLDPE lines, each designed to produce 360KTAusing INEOS technology.
Shandong Luqing Petrochemical commissions C4 facility
China’s Shandong Luqing Petrochemical has commenced operation of 170KTAisobutylene facility using Honeywell UOP C4 Oleflex process. Besides licensing technology, Honeywell UOP also provide this project with engineering design, catalysts and adsorbents, specialty equipment, staff training and technical service.
Comments: Shandong Luqing Petrochemical is a privately-owned refinery that produces mainly gasoline, liquefied petroleum gas (LPG), and gasoline additive methyl tert-butyl ether (MTBE). China’s continuing growth of economy has driven up the consumption of transportation fuel and consequently the demand for isobutylene in making fuel additives. The start-up of isobutylene facility would help Shandong Luqing Petrochemical catch the growth opportunity and improve cost structure of MTBE production. Honeywell UOP alone has licensed OleflexTMC4 technology to seven producers in China, of which three are scheduled to become operational in 2016.
COAL-TO-CHEMICAL
SABIC teams up with Chinese coal producer for petrochemical project
SABIC and China’s Shenhua Ningxia Coal Industry Group (SNCG) have signed an agreement to jointly build a coal-based Greenfield petrochemical complex in northwestern China. Under the project development agreement, a feasibility study will be conducted in three years of partnership.
Comments: Shenhua Ningxia Coal Industry Group (SNCG) is one of the largest coal-to-chemical producers in China, with a vertically-integrated production hub in Ningxia. The coal-to-chemical production base to date has two methanol units with total capacity of 310KTA, a210KTAdimethyl ether unit, a 60KTApolyoxymethylene unit, a 500KTAcoal-to-olefin facility and a 500KTAmethanol-to-olefin plant. However, profitability of coal-to-chemical production has been erased by huge dip in crude price since 2015. The partnershipwith SABIC is expected to help SNCG expand downstream portfolio toward high value-addition. On the flip side, SABIC is strategically seeking opportunities to explore new markets and diversify feedstock through this cooperation. In China, SABIC currently has a JV petrochemical complex (SABIC Tianjin Petrochemical Company) in Tianjin that consists of a 1,000KTAcracker and several downstream facilities.
BIOBASED
Gevo corporates with Clariant for commercial ethanol-to-olefin production
US biofuel firm Gevo has signed an agreement with Clariant to develop new catalysts that supports scale-up of Gevo’s ethanol-to-olefin (ETO) technology. Gevo’s ETO technology takes ethanol as feedstock to produce a mixture of isobutylene, propylene and hydrogen that can be further used for production of plastics and fuels.
Comments: Gevo has concentrated its limited resources on development of commercial bio renewable isobutanol production and its applications in alcohol-to-jet fuel, gasoline, solvents and plastics. Gevo’s ETO technology involves proprietary mixed metal oxide catalysts for direct conversion of ethanol to isobutylene, propylene and acetone. Previous efforts had achieved relatively high-yield production of these chemicals from ethanol (with >90% theoretical yield of acetone from ethanol demonstrated as early as 1980’s) but only at low ethanol concentrations (1-8% mol) and using catalysts that are too expensive for industry. Gevo claims that its ETO technology can retain high selectivity for isobutylene, propylene and acetone production at molar concentrations of ethanol in the feed stream exceeding 14% using novel catalysts and catalyst preparation methods. Clariant will now attempt to produce the catalysts to demonstrate the technology at a larger scale.