A variety of unconventional resources, such as shale based ethane, are now readily available to petrochemical producers, but refinery naphtha processed through ethylene steam crackers, aromatics units and extraction-based technology yield a wide range of valuable byproducts, such as polymer grade propylene (PGP).
According to statistical information available on Barchart (www.Barchart.com), ethane is trading at $176.22/metric tonne (mt) while naphtha is trading at $636.50/mt as of November 14. Ethane is definitely cheaper, or is it? The byproduct credits delivered for ethylene producers processing naphtha are one reason why Borealis in Sweden have emphasized they want to avoid a complete reliance on U.S. ethane.
Nonetheless, Borealis said it signed a 10-year deal back in August to receive ethane from U.S. gas fields, making it the second European olefins producer signing up to buy shale gas from gas/condensate bearing plays such as the Eagle Ford in South Texas and the Marcellus in the Northeast, primarily for its ethane content. The gas, bought from Antero Resources will be cracked at the Borealis steam cracker in Stenungsund, Sweden, utilizing flexible technology capable of processing combinations of ethane and naphtha.
Naphtha still constitutes about 70% of the European cracker throughput. There are 43 steam crackers in Europe with only four capable of processing 100% ethane. With new U.S. steam cracker capacity expected to be based primarily on ethane feedstock, much less propylene byproduct will be available for market, giving European and Asian naphtha crackers a competitive edge in terms of byproduct sales.
One unit of ethane yields as much as 0.78 units of ethylene, while only yielding about 0.03 units of propylene. In comparison, one unit of naphtha processed through a steam cracker can yield as much as 0.65 units of propylene byproduct, a byproduct that is actually more valuable than targeted ethylene product.
In the U.S., new and proposed projects to build condensate splitters along the Gulf Coast include the first one expected to go online by press time is at Kinder Morgan’s Galena Park facility in Houston. More than 60% of its output is naphtha. Unlike most conventional refineries, stand-alone condensate splitters rely on finding strong demand for naphtha.
There are three active sources of demand for naphtha in the U.S. market, including refinery gasoline blending; diluent to reduce the viscosity of heavy Canadian bitumen; and ethylene steam crackers. Naphtha as a primary gasoline blending component is often processed through a catalytic reforming unit to yield a high octane reformate. However, a significant trend seen since 2011 as a result of the North American shale boom is that shale feedstocks are providing a plentiful source of condensate quality components, such as C5 pentanes (i.e., natural gasoline) that is blended with naphtha for the gasoline pool. This provides U.S. refiners with the opportunity to circumvent the decades-long practice of having to buy additional naphtha and pentanes to meet the shrinking gasoline market.
In the Middle East, Qatar plans to cut exports of condensate and process more of the light oil into naphtha that it can market in Asia, where the boom in U.S. shale output is adding competition for sales. Qatar’s Ras Laffan refinery will double its capacity for processing condensate by 150,000 bbls/d by the end of 2016, officials at state-run oil-marketer Tasweeq recently said in Doha. The plant also targets a 42% boost in naphtha output, they said. According to Qatar government information, the Laffan refinery is capable of producing 60,000 bbls/d of naphtha, 50,000 bbls/d of jet fuel, and 24,000 bbls/d of gas oil. Some of the naphtha produced is planned to be utilized as feedstock for a future aromatics complex.
So in spite of the oil price downdraft and depressed naphtha prices, long-term upside opportunities in petrochemical byproduct credits from steam crackers and aromatics units using naphtha to primarily produce ethylene, could remain competitive with shale based ethane steam crackers lacking the flexibility to produce higher margins petrochemicals, such as PGP and benzene.