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Shale Based Ethane Marginalizing Refinery Naphtha Production

Middle Eastern refineries positioned for maximum naphtha utilization.

Middle Eastern refineries positioned for maximum naphtha utilization.

Nearly half of the world’s ethylene will be produced from liquefied petroleum gas (LPG) and ethane by 2023, mostly at the expense of refinery naphtha. These findings were recently made available in ESAI Energy’s new study, “A Perfect Storm: Global Natural Gas Liquids 2013-2013.” The shift in the global ethylene feedstock slate is driven by ethane-based capacity in the U.S. and the Middle East, and low natural gas prices in the U.S. and Saudi Arabia. However, the highly integrated Saudi Arabian refinery and petrochemical infrastructure seems to be maximizing refinery naphtha production as petrochemical feedstock — for ethylene steam cracker byproduct opportunities, including polymer grade propylene (PGP), butadiene, etc.

Global ethylene production will expand to 174 million tpy by 2023, an increase of 47 million tpy from the 2012 production of 127 million tpy. Of this growth, 24 million tons of production will be ethane and LPG based, and 15 million tons will be naphtha-based production, according to the ESAI study.

The feedstock shift is most dramatic in North America, where prolific shale gas production yields cheap ethane in the U.S. and is driving a petrochemical resurgence. By 2023, total planned ethane-based ethylene capacity additions amount to a 11 million tpy. “Increased ethane use in North America will mark the return of that region as a highly competitive ethylene derivatives producer and exporter,” said Vivek Mathur of ESAI Energy.

By 2023, North American exports of key ethylene derivatives could grow to over 10 million tpy, which would double today’s levels. Exports will target not only Latin America but also Europe and Asia, competing directly with Middle Eastern exporters. “The increased substitution of naphtha by ethane, however, will also impact the supply of other petrochemical by-products”, said Mathur. “We are looking at lower production of relatively higher value petrochemicals like propylene and butadiene.”

Monetization of refinery based naphtha production may nonetheless increase via aromatics production, as in benzene, toluene, xylene (BTX) and other derivatives. Historically, naphtha has been primarily purposed for gasoline production and as petrochemical feedstock. While ethane from shale has marginalized the naphtha market in North America, naphtha provides highly integrated refinery/petrochemical facilities in Saudi Arabia with a more diversified portfolio of products when cracked as compared to natural gas/NGL feedstock based components, such as ethane. For example, on a percentage (by mass) basis, one unit of naphtha processed through a modern naphtha-based ethylene steam cracker yields 16 wt% propylene, whereas one unit of ethane processed through the seven world scale ethane-based ethylene steam crackers planned for the U.S. will only yield 3 wt% propylene.

According to a study completed in August by Ankur Gupta, Head Marketing & Communications at Ken Research Private Limited, “Saudi Arabia Naphtha Market Outlook to 2018,”It is analyzed that Middle East countries are concentrating their efforts to produce more naphtha from refining and utilize it in their petrochemical complexes.” Gupta also noted that the Saudi Arabia General Investmet Authority (SAGIA) is strongly encouraging the use of naphtha for petrochemical production. “The Saudi Arabia naphtha market is predicted to pace up in the forthcoming years,” said Gupta.

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