A door opens: surplus ethylene to gasoline

MOSCOW (MRC) -- As the US has sought to exploit its hydrocarbon resources over the last decade, natural gas prices - which were once close to parity with oil prices in the early 2000s - have since diverged from oil prices. This shift evolved through the direct production of natural gas as well as gas production associated with oil development. The dynamic has transformed North America into a prolific producer of natural gas liquids (NGLs), the feedstocks used in the production of petrochemicals, according to Chemweek.

Given the plentiful supplies of these feedstocks and their inherent advantage relative to oil-based feeds, massive investment in grassroots petrochemical capacity—namely complexes dedicated to the production of ethylene -occurred to monetize the gas-linked feedstocks. In the past five years, nearly 7 million metric tons (MMt) of ethylene capacity were added in North America.

This capacity addition is considered unprecedented, given that North American chemical producers took about 20 years to reach an almost equivalent amount of new builds. Between 2019 and 2022, more than 6 MMt of ethylene capacity is expected to come onstream. An additional 13 MMt of capacity additions have either been announced or are under feasibility studies. While IHS Markit does not believe all this announced capacity will come to fruition, much of it likely will be added and will require a commensurate response on the demand side.

Ethylene demand has indeed been growing strongly as a result of the numerous new integrated ethylene derivative and standalone projects - mainly polyethylene (PE) and ethylene glycol (EG) targeting the export market - and derivative exports from the US have grown. Yet ethylene molecule exports became a hot topic as the substantial increase in ethylene supply in the US as well as a structural shortfall in other regions made the molecule shipments economically viable. Enterprise Products’s 1-million metric tons/year terminal project, which commenced construction in 2018, loaded its first cargo in December 2019.

In contrast to the accelerated project executions in both ethylene and ethylene derivatives, the overall demand growth for derivatives is moving slowly this year, a pattern driven by a cyclical slowdown in the global economy combined with prolonged US-China trade tension. These headwinds have inevitably had a negative impact on projects geared towards export markets, particularly those destined for China. Considering this reality, there is an open question on how hard those ethylene derivative projects can operate in the near term to avoid creating an oversupply scenario. The market is now casting increasing anxiety on the potential cycle of surplus.

Ethylene, often referred to as one of the key building blocks of petrochemical value chains, is typically converted to chemical derivatives such as polyethylene (PE), ethylene oxide (EO), styrene, ethylene dichloride (EDC), and others. Many of these derivatives will be eventually converted into plastics.

On top of those conventional outlets, we now have a new home for ethylene, ethylene to alkylate, a gasoline blendstock. In recent weeks, two separate announcements were made by an investor/operator and an engineering, procurement, and construction firm, discussing a new US Gulf coast project to produce alkylate from ethylene. Although neither announcement commented about the other, IHS Markit speculates that these two announcements are linked to the same project.

The positive final investment decision made by Next Wave Energy Partners pointed out that this complex is anticipated to begin initial production by mid-2022, consuming over 1.2 billion pounds of ethylene/year (515,000 metric tons/year). The expected structure of the project includes one dimerization unit to convert ethylene to butylenes and an alkylation unit that routes produced butylenes (C4) to make alkylate. From a technical standpoint, neither the involved ethylene dimerization nor the C4 alkylation process are novel technologies. However, it is certainly a unique approach that may become a new way to consume ethylene, diverting from traditional chemical use to fuel demand.

Refiners are being pressed to seek new strategies or sources to yield high-octane, clean alkylate products from diverse mandates and trends, including:

- Rising demand in cleaner-burning gasoline required by high-performance engines
- The looming International Marine Organization specification change that mandates a reduction in bunker fuel sulfur content to 0.5%
- The expiration of certain provisions pertaining to Tier 3 gasoline regulations in the US
- The on-purpose alkylation technology utilizing pure feedstock of ethylene, derived from NGL feedstocks, provides a solution that produces clean, high-quality alkylate product amidst a tight alkylate market.

The project is quoted at about 515,000 metric tons/year of ethylene consumption and 28,000 b/d of alkylate production at a cost just north of USD600 million. We queried our technical and analytics group at the Process Economic Program to assess the economic outlook. From the point of a pure merchant buyer of ethylene priced at market price, the economics look good in the near term but a bit challenging in the outer years. (Calculation on this route is based on IHS Markit US ethylene average acquisition index.)

In a second scenario, we calculated the project using ethylene priced at cash cost based on ethane feed. The ROI metrics look much better overall from a long-term perspective and compete very well versus the other key ethylene derivative, PE, for the export market. Thus, the ethane-to-alkylate chain makes a lot of economic sense in the longer run.
Both routes to alkylates, whether on merchant ethylene or priced at cost, yield a positive process scheme in the short term from today to 2026, with the excess ethylene capacity and traditional derivatives coming onstream. A player long in ethylene that blends gasoline could be a likely supplier or offtaker in an investment of this nature.

It is unknown whether this new ethylene demand will lead to continued investment in ethylene-derived gasoline blendstock or if it is just one-time occurrence. However, it is clear is that the surplus of ethylene production paved the way for a new source of demand.

As MRC informed previously, SP Olefins, a subsidiary of SP Chemicals, has recently started up China's "first" gas-based ethylene plant at a new gas cracker facility in Taixing, China, and was able to produce on-spec olefins, according to Wood Mackenzie. The new 650,000 t/y ethylene cracker will provide feedstock to the plant's 500,000 t/y vinyl chloride monomer unit and 320,000 t/y styrene facility. About 300,000 t/y of ethylene, as well as the entire 122,000 t/y of propylene production, will be supplied to the merchant market. SP Olefins' gas cracker facility is also the "first" to import US ethane as a feedstock, Wood Mackenzie noted.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- Albemarle Corporation announced its results for the fourth quarter and full year 2019. The company’s net sales in fourth quarter increased 8% to USD993 million with an adjusted EBITDA of USD295 million increasing 12%, reported Kemicalinfo.

Its full year net sales increased 6% to USD3.6 billion with an adjusted EBITDA of USD1.04 billion increasing 3%.

Net sales in the Lithium business were USD411 million, up roughly 20% prior-year quarter. Net sales grew because of favorable volume of 27%, largely in battery-grade lithium hydroxide.

Net sales in the Catalysts business were USD282.5 million, down roughly 7% prior-year quarter. Fall in sales of Clean Fuel Technology, or HPC, and Fluid Catalytic Cracking (FCC) Catalysts due to delays in the start-up of new FCC units, partially offset by favorable price impacts and product mix caused the decline.

Net sales in the Bromine Specialties business were USD243.5 million, up roughly 2% prior-year quarter. Net sales increased due to favorable price impacts and product mix of 3%.

"Our ability to integrate, execute and adapt to market conditions contributed to our strong growth and notable achievements this year," said CEO Luke Kissam. "In 2019, we saw solid performances across our portfolio and expanded our market-leading position in Lithium with additional high-quality resources and greater nameplate conversion capacity."

Albemarle anticipates its 2020 performance to be lower year-over-year based on expected lower results from Lithium and flat-to-slightly lower results from Bromine Specialties, partially offset by flat to slightly higher results from Catalysts.

As MRC wrote before, in April 2018, W. R. Grace & Co. completed the USD416 million acquisition of the Polyolefin Catalysts business of Albemarle Corporation. The acquired business primarily develops and manufactures proprietary and custom-manufactured single-site catalysts as well as metallocenes and activators used in the production of plastic resins. The transaction also includes a comprehensive series of highly optimized Ziegler-Natta catalysts for polyethylene production. The acquisition includes production plants in Baton Rouge, LA and Yeosu, South Korea; R&D and pilot plant capabilities; and an extensive portfolio of intellectual property.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- Oil and gas producer Kosmos Energy, which plans to produce at least 62,000 barrels of oil equivalent per day this year, aims to make its operations carbon neutral by 2030, said Hydrocarbonprocessing.

To achieve its target, Kosmos plans to increase the weighting of gas in its portfolio, improve the carbon footprint of its operations and invest in so-called nature-based solutions such as wetlands restoration and reforestation projects.

Kosmos Energy said its next steps would include developing a target for so-called Scope 3 emissions, meaning greenhouse gases emitted from the end-use of its products, for example diesel or petrol in a passenger car.

Some integrated oil companies such as BP and Repsol , which have refining and marketing units, have Scope 3 targets already. However, Kosmos would be among the first pure oil and gas producers to develop a such a goal.

Mediterranean-focused oil and gas producer Energean has committed to reducing its net carbon emissions to zero by 2050.

Kosmos, which has specialised in exploring for new barrels, also said it would “not seek access to new frontier oil basins”.

The company posted a loss of $36.6 million for the fourth quarter earlier on Monday, and said its Chief Financial Officer Thomas Chambers would retire in May.

Kosmos shares were down 15% in London by 1545 GMT, tracking a 5% drop in Brent crude oil.

As MRC informed earlier, Oil prices fell around 1%, pressured by growing worries about fuel demand as a coronavirus epidemic spread further beyond China, and as major crude producers appeared to be in no rush to cut output to buttress the market. Brent crude was down 64 cents, or 1.1%, at USD58.67 a barrel by 0703 GMT, while U.S. crude dropped 54 cents, or 1%, at USD53.34 a barrel.

As MRC infomed earlier, the price of Brent crude oil, the international benchmark, averaged USD64 per barrel (b) in 2019, USD7/b lower than its 2018 average. The price of West Texas Intermediate (WTI) crude oil, the U.S. benchmark, averaged USD57/b in 2019, USD7/b lower than in 2018.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- ExxonMobil announced that ExxonMobil Catalysts and Licensing LLC has launched its ExxonMobil Catalysts and Licensing introduces InFocus Online Platformto help customers optimize plant performance, increase operational efficiency and minimize production interruptions, said Chemicals-technology.

Users can now use secure, near-real-time data to make faster, more informed decisions and collaborate more easily with ExxonMobil technical support. The platform has been tested and piloted with early adopters and has already been fully deployed in multiple facilities.

"Our customers are under increasing pressure to improve profitability and be more efficient,” said Dan Moore, president of ExxonMobil Catalysts and Licensing. “Our InFocus Platform will provide deeper insight into their operations and will enable concrete recommendations on ways to optimize plant performance and minimize interruptions. The platform’s common data view enhances collaboration between the operator and ExxonMobil experts. Access to technical expertise and trusted advice defines our customer experience. This technology enhances this value and we are excited to get it into our customers’ hands."

Leveraging more than a century of experience in refinery and chemical plant leadership, the cloud-based InFocus Platform currently provides two solutions.

The predictive tool enables users to quickly and cost effectively test the impact of feedstock and operational changes on lube product yields and quality. Developed from years of ExxonMobil expertise and experience, the tool can also be tuned to match actual unit performance, delivering valuable data enabling users to evaluate feed flexibility, optimize product mix and maximize operational value.

The InFocus online lube optimization model includes lube hydrocracker (LHDC) and MSDW™ dewaxing technology modules, which can be run independently or linked. Each module predicts process performance, product yields and qualities based on key operating variables such as average reactor temperature, space velocity, pressure, product fractionation cut point and separation efficiency.

The InFocus unit monitoring tool enables timely technical insights to improve process performance. Drawing on ExxonMobil’s breadth of technical and operational experience, the monitoring tool provides users with easier access to ExxonMobil expertise, early identification of potential operational concerns and more meaningful analysis.

As MRC informed before, in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world's oil and about 2% of the world's energy.
MRC

MOSCOW (MRC) -- Exxon Mobil Corp plans to restart the large crude distillation unit (CDU) and a coker this week at its 502,500 barrel-per-day (bpd) Baton Rouge, Louisiana, refinery this week, sources familiar with plant operations said, said Reuters.

The 240,000 bpd PSLA 10 CDU and the 50,000 bpd coker were shut on Feb. 12 following a natural gas pipeline fire that idled most of the production units at the refinery, the sources said.

Exxon spokesman Jeremy Eikenberry said on Monday operations were continuing at the Baton Rouge refinery and adjoining chemical plant. He declined to discuss the status of individual units.

PSLA 10 and the coker could restart as early as the middle of this week, if all goes as planned, the sources said. Three of the four CDUs at the refinery were shut by the fire. The pipeline that caught on fire supplies natural gas that fuels boilers on the units, the sources said.

The CDUs do the primary breakdown of crude oil into the hydrocarbon feedstocks, from which motor fuels like gasoline and diesel and plastics are made in other production units at the refinery. Restarting PSLA 10 has been a top goal with for Exxon since the fire, the sources said. Restart efforts depend on restoring the natural gas feed to the unit.

Returning the refinery to production is expected to take at least a month from the date of the fire, sources have said.

The coker converts residual crude oil from distillation units into feedstock for motor fuels or petroleum coke, a coal substitute.

As MRC informed before, in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world's oil and about 2% of the world's energy.
MRC