The increasing use of cheaper natural gas as a feedstock by petrochemical producers means that less propylene is being produced as a co-product by the region’s steam crackers. This is driving greater global demand for on-purpose production of propylene, a key chemical building block second in demand only to ethylene, says a new IHS study.
“The increasing need for on-purpose production of propylene is primarily being driven by two factors: first, the changing feedslates in North American petrochemical production, which are getting lighter due to more ethane being used versus naphtha; and second, the decline in North American gasoline demand as automobile CAFÉ standards are implemented,” said Chuck Carr, senior director, global olefins at IHS Chemical and principal author of the IHS study.
Ethane is a cheaper feedstock than naphtha, but it produces minimal amounts of propylene as a co-product, Carr adds.
In 2003, less than three per cent of global propylene production — just 2 million metric tons (MMT), was considered on-purpose production, but according to the IHS Chemical North American Propylene Supply Study, in 2013, that number had increased to nearly 12 MMT or 12 percent of global production. By 2023, IHS says, nearly 30 per cent, or approximately 38 MMT of global propylene supply, will be on-purpose production.
In 2013, North America produced slightly more than 20 MMT of propylene (including fuels). By 2023, IHS expects North American demand for propylene into chemicals to exceed 20 MMT, and the region is expected to produce approximately 15 percent of global supply. Of that production, Carr expects 5 MMT will be on-purpose production from North America. Just four per cent of the region’s current propylene production, he said, is on-purpose production derived from technologies such as metathesis and propane dehydration.
According to the IHS report, current global propylene demand is approximately 90 MMT, and is expected to increase to 130 MMT by 2023. Propylene is produced from naphtha, natural gas liquids in refinery units, and to a much smaller extent, coal, and is essential for the production of polypropylene plastics such as films and packaging, and a wide variety of other uses. Polypropylene accounts for 67 per cent of total demand. Propylene is mainly produced as a co-product in steam crackers and a by-product in refineries. The second largest source of propylene supply has been production of refinery grade material in fluid catalytic cracking units and other refinery units.
“The source of propylene supply varies significantly by region, and North America is unique compared to the rest of the world,” Carr said. “Forty-eight per cent of the world’s production comes from steam crackers, but in North America, the majority of propylene, or 70 per cent of production, is produced by refineries. Just 26 per cent of North American production is derived from steam crackers because of their shale gas-based natural gas liquid feedstocks.”
In terms of North American propylene production, 5 MMT is consumed for fuels, while the remaining nearly 16 MMT are consumed to produce chemical derivatives. More than 60 per cent of region’s production is produced and consumed in the Texas Gulf Coast. Other Gulf Coast regions, including East Texas, Louisiana and Mississippi, account for nearly 20 per cent of the region’s additional propylene production.