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© 2016 IHS Markit. All Rights Reserved. © 2016 IHS Markit. All Rights Reserved.
Direct Oil and Gas to Ethylene - The Search for the Holy Grail -
MERTC Annual Meeting, January 2017, Manama, Bahrain
Dr. Richard Charlesworth
Managing Director, Middle East
© 2016 IHS Markit
Acknowledgment
2
King Arthur:
Go and tell your master that we have been charged by God with a sacred quest.
If he can provide us food and shelter for the night he can join us on the quest for the Holy Grail.
French Soldier:
Well, I'll ask him, but I don't think he'd be very keen. He's already got one you see!
© 2016 IHS Markit
Agenda
3
• Ethylene market trends
• Why are direct routes relevant?
• Who are using direct routes?
• What are the difficulties?
• Are direct routes competitive?
• Conclusions
© 2016 IHS Markit
Agenda
4
• Ethylene market trends
• Why are direct routes relevant?
• Difficulties, incentives and players?
• Are direct routes competitive?
• Conclusions
© 2016 IHS Markit
The market for ethylene is expected to grow at above GDP levels driven by polyethylene
5
HDPE 29%
LDPE 14%
LLDPE 19%
Ethylene Oxide 15%
Vinyls 9%
Styrenics 6%
Alpha Olefins
3% VAM 1%
Other 4%
Demand = 146.5 million metric tons
Uses of Ethylene 2016
© 2016 IHS Markit
The global feedstock mix has become lighter but is still dominated by naphtha cracking
6
Ethane 36%
Propane 9%
Butane 6%
Naphtha 43%
Gasoil 3% MTO
1%
CTO 1%
Other 1%
Production = 146.4 million metric tons
Sources of Ethylene, 2016
© 2016 IHS Markit
However world ethylene supply growth is expected to be dominated by North American ethane
7
-2-101234567
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Naphtha+ LPG Ethane Methanol Coal Other
World Ethylene Supply Growth
Mill
ion
Met
ric T
ons
© 2016 IHS Markit
Nevertheless liquids cracking is needed to fill the C3/4/6 supply gap
8
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Ethane Propane n-Butane Pentane
LP Hydrogen Methane Ethylene Propylene C4 Pyrolysis Gasoline Fuel Oil
© 2016 IHS Markit
Agenda
9
• Ethylene market trends
• Why are direct routes relevant?
• Difficulties, incentives and players?
• Are direct routes competitive?
• Conclusions
© 2016 IHS Markit
Since 2010, the Gas-to-Crude ratio favours N. America gas investments and therefore direct methane-to-olefins
0%
20%
40%
60%
80%
100%
120%
0.0
3.0
6.0
9.0
12.0
15.0
18.0
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
Crude (WTI) Natural Gas Gas-to-Crude Ratio
USGC Natural Gas Versus WTI Crude Oil Pricing (US$ / MM BTU)
Source: IHS
Gas
-to-C
rude
10
© 2016 IHS Markit
In the Middle East, feedstock availability drives petrochemical industry evolution, not the market
11
C1/C2 based feedstock Projects
Downstream Industry Development?
Mixed feedstock C1/C2/C3/C4/ Light Naphtha based Projects
Projects with Specialty /Differentiated Products
Refinery/ Petchem Integrated Naphtha Based (non-discounted) projects
Key Objectives: Monetize Gas, Diversify Local Economies, Downstream Industry and Job Creation
Direct Oil to Chemicals
© 2016 IHS Markit
Propylene
Energy at the extremes has catalyzed a “New Era” in light olefins production
12
• Light olefins supply based on refinery & naphtha cracker integrated sites in past.
• Ethane crackers emerged where ethane was advantaged.
• Propylene was a byproduct of refining and heavy or flexible steam cracking.
• Light olefins can now be made on purpose via a variety of technologies beyond refining and steam cracking: PDH, CTO/P, MTO/P, Metathesis, GTO/P, OCM(methane).
• A high crude oil prices in the long term will enable more on-purpose, leaving C4= & higher hydrocarbons with future supply issues
Ethylene CTO = Coal to Olefins MTO = Methanol to Olefins GTO = Natural gas to Olefins OCM = Oxidative Coupling of methane to ethylene
PDH = Propane Dehydro CTP = Coal to Propylene MTP = Methanol to Propylene GTP = Natural gas to Propylene
© 2016 IHS Markit
Agenda
13
• Ethylene market trends
• Why are direct routes relevant?
• Difficulties, incentives and players?
• Are direct routes competitive?
• Conclusions
© 2016 IHS Markit
Why hasn’t crude oil been steam cracked in the past?
14
• Residual content of crude oil will quickly
coke up in furnace radiant tubes.
• Crude consists of many fractions, there is no one “optimal set of conditions”
• Optimum steam-cracking temperature changes with feedstock composition (800–850°C, higher temperatures for lighter feed).
• Optimum dilution steam to oil ratio also changes with feedstock composition (0.3–0.5, higher ratio for heavier feed).
© 2016 IHS Markit
Why would anyone want to steam crack whole crude oil rather than refined oil products? • By-passing refinery saves US$5–10/barrel processing costs and saves 5–14 days
processing time in refinery.
15
LPG Fuel Oil
LPG Ethylene
Crude Oil CRUDE OIL REFINERY Naphtha STEAM CRACKER PropyleneGas Oil C4/Pygas
Fuel Oil
Gasoline DieselJet/Kerosene
B,S & W*
PRE-TREAT Crude Oil Refinery By-Pass *BS&W: Bottoms, solids, and water
© 2016 IHS Markit
Three companies have announced crude oil steam-cracking programs
16
• ExxonMobil has been reported to be
cracking crude oil at its Singapore complex since January 2014.
• Saudi Aramco announced an operational demo plant.
• SABIC suggested a “Crude Oil to Chemicals” project for Yanbu (KSA).
• Aramco and SABIC announced a JV in 2016.
ExxonMobil Steam Cracker in Singapore
© 2016 IHS Markit
ExxonMobil’s approach to steam cracking crude oil
17
• Preheat crude oil (Tapis Light) in cracker furnace convection section.
• Partially vaporize heated crude in flash pot outside furnace.
• Flash pot overhead vapor (76%) fed to cracker furnace radiant coils.
• Dispose of 24% flash pot bottoms liquid (resid) which is not suitable for steam cracking in refinery.
© 2016 IHS Markit
ARAMCO’s approach has significantly different yield than conventional cracking
18
• ARAMCO crude oil-to-ethylene process
integrates hydrocracking, FCC and steam cracking processes.
• ARAMCO proprietary high-severity FCC makes 20% propylene + FCC naphtha.
• FCC naphtha is not suitable for steam-cracker feed unless hydrogenated.
• CAPEX is 40% higher than conventional steam cracking due to Hydrocracker/FCC.
• Feed rate 80,000 barrels per day of Dubai crude to make 935 thousand tons per year of ethylene (0.93 stream factor)
ARAMCO USPA 2013/248419
© 2016 IHS Markit
Siluria has a demonstration OCM plant
19
• Oxidative coupling of methane (OCM) into
ethylene truly is a Holy Grail
• Methane is a cheaper and more plentiful raw material than ethane
• There would be the considerable energy savings over ethane steam cracking because methane conversion would be exothermic
• Siluria has taken OCM further than any of its predecessors • Lower reaction temperatures
• Substantially higher pressures
• Catalyst lifetimes measurable in years rather than months
© 2016 IHS Markit
Agenda
20
• Ethylene market trends
• Why are direct routes relevant?
• Difficulties, incentives and players?
• Are direct routes competitive?
• Conclusions
© 2016 IHS Markit
Design basis for ExxonMobil economic evaluation
21
• 1.0 million tons per year ethylene
production from Tapis Light 43 °API crude oil
• AACE Class-3 process design
• PFDs, stream-by-stream MatBal, equipment list with duty specs, itemized and fully loaded CAPEX estimate (+/- 25%).
• Yields simulated using commercial cracking simulation software
• Singapore project site location
• IHS PEP report #29J (by Mike Arne).
© 2016 IHS Markit
0102030405060708090
100
ExxonMobil Wide RangeNaphtha
% m
ass
yiel
d Fuel Oil
Pygas
C4 Fraction
Propylene
Ethylene
Methane
Hydrogen
Yield comparison with naphtha steam cracking shows some differences
22
• ExxonMobil’s process produces a little
more ethylene, and a lot more fuel oil.
• Wide-range naphtha produces more propylene, C4 fraction, and pygas
© 2016 IHS Markit
ExxonMobil approach has advantages versus naphtha steam cracking
23
• Assuming a Brent Oil price of $50/bbl, the
high level parameters are:
0100200300400500600700800900
1000
ExxonMobil Wide Range Naphtha
$US/m
etric
ton
Net raw materials UtilitiesPlant operating costs DepreciationCorporate SG&A
C2= $789 FOB S’pore
© 2016 IHS Markit
Strategic implications for considering ExxonMobil’s process
24
• Makes economic sense where the naphtha
price is significantly greater than the price of whole crude oil
• Makes economic sense when selecting a light crude oil with low resid content
• Likely to replace conventional naphtha steam cracking where lower-cost NGL feedstocks (ethane, propane) are not available
• Disposition and value of flash pot bottoms are an important economic consideration
© 2016 IHS Markit
Design basis for Aramco economic evaluation
25
• 935 KTPA tons per year ethylene
production from Dubai crude oil.
• AACE Class-3 process design.
• PFDs, stream-by-stream MatBal, equipment list with duty specs, itemized and fully loaded CAPEX estimate (+/- 25%).
• Yields simulated using commercial cracking simulation software.
• Kingdom Saudi Arabia (KSA) project site location
• IHS PEP report #29J by Mike Arne.
© 2016 IHS Markit
Yield comparison with naphtha steam cracking is significantly different
26
• ARAMCO process produces 13% more
pygas + fuel oil.
• Traditional naphtha steam cracking produces 3% more ethylene + propylene.
• ARAMCO produces much more hydrogen
0
20
40
60
80
100
120
ARAMCO Wide RangeNaphtha
% m
ass
yiel
d
Fuel Oil
Pygas
C4 Fraction
Propylene
Ethylene
Methane
Hydrogen
© 2016 IHS Markit
Aramco approach has advantages versus naphtha steam cracking
27
• Assuming a Brent Oil price of $50/bbl, the
high level parameters are:
0100200300400500600700800900
1000
ARAMCO Wide Range Naphtha
$US/m
etric
ton
Net raw materials UtilitiesPlant operating costs DepreciationCorporate SG&A
ARAMCO Wide Range
NaphthaCapex ($US billions) 3.062 2.177
Feedstock Consumption (mt/mt C2=)
4.248 3.487
Feedstock Price ($US/mt) 331 429
© 2016 IHS Markit
Strategic implications for considering ARAMCO’s process
28
• Production cost is higher than
ExxonMobil’s process at Singapore, but slightly below conventional naphtha steam cracking.
• ROI for US$1 billion of additional CAPEX in hydrocracker + high-severity FCC is questionable.
• It is probably a better idea to place HK bottoms into an existing FCC, given its low flow rate (12,000 barrels per day).
• Economic viability in KSA depends upon availability and price of historically much-lower-cost NGL feedstock.
© 2016 IHS Markit
Design basis for Siluria economic evaluation
29
• 1 MMTPA tons per year ethylene
production from Natural gas.
• AACE Class-3 process design.
• PFDs, stream-by-stream MatBal, equipment list with duty specs, itemized and fully loaded CAPEX estimate (+/- 25%).
• Yields simulated using commercial cracking simulation software.
• USGC project site location
• IHS PEP report 2014-07 by Sumod Kalakkunnath.
© 2016 IHS Markit
Siluria comparison with ethane steam cracking is slightly different
30
• xxx
© 2016 IHS Markit
Strategic implications for considering Siluria’s process
32
• CAPEX, omitting the air separation unit
(ASU), is similar to an ethane cracker so is competitive in a low gas price environment
• Oxygen can be supplied via third party provider however it makes more economic sense to have ASU co-located
• With co-located ASU, production costs are similar to ethane cracking at equivalent capacity.
© 2016 IHS Markit
The global ethylene cost curve flattens as crude declines
33
MDE NAM
NEA
SEA
WEP
0 20 40 60 80 100 120 140 160
World Cost Curve: Ethylene World Cost Curve: Ethylene
Cumulative Production - Million Metric Tons
World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene
2015
Brent Crude 2014 = 99.4 $/bbl 2015 = 52.3 $/bbl 2014
© 2016 IHS Markit
The three technologies are competitive on the global production cash cost curve
34
0 20 40 60 80 100 120 140 160
World Cost Curve: Ethylene World Cost Curve: Ethylene
Cumulative Production - Million Metric Tons
World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene World Cost Curve: Ethylene
2015
Brent Crude 2015 = 52.3 $/bbl
Naphtha Singapore
Aramco Crude Saudi
Exxon Crude Singapore
Siluria OCM USGC
© 2016 IHS Markit
Agenda
35
• Ethylene market trends
• Why are direct routes relevant?
• Difficulties, incentives and players?
• Are direct routes competitive?
• Conclusions
© 2016 IHS Markit
Conclusions
36
• Direct routes through crude oil cracking
and oxidative coupling of methane to ethylene offer a holy grail to certain regions
• Both ExxonMobil and ARAMCO costs are below naphtha cracking
• ARAMCO’s depreciation cost (representing CAPEX) is significantly higher than ExxonMobil or naphtha steam cracking
• Naphtha crackers still required for ethylene and co-products which will drive ethylene prices
© 2016 IHS Markit © 2016 IHS Markit. All Rights Reserved.
Direct Oil and Gas to Ethylene - The Search for the Holy Grail - MERTC Annual Meeting, January 2017, Manama, Bahrain
Dr. Richard Charlesworth
Managing Director, Middle East