Alberta Propylene Upgrade Prospects

ALBERTA PROPYLENE UPGRADING PROSPECTS

prepared for ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT

by T. J. MCCANN AND ASSOCIATES LTD. in conjunction with SIGURDSON & ASSOCIATES MARCH 2000

TABLE OF CONTENTS PAGE GLOSSARY ................................................................................................................................................................................... vii DISCLAIMER...............................................................................................................................................................................viii 1.0

EXECUTIVE SUMMARY............................................................................................................................................... 9

2.0

INTRODUCTION .......................................................................................................................................................... 11 2.1 2.2 2.3

3.0

BYPRODUCT PROPYLENE ........................................................................................................................................ 12 3.1

3.2

4.0

Availability ..................................................................................................................................................... 12 3.1.1 Overall............................................................................................................................................. 12 3.1.2 Incremental Propylene from Ethylene Production........................................................................... 14 3.1.3 Lack of Flexibility ........................................................................................................................... 14 Byproduct Propylene Processing..................................................................................................................... 14 3.2.1 Preamble.......................................................................................................................................... 14 3.2.2 Feedstock Handling......................................................................................................................... 15 3.2.3 Product Propylene Qualities ............................................................................................................ 16 3.2.4 Byproduct Processing...................................................................................................................... 17 3.2.5 Excess Product Sales ....................................................................................................................... 17 3.2.6 Byproduct Propylene Valuation ...................................................................................................... 18

PROPYLENE FROM PROPANE .................................................................................................................................. 20 4.1 4.2 4.3 4.4 4.5 4.6 4.7

5.0

Terms of Reference ......................................................................................................................................... 11 General Bases.................................................................................................................................................. 11 Propylene Only ............................................................................................................................................... 11

Preamble ......................................................................................................................................................... 20 Technology...................................................................................................................................................... 20 Integration Potential ........................................................................................................................................ 21 Hydrogen Use ................................................................................................................................................. 22 Propylene Handling......................................................................................................................................... 22 Production Cost............................................................................................................................................... 22 Propane from Propylene Cost.......................................................................................................................... 24

PROPYLENE CHEMICAL OPPORTUNITIES IN ALBERTA.................................................................................... 26 5.1 5.2

5.3

5.4

5.5

Propylene Derivatives in an Alberta Context .................................................................................................. 26 Polypropylene (PP) ......................................................................................................................................... 26 5.2.1 North American Market for Polypropylene (PP)............................................................................. 26 5.2.2 Major Producers of Polypropylene (PP).......................................................................................... 27 5.2.3 Production Technology for Polypropylene (PP).............................................................................. 27 5.2.4 Technical Business Trends in Polypropylene (PP) .......................................................................... 28 5.2.5 Potential for Alberta ........................................................................................................................ 29 Acrylonitrile (ACN) ........................................................................................................................................ 29 5.3.1 North American Market for Acrylonitrile (ACN)............................................................................ 29 5.3.2 Major Producers of Acrylonitrile (ACN)......................................................................................... 30 5.3.3 Production Technology for Acrylonitrile (ACN) ............................................................................ 30 5.3.4 Technical Business Trends in Acrylonitrile (ACN)......................................................................... 31 5.3.5 Potential for Alberta for Acrylonitrile (ACN) ................................................................................. 31 Cumene and Phenol......................................................................................................................................... 32 5.4.1 North American Market for Phenol and Cumene ............................................................................ 32 5.4.2 Major Producers of Cumene and Phenol ......................................................................................... 32 5.4.3 Production Technology for Cumene and Phenol ............................................................................. 33 5.4.4 Technical Business Trends in Cumene and Phenol ......................................................................... 35 5.4.5 Potential for Alberta in Cumene and Phenol ................................................................................... 35 Propylene Oxide (PO) and Glycol................................................................................................................... 36 5.5.1 North American Market for Propylene Oxide (PO) and Glycol ...................................................... 36 5.5.2 Major Producers of Propylene Oxide (PO) and Glycols.................................................................. 37

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TABLE OF CONTENTS PAGE

5.6

5.7

5.8

5.9

5.10

5.11

5.12 6.0

5.5.3 Production Technology for Propylene Oxide (PO) and Glycol ....................................................... 37 5.5.4 Technical Business Trends in Propylene Oxide (PO) and Glycol ................................................... 40 5.5.5 Potential for Alberta with Propylene Oxide (PO) and Glycol ......................................................... 40 Propylene Ethers ............................................................................................................................................. 40 5.6.1 North American Market for Propylene Ethers................................................................................. 41 5.6.2 Major Producers of Propylene Ethers.............................................................................................. 41 5.6.3 Production Technology for Propylene Glycol Ethers ...................................................................... 41 5.6.4 Technical Business Trends in Propylene Glycol Ethers .................................................................. 42 5.6.5 Potential for Alberta with Propylene Glycol Ethers ........................................................................ 42 n-Butanol......................................................................................................................................................... 42 5.7.1 North American Market for n-Butanol ............................................................................................ 42 5.7.2 Major Producers of n-Butanol ......................................................................................................... 42 5.7.3 Production Technology for B-butanol ............................................................................................. 43 5.7.4 Technical Business Trends in n-Butanol ......................................................................................... 44 5.7.5 Potential for Alberta for n-Butanol.................................................................................................. 44 Acrylic Acid (AA)........................................................................................................................................... 44 5.8.1 North American Market for Acrylic Acid (AA) .............................................................................. 44 5.8.2 Major Producers of Acrylic Acid (AA) ........................................................................................... 45 5.8.3 Production Technology for Acrylic Acid (AA) ............................................................................... 45 5.8.4 Technical Business Trends in Acrylic Acid (AA) ........................................................................... 46 5.8.5 Potential in Alberta for Acrylic Acid (AA) ..................................................................................... 46 Isopropanol/Acetone ....................................................................................................................................... 46 5.9.1 North American Market for Isopropanol/Acetone........................................................................... 46 5.9.2 Major Producers of Isopropanol/Acetone........................................................................................ 47 5.9.3 Isopropanol Production ................................................................................................................... 47 5.9.4 Technical Business Trends in Isopropanol/Acetone........................................................................ 48 5.9.5 Potential for Alberta with Isopropanol/Acetone .............................................................................. 48 2-Ethyl Hexanol .............................................................................................................................................. 49 5.10.1 North American Market for 2-Ethyl Hexanol.................................................................................. 49 5.10.2 Major Producers of 2-Ethyl Hexanol............................................................................................... 49 5.10.3 Production Technology for 2-Ethyl Hexanol................................................................................... 49 5.10.4 Technical Business Trends in 2-Ethyl Hexanol............................................................................... 50 5.10.5 Potential for Alberta for 2-Ethyl Hexanol ....................................................................................... 50 Atactic Polypropylene (APP) .......................................................................................................................... 50 5.11.1 Production of Atactic Olefins .......................................................................................................... 50 5.11.2 Process Technology......................................................................................................................... 51 5.11.3 Markets and Outlook ....................................................................................................................... 51 5.11.4 Investment Potential ........................................................................................................................ 52 Ranking of Propylene Product Potential ......................................................................................................... 52

THREE PRODUCTS WITH POTENTIAL FOR ALBERTA ........................................................................................ 55 6.1 6.2

6.3

6.4

Chemicals Selected for Further Analysis ........................................................................................................ 55 Polypropylene (PP) ......................................................................................................................................... 55 6.2.1 Market Potential .............................................................................................................................. 55 6.2.2 Trade in Polypropylene (PP) ........................................................................................................... 56 6.2.3 Technology Shifts in Polypropylene (PP) Resins............................................................................ 57 6.2.4 Cost Competitiveness of Alberta in PP Resins ................................................................................ 58 6.2.5 Alberta Potential for Polypropylene (PP) Resins............................................................................. 59 Acrylonitrile (ACN) ........................................................................................................................................ 59 6.3.1 Market Potential for ACN ............................................................................................................... 59 6.3.2 Trade in Acrylonitrile (ACN) .......................................................................................................... 60 6.3.3 By Product Potential in Canada....................................................................................................... 61 6.3.4 Technology Shifts in ACN Production............................................................................................ 62 6.3.5 Cost Competitiveness of Alberta for ACN Production.................................................................... 62 6.3.6 Alberta Potential for Acrylonitrile (ACN)....................................................................................... 62 Acrylic Acid (AA) and Acrylates.................................................................................................................... 63 6.4.1 Acrylic Acid (AA)........................................................................................................................... 63 6.4.2 Market Potential for Acrylic Acid (AA).......................................................................................... 64

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6.5

7.0

6.4.3 Trade in Acrylic Acid (AA) and Acrylates...................................................................................... 65 6.4.4 Cost Competitiveness of Alberta for Acrylic Acid (AA) Production .............................................. 66 6.4.5 Alberta Potential for Acrylic Acid (AA) and Acrylates................................................................... 67 Phenol ............................................................................................................................................................. 67 6.5.1 Markets and Outlook for Phenol ..................................................................................................... 68 6.5.2 Producers of Phenol......................................................................................................................... 70 6.5.3 Process Technology for Phenol ....................................................................................................... 71 6.5.4 Investment Potential for Product ..................................................................................................... 71

CONCLUSIONS............................................................................................................................................................. 73 7.1 7.2 7.3

7.4 7.5

Byproduct Propylene Availability................................................................................................................... 73 Byproduct Propylene Processing..................................................................................................................... 73 Propylene from Propane.................................................................................................................................. 74 7.3.1 World Situation ............................................................................................................................... 74 7.3.2 Process for Comparison................................................................................................................... 74 7.3.3 Yields and Balances ........................................................................................................................ 75 7.3.4 Sizing .............................................................................................................................................. 75 7.3.5 Propylene Supply Cost .................................................................................................................... 75 7.3.5.1 Deliberate Propane to Propylene Base............................................................................. 75 7.3.5.2 Byproduct Propylene ....................................................................................................... 75 7.3.6 Key Selected Derivatives ................................................................................................................ 76 7.3.7 Companies....................................................................................................................................... 76 Summary ......................................................................................................................................................... 77 Recommendations ........................................................................................................................................... 77 7.5.1 Byproduct Propylene Aggregation .................................................................................................. 77 7.5.2 Other Feedstocks ............................................................................................................................. 77 7.5.3 Utilities For New Plants .................................................................................................................. 77 7.5.4 Company Attraction ........................................................................................................................ 77

REFERENCES ............................................................................................................................................................................... 79

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LIST OF TABLES PAGE Table 3.1.1-1. Estimated 2005 Propylene Availability .................................................................................................................. 13 Table 3.1.1-2. Current Propylene Uses .......................................................................................................................................... 13 Table 3.1.1-3. Changes at Principal Prospective Propylene Sources ............................................................................................. 14 Table 3.2.3-1. Partial Typical Propylene Specifications ................................................................................................................ 16 Table 4.6-1. Propane Dehydrogenation Capital Costs ................................................................................................................... 23 Table 4.6-2. Propane Dehydrogenation Operation Costs ............................................................................................................... 23 Table 4.6.3. Cost Summary............................................................................................................................................................ 23 Table 5.1-1. Propylene Derivatives Assessed in Study.................................................................................................................. 26 Table 5.1-2. Demand for First-step Derivatives of Propylene in North America........................................................................... 26 Table 5.2.1-1. Markets for Polypropylene in North America ........................................................................................................ 26 Table 5.2.2-1. North American Polypropylene Producers ............................................................................................................. 27 Table 5.2.3-1. Raw Materials and Utilities Consumption per 1,000-kg of PP ............................................................................... 28 Table 5.2.4-1. North American Polypropylene Capacity Expansions*.......................................................................................... 29 Table 5.3.1-1. Acrylonitrile Demand in North American .............................................................................................................. 30 Table 5.3.2-1. Major North American Producers of Acrylonitrile ................................................................................................. 30 Table 5.3.2-2. Material Consumptions per 1,000-kg of Acrylonitrile............................................................................................ 30 Table 5.4.1-1. Demand for Cumene............................................................................................................................................... 32 Table 5.4.1-2. North American Demand for Phenol, 1998 ............................................................................................................ 32 Table 5.4.2-1. Cumene Producers in North America ..................................................................................................................... 33 Table 5.4.2-2. Phenol Capacity in North America ......................................................................................................................... 33 Table 5.4.3-1. Input Consumption per 1,000-kg of Cumene.......................................................................................................... 34 Table 5.4.3-2. Input Consumption per 1,000-kg of Phenol............................................................................................................ 34 Table 5.4.4-1. Phenol Plant Expansions Planned in North America .............................................................................................. 35 Table 5.4.5-1. Canadian Imports of Phenol ................................................................................................................................... 35 Table 5.5.1-1. Propylene Oxide Markets in North America .......................................................................................................... 36 Table 5.5.1-2. Propylene Glycol Markets in North America ......................................................................................................... 36 Table 5.5.1-3. Dipropylene Glycol Markets in North America...................................................................................................... 37 Table 5.5.2-1. Propylene Oxide Producers in North America........................................................................................................ 37 Table 5.5.2-2. Propylene Glycol Producers in North America ...................................................................................................... 37 Table 5.5.3-1. Consumptions per 1,000-kg of Propylene Oxide .................................................................................................... 38 Table 5.5.3-2. Raw Materials Inputs per 1,000-kg of PO with Peroxidation ................................................................................. 38 Table 5.5.3-3. Major Inputs per 1,000-kg of Mono Propylene Glycol........................................................................................... 39 Table 5.5.1-1. Canadian Imports of PO and PG............................................................................................................................. 40 Table 5.6.2-1. P&E-type Ether Solvent Capacity .......................................................................................................................... 41 Table 5.7.2-1. Major Producers of n-Butanol in North America.................................................................................................... 42 Table 5.7.3-3. Raw Materials Inputs per 1,000-kg of Butanol from Syngas.................................................................................. 43 Table 5.8-1. Acrylic Acid Demand in North American ................................................................................................................. 45 Table 5.8.2-1. Major Producers of Acrylic Acid............................................................................................................................ 45 Table 5.8.3-1. Input Consumptions per 1,000-kg of Acrylic Acid................................................................................................. 45 Table 5.8.5-1. Acrylic Acid and Ester Imports to Canada ............................................................................................................. 46 Table 5.9.1-1. Isopropyl Demand in North American.................................................................................................................... 46 Table 5.9.1-2. Acetone Demand in North American...................................................................................................................... 47 Table 5.9.2-1. Isopropanol Producers in North America ............................................................................................................... 47 Table 5.9.2-2. Acetone Producers in North America ..................................................................................................................... 47 Table 5.9.3-1. Balance for 1,000-kg of IPA................................................................................................................................... 48 Table 5.10.1-1. 2-Ethyl Hexanol Demand in North American ...................................................................................................... 49 Table 5.10.2-1. 2-Ethyl Hexanol Producers in North America ...................................................................................................... 49 Table 5.10.3-1. Raw Materials Inputs per 1,000-kg of 2-Ethyl Hexanol by Hydrogenation.......................................................... 49 Table 5.11.1-1. Producers of Atactic Olefin Resins....................................................................................................................... 50 Table 5.11.3-1. Estimated Market Segmentation for Atactic Polypropylene ................................................................................. 51 Table 5.11.3-2. Hot Melt Adhesive Use of Atactic Polypropylene................................................................................................ 51 Table 5.11.3-3. Some Major and Potential Users of Atactic Polypropylene.................................................................................. 52 Table 5.12-1. Typical Propylene Grade Requirements .................................................................................................................. 53 Table 5.12-2. Ranking of Propylene Opportunities in Alberta....................................................................................................... 53 Table 6.2-1. Polypropylene Plant Overview .................................................................................................................................. 55 Table 6.2.1-1. Growth Outlook for PP Resins in North America................................................................................................... 55 Table 6.2.1-2. Global PP Market Segmentation............................................................................................................................. 56 Table 6.2.1-3. Asia-Pacific PP Capacity by Country ..................................................................................................................... 56 Table 6.2.2-1. U.S. Exports of Polypropylene ............................................................................................................................... 56

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LIST OF TABLES PAGE Table 6.2.2-2. Canadian Polypropylene Resin Export Trade ......................................................................................................... 57 Table 6.2.2-3. Major U.S. Polypropylene Export Markets, 1998................................................................................................... 57 Table 6.2.3-1. Demand Patterns for mPP Resins ........................................................................................................................... 58 Table 6.2.4-1. Competitive Cost Factors for PP Resins in Alberta ................................................................................................ 58 Table 6.3-1. Acrylonitrile Plant Overview..................................................................................................................................... 59 Table 6.3.1-1. Global ACN Markets.............................................................................................................................................. 59 Table 6.3.1-2. Regional ACN Plant Capacities.............................................................................................................................. 60 Table 6.3.1-3. ACN Planned Plant Expansions.............................................................................................................................. 60 Table 6.3.2-1. ACN Exports from U.S........................................................................................................................................... 60 Table 6.3.2-2. Major U.S. Acrylonitrile Export Markets ............................................................................................................... 61 Table 6.3.3-1. Outputs of an ACN Plant per kg of Propylene Input .............................................................................................. 61 Table 6.3.3-2. Canadian Imports of Sodium Cyanide and Cyanide Salts ...................................................................................... 62 Table 6.3.5-1 Competitive Cost Factors for Acrylonitrile Production in Alberta ........................................................................... 62 Table 6.4.1-1. Acrylic Acid Capacity in North America ............................................................................................................... 63 Table 6.4-1-2. Acrylic Acid Plant Overview ................................................................................................................................. 64 Table 6.4.2-1. Market Growth Outlook ......................................................................................................................................... 64 Table 6.4.2-2. Expansion of Acrylic Acid Capacity ...................................................................................................................... 65 Table 6.4.3-1. Major U.S. Acrylic Acid and Derivative Export Markets, 1998............................................................................. 66 Table 6.4.3-2. Imports of Acrylic Acid by the U.S. ....................................................................................................................... 66 Table 6.4.3-3. Imports of Acrylic Acid Esters ............................................................................................................................... 66 Table 6.4.4-1. Competitive Cost Factors for Acrylic Acid Production in Alberta ......................................................................... 67 Table 6.5-1. U.S. Phenol Supply/Demand, 1996 ........................................................................................................................... 68 Table 6.5.1-1. North American Demand for Phenol, 1996 ............................................................................................................ 68 Table 6.5.1-2. Canadian Imports of Phenol ................................................................................................................................... 69 Table 6.5.1-3. Regional Phenolic Resin Plants .............................................................................................................................. 69 Table 6.5.1-4. Estimated Regional* Demand Growth for Phenol.................................................................................................. 70 Table 6.5.2-1. Phenol Capacity in North America ......................................................................................................................... 70 Table 6.5.2-2. Cumene Producers in North America ..................................................................................................................... 71

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LIST OF FIGURES PAGE Figure 3.2.2-1. Byproduct Receipt System .................................................................................................................................... 15 Figure 3.2.4-1. Byproduct Processing............................................................................................................................................ 17 Figure 4.2-1. Propylene from Propane........................................................................................................................................... 21 Figure 4.5-1. Propylene from Byproduct Processing ..................................................................................................................... 22 Figure 6.3.2-1. U.S. Acrylonitrile Exports, 1996 ........................................................................................................................... 61 Figure 7.2-1. Overall Byproduct Propylene Processing................................................................................................................. 74 Figure 7.3-1. Propylene from Propane........................................................................................................................................... 74

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GLOSSARY 2-EH AA ABS ACN AED AEF AEUB AIH APP bbls. BPD C2 / C2= C3 / C3= C4 CaCl2 CO CO2 COS EPD EIA GDP H2S IPA kg ktonnes kty lbs. m3/d MAPD MMscf mPP MTBE MW NaCl Ni OSB PE PG PO POSM PP ppm psig PVC ROI SAN SAP scf SCO SIA SM TPG TBA TCMS USGC VOC wt

2-ethyl hexanol acrylic acid acrylonitrile / butadiene / styrene (polymers) acrylonitrile Alberta Department of Economic Development Alberta EnviroFuels Alberta Energy and Utilities Board Alberta’s Industrial Heartland (Fort Saskatchewan area) atactic polypropylene barrels (6.29 barrels (barrels) = 1-m3) barrels per day ethane / ethylene propane / propylene butanes – n-normal, i – iso (other includes olefinic C4’s) calcium chloride carbon monoxide carbon dioxide carbonyl sulphide ethylene / propylene / diene (polymer) Environment Impact Assessment (and Related Application to AEUB) gross domestic product hydrogen sulphide isopropyl alcohol or isopropanol kilograms kilotonnes thousands of metric tonnes per year (2,204 pounds per tonne) pounds cubic meters per day methylacetylene and propadiene millions of standard cubic feet metallocene technology polypropylene methyl tertiary butyl ether megawatts sodium chloride (salt) nickel oriented strand board polyethylene polymer grade propylene oxide propylene oxide with styrene monomer (process) polypropylene part per million (by weight) pounds per square inch polyvinyl chloride return on investment styrene acrylonitrile super adsorbent polymer standard cubic feed synthetic crude oil Strathcona Industrial Association (region on East Side of Edmonton) Styrene Monomer tripropylene glycol tertiary butyl alcohol TransCanada Midstream U.S. Gulf Coast – Texas, Louisiana volatile organic compound weight

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DISCLAIMER The contents, conclusions, recommendations and numbers in this report are the sole responsibility of T. J. McCann and Associates Ltd. and its associated consultants. They may or may not be in agreement with views and/or policies of the Alberta Department of Economic Development (AED). It is also to be noted that this study – with the sole exception of confirmation of one data point – has been carried out with no related rapport with TransCanada Midstream (TCMS) who are proceeding on a byproduct propylene collection and purification system.

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1.0

EXECUTIVE SUMMARY

PROPYLENE IS THE MAJOR MISSING PETROCHEMICAL INTERMEDIATE IN ALBERTA. INTRODUCTION TransCanada Midstream (TCMS) is currently putting together a very significant byproduct recovery and purification scheme, but no announcements have yet appeared of local derivative facilities. This study independently considered propylene supply options and examined a variety of propylene derivatives to define those that appear to fit best in Alberta. At the same time, key chemical companies with propylene derivative interests were identified.

SUPPLY 280-ktonnes a year of propylene were conservatively estimated as available from byproduct sources in 2005. As byproduct sources have some risks, ups, and downs, a prudent chemical company would perhaps discount supply to the order of 200,000kty to ‘guarantee’ supply to his facility. Oil sands upgraders, ethylene plants and refineries are the principal sources with a total production of about 400-kty – some used now in fuel gas. Some shopped as a concentrate to the U.S. and some connected to gasoline. Each source has a different set of supply costs and the different source types have wide ranges of impurities. Each source also has more or less need for on-site facilities to separate propylene-rich streams for central processing. Pipeline and rail receipt is envisaged with a major central treating and distillation facility to produce polymer grade (PG) propylene with propane and other smaller byproducts from the raw feed. Major salt cavern storage will be needed to smooth out the plant feed and to insure highly reliable product supply. Very preliminary estimates tend to indicate such byproduct propylene available at about two cents U.S. per pound under the price on the U.S. Gulf Coast (USGC) before maximizing synergy with existing facilities (as at TCMS). A route starting from propane was considered for 350-kty of propylene. However, with current propylene product cost slightly above USGC prices, it will be attractive only as newer technology and more cost cutting lower capital costs. Such reductions are considered quite possible over the next 3 to 5 years and the propylene to propane value difference could widen from 1998 levels (as at present). This option appears to warrant further analysis in a year or two.

KEY POTENTIAL DERIVATIVES From a long list of 13 chemicals, some with multiple variants and derivative options, polypropylene (PP), acrylonitrile (ACN) and acrylic acid (AA) were singled out for special consideration. Each of these has above average growth rates and the estimated 200-kty of propylene would provide a good fit for a world-scale facility in Alberta. Polypropylene (PP) PP is produced as solid beads and moved in bulk rail cars to a variety of markets, e.g., injection and blow molding, fibers, films, wire and cable. Demand for PP in several forms, some with ethylene and other comonomers, is growing at 6 to 7% a year world wide, requiring 350 to 400-kty of added North American capacity each year. Canada currently exports $243 million of PP to the U.S., but imports $450 (1998 figures). While Asian market growth is most pronounced, there are growing PP markets worldwide. Dow is moving into new PP technology/product territories, and its acquisition of Union Carbide adds major more conventional PP technology depth. Shell Chemical is adding BASF, the world’s largest chemical company, to its Montell PP team – with two plants already in eastern Canada. There is a long list of other major PP producers not now represented in Alberta. New catalysts and other technological developments are dramatically broadening the range of grades and of applications. Acrylonitrile (ACN) ACN, a liquid product, demand is growing at 6 to 7% a year in Asia as an intermediate for fibers, various resins, and a variety of chemicals, such as those used in water treatment. North American markets are generally remote from Alberta, but Alberta is ‘close’ to Asian markets via West Coast ports. The propylene and ammonia feedstocks are here at low cost and there are regional markets, in mining for the byproduct hydrogen cyanide, which is often requires expensive disposal.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 9

BP Amoco is a major player both in ACN technology and production. BP Amoco is developing a new route directly from propane, bypassing propylene, and, thus, there may be no propylene connection for an Alberta ACN facility. Acrylic Acid (AA) Super absorbents, in particular, are driving up AA demand with their 8% per year growth with no sign of a major let up. Nevertheless, there is a variety of other AA derivatives with rising markets. Canada currently imports roughly $50 million U.S. worth of AA derivatives. It is likely that a series of derivatives would be produced at an AA facility, although AA can be railed/tankered as liquid to Pacific Rim and to mid continent North American markets. Dow and Celanese have a new German joint venture producing AA and various derivatives. Celanese, BASF and Union Carbide (Dow) currently have three of the four North American plants. Degussa-Hüls has a European AA joint venture.

OTHER POSSIBILITIES Propylene Oxide (PO) PO and one or more series of derivatives are considered good prospects, but do require isobutane – here now – or more normally benzene – short in Alberta – feedstocks with very major byproducts – e.g., styrene in the case of benzene as the cofeed. PO might well have been one of the three short-listed products if the major cofeed/coproduct situation did not exist. Propylene glycols and various ethers are good PO derivative prospects. Phenol Phenol has major regional markets in the production of resins used in various construction board products. Propylene can be a key feed, along with benzene. An apparent Alberta shortage of benzene must be addressed before phenol production is considered. This study was not bullish on isopropanol and acetone, n-butanol, 2-ethyl hexanol (2-EH) and propyl ethers (from isopropanol) should not be discarded as possible new small-scale Alberta chemical products.

SUMMARY • • • • • •

Alberta does not have merchant propylene at this time. Over 200,000-tonnes a year can be made available from byproduct sources below USGC costs. (TCMS has already started a collection and purification project.) This quantity well fits individual world scale PP, ACN and AA derivative prospects. Availabilities of benzene and certain other key chemical intermediates appear to warrant study and promotion, to extend the list of prospective ‘new’ Alberta chemical products. Alberta offers low capital and operating costs and shipping costs to the Pacific Rim are below, those from the Houston area, although marginally higher to the mid continent area. Propylene derivatives should have a strong place in Alberta’s future.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 10

2.0

INTRODUCTION

2.1

Terms of Reference

The Alberta Department of Economic Development retained T. J. McCann and Associates Ltd. to undertake a screening level study of the key prospects for propylene upgrading in Alberta. Appreciable propylene is produced in Alberta as a byproduct in ethylene production, oil sands upgrading, and oil refining and, to a minor extent, in other petrochemical intermediate production. However, currently there is no significant propylene chemical derivative production. This study was intended to see if economics appear attractive for local production of three to be identified important derivatives. TCMS is building a major propylene byproduct extension to their Redwater natural gas liquids fractionation plant. TCMS is also constructing facilities at Suncor’s oil sands plant to recover a propylene/propane mix and potentially more or less ethane and ethylene. The resulting liquid blend will be delivered to the Redwater site via Suncor’s oil sands pipeline and a short local line. TCMS will be obtaining byproduct propylene from other sources, but no details were available to this study. While this study essentially overlooks the TCMS propylene program, its very active presence must be considered by all.

2.2

General Bases

Local propylene derivative markets are, with one or two exceptions, quite small. Overall, Alberta’s current chemical industry is export driven producing large bulk commodities and few small-scale specialty products. Thus, this study concentrated on largerscale propylene derivatives that have growing markets worldwide, accessible from Alberta. Byproduct propylene is available from sites at Joffre, Edmonton (SIA—Strathcona Industrial Association—region), Fort Saskatchewan/Redwater area (AIH—Alberta’s Industrial Heartland) and the oil sands plants north of Fort McMurray. Due to the unique availability of salt for storage cavern development, relative central location and proximity to a variety of major chemical production and natural gas liquids fractionation sites, new propylene processing facilities have been assumed in the AIH. There are current expansion programs at current oil sands plants and, likely, expansions at regional refineries and an upgrader that will enhance propylene production through to and perhaps beyond the 2005 period. In addition, the Joffre E3 world’s largest ethylene unit comes on-stream in 2001. Thus, estimated 2005 byproduct propylene availability is considered as a base, consistent with project development, permitting, construction, startup of collection and purification facilities, including storage cavern development, with and propylene derivative facility completion(s). The early screening nature of this study is to be noted.

2.3

Propylene Only

This study has not considered TCMS’s propylene collection and purification project as being in or about to be in place. A totally grassroots approach has been assumed. Herein, only propylene and directly related materials, propane in particular, have been considered in this study, although, some TCMS facilities appear to be planned to capture and process both C2’s and C3’s. Certain, lighter and heavier impurities in byproduct propylene-rich streams will be important in most collection, purification and processing scenario to be better addressed in more detailed studies.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 11

3.0

BYPRODUCT PROPYLENE

3.1

Availability

3.1.1

Overall

Table 3.1.1-1 summarizes this study’s estimates of potentially propylene in Alberta and surrounding areas in 2005. The estimates are by the study team, but confirmed as reasonable by verbal contacts at all but two sources. The table also notes what the team considers as a ‘likely’ 2005 availability scenario—to be used in later sections of this report as a base case. The byproduct availability estimates are conservative – they allow for off normal operations, such as shutdowns and related events, occasional upsets, different catalysts and catalyst conditions (at refineries), new approaches to fouling control in ethylene furnace tubes, below capacity operation on occasion, and below design process severities on occasion or continuing (at least at one major source). Two sources provided ranges to cover likely operating severities with mid points used here and another advised reduced propylene compared to earlier estimates, due to less severe operating conditions. Expansion prospects at three sources were discussed, but it was too early to assess any increase in propylene availability. Not all sources will be available, nor will suitable commercial terms be negotiated at all sites. We acknowledge that the ‘likely’ figure is only a judgement call. The accuracy of the total, is perhaps, at the +20% level with individual accounts less certain. Changing conditions in source units are to be expected over time and propylene is generally not an economically preferred product at any of the identified sources. Table 3.1.1-2 notes current and prospective alternate uses for propylene at the various sources, without a capture/purify/chemical derivative scheme(s). Table 3.1.1-3 provides a brief review of what facilities will be required at various sources for propylene recovery and transfer. Scheduling of in-plant changes will be very tricky and with major turnarounds only every 2 to 2-1/2 years, there could well be delayed availabilities from specific various sites. (However, this is roughly the same timing as for large salt cavern development.) Alberta EnviroFuels (AEF) currently produce more or less propylene—say 10-kty—depending on the propane content of its feedstock C4 streams. This propylene now goes to fuel gas. AEF are reported to be considering changing the plant’s processes and products from methyl tertiary butyl ether (MTBE), but, as yet, without a public decision. Thus, AEF propylene has been neglected herein. Husky’s Lloydminster Upgrader expansion plans are unknown, hence, no estimate of possible propylene availability has been made—likely small in the overall picture, in any case. Note that the Shell Scotford and Parkland Borden refineries produce no propylene. At the bottom of Table 3.1.1-1 is this study’s judgement of a ‘realistic’ byproduct availability. The 280-kty may appear small, but prospects perceived to have major challenges economically or major delays to beyond 2005 have been excluded. Only detailed buyer to supplier negotiations will resolve economically attractive availability from any source. Hopefully, it may prove possible to attract at least another 100-kty of economic supply than has been assumed in this study. A prudent propylene consumer is likely to discount the byproduct availability, say, up to 80-kty to assure him of supply at all times, even if one major source drops out – leaving a ‘recognized’ availability of about 200-kty. Even then, major storage will be required to assure that rate on a daily basis.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 12

Table 3.1.1-1. Estimated 2005 Propylene Availability Source(s) Upgrading Syncrude Suncor TOTAL Ethylene Dow NovaChem TOTAL Alberta Refineries Imperial Petro-Canada TOTAL

Total That Might be Available kty

% Propylene in C3 Mix

Propylene Annual kty

Daily C3= Peak Rate kty

Base Case Judgement Overall C3 % Peak Rate Propylene kty (Vol.) † in Mix

Key Impurities †

135 60 195

40 29 37

– – –

– – –

– – –

– – –

MAPD, Sulphur, Others MAPD, Sulphur, Others (?)

30 75 105

90 * 90 * 90 *

– – –

– – –

– – –

– – –

MAPD * MAPD * MAPD *

100

65

–

–

–

–

90

67

–

–

–

–

190

66

–

–

–

–

60 65

– –

– –

– –

– –

Some MAPD, Sulphur, Others (?) Some MAPD, Sulphur, Others (?) Some MAPD, Sulphur, Others (?) Some MAPD, Sulphur Some MAPD, Sulphur

105 180

125 220

140 345

Overall Alberta (e) 490 Out of Province 110 Refineries/ Upgrader Base Case Availability to Purification Ethylene Industry – Others (c) –

– –

TOTAL – – 285 245 (m3/d) – – – – (BPD) – – – – Net Polygrade – – 280 – Product from Purification * Methylacetylene plus propadiene (MAPD) 3 to 5% – assumed converted to propylene. † C2- and C4+ not included – some in all streams. (a) Note year to year variations due to shutdowns. (b) Believed conservative. (c) Includes some out-of-province supply. (d) C4 content excluded – possibly an additional 800-BPD (130-m3/d) (e) Alberta EnviroFuels source may disappear – hence excluded.

90 * 56

535 (2,830) (17,800) –

68 – – –

MAPD* <100-ppm MAPD, Sulphur, others?? (b) (d)

Table 3.1.1-2. Current Propylene Uses (a) Byproduct Propylene Upgraders Syncrude Suncor Mobil/Koch Husky Lloydminster Ethylene Plants Dow NovaChem Alberta Refineries Imperial Petro-Canada Other Refineries Co-op, Regina Husky, Prince George Others (BC/U.S.) (a) (b) (c) (d) X N

Process Source

Current Propylene Use

Possible Other Use Options

Notes

Coking (fluid version) Coking (delayed version)

Fuel Gas

Conversion to Jet Fuel or Equal Committed to TransCanada Midstream

X (b)

Coking (delayed)

Fuel Gas Å NO INFO / NEGLECTED Æ (d) Fuel Gas

–

X (b) N X (d) (now small – neglected in this study)

C2 Cracking C2 Cracking

Ship to USGC Ship to USGC

Own Purification Own Purification

Expansion online in 2001

Catalytic Cracking Catalytic Cracking/Coking (delayed)

Alkylation Alkylation

– –

– –

Catalytic Cracking/Coking (delayed) Catalytic Cracking

Polymerization

Alkylation

X

Sells (C3 C4) to U.S. refineries

–

–

–

–

Catalytic Cracking/Coking Alkylation (fluid and delayed) (with some polymerization) Excludes Alberta EnviroFuels propylene to fuel in each case, due to unknown futures. By 2005 another coker at each site. Also polymerization at one site. Expansion plans unknown. Expanding. New – no process data availability beyond 2005, in any case.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 13

Table 3.1.1-3. Changes at Principal Prospective Propylene Sources Upgraders Suncor

Syncrude

Mobil/Koch? Husky Lloydminster Ethylene Dow and NovaChem Refineries Alberta

Other Refineries Husky, Prince George Chevron, Burnaby Montana Refineries (4) Co-op, Regina

3.1.2

• Recover C3= (and C3) from gas streams originating in two cokers, including stabilizer overhead gases. Low temperature, absorption recovery alternates with deethanizing of liquid product (at least). (Note that here only a C3 concentrate is considered, no C2 C3 concentrate as noted in some TransCanada Midstream documents.) • Purify to suit pipeline (avoid contamination in batch pipelining south)—at least all H2S must be removed. • Assemble batches and buffers if to be used. • Modify pipeline as needed to convey batches of C3 concentrate. • Recovery C3= (and C3) from gas streams originating in three cokers, including related stabilizer overhead gases. • Purify to suit pipeline (avoid contamination of adjacent batches). • Assemble batches for pipeline movement. • Define pipeline need – new pipeline ‘appears’ needed. • Project plans indefinite as to potential propylene, hence, neglected. • Similar facility needs to Suncor, but not considered as future plans unknown and current C3= availability probably too small to warrant consideration. • Any transfer will be rail due to small quantities. • C3 concentrate facilities (and related rail car handling) are already in place. • At Dow, a new small pipeline terminal would be needed. • Each of Imperial and Petro-Canada will need: • C3 C4 splitter—these will be big. • C3 concentrate shipping facilities (pipeline terminal). • Additional facilities (or equivalent) to make up for lost gasoline, due to removal of propylene from alkylation feed. Without C3=, alkylate will have a higher octane allowing reduction in severity and increased yields in another unit, but this will only make up for a portion of the lost gasoline. • Note new pipeline from ‘refinery row’ to AIH. • No change, now sell mixed C3 C4 to U.S. refineries, splitting at site unlikely to be economic due to small stream, do at purification site. • Some C3 concentrate shipping facilities needed. • Similar to Alberta refineries, except new rail loading systems needed. • Major changes foreseen (without much impact on gasoline volume) beyond this study.

Incremental Propylene from Ethylene Production

Discussions with ethylene producers indicated little potential for enhanced propylene production. While the early production at both sites at one time was planned for up to 20% propane in the feed with ethane, subsequent expansions have not added to propylene handling facilities and these appear full with byproduct propylene from ethane feedstock at projected throughputs.

3.1.3

Lack of Flexibility

Except as raw propylene streams may be railed to USGC—primarily from ethylene producers, as now—there will be little/no flexibility in byproduct supply from individual sources. When changes are made as in Table 3.1.1-3 at individual sources, 90% or more of all available propylene will be provided. Thus, there will normally be a surplus of byproduct derived propylene for Midwest or Gulf Coast sale, and/or shipment of more or less ethylene plant raw propylene to the USGC. The base case 285-kty of propylene in raw feed streams is an annual average and peaks of 330-kty are likely with minima to processing at or near 200-kty (using feed cavern storage).

3.2

Byproduct Propylene Processing

3.2.1

Preamble

There will be byproduct propylene coming from a variety of sources via pipeline and rail, all with differing qualities. Some trucked material is possible, but not considered in this study. Once propylene capture facilities are in place, the byproduct processor will be receiving all available feeds, with the possible partial exception of some from ethylene plant material. Portions of the ethylene plant material could continue to move south, but only to the extent, that sufficient numbers of railcars continue available. (Reducing such rail fleets appears likely to be important financial inducements for ethylene plant sources.)

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 14

3.2.2

Feedstock Handling

Due to the variety of source qualities and batch receipt of most material, significant raw propylene storage will be needed, possibly along with special withdrawal systems to smooth out feed composition to a byproduct processing facility itself. Such storage must also cater to shutdowns at major sources and in the byproduct processing facility. Figure 3.2.2-1 provides the byproduct feed system assumed in this study. Figure 3.2.2-1. Byproduct Receipt System Suncor or Equal Pipeline(s)

∼

Interface Processing complete with Distillation Tube Surge Storage

Oil Sands C3 Received in Batches C4 or C5 Plus

Pipeline to Processing Site (Try for continuous transfer)

SCO etc.

Dow Ethylene

Byproduct Propylene Processing Facility

New Continuous Pipelines

Edmonton Refineries Bullets NovaChem

Rail Averaging Withdrawal System Suggested

Other Refineries Injection Pumps

2 Wells Minimum Salt Cavern Storage

•

• • • •

Oil sand material is received in daily or bi-daily batches from the Fort McMurray area. • The batches are stored at the receipt point and then gradually transferred to the processing facility or to cavern storage. • Interfaces (and buffers if used) are segregated and the C3 content distilled off and the bottoms returned to the main pipeline. Local ethylene plant feed will be received by pipeline with Joffre feed by rail. Surface storage will be provided to allow continuous feed of the ethylene plant blend to processing. Edmonton refinery feed will be received by pipeline on a continuous basis and routed directly to processing. Other refinery feeds will be received by rail and transferred to surface storage and then to the processing facility with balancing via the caverns. All excess feed will be routed to caverns say two at 500,000 barrels each, to be led to the process as capacity and product demand permit.

This study has not attempted to optimize the feed/raw propylene storage system. (That will be a very complex study in itself— e.g., sizing cavern injection pumping will be a major challenge.) The diagram notes a possible cavern withdrawal/filling

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 15

averaging system (such as that of R. W. Temple who provided advice to this study) in at least one cavern to handle the very likely quality layering.

3.2.3

Product Propylene Qualities

As will be noted later, specific chemical derivative manufacture is based on a specific refinery, chemical or polymerization grade feedstocks. When PG propylene is not required, such processes can use such higher quality material, but only at a marginal additional payment compared to their normal quality feedstock, reflecting less byproduct production. Refinery propylene is foreseen as being used here directly for only a few propylene derivatives that were not identified as having major potential. In addition, even the largest individual propylene-rich streams appear below what is seen here as appropriate to significant propylene chemical production in Alberta. Any combination of source types will require some processing and/or distillation for even a refinery product grade. Thus, while smaller-scale opportunities for refinery grade propylene are definitely to be encouraged, this study has considered only chemical and PG propylene. Table 3.2.3-1 provides typical propylene product specifications from the literature, but each potential customer will have his own specifications. In practice, certain parameters in the product will regularly be well under formal specifications and customers will become used to such qualities. They will in effect become defacto standards. Table 3.2.3-1. Partial Typical Propylene Specifications Component Min/Max Chemical Grade Polymer Grade Propylene Min 94.0 wt% 99.5 wt% Propane Max 5.5 wt% 0.5 wt% Ethane Max 0.5 wt% Ethylene Max 50.0 ppm wt C4 Max 0.1 wt% 50.0 ppm wt Acetylenes/Propadiene (MAPD) Max 15.0 ppm (wt) 10.0† ppm wt Sulphur Max 10.0 ppm (wt) 5.0 ppm wt* Water and Methanol Max ** ppm (wt) 1.0 ppm wt** CO2 Max – 1.0 ppm wt CO Max – 0.5 ppm wt COS Max – 0.1 ppm wt* Oxygen Max – 1.0 ppm wt Hydrogen Max – 1.0 ppm wt Note: The above are not complete specifications with many trace contaminants to be added to both lists, Buyer specs will prevail in all sales – at his plant gate. † 5-ppm maximum will likely prevail in practice. * COS = Total sulphur minus H2S and mercaptans. ** Final drying at customer site.

The primary differences between the two grades are in propane content and trace contaminants (not all shown in the table). The methylacetylene and propadiene (MAPD) content, is definitely of more concern where PG is standard than when chemical grade is the normal feed. (Non refinery propylenes and even some refinery propylene may be non-acceptable to ‘refinery’ grade users due to MAPD content.) In the byproduct, processing scheme assumed in this study, an option for chemical and PG coproduction is shown. In practice, there are major differences only in the C3 splitter system between product grades and a PG capability (today using a single tower) will be a likely decision in any case. It is important to note that the specifications apply to propylene as delivered to customers—i.e., after caverns, pipelines, railcars, etc.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 16

3.2.4

Byproduct Processing

Each of the feed streams has its own characteristics and processing needs: the system must be able to handle a wide range of compositions. The processing proposals here are conceptual for study purposes only. Figure 3.2.4-1. Byproduct Processing

Ethylene Plant Feed

Pre Hydrogenation

Purges Hydrogen

Upgrader Refinery Feeds

Deethanizer

Chemical Treating

C3 C4 Splitter

C3 Splitter

(C)

(A)

Compressor

C2 – to Fuel Gas

Final Treater

Final HydroTreating

To Reflux

Sulphur Removal Hydrogen (B) Sulphur Rich Purge

(C) (D)

Product: (A) (B) (C) (D)

Polymer Grade Propylene to Market Chemical Grade Propylene to Market (Optional) Propane to Market C4+ to Market

Due to its very high MAPD contamination ethylene plant raw feed blend will have a hydrotreater to lower MAPD to 100 or less ppm (from an inlet design of 50,000-ppm—5%). There will be very appreciable heat generated in this operation and a large cold recycle will be needed. The MAPD will be converted very largely to propylene, but some hydrogenation to propane may occur, as well as trace polymerization, perhaps, as far as a thick ‘green’ oil on occasion. The non-ethylene plant feedstocks require sulphur removal to below 5-ppm. This will be done, probably, via 2 or 3 stages of processing. Byproduct sources have a habit of bringing unanticipated trace impurities – e.g., phosphorus, antimony, mercury and nitrogenous compounds. In byproduct processing the chemical treating must consider heavier than propane feedstocks, hence, the somewhat arbitrary location here ahead of C3 C4 separation. Only allowances for such treating are included here. The final hydrogenation unit will reduce MAPD to below 10-ppm; distillation in turn will reduce this to near zero in the product propylene. No significant polymer production is anticipated in this hydrogenation step. Butadiene partial saturation to butylenes will also occur (improving the quality of the small-scale C4 plus byproduct). The deethanizer removes all the ethane and lighter components to fuel gas and the C3 C4 splitter produces a C4 plus bottom product. (There will likely be too much C4 in the original feed to leave in propane. The original feed C4 will have 50 or so percent olefins, of value to refiners, but requiring hydrogenation if left in for propane, even if it can be.) The C3 splitter is assumed to be single tower vapour compression reboiled (heat pumped) system (as described further in the later propane dehydrogenation discussion). Blending a bypass of the final C3 splitter with polygrade product will permit a slightly lower (utility) cost chemical grade product if desired. A final guard bed solid adsorbent treater—e.g., for sulphur, CO2, CO, trace metals – has been assumed needed for quality assurance.

3.2.5

Excess Product Sales

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 17

As noted above, buyers are likely to discount byproduct propylene availability and this means regular excesses over local demands. Variations in byproduct supply will also result in significant short-term excesses, possibly above the ability to smooth out in storage. Rail shipment of excess polygrade product to the U.S. Midwest, California and/or USGC will be needed, and/or alternately possibly raw Joffre propylene could be routed south as less expensive than the polygrade propylene sale route.

3.2.6

Byproduct Propylene Valuation

A.

Raw Propylene Before Recovery

Each source plant will have its own unique value for propylene at any given time prior to any consideration of its separation for separate processing for sale. Oil Sands • • • •

Local marginal natural gas supply cost to displace propylene. Note that lower heating value must be used in calculating the amount of gas required. The large amount of co-recovered propane, 2 to 3 times the volume of propylene, must also be replaced. As oil sands processing and related cogeneration systems expands, their incremental gas supplies will be coming from farther and farther south on the TransCanada system unless a new line is built, increasing the cost of such gas. Like all propylene sources oil sand producers will require a premium over fuel or other replacement costs.

Refineries •

• • • • • Note:

Propylene sale from Alberta refineries will reduce alkylate production [C3= + iC4 Æ C7 isomers] and the resulting loss of very important gasoline blending stock must be made up by: • Gasoline purchase from others and/or • Added crude and intermediate processing Taking propylene out of alkylation does improve the octane of the remaining (C4) alkylate in-turn this allows slightly higher yields in the parallel catalytic reforming unit. However, this only makes up for a small portion of the deficit. Extraneous olefinic C4’s may be available to displace the propylene, but this study has not examined such potential nor its costs. Reduced isobutane demand in alkylation appears economically important, reducing overall refining butane purchases. Raw propylene sales from refineries, also reduces related propane sales, but this is not seen as of a great concern. (Conversely, less isobutane is needed reducing butane purchases.) This study has not attempted a valuation of raw refinery propylene, due to very refinery-specific economic bases beyond an external reviewer’s knowledge.

At the Regina Co-op refinery propylene is polymerized, hence, a different propylene replacement situation exists.

Ethylene Plants •

• B.

Here the situation is clearer as the raw propylene now moves to the USGC. Rail transport south is in the order of 3.5 to 4 cents U.S. per pound of propylene and processing costs appear to be in the 6 to 10 cents U.S. per pound range. However, in some USGC cases, MAPD may be extracted rather than hydrogenated to propylene complicating valuation. Ethylene plant raw propylene value will closely track USGC chemical and polygrade propylene.

Capture Costs

As noted in Figure 3.2.4-1, there will be significant facility needs at each oil sands and refinery source. These facilities will have high utility costs – electricity for compression, especially for low temperature recovery from fuel gas streams and steam for distillation, particularly at refineries. Even in the base case, new processing facilities at oil sand and refinery sources are likely to be in the order of $60 to 100 million with operating costs in the $7 to 12 million year range. C.

Transfer Costs

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 18

Any large-scale Alberta byproduct-processing facility will be receiving feed by pipeline (more or less in batches), by rail and possibly by truck. There may be a credit for the major reduction in rail cars now used to transport ethylene plant raw propylene to the USGC, although some will be needed for other non AIH/SIA source material. Raw propylene storage facilities will be large as noted above to cope with the widely fluctuating feed streams from other than local ethylene plant and Edmonton refineries. Handling and raw feed storage facility costs appear likely to have capital costs in the order of $40 to 50 million for the base case. (This does not consider a new line from the oil sands area.) D.

Processing Charges

The central facility for the assumed base case could cost in the $60 to 80 million range, but no estimate was attempted in this study, due to wide range of feeds and process alternates to be considered. E.

Overall Byproduct

The capital costs for the base case scheme appear likely to be in the order of $160 to 230 million, without any credit for rail car reduction. Possible operation costs have not been totalled due to their high uncertainties. Review of the preliminary costs indicates the likelihood of PG propylene available at 1 to 2 cents U.S. per pound under the USGC long-term average price, assuming all grassroots facilities. It is to be noted that underlying cost factors do not relate directly to USGC propylene values on a short-term basis. There will be many ups, and downs, with Alberta costs and USGC propylene values not being in sync. Reference (a), for example, has graphs reflecting very wide swings between USGC propane and propylene with only long-term time averaging of use in estimating economics. Propylene shipped to the USGC will receive only the contract or spot USGC value, resulting in roughly a four cents per pound shipping penalty at the Alberta source. While this study’s prefeasibility level estimates did not show such value for Alberta byproduct propylene from multiple sources, TCMS and/or other operators may well be able to achieve such pricing for all their propylene product. To be conservative, this study assumed an Alberta byproduct propylene price of two cents per pound under USGC prices. TCMS will be able to achieve significant cost savings compared to a grassroots project, due to co-location with the existing Redwater natural gas liquids fractionation and salt cavern storage facilities. There appear to be opportunities for integration at other sites, hence, the above cost estimate could well over estimate the required netback on local propylene sales. As such credits were not fully assessed, this study has assumed a two cents per pound under USGC price for locally delivered PG propylene.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 19

4.0

PROPYLENE FROM PROPANE

4.1

Preamble

The ready availability of at least 200-kty appears essential for each of the short-listed chemicals discussed below in Section 6. This much appears likely to be available from byproduct sources in 2005 with an 80-kty cushion (assuming only 5-tky lost to propane in the purification system). However, more than one major derivative plant should be targeted and another route to Alberta merchant propylene should be considered. Review of the world propylene scene indicates a number of plants now producing propylene from very low-cost propane. While Alberta does not fall into that category, construction and operating costs (ex utilities) are generally well below these developing country sites. Thus, Alberta propane to propylene warrants consideration. Enough propylene for the minimum sized facilities for two of the three short-listed propylene chemicals could be produced in a current relatively standard single train 350-kty plant. At much above 450-kty we expect a largely two-train design with only minor scale advantages. At 350-kty of propylene from propane, approximately 2,150-m3/d (14,000-BPD) of commercial grade propane will be needed. This compares to Alberta production of 25 to 30,000-m3/d, with over 80% going to export markets. Hence, a 350-kty propylene from propane facility should have little problem acquiring feedstock via TCMS, Dow, Amoco and/or Chevron AIH storage at prevailing prices (probably with some summer over purchases and seasonal storage), even with some diversion to the Alliance pipeline system.

4.2

Technology

Dehydrogenation of propane to propylene via catalytic processes is being practiced in Europe, Saudi Malaysia and Korea. In one case, a combined propane and isobutane feed is being processed to supply both PP and MTBE feedstocks.1 However, separate processing at larger-scale is more economic and strongly recommended. In the combined feed case and most other current propane dehydrogenation facilities, the UOP Oleflex dehydrogenation technology used is very similar to that used for isobutane to isobutylene at AEF. The catalyst regeneration system at AEF is also common to that at the propane units and close to that of Shell’s continuous catalytic reformer in the Scotford Refinery. Other process routes to propane dehydrogenation are practiced in one Antwerp unit and licensed for two new smaller Mid East units. Due to its predominance and local partial usage, here, we have assumed use of UOP’s Oleflex technology, based on Reference (a) and discussions with UOP staff (References (b) and (c)). There would be four reactors versus three at AEF and metallurgy would be higher due to more severe conditions when dehydrogenating propane.

1

Alberta EnviroFuels now dehydrogenate a portion of the propane contaminant in its feed butane, but both unreacted propane and propylene are routed to fuel gas.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 20

Figure 4.2-1. Propylene from Propane

Fuel Gas

H2 Fuel Gas

Depropanizer

H2 Purification Dehydrogenation

(C) Compressor

H2 Deethanizer

Pipeline from

Hydrogenation of MAPD

Pretreatment

C3 Splitter

NGL

Polymer Grade Propylene Storage Cavern Reboiler Reflux

Frac / Storage C4 + (C) Propane to Market

Recycle Propane with traces of C4+

The pretreatment system would reduce sulphur and other contaminants to a very low level to protect the precious metal catalyst used in dehydrogenation. Essentially, all C4 and any heavier portions of the propane feed and recycle streams would be removed in the depropanizer. (Note that ethane in the feed carries on through reaction to fuel gas.) Propane and hydrogen pass through four fired heaters and four moving bed reactors in series as dehydrogenation proceeds to near the 40% equilibrium level. The reaction products are then processed to remove small quantities of light decomposition components and hydrogen. A small amount of propadiene/methylacetylene is formed in the reaction and is converted to propylene in a well-proven low temperature hydrogenation step. The deethanizer insures final control of the ethane content of the propylene product and the C3 splitter the propane content. UOP has standardized on a single tower C3 splitter arrangement compressing overhead vapour before condensing to provide the heat input needed at the tower bottom. (Product is withdrawn part way down the column to insure purity, a small overhead recycle removes ethane and other trace contaminants.) This arrangement results in lower temperatures and enhanced distillation properties than normal distillation, and avoids a two very large tower arrangement. The C3 splitter will still be in order of 60 meters tall and have up to 250 or so specially designed trays.2 The reboilers will also be special to minimize vapour compression requirement. The C3 splitter will be more complex than for chemical grade, but in a new propane dehydrogenation system, the added costs are more than repaid in the premium for PG product. Chemical grade product could be produced in such a system with lower compressor energy inputs, if desired.

4.3

Integration Potential

It is possible to introduce properly conditioned byproduct propylene at the hydrogenation or deethanizer step. However, two C3 splitters are recommended for reliability and flexibility over, say 450-kty of total propylene. Hence, parallel byproduct and propane-based trains appear likely, if more than two major propylene derivative plants emerge. Propylene product storage, utility and other support systems would be common to both trains. It is also very realistic to integrate the deethanizer/C3 splitter system with homopolypropylene production to handle the purges of that process. Similar fits with other propylene derivative facilities may also be available. The furnaces in the dehydrogenation system produce large qualities of steam—usually used to drive the compressor(s) in the dehydrogenation system. The heat pump compressor of the C3 splitter is usually electric. There are major opportunities for utility integration with other process plants and/or cogeneration facilities.

2

UOP has supplied the special trays to over 150 C3 splitters, most produce polygrade product.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 21

4.4

Hydrogen Use

Decision economics are usually based on using hydrogen byproduct internally as fuel gas, but in the AIH or SIA, it appears very likely that hydrogen would be recovered for sale.

4.5

Propylene Handling

Product propylene from byproduct processing and/or propane dehydrogenation has been assumed handled as follows: Figure 4.5-1. Propylene from Byproduct Processing Chemical Grade

Separate Line Propylene

Polymer Grade Pipelines Polymer Grade Propylene Product

Network

Users

Guard Treating Product Storage

Rail Loading Truck Loading

Off-specification propylene is assumed routed back to in process or to raw feed caverns in the byproduct case or sold as chemical grade via direct railcar loading in the propane route. Note that any/all chemical grade shipments will have their own pipeline system. Two caverns will be needed with their own brine system (separate from other cavern systems to preclude trace impurities). As with ethylene the cavern capacities must allow for at least a one-month supply shutdown and a one-month demand shutdown, with flexibility for day-to-day and week-to-week supply/demand in balances. Brine displacement will introduce contaminants such as oxygen and a special drying/chemical treating system will be needed to insure delivered product quality. A final drier/treater will be recommended at any consuming facility to reinsure polygrade product quality, but is probably not needed for chemical grade product. Both railcars and trucks will be dedicated to the specific product grade. Rail car unloading facilities will be provided at one or two spots for off-spec returns and to allow railcars to be used for peak storage.

4.6

Production Cost

UOP indicate 7% extra capacity inherent in their designs, hence, another 25-kty of added propylene can be expected over time. (Experience indicates UOP claims are generally conservative.) Due to worldwide dehydrogenation technology, competition and ongoing catalyst improvements the study expects either an added 10% at least available or 7% less capital cost if facility size is reduced. However, these potential credits have not been considered in the following operating cost estimates. Reference (a) contained an early 1999 estimate of USGC costs for propane based propylene units producing 150 to 350-kty, starting up in 2002. Here, only the latter size has been considered – for two minimum sized derivative units and to take advantage of Alberta’s high propane availability. Nominal capacity of such a facility is unlikely to be discounted, given sufficient product storage capacity – say two months of production – to handle propylene and conversion units operating cycles. Propane feedstock cost is discussed in the next section, here the production costs are considered.

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March 31, 2000 Page 22

Table 4.6-1. Propane Dehydrogenation Capital Costs ($ million U.S.) UOP Paper This Study Project Sector USGC AIH Pretreating – 10 Battery Limit Propylene Unit 145 145 Outside Battery Limit (@ 20%) 29 29 Other Project Costs (a) 37 40 Added Storage – 6 Total 211 230 (a) Catalysts, adsorbents, precious metal inventory, project developments and management, technology license and similar costs.

An SIA or AIH location has been assumed with essentially identical capital costs as on the USGC – given optimum use of prefabrication and excellent project management.3 Added feed processing needs and salt cavern product storage have been added along with a nominal adjustment to ‘other costs’ for corporate costs and land. Note that no synergies with other plants were considered, conversely, no hydrogen purification facilities are included. Table 4.6-2. Propane Dehydrogenation Operation Costs (ex Feedstock) ($ million U.S.) UOP Paper USGC 5

This Study Estimate Location AIH Catalysts and Chemicals 5 Utilities - Electricity (a) 12 9 - Fuel (a) Fixed Costs (b) 19 20 Total 36 34 (a) Both estimates assume hydrogen and ethane from propane and light process gases provide the bulk of the fuel needs. This study assumed a lower electricity cost, as well as lower makeup fuel costs. (b) Maintenance, operators, technical, administration and related costs. This study added an allowance for interest on inventories and for added corporate costs.

Hydrogen recovery and sale would add capital but add very roughly $1 million a year to the plant’s margin not considered here. Converting the capital costs to annual ‘cost’ at a simple 20% per annum to cover provides the next table.

Portion Capital Operating (ex feed) Total @ 350,000-kty

Table 4.6.3. Cost Summary (ex Feedstock) ($ million U.S.) Base 227 34 –

Unit Cost

Factor 0.2 1.0 –

Alberta 45.4 34.0 79.4

USGC 42.2 36.0 78.2

10.3 cents U.S. per pound ($227 per tonne)

The original paper numbers would indicate a USGC facility production at 10.1 cents U.S. per pound, marginally lower at a 20% simple before tax. (The early nature of these calculations is to be noted.)

3

A current study for AED indicates AIH petrochemical facility capital costs 5% below those of the USGC. Such a credit has not been shown in these estimates.

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March 31, 2000 Page 23

4.7

Propane from Propylene Cost

Review of weekly propane and propylene prices as quoted by OPIS for 1998 and 1999, indicated the following annual averages.

Product/Location/Cost Propane Mt. Belvieu, Texas ¢ U.S. per U.S. gallon ¢ U.S. per pound $ U.S. per tonne Edmonton ¢ U.S. per U.S. gallon Differential Mt. Belvieu – Edmonton ¢ U.S. per U.S. gallon ¢ U.S. per pound $ U.S. per tonne Propylene Mt. Belvieu, Texas ¢ U.S. per U.S. gallon ¢ U.S. per pound $ U.S. per tonne Propylene/Propane Differentials USGC ¢ U.S. per pound USGC $ U.S. per tonne USGC Propylene/Edmonton Propane ¢ U.S. per pound $ U.S. per tonne

Table 4.7-1. Propane and Propylene (Annual Averages in U.S. dollars) 1997

1998

1999

37.6 8.9 196

26.2 6.2 137

33.3 7.9 174

32.1

17.9

24.7

5.5 1.3 22

8.3 2.0 44

8.6 2.0 45

not calculated not calculated not calculated

51.0 11.8 260

59.7 13.8 304

not calculated not calculated

5.6 123

5.9 130

not calculated not calculated

7.6 167

7.9 175

Source: OPIS Weekly Publications

The Mt. Belvieu (USGC)/Edmonton propane posting differences are related to the traditional ‘eternal triangle’ between Edmonton (the net producer region), Sarnia (eastern consumer hub, including Marysville, Michigan) and USGC (the ‘mother-of-all-consumers’). The economics can best be conceptualized as propane prices being set by the ability of USGC to ‘clear’ propane (at a profit over cracker feedstock values) into the Eastern U.S. market base, via TEPPCO pipeline and local distribution) where they meet Sarnia and Marysville-based rail transported LPGs. The combined transportation costs to that Eastern market base being about the same from both hubs, means that the Sarnia area and USGC prices are about the same level, with seasonal variations. Conway, Kansas is the fourth hub, sitting on the mid-western side of the triangle, and having a major ‘intermediate’ influence on the pricing dynamics. Edmonton pricing discount (relative to these markets) is a function of rail or pipeline transportation costs to the alternative market. Using Sarnia as an example, the discount is approximately the cost of shipping the marginal barrel in the Cochin pipeline at non-incentive rates, or about 7 to 8 cents U.S. per U.S. gallon. A similar rationale applies to the Edmonton long-term differential of about 7 to 8 cents U.S. per US gallon. This study analyses have not considered the future in-depth, but foresee no major changes in propane availability, currently about 25,000-m3/d from Alberta gas and straddle plants, and refineries. Reference (a) presents a week-by-week analysis for the period 1981 through part of 1998, showed a $217 per tonne (9.8 cents U.S. per pound) differential between USGC propane and propylene over that period. That number is significantly higher than noted in the above table – noting a major need for much more rigorous analysis by any propane dehydrogenation project proponent. Over 80% of Alberta’s average (25,000-m3/d) of propane production is sold out of the province, largely by pipeline. As noted above, 350-kty propylene propane to propylene facility will only use approximately 2,150-m3/d (14,000-BPD). Thus, no impact on Edmonton postings is foreseen with such a new local propane derivative plant. Commercial propane has 2+% ethane and 3 to 5% butane contents. In the selected technologies the ethane would be routed to fuel gas, there not being sufficient for economic recovery for sale. The C4’s would be isobutane rich and, with a small byproduct stream from dehydrogenation valued above conventional butane (of special value to refinery alkylation units). Thus, no adjustments for commercial propane impurity values have been made.

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March 31, 2000 Page 24

Propane is the swing feed in USGC ethane (‘gas’) based ethylene plants, although not used here (beyond the present low impurity level in ethane feedstock) due to poor yields. Propane is also a swing feed in U.S. Gulf Canada naphtha based ethylene plants. Thus, USGC propane values follow naphtha and condensates over time. The naphtha and condensate values in-turn are crude oil based. Thus, USGC propane can be considered to follow crude oil averaged over, say 12 months. Commercial propane contains sulphur compounds above the <1-ppm level required by the dehydrogenation facility. But aside from feed desulphurization drying and C4 plus rejection (in the feed depropanizer), feed propane treating needs are minimal. The propane portion of the dehydrogenation feed is converted to propylene at approximately 94.5 weight percentage yield – hydrogen at 3+% being the principal byproduct. In other words, 1.06 pounds of propane are required per pound of propylene. Using the 1999 average data: • • • • •

Alberta propane feed to product one tonne of propylene • 106-tonnes @ $129 U.S. per tonne = 137 USGC selling price – $304 per tonne Differential available to cover propane dehydrogenation • Capital and operating costs $167 per tonne of propylene But calculated cost is $227 at 20% or $185 at 15% Return at $167 per tonne would be only 13.5%, based on USGC sales value.

Thus, deliberate propane conversion to propylene does not appear attractive with 1999 conditions. However, the difference between the reference’s, USGC propylene, minus propane differentials and this study’s costing may warrant a second look. The high sensitivity to capital is to be noted and hopefully, decreasing capital costs could make this route a future winner in Alberta, even with our high propane costs, relative to developing country supply. While this study did not find propane dehydrogenation greatly economic in a current Alberta setting – only a fair return even at 1999 USGC propylene value – the current surge in dehydrogenation technology development is to be noted. The two Mideast projects committed to new technology may confirm lower capital costs, particularly in smaller facilities. The competition is heating up with another technology entry about ready to go. Thus, while apparently poor economically at this time, the study team strongly recommends very close attention to dehydrogenation developments and Alberta propane cost. We believe a prudent propylene supplier or bulk user would go much deeper into dehydrogenation than possible in this study.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 25

5.0

PROPYLENE CHEMICAL OPPORTUNITIES IN ALBERTA

5.1

Propylene Derivatives in an Alberta Context

Overt the past decade there has been a shift in propylene as a raw material from the ‘unwanted child’ of ethylene and refining production to a feedstock for a variety of chemicals and resins with strong growth. Table 5.1-1. Propylene Derivatives Assessed in Study Polypropylene Propylene oxide Isopropanol/acetone Propyl ethers n-Butanol 2-Ethyl hexanol

Cumene/phenol Propylene glycol Acrylonitrile Propyl esters Acrylic acid Acrylates

In the analysis of the chemicals derived from propylene or secondary products from propylene derivatives, the products are handled in roughly the order below. Table 5.1-2. Demand for First-step Derivatives of Propylene in North America (1998 - (ktonnes) Chemical Product Demand Propylene Use Polypropylene 5,818 5,926 Acrylonitrile 1,564 1,858 Cumene 3,136 1,170 Propylene oxide 1,455 1,148 n-Butanol 818 920 Acrylic acid 954 651 Isopropanol 636 622 2-Ethyl hexanol 377 397

5.2

Polypropylene (PP)

PP is a thermoplastic resins that has gained wide use in injection molding of a wide range of products, blow molding of bottles, sheet production particularly for food products, and even some application in wire and cable uses. The resin is made from PG propylene in a gas-phase process. Some plants can use lower grade propylene – chemical grade – but give up some capacity utilization with that decision.

5.2.1

North American Market for Polypropylene (PP)

The market for PP resins in North American ran to 5,750-ktonnes in 1998 with injection molding and fiber applications as the dominant demand areas. The injection molding area is highly varied as PP provides an easily worked and tough resin. Automotive parts have been a major outlet for resin in recent years as have appliances, and equipment parts for uses ranging from trucks to garden tractors. Table 5.2.1-1. Markets for Polypropylene in North America (ktonnes) Market Sector Injection molding Fiber and filament Distributors and compounders Film and sheet Blow molding Other, including wire and cable Exports Total Demand

Demand 1998 1,635.7 1,582.9 1,213.6 580.4 105.5 158.3 541.8 5,818.2

.

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March 31, 2000 Page 26

5.2.2

Major Producers of Polypropylene (PP)

The PP business has been consolidating, as have many other product areas, and today in North America there are two firms – Shell through Montell4 and BP Amoco that dominate the field with 30% of capacity. There are two plants in Canada, the Montell/Shell facility in Montreal (Varennes) with a capacity of 185-kty and the Shell/Montell facility in Corunna, Ontario with a similar capacity. Table 5.2.2-1. North American Polypropylene Producers (kty) Producers Canada Montell, Varennes, QU Montell/Shell, Corunna, ON U.S. Plants Aristech, La Porte, TX Aristech, Neal, W. VA BP Amoco, Cedar Bayou, TX BP Amoco, Chocolate Bayou, TX Epsilon, Marcus Hook, PA Exxon, Baytown, TX Fina, La Porte, TX Formosa Plastics, Point Comfort, TX Huntsman, Longview, TX Huntsman, Marysville, MI Lyondell, Bayport, TX Millennium, Morris, IL Montell, Bayport, TX Montell, Lake Charles, LA Phillips Sumika, Pasadena, TX Rexene, Odessa, TX Solvay Polymers, Deer Park, TX Union Carbide Norco, LA Union Carbide, Seadrift, TX Total

5.2.3

Capacity 185 185 175 205 250 545 335 480 680 230 300 80 180 130 525 425 340 95 350 225 140 6060

Production Technology for Polypropylene (PP)

The basic or most common PP process involves a gas-phase polymerization using proprietary catalysts. A number of competing processes using alternative routes include a tubular reactor using liquid propylene. Single site catalysts are replacing the traditional Zeigler Natta catalysts. Recently metallocene catalysts have been developed for PP resins, and this development is expanding the range of resin grades and characteristics. In the gas phase process (Unipol PP from Union Carbide Corp., now Dow Chemicals) a fluidized bed reactor using a proprietary catalyst is used. Melt index, isotactic level and molecular weight distribution, are controlled by catalyst type and quantity, as well as the addition of molecular weight control agents. The reaction takes place at 35 bar and 70ºC. The reaction gas is circulated by a centrifugal compressor, which also fluidizes the bed and provides the feed stream. The reaction is exothermic, and the outlet gas removes the heat of reaction. Approximately 20% of the feed is reacted per pass. The granulated product is removed after cooling. Unread reactants are recycled. Hydrocarbons remaining in the product are removed by purging with nitrogen. The granulated product is sent to a pelletizer, which provides a uniform low dust product. Both homopolymers and copolymers with ethylene or butene can be produced in PP plants. However, impact grade copolymers require a second reactor.

4

BASF – the world’s largest chemical company, is now becoming a partner in Montell.

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March 31, 2000 Page 27

Inputs Propylene is the major raw material for the production of PP resins with 1.01-kg required for each kg produced. Outside of utilities and labor the cost of catalysts and license fees are the major input expense in the process. Table 5.2.3-1. Raw Materials and Utilities Consumption per 1,000-kg of PP Input Propylene Electricity Cooling water Catalyst Steam

Quantity 1,010-kg 120-kWh 100-m3 0.1-kg (cost $10 to 20 per kg) 300-kg

Plant Size Although, the existing plants are in the 30 to 300-kty capacity a World Scale Plant should be considered to be in the 200 to 300kty range depending on process and propylene cost. The very minimum plant size for new facilities is at the 120-kty level. Process Suppliers The popularity of PP resins has help to foster a number of suppliers of process technology. However, three processes tend to dominate the field – Unipol PP, Spheripol, and Novelen. Polypropylene Process Suppliers • • • • • • •

Union Carbide/Dow Montell/Shell Targor/ Krupp Uhde Borealis A/S of Denmark. Chisso Corp. of Japan Mitsui Chemicals of Japan Nova of Canada

Unipol PP Process From Union Carbide Corp. (now Dow Chemicals) this gas phase process is the most successful process and is readily available commercially. Today 34 lines are operating or under construction worldwide ranging from 80 to 260-kty. This covers a wide range of homopolymers and copolymers with up to 12% ethylene or 14% butene. Spheripol Process Montell PP (from Shell) is the main commercially competing process originally developed by Montedison of Italy. Shell recently acquired all of the company and its polymer technologies. This process uses a liquid phase reaction and Montedison developed the Loop Reactor. Some 65 Spheripol plants are in operation with a capacity of 10 million tonnes per year with individual plant capacities in the 40 to 300-kty range. Novelen PP Process This process was developed by Targor (the PP Company with the BASF and Hoechst plants) and is offered exclusively by Krupp Uhde of Germany. Some 39 lines with capacities of 60 to 225-kty are in operation or under construction. This process uses a vertical helical stirrer for homogenization and is particularly suited for making rubber copolymers

5.2.4

Technical Business Trends in Polypropylene (PP)

PP resins have been growing a 6% annually for most of the past decade and the near-term expectations in this century are that growth in demand will run in the 6 to 8% range. Metallocene catalyzed resins and a growing range of copolymer resins have been major drivers in this demand trend as PP takes over market areas once dominated by other resins. Compared with polyethylene’s (PE’s) 3 to 4% annual demand growth, PP growth has been stronger by 2 to 3%.

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March 31, 2000 Page 28

Table 5.2.4-1. North American Polypropylene Capacity Expansions* (kty) Producers Capacity Amoco, Chocolate Bayou, TX 250.0 Arco Products, Carson, CA 200.0 Aristech, La Porte, TX 250.0 Aristech, Neal, W. VA 55.0 Dow Chemical, un-named n/a Epsilon/Marathon, Garyville, LA 360.0 Exxon, Baytown, TX 250.0 Fina, La Porte, TX 250.0 Huntsman, Longview, TX; Marysville, MI; Woodbury, NJ 420.0 Total 2,035.0+ * proposed/planned from 1998 forward

Date Planned 1999 1999 1999 to 2000 1998 1999 to 2001 2000 1999 planned debottlenecking

Should growth rates in resin demand hold up, all the planned capacity is likely to be completed. The major change in the PP business is the entry of Dow Chemical and Arco Products. Both firms have strong molding resin businesses, and PP is a natural addition to their product slate. Also, Dow has a strong position in metallocene catalyst technology, and will likely put it to good use in making PP resins. Dow Chemical's first PP unit was a 200-kty at Schkopau, Germany. A second plant is slated for Tarragona, Spain, and a further PP plant is planned for the U.S. The three plants together would give Dow a total of about 680-kty of capacity.

5.2.5

Potential for Alberta

The strong growth in PP offers good potential for an investment in Alberta. The province has potentially a large supply of untapped raw materials, as well as PP producers with established plant sites in the province. Strengths for an Alberta Plant • • • •

Strong regional position to access Western N. American markets and Asia-Pacific. Good supply of raw materials at below USGC prices. Rail distribution access to North America markets. Potential investor companies with existing plant sites.

Dow Chemical’s move into PP and its plans for a resin plant in North America would offer solid potential to persuade the company to investment in the province. A second possibility is Montell, controlled by Shell Chemical, which has a plant site in the province (with BASF as a new partner). Montell has not been making capacity additions recently, and the firm may be considering new capacity should PP market growth continue.

5.3

Acrylonitrile (ACN)

ACN is best described as a fiber chemical, since it is a raw material for two major products of the fiber industry – nylon and acrylic fibers.

5.3.1

North American Market for Acrylonitrile (ACN)

The markets for ACN are concentrated in the fiber business in North America; so the U.S. southeast provides the geographic focus for the demand. The plastics business provides the second major demand area for this chemical. Nylon demand is the larger market segment as ACN is turned into adiponitrile for producing this plastic. Acrylic resins are also made from ACN for fibers along with sheet production and molding grades. Nitrile elastomers also have a fiber market use as well as molding applications. At the performance fiber end of the scale, ACN is used for making carbon fibers. The plastics sector forms the second major use area for ACN derivatives. The chemical forms the ‘A’ in ABS and styrene acrylonitrile (SAN), two copolymer resins. ABS is used in everything from auto parts and other molded products to pipe, while SAN goes into the packaging sector as well as consumer food wraps.

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March 31, 2000 Page 29

Table 5.3.1-1. Acrylonitrile Demand in North American (kty) Market Volume Adiponitrile 356.6 ABS/SAN resins 332.8 Acrylic fibers 297.2 Acrylamide 71.3 Nitrile elastomers 47.5 Misc. incl. polymers, carbon fibers 83.2 Exports 375.0 Total 1,563.6

5.3.2

Major Producers of Acrylonitrile (ACN)

Over 90% of North American ACN production is carried out in Texas. Only the Lima, OH plant of BP Amoco is outside of that state. The level of integration of the fiber producers with the production of ACN has been lessening in recent years. Cytec and Monsanto produce or produced acrylic fibers, and much of their production goes into that market. After selling its fibers business to Sterling, Cytec is still in the acrylamide applications in a major way, as well as supplying ACN to Sterling. Table 5.3.2-1. Major North American Producers of Acrylonitrile (kty) Producers Capacity BP Chemicals, Green Lake, TX 450 BP Chemicals, Lima, OH 225 Cytec Industries, Avondale, LA 220 DuPont, Beaumont, TX 175 Monsanto, Alvin, TX 225 Sterling Chemicals, Texas City, TX 320 Total 1,615

DuPont’s nylon business is supported by the Beaumont plant, but it also buys on a merchant basis. Sterling and BP Amoco have about 60% of ACN capacity for merchant sale.

5.3.3

Production Technology for Acrylonitrile (ACN)

Over 90% of the world ACN capacity is based on BP Amoco’s Sohio process. With this process, the propylene can be low purity refinery stream propylene or a 94% chemical grade stream. This is reacted with fertilizer grade ammonia and oxygen (as air) in proportions of 1:1:1.5 (by volume) in a catalyzed fluidized bed reactor at 400oC and 15-psig. The propylene is converted to ACN with an efficiency of over 70%. The main byproduct is HCN at 0.15-kg per kg of ACN with 0.04-kg of acetonitrile. The reactor effluent after cooling is sent to separator where unconverted propylene, nitrogen and combustion products which are sent overhead. The bottoms product containing an aqueous solution of ACN is sent distillation for separation of acetonitrile and purification. Sohio are also developing a competing process based on propane feedstock, which claims to reduce the cost of production by 20%. This is based on the much lower price of propane compared to propylene. This process, when proven, will reduce the propylene feedstock requirements for ACN. Table 5.3.2-2. Material Consumptions per 1,000-kg of Acrylonitrile Propylene (100% basis) Ammonia Air Catalyst

1175-kg 475-kg 0.2-MMscf $2

Plant Size

•

The size of World Scale ACN Plant is 200-kty capacity.

Process Availability

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 30

•

New ACN processes are not readily available on a commercial basis in North America, although the conventional BP Amoco process is likely available for selected markets.

Major Suppliers of Acrylonitrile (ACN) Technology • •

BP Amoco Chemicals Monsanto

The Sohio Process from BP Amoco Chemicals is the sole commercially proven and viable process at present. (A competing process based on propane may also be licensed by the same party, as well.) Since BP is a major producer of this product, it should be expected that the licensing for this process can be considered restricted. Monsanto has an ACN process, which recently was licensed to Tae Kwang in Korea. This move breaks the near monopoly on the BP Amoco process. Solutia (formerly Monsanto) has an in-house ACN process, which they are using for the 300-kty capacity plant at Alvin, TX, but it is not available commercially.

5.3.4

Technical Business Trends in Acrylonitrile (ACN)

The ACN business in North America has involved a strong domestic market as well as exports, mainly to Asia of between 500 and 636-ktonnes a year. These exports come out of the Texas plants. The Asian markets have been growing driven by acrylic fiber demand and the ABS resin business. Domestically construction and durable goods – such as automobiles and major appliances – have kept ACN growing at 2 to 3% annually. The fastest growing market for the chemical has been the polyacrylamide polymers that go into the paper and water treatment business as flocculants and retention aids. PAM products have been growing at 4 to 5% annually. On the supply side, there has been rationalization of ownership in recent years as Cytec sold off its fiber plants to Sterling in 1997. BP added a new production train to its Green Lake plant in 1996, which added 120-kty to the site capacity. Since then, no new capacity has been added in North America.

5.3.5

Potential for Alberta for Acrylonitrile (ACN)

The major opportunity from an Alberta market position to ACN lies in competitively reaching the Asian markets. With over 500ktonnes a year moving into those markets from the USGC, an Alberta plant could cut the shipping distance. Domestically Canada imports some 7.3-ktonnes of ACN (each for 1997 and 1998) worth some $8 million or so a year, the investment market support lies in the export markets. On the raw material side, Alberta has both propylene and ammonia at fully competitive levels. Given the seasonable nature of the ammonia business local fertilizer plants should be in a strong position to supply a world-scale ACN plant. With Agrium and Sherritt in the AIH (and Agrium and Canadian Fertilizer at other sites) as ammonia suppliers an ACN plant will be well supplied with ammonia. The byproduct cyanide offers good market potential as well. Traditionally this side-stream has been converted into sodium cyanide for the mining sector. In Canada, all the gold and copper refineries operate on imported sodium cyanide – mainly from ICI, Degussa and DuPont. The western mining market in Canada as well as into the U.S. would be open to an ACN plant. The nearest competitor is a liquid plant of FMC in Wyoming that supplies the local gold mines. One of the more interesting potentials lies in production technology. A couple of years ago BP Amoco started of a demonstration unit for its new process for producing ACN directly from propane. The process is said to cut the cost of acrylo manufacture by at least 20%. Again, Alberta has a sufficient supply of propane to support a competitively sized facility, if the process shows promise.

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5.4

Cumene and Phenol

Cumene and phenol together form a combination of intermediate and finished products with cumene as the direct propylene derivative. All cumene production virtually goes into the production of phenol. Phenol must be considered as the commodity petrochemical since little cumene trades on a merchant basis.

5.4.1

North American Market for Phenol and Cumene

The cumene demand in North America ran to 3,136-ktonnes in 1998 and growth is running 4% annually based on phenol demand.

Phenol Imports Exports Total

Table 5.4.1-1. Demand for Cumene (ktonnes) 3,039 (114) 211 3,136

Virtually all cumene produced is oxidized to cumene hydroperoxide, which is then cleaved catalytically to phenol and acetone. Therefore, the market for cumene is phenol. Table 5.4.1-2. North American Demand for Phenol, 1998 (ktonnes) Use Volume Bis-phenol A 701.2 Phenolic resins 677.3 Caprolactum 294.4 Aniline 101.2 Alkylphenols 99.2 Xyenols 97.8 Miscellaneous 19.1 Exports, net imports 20.5 Total 2,010.7 Source: Sigurdson & Associates/SRII Consultants

The market growth in the U.S. has been driven by the growth in three major plastic resins – epoxy, nylon and polycarbonate resins. Bis-phenol A is used for making epoxy resins and polycarbonates, as well as other chemicals. These two resins are undergoing strong growth at present. Polycarbonate is being driven by its use in glazing as well as in compact discs, while epoxy resins are finding greater use in industrial and consumer applications as adhesives, coatings and casting compounds. Other demand areas for phenol lie in the wood binder business where phenolic resins dominate for outdoor grades of plywood oriented strand board and increasingly manufactured studs and beams.

5.4.2

Major Producers of Cumene and Phenol

In the past, Canada had phenol production with a plant in Montreal operated by Gulf Canada, and Chatterton Chemicals (originally Dow) in Burnaby, BC. However, both of those facilities closed several years ago.

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Table 5.4.2-1. Cumene Producers in North America (kty) Producer Chevron Chemical, Port Arthur, TX Citgo Petroleum, Corpus Christi, TX Coastal Eagle, Westville, NJ Georgia Gulf, Pasadena, TX JLM Industries, Blue Island, IL Koch Industries, Corpus Christi, TX Marathon/Ashland, Cattlesburg, KY Shell Chemical, Deer Park, TX Sun Chemicals, Philadelphia, PA Texaco Refining, El Dorado, KS Total

Capacity 454 507 150 682 70 682 363 500 475 77 3,960

Source: Chemical Marketing Reporter

The integration of cumene and phenol production runs just over 20% of phenol capacity, which is very low for a commodity chemical of this volume. Georgia Gulf is integrated from cumene into phenol in order to supply its phenolic wood binder plants scattered across the continent. JLM Industries, Shell, Sun and Texaco are the other firms integrated back to cumene, but most of their sales are into the merchant markets. GE Plastics has captive uses for phenol in its plastics and specialties business. Kalama Chemicals in Washington State produces phenol from toluene, using an old process developed originally by Dow Chemical, the plant also produces a series of benzoic acid derivatives. Table 5.4.2-2. Phenol Capacity in North America (kty) Producer Aristech, Ironton, OH Dakota Gasification, Beulah, ND Dow Chemical, Freeport, TX Fenoquimia, Cosoleacaque, Veracruz GE Plastics, Mt. Vernon, IN Georgia Gulf, Pasadena, TX Georgia Gulf, Plaquemine, LA JLM Industries, Blue Island, IL Kalama Chemical, Kalama, WA Merichem, Houston, TX Shell Chemical, Deer Park, TX Sun, Frankford, PA Texaco, El Dorado, KS Total

Capacity 291 17 295 22 318 73 230 43 32 16 318 454 57 2,166

Source: Sigurdson & Associates

Consolidation has been occurring in the phenol business. The most recent shift saw Sun Chemical buy Allied-Signal’s phenol business, which tied phenol production to Sun’s cumene capacity in the Philadelphia area.

5.4.3

Production Technology for Cumene and Phenol

Cumene Cumene is produced by alkylating benzene with a refinery or chemical grade propylene (94% purity). Liquid propylene is mixed with fresh and recycled benzene and fed to a fixed bed alkylation reactor. A proprietary regenerable zeolite catalyst is used for the alkylation. The propylene reacts completely and the effluent flows to the depropanizer column where the propane leaves as the overhead product. The bottoms are sent to the benzene column where the unreacted benzene leaves as the overhead product and is recycled. The benzene column bottoms are sent to the cumene column where the overheads are the cumene product with 99.7% purity. The bottoms are sent to the heavies column, where the overhead product is diisopropyl benzene, which is recycled and the heavies are a byproduct.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

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Table 5.4.3-1. Input Consumption per 1,000-kg of Cumene Benzene Propylene( 94%) Catalyst Electricity Heat input Cooling Water

651-kg 370-kg $2 11-kWh 0.35 million kcal 5-m3

Plant Size •

The existing plant capacities cover the 100 to 600-kty range. A world scale plant today should have a minimum plant capacity of 300-kty. This would require the availability of 195-kty of benzene and 210-kty of propylene. Plants are usually located near an existing refinery complex where the bulk feedstocks and utilities are readily available over-the-fence.

Process Technology •

Cumene process technology is readily available on a commercial basis with three major suppliers actively marketing their engineering and process expertise.

Major Suppliers of Cumene Technology • • • •

UOP LLC, Des Plains, IL Badger/Raytheon, Pittsburgh, PA CDTECH, Houston, TX Mitsui, Japan

Q-Max Cumene Process •

UOP’s process is relatively new with plant capacities up to 600-kty. There are three plants in operation and one under construction. The process integrates well with UOP’s BTX (aromatics) units and is readily commercially available. The catalyst is regenerable and has an expected life of three years. Low-pressure steam can be recovered for use in an adjacent phenol plant.

Mobil/Badger Process •

Provided by Raytheon, Pittsburgh, PA this is the traditional favorite and is well suited to low purity propylene. It is commercially well developed and seven plants have been installed since 1996.

CDTECH Process •

This process has been developed by ABB Lummus and CR&L. This process uses catalytic distillation and is suited to lower capacity plants. The first commercial unit of 270-kty for Formosa will go on stream this year.

•

Cumene peroxidation process is the major process used and involves the liquid-phase oxidation of Cumene into Cumene hydroperoxide, which decomposes into phenol and acetone. For every tonne of phenol produced 0.6tonnes of acetone is generated in the process.

Phenol

Table 5.4.3-2. Input Consumption per 1,000-kg of Phenol Cumene Air Sulfuric acid Sodium hydroxide

1380-kg 1415-m3 small small

Plant Size •

A World Scale phenol plant would be minimum 150-kty and more likely 200-kty for most market areas.

Process Availability •

There are two major suppliers of phenol processes, Kellogg and ABB Lummus.

Kellogg/Hercules/BP Process ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 34

•

Kellogg boasts to having supplied this process to 50% of the world’s phenol plant capacity. Three plants are presently under construction including two major facilities in North America.

CDHYDRO Process •

5.4.4

ABB/Lummus’ process is a companion to its cumene technology and offered by CDTECH. Presently two plants are being built – one in North American and the other in Taiwan and the firm boasts 50 years of building these plants.

Technical Business Trends in Cumene and Phenol

The phenol business has been growing at 3% annually over the past few years driven by the construction board adhesives and the bis-phenol-A businesses. However, expansion has been the order for all the major producers; in addition, two new companies have announced plans to enter the business. Phenolchemie, a Degussa-Hüls subsidiary, is a leading European phenolic resin producer, has announced plans for a facility in Alabama. Also, Solutia’s new plant in Florida will have JLM Industries as a partner to take a portion of the output. That facility will use Russian technology to produce phenol without going through the Cumene step. Table 5.4.4-1. Phenol Plant Expansions Planned in North America Producer

Expansion ktonnes 318 400 225 136 1,308

Aristech, Haverhill, OH Phenolchemie, Mobile, AL (1999) Shell Chemical, Deer Park, TX Solutia/JLM, Pensacola, FL (2000) Total

Date 1999 2000 2000 2001

Over the past year, the phenol industry has announced expansions that will more than double North American output, if all the plants are constructed. To this point, the ‘brown-field’ expansions have been going ahead strongly. Suncor brought on stream the Allied Signal expansion after its acquisition of the Allied facilities. Several of the other plants have debottlenecked to add some capacity. Cumene production capacity is out of sync with phenol at this point. Minor plant expansions and one new production train have been completed in the past three years. Should the Cumene process continue strongly, and the proposed phenol plant capacity be constructed there will be a shortage of Cumene in the coming years.

5.4.5

Potential for Alberta in Cumene and Phenol

The potential for cumene/phenol in Alberta lies in the growing board resin market in the Northwest of North America and only one small phenol plant supplying this region. Canadian imports of phenol run to 100+ kty with 60% of that going into the Western regional market. The development of technology that produces phenol without generating acetone is a big plus for potential investment in Alberta. There are few acetone uses in Western Canada, and the newer technology would mean that byproduct acetone would not have to be shipped out of the region by a plant mainly involved with supplying the phenolic resins sector.5 In Canada demand for phenol is supplied by imports, and the bulk of supply comes from the U.S. The share of the market held by U.S. producers has remained constant over the years, in part, because of the spread-out nature of the domestic market. Major demand lies in Ontario, Quebec and the Maritimes, but it is also scattered into Alberta and BC. Table 5.4.5-1. Canadian Imports of Phenol Year 1998 1997 1996

5

Value $ million Cdn 123.5 107.1 97.6

Total Imports ktonnes 116.4 99.9 97.0

Acetone can be converted to isopropanol and most of that back to propylene via hydrogenation to alleviate byproduct challenges, if required.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 35

1995 1994 1993

76.2 59.4 45.0

73.3 71.9 61.3

Source: Statistics Canada, Imports by Commodity

5.5

Propylene Oxide (PO) and Glycol

PO is the starting point for the production of a variety of chemicals particularly urethane polyols and plasticizers. Most of the PO plants also have integrated polyol production. Dipropylene glycol Propylene oxide

Urethane polyols Propylene glycol P-series Glycol ethers

5.5.1

North American Market for Propylene Oxide (PO) and Glycol

The major use of PO lies in the production of urethane polyols. When reacted with isocyanate the polyols make urethane foams – flexible and rigid. On a PO basis flexible foam polyols account for 53% of use, while the rigid foams take 6% of PO and nonfoam use of polyols accounts for 1% of material going into this market area. Table 5.5.1-1. Propylene Oxide Markets in North America (ktonnes) Market Demand Urethane polyether polyols 749.3 Propylene glycols 312.3 P-series glycol ethers 49.9 Miscellaneous 137.4 Exports, net imports 206.1 Total 1,455.0

The next largest demand area for PO is the production of propylene glycol, followed by the p-series glycol ethers, miscellaneous applications for PO, including making polyalkylene glycols, alkyl alcohol and isopropanolamines. Trade in PO per se is modest with some 200 to 210-ktonnes being exported from the U.S. and imports into the U.S. being negligible. Table 5.5.1-2. Propylene Glycol Markets in North America (ktonnes) Market Demand Unsaturated polyester resins 105.6 Antifreeze and deicing fluids 89.2 Food, drug and cosmetics 73.0 Liquid detergents 44.6 Paints and coatings 20.3 Functional fluids 16.2 Pet food 12.2 Tobacco 12.1 Miscellaneous, incl. plasticizers 32.4 Exports, net imports 59.5 Total 465.1

The largest polygrade (PG) market is the polyester resin systems for making fiberglass parts; followed closely by antifreeze and deicing fluids, where PG competes with ethylene glycols. Aircraft deicing and long-life radiator antifreeze applications top this market area. In the food, drug and cosmetic areas, PG acts as a texturizing agent, binder, and humecent. Unlike ethylene glycol

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 36

PG is not toxic and so can be used in food and drugs. The balance of PG demand lies in a variety of specialty applications from pet food to tobacco where the glycol helps to keep things moist, or hold texture or flow properties. Table 5.5.1-3. Dipropylene Glycol Markets in North America (ktonnes) Market Demand Plasticizers 18.7 Unsaturated polyester resins 12.3 Cosmetics and fragrances 4.9 Urethane polyols 3.9 Alkyd resins 3.4 Miscellaneous, incl. functional fluids 5.8 Total 49.0

The dipropylene glycol applications are a refined sub-set of the PG market. Plasticizers are the largest application area; followed closely by unsaturated polyester resins. The other uses areas are cosmetics, urethane polyols, alkyd resins and a variety of areas including functional fluids. Plasticizers, 38%; unsaturated polyester resins, 23%; cosmetics and fragrances, 10%; polyurethane polyols, 8%; alkyd resins, 7%; miscellaneous, including solvents and functional fluids, 14%.

5.5.2

Major Producers of Propylene Oxide (PO) and Glycols

The producers of PO are all located in the USGC are involved in the urethanes business. Arco dominates the field in terms of capacity with Dow running second. Huntsman purchased its facility from Texaco a few years ago and is the third player in the field. Table 5.5.2-1. Propylene Oxide Producers in North America (kty) Producer Capacity* Arco, Bayport, TX 550 Arco, Channelview, TX 500 Dow, Freeport, TX 590 Dow, Plaquemine, LA 290 Huntsman, Port Neches, TX 180 Total 2,110 * 1998

Propylene glycol tends to be an integrated product to PO production. However, two of the propylene glycol producers are not integrated with the production of PO, Eastman and Olin purchasing their raw material on a merchant basis. Table 5.5.2-2. Propylene Glycol Producers in North America (kty) Producer Capacity* Arco, Bayport, TX 256 Dow, Freeport, TX 115 Dow, Plaquemine, LA 105 Eastman, South Charleston, W. VA 33 Huntsman, Port Neches, TX 55 Olin, Brandenburg, KY 35 Total 599 * 1998 figures, Source: Chemical Market Reporter.

Specialty products generated as byproducts from propylene glycol production are the di and tri glycols at about 10% of PG production.

5.5.3

Production Technology for Propylene Oxide (PO) and Glycol

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 37

Propylene oxide Today there are several routes for the production of PO, each with different raw material requirements and product outputs. The choice of route is dependent on the price of raw materials and required products. The traditional route is from propylene and chlorine using the chlorohydrin route. The dilute chlorohydrin is reacted with 10% slaked lime (or caustic soda) slurry to produce PO; however, further reaction to the glycol is to be prevented. This process gave way to the generally lower cost peroxidation route: peroxidation of isobutane and propylene to give PO and tertiary butyl alcohol (TBA). This was traditionally done using air, but the newer plants use oxygen. In a third process, propylene and ethyl benzene are reacted to produce PO and Styrene Monomer (SM) in another emerging technology – the most common in new facilities of the past five years. Chlorohydrin The traditional route is the production of PO from propylene via the chlorohydrin route. This route has been used by Dow but has a higher per capita propylene consumption. The process uses the hydrolysis of propylene and chlorine with water in the presence of a lime slurry or caustic soda to produce PO. The oxide must be removed rapidly to prevent the formation of propylene glycol. Propylene, chlorine and water are sent to the reactor. Initially hypochlorus and hypochloric acids are formed. The liquid effluent contains 3 to 4% chlorohydrin. The chlorohydrin should not separate as an oil phase as this increase the side reactions. Unreacted chlorine and acid are scrubbed using a lime or caustic wash. The chlorohydrin is reacted with a 10% lime slurry or caustic solution to give PO and CaCl2 or NaCl. The PO has to be removed rapidly from the reaction zone to prevent the formation of propylene glycol. The resulting PO is purified by distillation. Table 5.5.3-1. Consumptions per 1,000-kg of Propylene Oxide Product Propylene (100%) Chlorine Lime

Consumption 940-kg 1,590-kg 1,090-kg

Byproducts are 90-kg of propylene chloride, 20-kg of ethers and 2,150-kg (as 1,005 CaCl2) of calcium chloride brine (or sodium chloride brine). Peroxidation In this process isobutane is peroxidized at 90ºC and 450-psig in the presence of a catalyst to form tertiary butyl hydroperoxide and tertiary butyl alcohol (TBA) yield is approximately 94% of the theoretical and 2.2-kg of TBA is produced per kg of PO. Other byproducts depend on isobutane purity. Table 5.5.3-2. Raw Materials Inputs per 1,000-kg of PO with Peroxidation Input Propylene Isobutane Oxygen

Quantity 728-kg 2,160-kg 895-kg

Propylene Oxide/Styrene Monomer (POSM) This process has styrene monomer (SM) as its major product with a byproduct (on a weight basis) of PO. The starting point is ethyl benzene (or benzene and ethylene which can be reacted and dehydrogenated to give ethyl benzene). The ethyl benzene and propylene are reacted to produce POSM. It is not a viable alternative without the availability of ethyl benzene at competitive prices and in large quantities. Plant Size For the peroxidation process, a world-scale plant has 300-kty of capacity. The World Scale plant based on the POSM process is approximately 250-kty of PO plus 600-kty of styrene.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

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Process Availability Availability of PO technology is mixed with the POSM process tightly controlled. The new technology for this route is provided by Nizhnekamskeftekhim of Russia through Dow Chemicals. Arco has never offered its POSM technology for sale, and Shell is building a plant in Singapore using a similar technology. Major Suppliers of Propylene Oxide Technology None Union Carbide and Dow Chemical have PO technology but do not offer it on a merchant basis. Carbide developed a peroxidation process using oxygen, which has equipment cost reduction, as well as higher conversion compared to air peroxidation. Overall, the technology is not freely available and will require negotiation. Propylene Glycol Propylene glycol is produced from PO and water. PG can be produced in a stand alone unit starting with purified PO or in an integrated unit using aqueous solution of PO, hence, saving on purification. However, it is the PO, which is a consumer of propylene and not PG directly. The process is similar to that used for ethylene glycol. It is in principle possible to use the ethylene glycol hydration facilities to produce PG. In addition to mono propylene glycol, there is some requirement for dipropylene glycol for the polyester resin industry. PO with an excess of recycled water is heated to approx. 190oC at 185-psig. In the tubular reactor, total conversion to propylene glycols takes place. Excess water provides for a higher mono glycol product. Excess water is evaporated in multi stage evaporators, with the last evaporator producing low-pressure steam. The process is noncatalytic. Crude PG is purified using a vacuum column. Dipropylene glycol can be produced by the addition of PO or by reducing the recirculating water. Table 5.5.3-3. Major Inputs per 1,000-kg of Mono Propylene Glycol Input Propylene oxide MP steam Electric power Cooling water

Quantity 770-kg 600-kg 40-kWh 15-m3

Plant Size Since the propylene consumption is dependent on the PO plant size the minimal size is more a function of whether the plant is stand alone or integrated. Scale can be further reduced in principle if some ethylene glycol equipment is used. However, it can be said that the minimum capacity should be 40-ktonnes with an optimum for a standalone unit at 100-ktonnes. Process Availability With the similarity of ethylene and propylene glycol plants, there are several suppliers of PG processes and access is good. Major Suppliers of PG Technology • • •

Shell International Scientific Design Union Carbide/Dow

Shell International have 60 EG and PG plants in operation and commercially offer the process. Sharing the field is Scientific Design with again, 60 EG and PG plants in operation. The two other major glycol producers with well-developed technology are Union Carbide and Dow Chemical (now all Dow). At this point, they do not appear to offer this technology for third party usage.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 39

Dipropylene Glycol Dipropylene glycol, along with tripropylene glycol (TPG) and small quantities of higher glycols are produced during the manufacture of propylene glycol from PO. TPG production represents 1% of output normally in such a plant. Dipropylene glycol can be made on purpose should demand warrant by reacting propylene glycol with PO. No proprietary commercial process is involved with this simple reaction.

5.5.4

Technical Business Trends in Propylene Oxide (PO) and Glycol

Both PO and PG are growing in the 2 to 4% per year range and are expected to hold those growth rates in the coming years. PO has an export component that runs to 15% of U.S. domestic demand at 210-ktonnes a year or so. Much of this product has been going into the Asian markets. Durable goods such as cars, major appliances, carpeting, etc. that use urethane polyols are expected to be the major driver in North America for PO in the coming years. At this point points strong automotive sales are driving flexible mold urethane foams, while good demand for furniture, carpet underlay and bedding raises urethane slab stock requirements. PG’s outlook is for growth in the 3 to 4% per year range, about 1% above PO’s growth rate. Unsaturated polyester, resins, personal care products and functional fluids are considered the strong market areas for the chemical. In recent years the strong polyester resins business has helped growth, but in recent years, dicyclopentadiene-based resins have been moving into the fiberglass business. This trend may cut the use of PG in this market segment. Deicing fluids for aircraft using PG have been growing nicely due to the concern about toxicity for using ethylene glycol. Growth of USP glycol in the cosmetics and the personal care segment is being driven by strong markets for a variety of skin care and sunscreen products; however, tobacco use is expected to continue to decline. U.S. Exports of propylene glycol have been in the 80-kty level recently with imports minimal.

5.5.5

Potential for Alberta with Propylene Oxide (PO) and Glycol

A PO/PG complex likely would have to be considered, to justify building a Greenfield plant in Alberta. Favorable raw material supply helps, but developing market access to the Asian markets and strong ties to U.S. mid-western consumers of both PO and PG would be critical in justifying an investment in these chemicals in the province. The Canadian market does offer some demand support, although most of the use lies in the eastern half of the country. Between the two chemicals domestic use run in the $100 million level annually. Table 5.5.1-1. Canadian Imports of PO and PG Product Propylene Oxide Volume, ktonnes Value, $ million Cdn Propylene Glycol Volume, ktonnes Value, $ million Cdn

1998

1997

58.5 88.6

57.1 83.4

20.6 29.0

22.2 31.7

Asian PO demand, which had been growing at double-digit rates, is still expected to increase by 4 to 5% this year and offers interesting potential. It is likely that an investor will have a specific geographic supply need to seriously consider a PO/PG facility. Also, many of the producers are moving into value-added products such as polyalkylene glycols – e.g., Dow recently expanded its capacity for those products at its Plaquemine, LA site.

5.6

Propylene Ethers

Propylene ethers are a growing product for the coatings, adhesives, inks and some industrial chemical applications. Some of the Propylene Ethers • • • • •

Propyl propionate iso-Propyl ether Propylene glycol butyl ether PBT (propylene glycol t-butyl ether) Propylene glycol monoethyl ether

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

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• •

5.6.1

Propylene glycol monomethyl ether Propylene glycol phenyl ether

North American Market for Propylene Ethers

Propylene glycol ethers are growing rapidly, far outstripping the ethylene glycol ethers or E-series products. In Europe P-series ethers are accounting for 44% of all ether solvent consumption, while in North America it runs to just over 20%. In coatings and adhesives, the two products can be easily switched without great reformulation. PO based (P series) glycol ethers are produced by Dow Chemical Co., Arco Chemical Co., Eastman Chemical Corp., Shell Chemical Co. and Oxychem. Demand for P- and E- series glycol ethers is about 880 million pounds per year and growing at 2 to 3% per year. The coatings industry consumes about half of the glycol solvents. Because P-series are not classified as hazardous air pollutants, they will continue to outpace demand for E-series and hydrocarbon solvents.

5.6.2

Major Producers of Propylene Ethers

Propylene ethers are made by the same producers as ethylene ethers and as a result, capacity cannot be easily split between the various products to isolate the propyl portion of the sector. PO based (P series) glycol ethers are produced by Dow Chemical Co., Arco Chemical Co., Eastman Chemical Corp., Shell Chemical Co. and Oxychem.

Company Union Carbide

Dow Chemical

Table 5.6.2-1. P&E-type Ether Solvent Capacity (kty) Site Seadrift, TX Seadrift, TX Taft, LA Plaquemine, LA Midland, MI Longview, TX Bayport, TX Bayport, TX Geismar, LA Brandenburg, KY

Eastman Chemical Oxychem Arco Chemical Shell Chemical Olin 1 butylene-based 2 ethylene based 3 methylene based 2, 4 ethylene and propylene based 4 propylene based

Capacity 136 1 64 2 41 3 91 2,4 34 2,4 91 2 82 2 52 4 34 2 92

Source: Company reports

All the major producers provide a range of products to the coatings, adhesives, inks and general solvents business areas. Also, in their production complexes they also produce various alcohols and PO to support the production of the propylene and other ethers.

5.6.3

Production Technology for Propylene Glycol Ethers

Alcohols or phenols and PO are reacted to produce propylene glycol monoethers, which may be further reacted to produce di-, tir- and poly (propylene glycol) ethers. Propyl ethers are produced by the dehydration of propyl alcohols. For this, IPA is a suitable feedstock. The traditional propyl ether process is carried out in the liquid phase using sulfuric acid as the dehydrating agent. A 96% sulfuric acid is reacted with an aqueous 95% IPA solution in a corrosion resistant kettle. The reaction takes place 125oC. The vapor effluent is scrubbed with dilute caustic soda to remove the residual acid. The ether is recovered by distillation. The process requires special technology due to the explosive nature of the ether. The scale of production is normally about 10 to 15% of the IPA capacity. The production technology is similar and the same plants can be used for making a variety of ethers. Ethylene, butylenes and methylene ethers are made by the same producers.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 41

5.6.4

Technical Business Trends in Propylene Glycol Ethers

A high growth rate in the coatings, inks and adhesives area is giving rise to a bright outlook for p and e-type ethers in North America. Growth rates are expected to run over 5% annually as the major demand areas try to control VOC emissions from their products by switching to low volatile solvents such as propylene glycol ethers.

5.6.5

Potential for Alberta with Propylene Glycol Ethers

With no major regional supplier of these growing solvents, should a PO facility be built in Alberta, the production of propyl ethers could be viable. There is not a large local regional market, but shipping to Eastern Canada and the Midwestern U.S. would be competitive with the USGC.

5.7

n-Butanol

Normal butyl alcohol or n-butanol is a medium-volume propylene derivative that goes into solvent products on a direct basis or as a raw material.

5.7.1

North American Market for n-Butanol

Acrylates, both butyl and methyl form the largest use for n-butanol, and also is one of the areas that is highly integrated with the production of AA as well. The chemical’s use as a solvent or for making flow modifiers such as ethers, acetates and plasticizers. Table 5.7.1-1. n-Butanol Demand in North American (kty) Market Butyl acrylate and methacrylate Glycol ethers Butyl acetate Solvent use Plasticizers Amino resins Misc. incl. butylamines Exports, net imports Total

5.7.2

Volume 296.9 176.8 106.1 63.6 21.2 14.1 28.3 111.4 818.4

Major Producers of n-Butanol

Solvent and specialty chemical producers dominate the n-butanol business in North America. Carbide is the largest producer and is well-integrated into specialty esters. BASF and Celanese both have fiber and specialty chemical operations as well as specialty chemical distribution. Table 5.7.2-1. Major Producers of n-Butanol in North America (kty) Producer Capacity BASF, Freeport, TX 240 Celanese, Bay City, TX 136 Eastman, Longview, TX Shell, Deer Park, TX Union Carbide, Taft, LA Union Carbide, Texas City, TX Total

180 66 275 255 1,152

Most commercial production involves the hydrogenation of n-butyraldehyde made through oxo reaction with propylene. However, there are byproduct sources as well. Condea Vista Company produces about 5-kty of n-butanol annually at Lake Charles, LA as part of its detergent alcohols operations. BP Amoco obtains an ethanol/n-butanol stream as a byproduct at its Pasadena, TX linear alcohols plant.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 42

5.7.3

Production Technology for B-butanol

The production of n-butanol is mainly from propylene and syngas (H2 and CO). The traditional route, which was based on the fermentation of carbohydrates, can be assumed uneconomic for new capacity. Many existing plants are being converted to this route. The option is to use the oxo synthesis to produce butyraldehyde, which can be hydrogenated to butanol. The alternative product is 2-EH, which is produced by the aldol condensation reaction followed by catalytic hydrogenation. In the newer processes, propylene and syngas can be converted directly to a mixture of n and iso butanol and 2-EH without isolating the butyraldehyde. A mixture of n and iso-butyraldehyde can be produced by the LP Oxo Process, available from Kaverner/Dow UCC using a rhodium catalyst, which operates at less than 300-psig as against the 1,500-psig for the convention oxo process. The oxonation process produces n to iso product at a ratio of 10 to 1, but can be tailored to ratios varying from 30:1:1. The mild reaction conditions result in fewer byproducts. The catalyst has a long life and is regenerable at site. The water-soluble Rh catalyst is easily recovered and reused. The reactor effluent is cooled and crude product separated with recycle of unreacted gases to the reactor. N and iso butyraldehyde is separated by distillation. A separate syngas generation facility based on natural gas feed would typically be required, but H2O and CO can be made available from hydrogen and methanol units now in the AIH and SIH. N-butyraldehyde can be hydrogenated to produce n-butanol using a variation of oxo alcohols synthesis. This uses a propylene: CO: H2 mole ratio of 1:1:2. The reaction takes place at 1,000-psig and 150oC. The catalyst is a Ni catalyst in the Celanese/Rhone Poulenc process. This process requires a significant supply of hydrogen. Table 5.7.3-1. Raw Materials Inputs per 1,000-kg of Butyraldehyde Input Propylene Syngas ( CO + H2)

Quantity 600-kg 28,000-scf

Table 5.7.3-2. Raw Materials Inputs per 1,000-kg of n-Butanol by Hydrogenation Input Butyraldehyde Hydrogen

Quantity 1,020-kg 15,000-scf

For the direct process from syngas that generates both n-butanol and 2-EH the inputs are as follows for Butanol. Table 5.7.3-3. Raw Materials Inputs per 1,000-kg of Butanol from Syngas Input Propylene Syngas ( CO + H2) Hydrogen

Quantity 1,050-kg 17,000-scf 5,000-scf

Plant Size Plants of capacity 30 to 350-kty have been installed. The minimum capacity for a world scale plant starting from propylene is 150-kty capacity. For 2-EH production, this could be reduced to 50-kty. Process Availability The process options for making n-butanol are several and the process can be combined with the production of 2-EH and other oxo alcohols. Suppliers of n-Butanol Processes • • • •

Union Carbide Corp Kruppe Udhe Hoechst AG/Rhone-Poulenc Hüls AG

– low pressure oxo process – n-butyraldehyde & hydrogen – propylene and syngas – butyraldehyde and hydrogen

Kvaerner/Dow/UCC have a well-developed LP oxo synthesis for the production of butyraldehyde. This is the rhodium catalyst system described above. There are 18 plants with capacities up to 350-kty installed. ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 43

Celanese/Rhone Poulenc offer a water soluble catalyst system engineered by Krupp Uhde for butyraldehyde production starting from propylene and hydrogen Krupp Uhde offer a Ni catalyst based hydrogenation process, which is commercially available and well proven. They are also leaders in syngas production and offer the adol route where butyraldehyde is treated with dilute caustic soda to give 2-EH. Hüls AG offer the catalytic hydrogenation of butyraldehyde to butanols and 2-EH. The company has two plants in operation since 1988. Kvaerner/Dow – UCC also offer the Rh catalyzed low-pressure oxo process, which has been installed at Taft for Dow-UCC. Celanese/Rhone – Poulenc also offer the Rh catalyzed process for direct oxo synthesis of n-butanol from propylene and syngas. Shell Chemical has a one-step process, which converts propylene to butanols or 2-EH by hydrogenation. This is a flexible process and permits flexibility in operations depending on market demand. This process has restricted licensing possibilities.

5.7.4

Technical Business Trends in n-Butanol

Growth in n-butanol demand has been running 3% annually, and that is expected to be maintained. Recently there has been some 125-kty of capacity added to the North American supply as Carbide expanded its Taft site in 1999, however no new plants are announced at this time. Only modest volumes of n-butanol are exported, but the chemicals derivatives do go into the international markets in better volumes. The use of butanol in acrylate and methacrylate esters is growing at above 4% annually. These applications are expected to drive the market in the coming years. They now account for over 40% of n-butanol consumption. Both of these products go into the construction renovation market as an additive for latex paint. The additional growth potential lies in the shift to water-based coatings in the paint industry on an overall basis. Exports of n-butanol derivatives – butanol, butyl acrylate and butyl acetate – have become increasingly important. However, new global capacity may reduce the volume in the coming years from the U.S.

5.7.5

Potential for Alberta for n-Butanol

The most favorable investment strategy for butanol in Alberta would be the establishment of a complex making n-butanol and 2EH. Product would mainly be aimed at the export Asian markets, but a favorable raw material situation and a growing market in the Pacific Rim countries could be attractive. The domestic demand for n-butanol runs in the 5 to 6-ktonnes range annually and the value of imports has been in the $4 to 5 million level, not major support for a plant investment. Overall, the potential for production of n-butanol in Alberta is modest. Coupled with an AA and acrylate facility the potential rises dramatically, but as a single product, the investment potential must be considered fairly low.

5.8

Acrylic Acid (AA)

AA is a versatile and key raw material for water/moisture control products and coating additive products. It also is reacted up to form various acrylates.

5.8.1

North American Market for Acrylic Acid (AA)

Super absorbants have been the largest and perhaps the most dynamic market areas for AA demand in recent years. The AA water treatment derivatives provide flocculation or formation process control in the water treatment and paper making sectors. The various acrylates – butyl, methyl, ethyl, ethyl hexyl and the specialties – form the balance of AA demand and these products go into the coatings sector mainly.

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Table 5.8-1. Acrylic Acid Demand in North American (kty) Market Polyacrylic acid and salts n-Butyl acrylate Ethyl acrylate Methyl and 2-ethylhexyl acrylates Specialty acrylates Miscellaneous Exports, net imports* Total * Imports exceed exports by 77-ktonnes

5.8.2

Volume* 334.0 286.3 190.9 66.8 47.7 28.5 (77.2) 954.4

Major Producers of Acrylic Acid (AA)

The dominant producer of AA is Rohm & Haas, which has a major position in acrylic sheet through to acrylic emulsions and other polymers. However, both BASF and Celanese have super absorbent businesses and major specialty chemicals operations, serving the coatings sector, as a result, they are strong in butyl acrylates and ethyl acrylates including raw material integration. Table 5.8.2-1. Major Producers of Acrylic Acid (kty) Producer BASF, Freeport, TX Celanese, Clear Lake, TX Rohm and Haas, Deer Park, TX Union Carbide, Taft, LA Total

Capacity 300 275 520 110 1,205

About three-quarters of AA production is converted directly into acrylate esters on site and the balance is purified and sold as glacial AA. Despite, nominal U.S. over-capacity AA imports exceed exports.

5.8.3

Production Technology for Acrylic Acid (AA)

The main process route for AA is by the gas phase catalytic oxidation of propylene. The alternative route is via the hydrolysis of ACN (which is produced from propylene and ammonia). The oxidation route is highly favored economically. The reaction between propylene and oxygen is carried out in a catalytic reactor at 400oC containing a solid, cobalt molybadate/tellirum oxide catalyst. The reaction requires careful control to prevent by product formation. Aqueous AA is separated and concentrated to crude AA. For ester production, this can be reacted with the appropriate alcohol in a n esterification tower using an acid catalyst. A vapor phase esterification process using silica gel has been developed for ethyl acrylate. This has a conversion rate of 56% at 260oC. This has the advantage that for an integrated plant the heat efficiency is greatly improved. However, for product quality considerations most new plants use glacial AA as the starting point for the esters. Table 5.8.3-1. Input Consumptions per 1,000-kg of Acrylic Acid Input Propylene ( as 100%) Oxygen

Consumption 620-kg 710-kg

Plant Size A World Scale Plant for this process has a capacity of 200 to 300-kty. Technology Availability Most of the producers of AA are reported to license their technology for selected markets. There are three or four firms offering that technology on a commercial basis. BASF, Nippon Shokubasi and Mitsui tend to be the leaders in this production technology area.

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Major Suppliers of Acrylic Acid Technology • • •

BASF, Germany Nippon Shokubai, Japan Mitsui, Japan

Currently the firms expanding in AA tend to be using their own technology. BASF is setting up a plant in Malaysia (a joint venture with Petronas) using in house technology. Sumitomo is providing the technology for a 25-kty glacial AA plant in Singapore, while Nippon Shokubai/MHI are providing technology for a 40-kty acid and ester plant in China. Mitsubishi Petrochemicals have provided technology for seven plants producing AA. The process boasts a high yield catalyst system and low capital cost, but Mitsubishi does not seem to be involved in the latest round of global expansion.

5.8.4

Technical Business Trends in Acrylic Acid (AA)

AA has been growing at 5% annually and expectations are that it will continue to increase at that level in the coming years. Products such as super absorbants are projected to grow at 6 to 7% annually, while the coating products face more measured growth in the 3 to 4% range. To meet this demand outlook there has been some expansion of the supply. Slated for start-up in 2001 is a new 125-kty plant of American Acryl at Pasadena, TX. The company is a joint venture between Elf Atochem North America and Nippon Shokubai. Elf is also constructing an acrylate facility to take its share of the new plant’s output. Both BASF and Celanese has recently added to the capacity of their AA plants, and Celanese is adding a further 80-kty at Clear Lake, TX later this year.

5.8.5

Potential in Alberta for Acrylic Acid (AA)

Alberta offers interesting potential for AA. The strong growth rate of the chemical will mean that in the coming 3 to 4 years additional capacity will be required for North American demand. Asian demand also is growing strongly both for acid as well as the esters. Until the expansions come on stream in the USGC imports of AA are exceeding exports. If market growth continues, there still could be an opportunity to add another AA plant in a few years without disrupting the market here. Table 5.8.5-1. Acrylic Acid and Ester Imports to Canada Import

1998 ktonnes 1.9 27.7

Acrylic acid Acrylic esters

1997 $ million Cdn 2.8 53.3

ktonnes 1.8 29.0

$ million Cdn 2.6 52.9

The players in AA and its derivatives also are changing. As a consumer of AA and acrylates in the U.S., Dow Chemical broke ground in 1998 for a 125-kty AA unit at its BSL complex (Bohlen) in Germany. Startup of the project, which includes esters, is scheduled for 2000. With the Dow/Carbide merger, domestic interest in the product could be increasing, since the Carbide plant is the smallest complex in the North American industry.

5.9

Isopropanol/Acetone

Isopropyl alcohol or isopropanol (IPA) is a popular solvent.

5.9.1

North American Market for Isopropanol/Acetone

The North American market for isopropanol or isopropyl alcohol (IPA) was 636-ktonnes in 1998 with solvent use dominating the business. As part of the solvent application is the use of IPA as an oxygenate in certain gasolines. Table 5.9.1-1. Isopropyl Demand in North American (ktonnes) Market Solvent Chemical derivatives Acetone Household & personal care. Pharmaceuticals. Misc. solvent

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

Volume 172.8 116.6 64.8 43.2 21.6 12.9

March 31, 2000 Page 46

Exports, net imports Total

204.5 636.4

The ability to make a high quality acetone from isopropanol has created a outlet for about 15% of IPA demand. However, in the context of the acetone business IPA-based product accounts for only 5% or less of supply. Household and personal care use of IPA represents sales to the consumer as a cleaning solvent and a medicinal alcohol. The pharmaceutical use of IPA is as a process chemical or additive. Table 5.9.1-2. Acetone Demand in North American (ktonnes) Market Acetone cyanohydrin (methyl methacrylate) Bis-phenol-A, Solvent MIBK and MIBC. Miscellaneous Total

5.9.2

Volume 568.6 252.7 214.8 101.1 126.4 1,263.6

Major Producers of Isopropanol/Acetone

There is one IPA plant in Canada, that of Shell Chemical facility in the Alberta area, a major regional supplier for many years. All the other facilities in North America are on the USGC. Table 5.9.2-1. Isopropanol Producers in North America (kty) Producer Shell Chemical, Corunna, ON Exxon, Baton Rouge, La. Shell, Deer Park, Tex. Union Carbide, Texas City, Tex. Total

Capacity 85 295 275 260 915

The production of acetone is dominated by the phenol plants where it is a byproduct or coproduct of the cumene to phenol process. Deliberate IPA to acetone production is aimed at high quality markets where minor trace chemicals cannot be tolerated. Table 5.9.2-2. Acetone Producers in North America (kty) Producers Shell Chemical, Corunna, ON Aristech, Haverhill, Ohio Dow, Freeport, Tex. GE Plastics, Mount Vernon, Ind. Georgia Gulf, Pasadena, Tex. JLM Chemicals, Blue Island, Ill. Shell, Deer Park, Tex. Sun, Frankford, Pa. Texaco, El Dorado, Kans. Union Carbide, Institute, W.Va. Total

5.9.3

Capacity 15 200 180 195 45 26 190 280 38 77 1,246

Isopropanol Production •

C3 H6

propylene

+

H2O

Æ

water

CH3 CHOH CH3 isopropanol

Isopropanol (IPA) production from propylene is produced via a gas phase 170 to 190oC temperature medium pressure reaction over a fixed bed catalyst. Unreacted propylene and most byproducts are recycled. Propane and

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minor unreactable byproducts – mostly acetone – are purged from the raw product before final dehydration to cosmetic grade IPA. Table 5.9.3-1. Balance for 1,000-kg of IPA Propylene (@100%) Water Steam Electricity Fuel Gas

715-kg 600-kg 2,200-kg 35-kWh small

Capital costs are in the order of $60 million for a 100,000-kty facility using Degussa technology. If desired ethanol can be produced in the same facility with ethylene replacing propylene as feed. Acetone Approximately 27% of the IPA are used to produce acetone by the water removal step. However, 90% of the North American acetone is as a byproduct in phenol production. A small amount is also produced as by product from PO production. Plant size Plant sizes vary widely depending on the local market for high quality acetone. A minimum plant size would be at the 25-kty level. Process Technology IPA to acetone process technology is available from Edelneau of Germany, as well as IFP, of France. The bulk of acetone is produced in the conversion of cumene to phenol, as discussed above. Propyl Ethers Propyl ethers are produced by the dehydration of propyl alcohols. For these derivatives, IPA is a suitable feedstock. In the traditional process, this was carried out in the liquid phase using sulfuric acid as the dehydrating agent. 96% sulfuric acid is reacted with an aqueous 95% IPA solution in a corrosion resistant kettle. The reaction takes place 125oC. The vapor effluent is scrubbed with dilute caustic soda to remove the residual acid. The ether is recovered by distillation. The process requires special technology due to the explosive nature of the ether. The scale of production is about 10 to 15% of the IPA capacity. Plant Size The capacity for propyl ether is in the order of 10-kty given its specialty chemicals nature. Process Technology Propyl ether technology is available from various engineering companies and major IPA producers have it for internal use.

5.9.4

Technical Business Trends in Isopropanol/Acetone

Isopropyl alcohol is a mature product with a growth rate in the 1 to 3% annual level. To ease the lack of local demand, U.S. producers export about 35% or 300-ktonnes offshore to Europe, Central and South America. Imports into the U.S. come mainly from the Shell plant in Alberta with about half of its output going into U.S. regional markets. Solvent demand is an area of little growth. The pharmaceutical industry, a major consumer, has been moving to solvent recycling, which has cut into IPA sales. Regulations aimed at cutting down on volatile organic compound (VOC) emissions also have been hurting IPA solvent use as industrial consumers move to less volatile products. Derivative products – amines, esters and ketones – are growing at higher rates in the 3 to 4% annual level, but demand in those products is not offsetting a stagnant solvent market.

5.9.5

Potential for Alberta with Isopropanol/Acetone

While there is a good supply of propylene in Alberta from local refineries, the lack of a regional market for IPA and the shipping distance to most North American markets mitigate against the product. As an ancillary product for production of another

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chemical in the province, a small IPA plant might be considered. Capital costs are modest and production operations are not particularly complex for making isopropanol, so a local demand could be handled by a less than world-scale plant.

5.10

2-Ethyl Hexanol

Significant 2-EH nitrate is used by Alberta oil refiners to increase the cetane of oil sands derived diesels, however, 2-EH nitrate is apparently available at low cost in the Far East and suitable quality nitric acid is not available in Alberta. Plasticizers and acrylates are normally major outlets for 2-EH. The balance of uses represents fewer than 10% of demand.

5.10.1 North American Market for 2-Ethyl Hexanol The plasticizer business has been dominated by phthalates. Today about 60% of the plasticizer EH goes into making dioctyl phthalate, followed by dioctyl terephthalate (about 30%). The Plasticizers go mainly into the polyvinlyl chloride (PVC) business for making flexible products. Acrylates are mainly used in emulsion polymers for adhesives, coatings and in textiles. The rest of demand lies in making specialty chemicals used in the lubricant additives and surfactants or directly as solvents. On a net basis, export account for about 15% of demand from the domestic producers of 2-EH. Table 5.10.1-1. 2-Ethyl Hexanol Demand in North American (kty) Market Volume* Plasticizers 154.7 Acrylates 90.2 2-Ethylhexyl nitrate (cetane improver) 25.8 Lube additives 12.9 Surfactants 9.7 Solvents 6.4 Miscellaneous 22.6 Exports, net of imports 55.0 Total 377.3

5.10.2 Major Producers of 2-Ethyl Hexanol All the North American capacity for 2-EH lies in Texas with Eastman accounting for half of the continent’s capacity. Aristech and Union Carbide (Dow) rank second and third in the sector. Aristech’s Pasadena site also has an ophthalmic anhydride facility or plasticizer production. BASF has been a major producer and developer of plasticizers, while Shell has strength in lube additives and certain improvers as well as other specialty products. Table 5.10.2-1. 2-Ethyl Hexanol Producers in North America (kty) Producer Capacity Aristech, Pasadena, TX 138 BASF, Freeport, TX 40 Eastman, Longview, TS 240 Shell, Deer Park, TX 30 Union Carbide, Texas City, TX 55 Total 503

5.10.3 Production Technology for 2-Ethyl Hexanol There are three processes for making 2-EH: the oxo process, syngas and propylene, and the hydrogenation of butyraldehyde. Table 5.10.3-1. Raw Materials Inputs per 1,000-kg of 2-Ethyl Hexanol by Hydrogenation Input Butyraldehyde Hydrogen

Quantity 1,200-kg 10,000-scf

It should be noted that approx. 200-kg of byproducts are obtained in the process.

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Plant Size A minimum sized World Scale plant for 2-EH would be 100-ktonnes per year.

5.10.4 Technical Business Trends in 2-Ethyl Hexanol There have been minor additions to 2-EH capacity in recent years, although much of the oxo plant capacity installed has been oriented to n-butanol use. Eastman added about 40-ktonnes of capacity to its facility in 1997, but the other producers have expanded their aldehyde capabilities without adding any hexanol capacity. In Shell's one-step process, propylene is converted directly to butanols and 2-EH, without isolating butyraldehydes. The company's 2-EH capacity is very flexible depending on the production of n-butanol, some of which is used solely for glycol ethers. Growth for 2-EH has been running in the 2 to 3% level and is expected to remain there. The plasticizer business has been under pressure for the toxic concerns regarding phthalates. As a result, for many PVC applications processors have been moving to other products away from the phthalates. Growth is acrylates and methyl acrylates is expected to be in the 5 to 7% range in the coming years as demand for emulsions increases.

5.10.5 Potential for Alberta for 2-Ethyl Hexanol As part of a butanol/2-EH complex, production of this chemical could occur in the province. On its own 2-EH will not be a driver for investment, despite the favorable supply of propylene in the province and the cetane improver market. On an overall continental basis low demand growth and an in-place capacity of 500-ktonnes facing a demand of less than 400ktonnes and Asian imports means it is unlikely that a new plant will be built in the medium future. Pressures on 2-EH in the plasticizer business may further reduce demand.

5.11

Atactic Polypropylene (APP)

APP is used as a polyolefin constituent in products such as hot melt adhesives and specialty laminations. Traditionally the material was a byproduct from the production of homopolymer PP. However, in recent years, catalyst technology and tighter production control has reduced the production of APP, while the market for hot metal adhesives and some of the other applications has continued to grow.

5.11.1 Production of Atactic Olefins The soft and waxy resins are produced by PP and PE producers as specialty items in their product lines. Eastman Chemicals and Exxon Chemicals both have substantial product lines going into the adhesives industry (hydrocarbon resins, solvents, additives, etc.). The dominant position is held by Eastman, which supplies both APP and atactic PE as part of its adhesives chemicals business. About 15 to 20% of material comes as a byproduct from PE and PP plants. International Waxes of Ajax, ON was one of the forerunners in developing the APP applications in adhesives, as an adjunct to its wax business (business sold to IGI International). Firms such as Crowley Chemicals of New York also market byproducts from various PP plants. Table 5.11.1-1. Producers of Atactic Olefin Resins Polypropylenes Eastman Chemicals Long View, TX IGI/Himont Sweetwater, TX Rexene Odessa, TX Polyethylenes Eastman Chemicals Long View, TX Exxon Chemicals Baton Rouge, LA Millennium/Quantum Houston, TX Union Carbide Sea Drift, TX Source: SRI Consultants

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5.11.2 Process Technology APP, unlike resin grade PP, involves polymerizing propylene into a non-regular or random polymer chain. During the stepgrowth polymerization process, an isotactic structure normally found in PP resins is not produced, and the result is a soft, waxy product highly suited for blending into adhesive formulations. Raw material requirements are the same as for homopolymer PP and identical production hardware is required. Potential Sources of Atactic Polypropylene Technology • • •

Hercules Inc., Wilmington, DE Shell Chemical, Houston, TX Mitsui, Japan

From a capital cost point of view, an option is to obtain an old, small PP reactor that will be the right size for the market to be served. The APP market could not take the output from a new large plant. One additional factor in terms of technology acquisition in the context of a Alberta location could be the possible availability of plant hardware. At the Shell/Montell PP plant site in Montreal is a mothballed PP plant with some 80-kty capacity. This facility was considered at one point by its past owners to be reactivated for making APP.

5.11.3 Markets and Outlook The markets for APP and PE run in the 120 to 150-ktonnes (265 to 330 million pounds) area annually in North America. Table 5.11.3-1. Estimated Market Segmentation for Atactic Polypropylene Application Bituminous roofing Adhesives Lamination Misc. Total

Use 60% 25% 10% 5% 100%

Source: Sigurdson & Associates

The major application lies in the bituminous roofing materials, where APP competes with SBR rubber. The PP allows the sheet roofing material to be easily adhered and bonded. The next major market lies in the formulation of hot melt adhesives. Along with EVA resins and hydrocarbon resins, APP provides melt flow and body to the hot melt formulations. Close to one-third of the APP market is in the manufacture of hot melt adhesives. This has been a steadily growing application area for APP. Table 5.11.3-2. Hot Melt Adhesive Use of Atactic Polypropylene Industry Packaging Textiles Appliances Disposables Electrical/Electronics Automotive OEM Construction Total

1992 ktonnes 17.3 6.4 1.9 1.1 1 1 0.2 28.9

1997 million lbs. 38 14 4 2 2 2 <1 62

ktonnes 15.1 6.8 2.1 1.3 1.2 1.5 0.2 28.2

million lbs. 33 15 5 3 3 3 <1 57

Source: SRI Consulting

Paper lamination and some plastics/paper lamination is another solid use of APP. In the wire & cable area the resin is used for cable flooding where the polymer is used to fill in around the insulation filler in large power cables to keep moisture out. APP is also used in the lamination of plastic films and plastic to other materials. The miscellaneous uses, are in the wire and cable industry where APP is used for filling and sealing the insulation in high-tension cables and other similar products. ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

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The list price for APP is $1.82 Canadian per kilogram (55 cents U.S. per pound). APP sells at price levels as a specialty chemical. While the market size is modest with any volume of sales a producer can generate an attractive margin based on propylene raw materials running currently at 60 cents Canadian per kilogram (20 cents U.S. per pound). Table 5.11.3-3. Some Major and Potential Users of Atactic Polypropylene Company Croda Apex Adhesives Dexter Corp. Findlay Adhesives Hall Tech Harcos Chemicals H.B. Fuller, Canada H.B. Fuller Imperial Adhesives Loctite, div. of Henkel National Starch & Chemical Taac International Firestone GAF Roofing Polyglass Suprema U.S. Intec

Major Location Itasca, IL Seabrook, NH Watosa, WI Toronto, ON Belleville, NJ Toronto, ON St. Paul, MN Cincinnati, OH South Elgin, IL Bridgewater, NJ Rockland, MA Carmel, IN Cedar Knolls, NJ Fernley, NV Cleveland, OH Somerville, NJ

Product hot melts hot melts hot melts hot melts hot melts hot melts hot melts hot melts hot melts hot melts hot melts roofing sheet roofing sheet roofing sheet roofing sheet roofing sheet

Source: Sigurdson & Associates

5.11.4 Investment Potential As older PP plants are retired and the new PP technology generates no atactic byproducts, new capacity for atactic products will be required. Alberta Investment Factors The combination of raw materials and a location in the heart of the key markets for APP help provide the investment impetus for the product. The factors include: • • • • •

5.12

APP supply from PP production is dwindling as older PP plants are closed. Availability of low cost propylene raw materials in Alberta. Technology and possibly plant equipment could be available through Shell. Markets such as modified roofing products and adhesives are close by in the region. Demand growth has been in the 3 to 4% annually with construction products seeing 5%+ growth in recent years.

Ranking of Propylene Product Potential

Propylene Quality A major issue in the development of propylene raw material sources is matching volume and quality with the demands of a particular chemical process. In ranking the investment options in the context of Alberta, this becomes a critical step in the evaluation. As has been indicated in Section 4, refinery propylene can be upgraded from a ‘refinery grade’ to a ‘chemical grade’ or a ‘PG’. However, some of the propylene sources, such as ethylene plants, generate diolefins and other difficult to handle products that can hinder efficient use of C3 streams as propylene sources without further processing.

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Table 5.12-1. Typical Propylene Grade Requirements Chemical Polypropylene * Acrylonitrile Cumene Propylene oxide n-Butanol Acrylic acid Isopropanol 2-Ethyl hexanol * Includes copolymers and atactic grades.

Typical Quality polymer refinery refinery chemical refinery chemical chemical chemical

Alternate Quality high chemical chemical chemical polymer chemical polymer refinery refinery/syngas

Selection Criteria In rating the chemicals for investment potential in Alberta, four criteria were used to evaluate the prime propylene derivatives. As has been indicated in the previous sections, many of the propylene chemicals are produced in a complex, so that several products justify and carry the overhead of production. For an investment to be made in a propylene production facility in Alberta a two or three-step production decision may be required to justify the expenditure, and such complexity mitigates against a Greenfield investment. Selection Criteria for Rating Potential • • • •

Sufficient raw materials available for a plant of competitive scale. Market growth to foster expansion. Possible competitive price advantage. Some regional market support.

Based on examining the eight primary derivatives analyzed in this study and considering the need for downstream investments to justify an initial production facility, the rating is as follows: Table 5.12-2. Ranking of Propylene Opportunities in Alberta Chemical Polypropylene* Acrylonitrile Acrylic acid Cumene Propylene oxide Isopropanol n-Butanol 2-Ethyl hexanol Ranking: 1 to 5 = strong * Includes atactic and copolymer variations.

Overall 11 11 10 10 9 8 7 5

Market Growth 4 3 4 4 3 2 2 1

Regional Market 2 4 2 5 3 1 2 1

Raw Materials 5 4 4 1 3 5 3 3

The rationale for the specific chemical’s rating is as follows: Polypropylene offers solid potential in the medium term. Growth is high at 5 to 6%, and despite recent expansions in capacity in North America, a need for further capacity is likely in the next 4 to 5 years. The capital investment in, say, 225-kty plant is not large, running in the $175 to 200 million range. Sufficient raw materials are readily available to support a 225-kty facility. The major negative is the regional market support. Product would be shipped to Asian markets or to the U.S. Midwest, so raw material costs need to be low enough to cover transportation costs. Alberta has sufficient raw materials for a world-scale plant. In addition some of the raw materials for making copolymer PP are available in raw form, at last, in the province. PG material is required for an efficient plant operation. While not considered in-depth a smaller APP project could well be developed for its niche markets. Acrylonitrile has good potential through a supply of raw materials and a growing Asian market, which can be accessed in competition with the U.S. exports from the Gulf Coast. There are sufficient raw materials to support an ACN plant, and chemical grade material is all that is required, making the process competitive in the context of Alberta.

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Acrylic Acid and acrylates offers good regional potential, when the Asian markets are considered. Cumene/Phenol is one of the strongest product potentials for Alberta on a market basis. There is strong regional demand and little competition. Benzene raw material is a problem, which is why it does not rank in the top three selections for Alberta potential investments. A growing regional market for phenol with only one small competitor is a major plus. Also, changes in production technology mean that the product can be made without generating acetone as a byproduct. The lack of regional acetone customers has always been a major deterrent to a cumene/phenol plant complex, but added processing can decrease that risk. The only major negative lies in the tightness in benzene supply in the province. With sufficient propylene available for a 150 to 200-kty plant, some 100-ktonnes of benzene would be required. Propylene Oxide PO has perhaps the strongest potential in an Alberta context outside of the top four chemicals selected. Raw materials are sufficient in the province to support a plant. However, PO on its own has little market potential, and a PO derivatives complex has to be considered in order to create demand. Many of the key derivatives – urethane polyols, propyl esters and the like have most of their demand far to the Southeast in North America, and in the early stages of growth in many parts of Asia. Propylene glycol might be the derivative exception. Isopropanol From a production point of view, isopropanol offers good potential in Alberta. However, there is little regional market and the low value-added of the product makes it difficult to ship long distances and be competitive. Should IPA find use in a volume application in the region, the potential would increase substantially. There are sufficient raw materials around and the process can be run with refinery grade material as feedstock. n-Butanol Butyl alcohol offers only modest potential for an Alberta investment. Any investment would likely have to be coupled with an AA plant. There is little regional market and the export potential into the Pacific Rim countries is modest at this time. 2-Ethyl Hexanol Ethyl hexanol is last on the list due to low growth rates on plasticizers almost globally, and little regional market to be accessed. Canada did have a small 2-EH plant in Montreal some years ago, but it was closed with little disruption to domestic plasticizers producers. From a market perspective, the plasticizer market is under pressure with the European Community threatening to ban the use of phthalate plasticizers, particularly for use in consumer products such as kids’ toys. Also, local cetane improver 2-EH nitrate markets.

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6.0

THREE PRODUCTS WITH POTENTIAL FOR ALBERTA

6.1

Chemicals Selected for Further Analysis

The chemicals selected for further analysis all have the characteristic of a strong growth rate in the global market, a strong continental market and access to attractive Pacific Rim markets. In addition, the products often have the competitive option of competing with the USGC on trade with the Orient. The products selected are: • • •

Polypropylene Acrylonitrile Acrylic acid and acrylates

An analysis of phenol is at the end of this section. This product has strong regional demand, but there is a shortage of raw materials. The potential for a regional phenol plant is strong.

6.2

Polypropylene (PP)

PP’s strong growth in new production technology and copolymers, with a well developed continental market and export opportunities placed it first in products with strong potential for Alberta manufacture. PP is made by polymerizing propylene into polymer chains of various lengths; copolymers are also produced by adding rubbers, and various monomers to change the performance properties of the PP resin. Capital costs and operating cost factors vary widely with the specific location and the service infrastructure available. Many PP plant projects include propylene recovery on production as well, and there is considerable benefit to having a resin plant and a fractionator located on the same site. Table 6.2-1. Polypropylene Plant Overview Size of world-scale plant Capital cost of plant, green field Propylene requirements Resin selling price, homopolymer Electricity Steam Nitrogen

6.2.1

225-kty $25 to 175 million U.S. 230 to 240-kty 22 to 65 cents U.S. per pound 8-MW 103-kg/hr 103m3/hr

Market Potential

Growth rate of PP has been outstanding among the commodity plastic resins at 6%, and expectations are that it will run in the 6 to 7% annually in the coming years. Should this happen, it will mean that the continental market will require 350 to 400-kty of new capacity each year in order to supply the growing demand. The major demand drive in the market for a Western Canadian plant would be a mix of continental business and some Pacific Rim exports. Globally PP demand is running in the 23,500-kty (1997). Should growth continue in the 5 to 7% annual level about five 250-kty PP plants are required each year to keep the global market in balance. Table 6.2.1-1. Growth Outlook for PP Resins in North America (ktonnes) Market Sector Demand 1998 Injection molding 1,635.7 Fiber and filament 1,582.9 Distributors and compounders 1,213.6 Film and sheet 580.4 Blow molding 105.5 Other, including wire and cable 158.3 Exports 541.8 Total Demand 5,818.2

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

Growth 10.2% 6.1% 8.5% 6.8% 6.3% 5.4% 2.0% 7.1%

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. In 1999 among the industrial countries and the emerging Asian economies PP resin use is expected to grow by 10% over the previous year, thanks to favorable resin prices and the recovery in the Asian countries. Another major factor has been the development of high impact PP resins and thermoplastic elastomers using a propylene backbone. The high growth in the injection molding and distributor/compound market sectors in North American can be traced to these developments. PP resin producers now are making copolymers with ethylene, butylenes and various rubbers with the ‘comonomer’ content running as high as 50% for some of the new rubber copolymers coming onto the market. The PP resin producers are using different catalysts and comonomers to change stiffness, impact resistance, toughness, cold weather cracking resistance and flow rate in their products. Most of these developments are finding they way to the injectionmolding field. Some of the new copolymer resins offer the benefit that parts can be painted directly out of the mold, eliminating surface treatment. As a result of the developments PP resin growth of 10% or even higher is predicted for the molded pails, jars, baskets, auto fascias, furniture, appliance parts and some industrial products. In comparison application, segments such as fibers and blow moldings are mature, even though their overall growth is high compared to other plastic resins. Table 6.2.1-2. Global PP Market Segmentation North America Asia Western Europe Eastern Europe Africa & Middle East South America Total

24% 38% 25% 2% 5% 4% 100%

The Asian market is the largest PP market in the world with some 11,500-ktonnes of resin being consumed annually. With relatively fast-growing markets in the region, the Pacific Rim has been an importer of PP resins in the 200+ ktonnes level recently. Table 6.2.1-3. Asia-Pacific PP Capacity by Country (kty) Country Japan Korea China Thailand Indonesia India Taiwan Singapore Philippines Australia Malaysia Total

PP Capacity 2,946 2,520 1,810 920 625 560 510 350 340 320 210 11,111

Now Exxon is planning 250-ktonnes of new capacity in Singapore, and there are several projects in the works in the Middle East. That will supply some of the Asia-Pacific shortfall in resin, but still leave room for supply from North America.

6.2.2

Trade in Polypropylene (PP)

On a continental basis, North America exports over 500-ktonnes of PP resins a year. The export of PP resins from North America has been steady with over 600-ktonnes moving in recent years. Some of the new plants being built in Asia may cut into that trade, but the producers on this continent have a strong position in the global PP business. Table 6.2.2-1. U.S. Exports of Polypropylene

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(ktonnes) Homopolymer 673.2 519.2 406.9 480.9 611.6

Year 1996 1995 1994 1993 1992

Copolymer 132.8 130.1 103.0 102.3 93.9

Total 806.0 649.3 509.9 583.2 705.5

The Canadian situation on PP resins exports has move from an export position to integration into the continental market. Shell’s takeover of Montell brought both the Alberta and Montreal plants under one management and the move to more copolymer production from the two facilities helped to shift the supply focus to the regional markets.

Year 1998 1997 1996 1995 1994

Table 6.2.2-2. Canadian Polypropylene Resin Export Trade ($ million Cdn) Polypropylene Copolymer PP U.S. Exports Others U.S. Exports Others 163.7 11.6 78.9 9.4 169.8 39.1 54.8 8.9 127.2 50.1 82.3 1.7 159.5 67.4 23.8 1.3 95.8 52.9 41.8 0.6

Total 263.6 272.6 261.3 252.0 191.1

Source: Statistics Canada Trade Data

Country Canada Mexico Hong Kong Taiwan China Japan Australia Brazil Columbia Guatemala Argentina Belgium France Israel Egypt Others Total

Table 6.2.2-3. Major U.S. Polypropylene Export Markets, 1998 ($ million Cdn) Homopolymer PP Copolymer PP 262 189 267 53 46 2 17 – 20 – – 5 – 6 23 3 13 6 15 – – 4 – 14 – 3 24 – 16 – 116 23 819 309

Total 451 320 48 17 20 5 6 26 19 15 4 14 3 24 16 139 1,127

The cross-border trade on PP resins is a major factor today with Canada running a trade deficit on PP resins with the U.S. While exports to the U.S. run to $243 million Canadian, imports from the U.S. run at $451 million Canadian on PP resins. The export of PP resins from the U.S. to Pacific Rim countries amounted to $96 million Canadian in 1998. Canada and Mexico accounted for almost 70% of the exports in that year. However, U.S. trade with the Pacific Rim countries over the past few years has been declining. In 1995, shipments to Hong Kong, China and Taiwan accounted for 15% of exports, totalling $906 million Canadian of business.

6.2.3

Technology Shifts in Polypropylene (PP) Resins

Metallocene technology polypropylene (mPP resins) holds the promise of revolutionizing the PP grade slate for most processors. While mPP resin use is only running to about 85-ktonnes in 1999, demand is projected to grow by 6%+ in North America and by 7%+ in Europe in the coming years. These higher performance resins are more expensive because of higher production costs, but the suppliers are confident that many application areas will be able to justify their cost/performance situation.

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Dow Chemical has developed a mPP catalyst system and is about to commence production in North America. In Europe Targor (a Montell subsidiary) has a 60-ktonnes per year plant in Germany and will provide catalysts to the PP resin producers as well. Montell is working on their metallocene catalyst technology and the industry is expecting this major producer to move into full commercial production in a year or so. Metallocene polypropylene offers a narrow molecular weight distribution, which improves the properties of PP resins considerably. While much of the PP markets are commodity oriented and some analysts do not foresee processors paying more for mPP over conventional PP resins, the expectations are that mPP will have a dramatic effect on resin use for many products in the coming years. Table 6.2.3-1. Demand Patterns for mPP Resins Segment Fiber Injection molding Blow molding Film Other

Use 50% 30% 5% 5% 10%

Another factor in PP plant technology is the reduction of capital costs on plants in recent years. The Unipol PP plant technology was the start of this trend and recent facilities being built are coming in 10 to 15% lower than plants built five or more years ago for the same capacity.

6.2.4

Cost Competitiveness of Alberta in PP Resins

On an operating and investment, basis and Alberta plant holds a major advantage in the raw material costs and in shipping containers to the Asian markets. While a PP plant does not consume large amounts of electricity or natural gas there is some solid savings offers by most Alberta locations. Labor costs in Alberta are slightly below the USGC for plant operating, while construction costs are generally equivalent to 5% higher. Table 6.2.4-1. Competitive Cost Factors for PP Resins in Alberta Factor Difference to USGC Raw Materials 0 to 2 cents/kg Capital Cost + 0 to 5% Plant labor & operating costs - 2 to 4% Electrical costs - 1 cent/kWh Natural gas costs - 20% Transport to Midwest1 + 0.2 cents/kg Transport to Asian markets2 - 0.2 cents/kg 1 – Fort Saskatchewan to Chicago, 10 car lots vs. Houston to Chicago, same basis. 2 – Fort Saskatchewan to Hong Kong in 40ft container vs. Houston to Hong Kong, same basis. Reference: Alberta’s Petrochemicals – Transportation Assessment – Alberta Department of Economic Development updated to January 1999.

The transportation factors are such that shipping to Chicago is slightly uncompetitive compared to shipping out of Houston, however movement to Asia is competitive on prices as well as shipping time. Shipping time from the Gulf Coast to Asian through the Panama Canal takes 30 to 39 days, while out of the BC ports 15 days is shaved off the delivery typically. Therefore, overall a PP facility located in Alberta will have a significant operating cost advantage over a Gulf Coast facility competing in the Pacific Rim markets.

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6.2.5

Alberta Potential for Polypropylene (PP) Resins

Alberta offers an investment location for a PP producer that has favorable raw material costs and a geography suited to supplying product to both the North American market as well as the large Pacific Rim market. Major Benefits and Business Trends • • • •

Operating and (to Pacific Rim) freight advantages. New plant technology is 10 to 20% cheaper in capital cost and more efficient than older technologies. Metallocene catalyst technology may push needs for more plants. Supply of underutilized propylene in Alberta at below USGC prices.

The large Asian market with its continued importation of PP resin is an essential business factor to consider. The ability to competitively ship from Alberta to Pacific Rim markets makes a plant investment highly attractive to any firms wishing to expand its business in Western North America and move more products to Asia.

6.3

Acrylonitrile (ACN)

ACN offers interesting potential because the product can easily be made in Alberta. For the Asian market and its byproduct, cyanide can go to the regions’ gold mining and metal extraction business. While the ACN technology route is being bypassed, to a great extent ACN can also be used for making AA (see the following section). ACN is made through the reaction of propylene, ammonia and air in the following reaction: C3H6 + NH3 + 3/2O2

Æ

C3H3N + 3 H2O

The yield on the process is 70 to 75% and refinery grade propylene and fertilizer grade ammonia can be used. Oxygen from air is assumed here, but purchased oxygen for enriched air route is to be considered. Table 6.3-1. Acrylonitrile Plant Overview Size of world-scale plant Capital cost of plant, green field Propylene requirements Ammonia requirements Hydrogen cyanide, by product ACN selling price Sodium cyanide selling price Electricity

250-kty ~$200 million U.S. 190 to 195-kty 120-kty 38-kty 40 to 52 cents U.S. per pound 75 to 90 cents U.S. per pound 6-MW

Plant capital and operating costs vary widely with location for ACN. When a plant is situated near an ammonia facility as in the AIH ammonia will be pipelined and uncompressed for reaction in the ACN units with considerable cost savings all around. Also, the handling of and reaction into sodium cyanide or disposal of the hydrogen cyanide can vary capital costs on a facility to a marked extent.

6.3.1

Market Potential for ACN

The market potential for ACN lies in the fibers business and the Asian market will be the key to any investment in Western Canada. The fibers market in North America lies in the southeastern states, which makes competition difficult, compared to the Gulf Coast producers. However, the growing Asian market offers good potential for the fibers business as well as the acrylic specialties. Table 6.3.1-1. Global ACN Markets 1998 Acrylic fiber ABS/SAN resins Other chemicals & resins Total

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

ktonnes 2,305 1,305 740 4,350

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The major demand drive in the market for all North American producers has been the supply deficient in Asian with upwards of 600-ktonnes a year being imported from around the world by the fiber and resin producers in the Pacific Rim area. A secondary, but fast growing market has been acrylamides, for water flocculation. This use area has been growing at 6 to 7% annually. Again, water treatment chemicals are a fast growing demand area in the Asian countries. Table 6.3.1-2. Regional ACN Plant Capacities Country U.S. Gulf Coast China Japan Korea Taiwan Total

kty 1,615 170 619 90 132 2,626

The expansion of ACN capacity has been modest, although the plans are in place to meet some of the growing demand in Asia. The new plant of Formosa Plastics in Taiwan was slated to start operation last year, but has been put off until the middle of this year. In Korea the 250-ktonnes Ulsan plant planned by Tae Kwang has been put on hold or abandoned because of the financial crisis in that country. Table 6.3.1-3. ACN Planned Plant Expansions Plant Solutia, Alvin, TX Formosa, Mailoi, Taiwan Jinling Petrochemicals, China BP Amoco, Shanghai, China Total

6.3.2

Capacity 250 200 70 260 780

Date 3rd Q, 2000 2000 2001 2001+

Trade in Acrylonitrile (ACN)

A major strength of a Western Canadian ACN plant could lie in the potential to supply the growing Asian markets. At this point, some 450-ktonnes of product is exported from the USGC each year. Moreover, this trade has been steady since the early 1990’s. Table 6.3.2-1. ACN Exports from U.S. Year 1992 1993 1994 1995 1996

Quantity ktonnes 620.1 463.8 639.5 661.3 623.5

Value $ million 381.6 265.8 403.0 792.9 448.2

The major countries importing U.S. ACN are Japan, Taiwan, China and Hong Kong with smaller amounts going into India and Thailand. Asian countries account for over 80% of the export trade from North American in ACN, and even with the expansion of regional facilities, the movement from the USGC remains strong.

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Country Canada Mexico Japan Taiwan Korea India Peru Thailand Italy Turkey Others Total

Table 6.3.2-2. Major U.S. Acrylonitrile Export Markets ($ million Cdn) 1998 1997 8 9 20 43 96 94 90 134 84 171 12 13 11 31 5 0 10 37 8 88 14 75 358 695

1996 8 14 111 125 170 7 26 7 47 49 47 611

Figure 6.3.2-1. U.S. Acrylonitrile Exports, 1996

Other 29%

Singapore 4% China 0% Japan 17%

6.3.3

Taiwan 21%

Korea 29%

By Product Potential in Canada

An ACN plant of 250-kty capacity running at full capacity generates 150-kg of cyanide for each tonne of product or about 38ktonnes of cyanide. (A plant this size would consume 190-ktonnes of propylene and 120-ktonnes of ammonia annually.) By neutralizing the material with sodium hydroxide, sodium cyanide is produced. The major application for sodium cyanide lies in the mining industry as the extractive chemical for gold and for helping separate metal values from copper/lead floatation circuits. Table 6.3.3-1. Outputs of an ACN Plant per kg of Propylene Input Product Acrylonitrile Acetonitrile Cyanide

Proportion 0.84-kg 0.03-kg 0.13-kg

Canada imports all its sodium cyanide and an ACN plant would be able to serve the Canadian market as well as a portion of the Western U.S. gold and copper mining areas. A world-scale plant would also have additional cyanide available to serve the export markets for sodium cyanide in Austral-Asia and South America. The closest competitor in the U.S. is the Wyoming plant of FMC, a liquid sodium cyanide facility serving that region’s gold mines.

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Year 1998 1997 1996 1995 1994

Table 6.3.3-2. Canadian Imports of Sodium Cyanide and Cyanide Salts ($ million Cdn) BC, NWT and Yukon Prairies Ontario and Quebec 2.1 2.0 19.4 1.0 7.5 19.3 4.5 5.8 17.9 4.5 4.0 18.9 3.8 3.3 13.1

Total Canada 23.6 28.2 29.3 28.3 21.7

Alberta has a good supply of sodium hydroxide from the Dow Fort Saskatchewan chloralkali plant, so all the elements to support a cyanide business an ACN plant exist in the province.

6.3.4

Technology Shifts in ACN Production

While many ACN plants are being built around the world the major, almost the only technology supplier is BP Amoco. The exception was Monsanto, which had a deal to supply technology for a new plant in Korea. Despite the fact that the Tae Kwang plant was not built, the presence of alternate technology widens the potential for new entrants in the ACN business. On the negative side for propylene use, but a potential factor in the ACN business could be a new BP Amoco process, using propane as a feedstock, instead of propylene and claims major savings in production.

6.3.5

Cost Competitiveness of Alberta for ACN Production

The major cost advantage for making ACN in Alberta lies in raw materials. Both propylene and ammonia are available at competitive levels. Alberta’s world scale fertilizer business is highly seasonal as well as cyclical. And with two or more major ammonia suppliers in the region raw materials for a world scale ANC plant could be easily available and at off-season prices for much of the year. Table 6.3.5-1 Competitive Cost Factors for Acrylonitrile Production in Alberta Factor Raw Materials: - propylene - ammonia Capital Cost Plant labor & operating costs Electrical costs Natural gas costs Transport to Midwest1 Transport to Asian markets2 1 – Fort Saskatchewan to Chicago, 10 car lots vs. Houston to Chicago, same basis. 2 – Fort Saskatchewan to Hong Kong in 5000 ton lot vs. Houston to Hong Kong, same basis.

Difference to USGC - 2 cents/kg - 2 cents/kg - 5 to 0% - 2 to 4% - 1 cent/kWh - 20% + 0.2 cents/kg + 0.2 cents/kg

Reference: Alberta’s Petrochemicals Transportation Assessment – Alberta Department of Economic Development update to January 1999.

For an Alberta ACN plant operational costs are competitive and infrastructure can help in the supply of services. Oxygen pipelines are available should a plant want to use an enriched air stream in production. In addition, steam may be available ‘overthe-fence’ in some locations. Electrical and natural gas costs offer solid savings compared to the USGC. Labor costs in Alberta are slightly below the USGC for plant operating. Construction costs are generally, equivalent to 5% high. The transportation factors are slightly negative for ACN, but in terms of serving the Pacific Rim markets, an Alberta plant would have a good response time. Shipping time from the Gulf Coast to Asian through the Panama Canal takes 30 to 39 days, while out of the BC ports 15 days is shaved off the delivery typically. The possible need for storage on the West Coast requires further consideration.

6.3.6

Alberta Potential for Acrylonitrile (ACN)

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 62

Alberta offers a production center for ACN that provides access to the strong and growing Asian markets, as well as regional market support for byproduct cyanide from a plant. Major Benefits and Business Trends for Acrylonitrile • • • • •

Raw material advantages of two to four Canadian cents per pound. Competitive shipping to Pacific Rim versus USGC. Growing Asian market to serve. Supply of underutilized propylene in Alberta. Nice sized sodium cyanide business in Canada for byproduct sales and utilization.

A medium-scale, 250-kty ACN plant in Alberta would have solid market coverage in the Asian markets, and the ability to back out some or all of the $150 million in exports to that region. Perhaps the most favorable development scenario for an Alberta ACN investment might be a slowdown in Chinese investments. The BP Amoco plant has been in the planning stages since 1996; such a facility could be ideal here to serve the Chinese market.

6.4

Acrylic Acid (AA) and Acrylates

6.4.1

Acrylic Acid (AA)

An investment possibility for Alberta could be AA. Dow Chemical and Celanese are considering a plant in North America, and Dow already has a suitable site in Alberta. Recently Dow and Celanese joined forces to build an AA plant in Bohlen, Germany. Dow will use the bulk of the new plant’s output and Celanese will sell the balance on the merchant market in Europe. Table 6.4.1-1. Acrylic Acid Capacity in North America Producer

Location

BASF Hoechst Celanese Rohm and Haas Union Carbide Total

Freeport, TX Clear Lake, TX Deer Park, TX Taft, LA

Capacity kty 136 193 373 109 811

million lbs./yr. 300 425 820 240 1785

Source: Chemical Marketing Report

A similar joint venture might be possible in North America, and the companies have made initial moves in that direction. Dow produces super absorbents and acrylic lattices both in Europe and North America, buying AA. In addition, an acrylic latex plant is already located in Alberta and Dow has been considering its long-term future. While there are several routes to AA the most favorable one for the Alberta area would likely be the oxidation of propylene to acrolein, which is then oxidized with a molybdenum-vanadium catalyst to AA. Other routes such as reacting acetylene and carbon monoxide run into the problem of local raw materials. However, the Dow-Celanese venture in Germany is using the propylene route using Celanese process technology. Using propylene feed from the ethylene crackers, the new plant will produce 80-kty (175 million pounds per year) of crude AA, which will be processed into 60-kty (132 million pounds) one of either AA or butyl esters. The plant will be using Nippon Shokubai catalysts. AA is produced by the oxidation of propylene in the following two-step reaction that takes placed in the reactor: C3H6 + O2 2C3H5O + O2

Æ Æ

C3H5O + H2O 2C5H8O2 + H2O

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Table 6.4-1-2. Acrylic Acid Plant Overview Size of world-scale plant Capital cost of plant, Greenfield Propylene requirements Acrylic acid selling price Electricity

225-kty $150 to 200 million U.S. 140 to 145-kty 50 to 65 cents U.S. per pound 3-MW

Note that oxygen is provided from air.

Capital cost on AA plants may vary with process. BASF has a new process, which they are planning to use in Brazil. This catalyst technology developed by the German firm reportedly reduces capital and operating costs significantly.

6.4.2

Market Potential for Acrylic Acid (AA)

AA’s prospects in the context of Alberta lie in the super absorbent growth in the Pacific Rim countries and in the growth in acrylates in that region as well. In North America, growth in super absorbents and the acrylates is adding about 65 to 70-ktonnes of demand a year domestically. The hottest market area for AA lies in the super absorbent polymer (SAP) business. These products have been growing at 5 to 10% annually as the chemical has found application in feminine products, diapers, wipes as well s medical products and a host of specialty uses. Growth in super absorbents has been running close to 8% annually with no let up in sight. The European market is showing sings of maturity, but growth continues at a good pace in North America. Highest growth for super absorbents occurs in South America and in the Pacific Rim countries.

Market Polyacrylic acid salts n-Butyl acrylate Ethyl acrylate Methyl and 2-EH acrylate Specialty acrylates Miscellaneous products

Table 6.4.2-1. Market Growth Outlook KTPA North American Use 334.0 286.3 190.9 66.8 47.7 28.5

Growth/yr. 7.9% 3.6% 4.1% 3.7% 5.2% 3.1%

The global SAP business now is almost 750-kty of product with 38% of demand in North America and 32% in Europe. Japan is the other well-developed market area. Latin America and Asia are the hot growth markets for SAP product with demand increasing at 7 to 10% annually in these areas. Butyl acrylate is a major raw material for making super absorbent polymers. The acrylates are experiencing slower relative growth, but still a solid 3 to 4% annually depending on the product. The major driver for them has been the push to remove solvents from coatings, adhesives, inks and various industrial products. Concern about VOC emissions has been pushing the formulators in these sectors to reduce or eliminate high volatile solvents. Acrylates, along with ester solvents, can be a major part of the reformulation as well as performance improvers for making the thin films required. Ethyl acrylate goes into the acrylic resins sector, and this clear plastic has solid growth prospects in both casting and sheet applications. However, demand is not likely to be beyond GDP growth in the coming years from the acrylic resin area. Degussa-Hüls’ subsidiary, Stockhausen, has merged with Rohm & Haas’ AA business to form StoHaas. Rohm & Haas also bought Stockhausen's butyl acrylate business, and the two firms are aggressively perusing a supply position with super absorbent (SAP) producers around the world. The planned Brazilian plant is aimed at supplying a new Degussa-Hüls SAP plant.

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Producer American Acryl, Pasadena, TX BASF/Petronas, Malaysia Rohm & Haas, Antwerp, Belgium StoHaas,* Marl, Germany StoHaas,* Marl, Germany StoHaas,* Brazil Sasol, South Africa * Degussa affiliate.

Table 6.4.2-2. Expansion of Acrylic Acid Capacity (kty) Capacity 130 160 n/a 75 100 n/a n/a

Timing 2001 2000 on hold expansion 2001 planned 2003

Investment Example: Acrylic Acid Complex Sasol's board has approved an R835-million ($140 million) n-butanol project and a plan to builds a world-scale acrylates complex. It follows completion of a feasibility study launched at the end of last year (CW Dec. 9, 1998, p. 22). Sasol will locate the 150,000-m.t./year n-butanol unit at either its Sasolburg or Secunda complexes. The company will make a decision by March 2000 when it completes basic engineering work on the plant. Completion is scheduled for 2002. Sasol will supply the plant with propylene and synthesis gas feedstock, which it produces at its coal-to-synthetic fuels plants. Sasol will locate the acrylates complex at the same site as the n-butanol plant. The complex will comprise an acrylic acid plant and units producing n-butyl acrylate, ethyl acrylate, and glacial acrylic acid. The acrylates plants are likely to be commissioned in 2003. All of the new plants will be operated by Sasol's solvents division. Once on stream, the n-butanol and acrylates units “will probably add 40%-50% to Sasol solvents' [$200 million/year ] sales," says general manager Anton Putrer. The n-butanol unit will use technology licensed from Mitsubishi Chemical. Most of the n-butanol and derivatives will be exported, says Sasol. The company has also agreed to supply a small portion of the output to Mitsubishi. – Chemical Week.

Dow Chemical also is planning to build a SAP plant in North American and apparently is considering an AA plant. No site or timing has been announced. In summary expansion of AA and acrylates is continuing on a global basis. However, the capacity gain in North America could still leave room for a new plant in the coming years.

6.4.3

Trade in Acrylic Acid (AA) and Acrylates

A major strength of a Western Canadian AA plant could lie in the potential to supply the growing continental markets and back out some of the imports from Japan and Korea. While AA is a modest export product, the methyl, ethyl and butyl acrylates are a major export business from North America, despite solid imports from Europe and Asia. North America tends to be a net importer of AA, despite the strong exports in acrylates. Imports have been at the 70 to 80ktonnes for several years. Canadian imports of AA run to $3 million annually, but 90% of that is material imported from the U.S. Japan is a major supplier of AA to North America with imports from Japan to the U.S. running as high as $60 million Canadian in recent years.

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March 31, 2000 Page 65

Country Canada Mexico Korea Taiwan China Australia Brazil Venezuela Columbia Argentina Belgium Netherlands Malaysia South Africa Others Total

Country Japan Mexico Germany Others Total

Table 6.4.3-1. Major U.S. Acrylic Acid and Derivative Export Markets, 1998 ($ million Cdn) Acrylic Acid Acrylates 2.8 54 18.6 40 3.4 – 1.2 13 – 13 – 17 11.3 58 3.6 – 1.2 – 1.5 13 – 54 1.4 33 0.7 – – 14 4.1 89 50.0 399

Table 6.4.3-2. Imports of Acrylic Acid by the U.S. ($ million Cdn) 1998 1997 1996 22.7 39.3 60.7 2.8 3.5 1.4 0 23.6 33.6 5.7 6.7 2.0 31.2 73.1 97.7

Total 56.8 58.6 3.4 14.2 13.0 17.0 69.3 3.6 1.2 14.5 54.0 34.4 0.7 14.0 93.1 447.8

1995 66.8 0.1 7.4 1.3 75.6

1994 33.2 1.5 4.1 1.2 40.0

The acrylates offer strong potential for import substitution into North America. Canada brings in $1 to 2 million worth of acrylates not including material coming up from the U.S., which runs to $45 to 50 million annually in recent years.

Country Canada U.S. Others Total USA Japan Mexico Germany Belgium Others Total

Table 6.4.3-3. Imports of Acrylic Acid Esters ($ million Cdn) 1998 1997

1996

1995

52.5 0.6 53.1

52.3 1.7 53.0

48.9 1.4 50.3

41.4 1.0 42.4

33.1 35.5 14.8 17.5 21.7 122.6

30.7 48.4 16.5 10.7 24.2 130.5

43.8 51.0 12.4 2.6 26.3 136.1

43.7 39.8 13.2 1.3 33.7 131.7

Japan and Mexico account for over half of the imports of acrylates into the U.S. and form the major potential for import displacement. The European suppliers, including some material form France, England and the Netherlands, also could be displaced by new North American capacity in the coming years.

6.4.4

Cost Competitiveness of Alberta for Acrylic Acid (AA) Production

Favorable operating costs and a competitive propylene supply are the factors making AA’s and derivatives attractive for an Alberta investment. Investment in an AA plant and most likely an associated acrylates facility would be raw material competitive with the other plants on the continent, and should be competitive in much of the continental market.

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March 31, 2000 Page 66

On an operational basis, oxygen pipelines are available in the Edmonton area. In addition, steam may be available ‘over-thefence’ in some locations. Electrical and natural gas costs offer solid savings compared to the USGC. Table 6.4.4-1. Competitive Cost Factors for Acrylic Acid Production in Alberta Factor Raw Materials - propylene Capital Cost Plant labor & operating costs Electrical costs Natural gas costs Transport to Midwest1 Transport to Asian markets2 1 – Fort Saskatchewan to Chicago, 10 car lots vs. Houston to Chicago, same basis. 2 – Fort Saskatchewan to Hong Kong in 5000 ton lot vs. Houston to Hong Kong, same basis.

Difference to USGC - 2 cents/kg - 5 to 0% - 2 to 4% - 1 cent/kWh - 20% + 0.2 cents/kg + 0.2 cents/kg

Reference: Alberta’s Petrochemicals – Transportation Assessment – Alberta Department of Economic Development Updated to January 1999.

Labor costs in Alberta are slightly below the USGC for plant operating, and construction costs are generally utility costs are lower. The transportation factors are slightly negative for the continental markets against the USGC, but in the Pacific Rim markets, an Alberta plant would have favorable shipping costs and a good response time. Shipping time from the Gulf Coast to Asian through the Panama Canal takes 30 to 39 days, while out of the BC ports 15 days is shaved off the delivery typically.

6.4.5

Alberta Potential for Acrylic Acid (AA) and Acrylates

Production of the volume acrylates along with AA offers good potential in Alberta. A facility would have operating costs equal to or competitive with the USGC, and a slight edge on raw material prices. Major Benefits and Business Trends • • • •

Raw material advantage of 2 or more cents/kg. Growing Asian market to support a plant. Ability to back-out imports from Japan and other countries in Asia. Supply of underutilized propylene in Alberta.

From a market point of view, a new facility in Alberta should be in a position to back-out some of the $70 million or so imports of AA and esters from Japan moving into the U.S. market. In addition, a portion of the $40 million of U.S. imports into Canada should be open to a new plant.

6.5

Phenol

A product with strong regional potential in Alberta is phenol. However, the major drawback at this point, in time, is a lack of benzene for making the chemical either through the cumene route or through a new more direct benzene reaction. It is being included as an adjunct possibility for Alberta’s use of propylene. While there has been a reasonably strong expansion of the North American capacity carried out or planned in the past year or two, technology is also having an impact on the business. A new process that does not generate acetone as a coproduct or byproduct is being refined in a full production plant.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 67

Table 6.5-1. U.S. Phenol Supply/Demand, 1996 Use

Volume ktonnes 2,372 1,892 106 1,998 1,864 134 1,998

Capacity Production Imports Supply Uses Exports Demand

million lbs. 5,218 4,162 234 4,396 4,101 295 4,396

Phenol must be considered as a commodity petrochemical. While small amounts of the product go into the specialty chemicals and formulated chemicals sectors, which are the focus of this study, the bulk of use lies outside of these areas.

6.5.1

Markets and Outlook for Phenol

Uses for phenol are concentrated in three applications areas – bis-phenol A, phenolic resins and caprolactum. Together these three uses account for over 75% of demand for the chemical and are heavily dependent on the demand for plastic resins. Other uses: aniline demand is driven by the demand for rubber accelerators, dye-stuff production and isocyanate production, plus a host of minor chemical applications. Alkylphenols as a group tend to go into specialty chemicals applications ranging from rubber accelerators through to pharmaceutical intermediates. Table 6.5.1-1. North American Demand for Phenol, 1996 Use

Volume Bis-phenol A Phenolic resins Caprolactum Aniline Alkylphenols Xyenols Miscellaneous Total

ktonnes 653 634 280 93 92 90 22 1,864

million lbs. 1,437 1,395 616 205 202 198 48 4,101

Source: SRI Consultants

The market growth in the U.S. has been driven by the growth in three major plastic resins – epoxy, nylon and polycarbonate resins. Bis-phenol A is used for making epoxy resins and polycarbonates, as well as other chemicals. These two resins are undergoing strong growth at present. Polycarbonate is being driven by its use in glazing as well as in compact discs, while epoxy resins are finding greater use in industrial and consumer applications as adhesives, coatings and casting compounds. Other demand areas for phenol lie in the wood binder business where phenolic resins dominate for outdoor grades of plywood, oriented strand board, and increasingly manufactured studs and beams. In Canada, demand for phenol is supplied by imports, and the bulk of supply comes from the U.S. The share of the market held by U.S. producers has remained fairly constant over the years in part because of the spread-out nature of the domestic market. Major demand lies in Ontario, Quebec and the Maritimes, but it is also scattered into Alberta and BC.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 68

Table 6.5.1-2. Canadian Imports of Phenol Year 1997 1996 1995 1994 1993

Value $ million Cdn $ million U.S. 107.1 71.3 97.6 65.1 76.2 54.4 59.4 42.1 45.0 34.1

Total Imports ktonnes million lbs. 99.9 220 97.0 213 73.3 161 71.9 158 61.3 135

ktonnes 77.1 77.7 63.9 65.5 53.9

U.S. Exports million lbs. 170 171 140 144 119

Source: Statistics Canada – Imports by Commodity.

With no bis-phenol A production or caprolactum demand in Canada the bulk of the imports goes into the phenol resins business, which has been growing at 4 to 5% annually. Regional Market The major regional market for a phenol plant located in Alberta lies in the phenolic resins area. Major multi-plant producers in the region are Borden Chemical, Neste Resins and Unibord Inc. with Georgia Pacific having several plants along the U.S. East Coast, as well. In addition to the regional market for phenol in the wood adhesives business, Arisitech has a bis-phenol A plant associated with its phenol operation at Haverhill, OH. Allied-Signal has a caprolactum facility at Hopewell, VA for its nylon business. Table 6.5.1-3. Regional Phenolic Resin Plants Canada ARC Resins, Longueil, QC

Neste Resins, St. Therese, QC

Borden, Edmonton, AB Borden, Vancouver, BC Borden Packaging, Laval QC Borden Packaging, North Bay, ON Neste Resins, North Bay, ON

Neste Resins, Thunder Bay, ON Temfibre, Temiscaming, QC Unibord Inc., Mont Joli, QC Unibord Inc., Mont Laurier, QC Unibord Inc., Val d’Or, QC

Borden Chemical, Fayetteville, NC Borden Chemical, Hope, AR Borden Chemical, Sheboygen, WI Capital Resins, Columbus, OH Celanese, Rock Hill, SC Chembond Corp., Moncure, NC DuPont, Parkersburg, W.Va. Georgia-Pacific, Columbus, OH Georgia-Pacific, Conway, NC Georgia-Pacific, Louisville, MS Georgia-Pacific, Russellville, SC

Georgia-Pacific, Vienna, GA Hoechst Celanese, Rock Hill, SC IMC, Seiple, PA Malenckrodt, Allentown, PA Neste Resins, Moncur, NC Perstorp, Toledo, OH Riechold, Hampton, SC Spurlock Adhesives, Bethlehem, NY Spurlock Adhesives, Waverly, VA Spurlock Adhesives, Malvern, AR Wright Chemical, Reigelwood, NC

USA

Source: Sigurdson & Associates

These plants have been serving the plywood and oriented strand board (OSB) plants in Eastern Canada and along the Atlantic coast. With the changes in board technology coupled with a strong construction sector demand for phenolic resins has been booming. Several new and large wood board plants have come on stream in the past three years within the region increasing demand for wood binders. Demand growth is likely to continue for phenolic resins and phenol in Canada. The wood board industry has developed synthetic lumber products – stud and beams – using wood chips bound together with phenolic resin. By allowing the wood industry to use smaller trees and what used to be waste wood to make dimensional lumber and semi-finished products demand is increasing.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 69

Table 6.5.1-4. Estimated Regional* Demand Growth for Phenol Country

1996 ktonnes million lbs. ktonnes Canada 68 150 105 U.S. 835 1,837 995 Total 905 1,987 1,100 * Region includes Ontario, Quebec & Maritimes; Illinois to Maine and down the East Coast to South Carolina.

2001 million lbs. 231 3,189 3,420

Source: Sigurdson & Associates

6.5.2

Producers of Phenol

The firms involved in the production of phenol have tended to be either merchant producers or companies with an internal demand for phenol. Shell and Dow, as major producers of epoxy resins, along with Solutia in caprolactum and nylon, are examples. Georgia Gulf as part of the Georgia Pacific group (G-P) has been a major supplier into the phenolic resin business, despite the splitting of G-P’s businesses into chemicals and forest products. Regional supply of phenol consists of four world-scale plants with a total capacity of 1,332-kty (2,930 million pounds per year). The Blue Island facility of JLM Industries could also be considered part of the regional supply. Sun’s Philadelphia plant and Aristech’s Haverhill, OH facility are both being expanded, and each will come up to over 630-kty (1,385 million pounds per year) of capacity. These two expansions will add a total of 545-kty (1,188 million pounds per year) of capacity to the regional market. Table 6.5.2-1. Phenol Capacity in North America Producer Allied Signal, Philadelphia, PA (now Sun) Aristech, Ironton, OH Aristech, Haverhill, OH Dakota Gasification, Beulah, ND Dow Chemical, Freeport, TX Fenoquimia, Cosoleacaque, Veracruz Georgia Gulf, Plaquemine, LA Georgia Gulf, Pasadena, TX JLM Industries, Blue Island, IL Kalama Chemical, Kalama, WA Merichem, Houston, TX Mount Vernon Phenol, Mt. Vernon, IN Phenolchemie, Mobile, AL (1999) Shell Chemical, Deer Park, TX Solutia/JLM, Pensacola, FL (2000) Texaco, El Dorado, KS Total

ktonnes 425 291 318 17 264 22 200 73 43 32 16 318 – 300 – 53 2,372

Capacity million lbs./yr. 1,054 640 700 37 580 48 440 160 95 70 35 700 – 660 – 117 5,336

Expansion ktonnes million lbs./yr. 227 500 – – 318 700 – – – – – – – – – – – – – – – – – – 400 880 227 500 136 300 1,308

2,880

Source: Sigurdson & Associates

Consolidation has been occurring in the phenol business. The most recent shift saw Sun Chemical buy Allied-Signal’s phenol business, which tied phenol production to Sun’s cumene capacity in the Philadelphia area. Also, relationships are firming up. Solutia’s new plant in Florida will have JLM Industries as a partner to take a portion of the output. Over the past year, the phenol industry has announced expansions that will more than double North American output, if all the plants are constructed. To this point, the ‘brown-field’ expansions have been going ahead strongly with Sun bringing on stream the Allied Signal expansion after its acquisition of the Allied facilities. The phenol business requires access to cumene on a favorable geographic and business basis. Several of the phenol producers are integrated backwards. Shell, JLM Industries, Texaco, and Georgia Gulf are all cumene producers. The Dow Chemicals plant in Freeport, TX buys cumene on a merchant basis, but the company can draw upon its European cumene supply should local pricing dictate an advantage to importing product.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 70

Table 6.5.2-2. Cumene Producers in North America Producer

Capacity kty 14 363 454 507 68 682 70 682 409 193 77 3,519

Amoco, Texas City, TX Ashland Petroleum, Cattlesburg, KY Chevron Chemical, Port Arthur, TX Citgo Petroleum, Corpus Christi, TX Coastal, Westville, NJ Georgia Gulf, Pasadena, TX JLM Industries, Blue Island, IL Koch Industries, Corpus Christi, TX Shell Chemical, Deer Park, TX Sun Chemicals, Philadelphia, PA Texaco Refining, El Dorado, KS Total

million lbs./yr. 30 800 1000 1115 150 1500 154 1500 900 425 170 7,744

Source: Chemical Marketing Reporter

6.5.3

Process Technology for Phenol

Most phenol is made by the oxidation of cumene, which produces acetone as a coproduct. Overall, the process is as follows: benzene + propylene Æ cumene + oxygen

cumene Æ phenol + acetone

In the production of phenol for each tonne of product made 0.6-tonnes of acetone is generated. From a production technology, point of view, the phenol process fits extremely well for the production of bis-phenol A, which requires 0.9-tonnes of phenol and 0.3-tonnes of acetone to produce a tonne of product. Generally, however, the acetone markets have been smaller than the phenol markets, so finding homes for acetone has occasionally been a problem. Over the years, several developments have resulted in processes that do not generate acetone in the production of phenol. Kalama Chemicals in Kalama, WA generates phenol by the oxidation of toluene with benzoic acid as an intermediate. That process was at one time also used by Chatterton Chemicals in Vancouver, BC (now closed). There is a growing move to processes that do not produce acetone. Kalama’s route, which was developed by Dow Chemical, is the pioneer in the area. Today Merichem in Houston, TX and Dakota Gasification in Beulah, ND, also use processes that only produce phenol (total non-phenol capacity is 65-ktonnes per year or 143 million pounds per year). The major move in the direction of acetone, less production of phenol is the recently announced 136-kty (300 million pounds per year) plant that Solutia is building in Pensacola, FL. Solutia holds the rights outside of Russia for technology developed by the Boreskov Institute of Catalysis. This process starts with benzene and does not require cumene to move through to a phenol output. Solutia’s Russian process uses nitrous oxide, either from its adipic acid production or from ammonia at the Florida plant site as well as the two raw materials. Costs are reported to be 20% lower than the traditional route. Capital costs on phenol plants vary, but in petrochemical terms, they are not expensive. A recent 136-ktonnes per year (300 million pounds per year) plant in Singapore is budgeted at $128 million Canadian ($85 million U.S.). Even the new Solutia plant in Florida is likely under $150 million Canadian ($100 million U.S.), since JLM Industries is only paying $54 million Canadian ($35 million U.S.) towards capital costs for just under half the output.

6.5.4

Investment Potential for Product

An investment in phenol in Ontario would probably be done in AIH when benzene is available. Today margins on the products are good with pricing in the $1.35 Canadian per kilogram (41 cents U.S. per pound) level and cumene selling at 63 cents Canadian per kilogram (19 cents U.S. per pound). The present, round of plant expansions have been predicated on this type of price spread. However, the new plant investments are expected to drive down pricing in the next few years. The over supply is expected to bring margins down to a level of 10 to 15% or less.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 71

Phenol Investment Considerations and Alberta • • •

Much of the recent expansion is by firms integrating backwards to support nylon, epoxy or phenolic resin production. A major portion of the phenol market is captive. Direct benzene to phenol production could revolutionize the business.

In the short and medium-term, the potential for attracting a ‘player’ to Alberta may be modest. The phenol business is undergoing a 55% increase in capacity at this point, in time and running through to the year 2000. Secondly, much of the phenol industry in North America will wait on new investment to see how the Solutia plant in Florida operates. The process claims to have low costs by removing the cumene production step in the route to phenol. While many of the phenol producers also have strong market position in acetone, the new technology may make any new investor cautious about a new plant in the short term, given the potential for competitive economics to shift downward.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 72

7.0

CONCLUSIONS

7.1

Byproduct Propylene Availability • •

Nearly 500-kty of propylene is estimated to be produced in Alberta in 2005 following completion of publicly known projects. However, only approximately 280-kty of that propylene is seen here as being commercially available from a purification facility, (including some out of province supply); 90-kty of that from a single source. A prudent propylene user will probably discount that supply by the latter quantity to assure enough available with that source unavailable from an extended period, say, 200-kty fully secured supply.

Preliminary •

The 280-kty availability figure is possibly conservative, but it is very subject to the success of current/future contract negotiations. (Another 100 or so kty may become available, conversely, 90-kty may not.)

All or Nothing •

Byproduct supply will be an all or nothing affair from all sources, except possibly for ethylene production byproduct propylene and there, only if sufficient rail cars remain available to move excess raw propylene to the USGC. (With several hundred cars involved without its local processing this is a big ‘if’.)

Purification Capacity •

7.2

The purification facility will be receiving at a rate of up to 330-kty of propylene on occasion – e.g., no shutdowns, slightly above design production rates at most suppliers, and down to less than 180-kty during shutdowns. The processing facility must have a 300-kty capacity with up to turndown capability, unless railcars kept are available to move long-term excesses south. (Major raw propylene storage is essential in any byproduct propyleneprocessing scheme.)

Byproduct Propylene Processing

There will be at least three quite different types of raw propylene: • • •

Ethylene plant • 90% propylene (after partial saturation of methyl acetylene propadiene) Refineries • 65% propylene with rest mostly propane Oil Sand Upgraders • 30 to 40% propylene with rest mostly propane, but some butanes plus likely

Only the oil sands propylene is expected to be received by pipeline, with significant railcar movement for ethylene plant and refinery material. The various feeds will carry a variety of impurities – e.g., methyl acetylene propadiene (MAPD) at 3 to 5% in ethylene plant feeds, but at 100-ppm or less in other feeds, sulphur compounds, and possibly arsenic, phosphorus, mercury and other metallic compounds.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 73

Figure 7.2-1. Overall Byproduct Propylene Processing Ethylene Plant Feeds

P

MAPD

R*

Other Feeds

Treatment

Distillation

P

Hydrogenation C2’s to Fuel

R

P R

C4 + C3 Byproducts

Feed Caverns

Product Propylene Caverns

To New AIH or SIA Area Propylene Users

To Other Propylene Users

P - Pipeline R - Rail (plus truck?)

Extensive raw feed storage is essential, up to one million barrels (1150,000-m3). Ethylene plant high MAPD content must be reduced and depending upon byproduct propane and butanes plus specifications likely a final hydrogenation will be needed. Other treating can be perhaps before or after the final propylene purification distillation. This study assumed byproduct purification to a polymer (99.5%) grade product as the only significant difference between chemical (94 to 95%) and PG is the size and type of distillation equipment. We believe a prudent processor would design for PG to suit PP plant needs, although the other short-listed propylene derivatives require only a chemical grade. (There will be some economic advantages if they use PG, but possibly not enough to warrant a PG price.)

7.3

Propylene from Propane Figure 7.3-1. Propylene from Propane Hydrogen (Optional)

Existing Propane Systems

Propylene Consumer

P C3 Dehydrogenation

Propylene Cavern Cavern Storage

Feed C4’s

P - Pipeline

7.3.1

World Situation •

Worldwide propane to propylene conversion of propylene6 has at least one well proven technology. Other technologies are in the wings and the competition appears to be decreasing capital costs. However, locations of all of the current and planned propane to propylene units are in areas of very low propane costs.7

7.3.2

Process for Comparison

6

Propane is also being used as a feed to acrylonitrile in a new Asian plant in lieu of propylene. Areas of high capital costs and high propylene derivative transport charges.

7

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 74

•

7.3.3

Yields and Balances • •

7.3.4

The Oleflex technology results in a 94.5+% yield (on feed propane) of propylene and a major hydrogen byproduct that can be used. Deliberate production of propylene can be tailored to match specific end user needs with storage only to match shutdowns at producer and consumer ends.8 (But excess production might be railed to the U.S. Midwest or Gulf Coast.)

Sizing • • •

7.3.5

The assumption of UOP’s Oleflex route to propylene in this study is consistent with all but one, propane to propylene project worldwide in the past 10 years. Portions of that technology are now used at AEF and at Shell’s Scotford Refinery.

This study assumed a 350-kty (of propylene) facility due to that size being a relatively standard single train facility (and good cost data being available). At that size roughly 14,000-BPD (2,150-m3) of commercial propane would be needed (similar to AEF field butane supply rate). This size could carry two of the short-listed chemicals, assuming each at minimum size.

Propylene Supply Cost

7.3.5.1 Deliberate Propane to Propylene Base • •

The literature indicates that a propane to propylene route would have been competitive with other propylene sources on the USGC over the 1982 through 1998 period. However, this study’s review of 1998 and 1999 propane prices (Texas and Edmonton) and USGC PG propylene price indicated the likelihood of a relatively low 13.5% simple rate of return from such a venture, even assuming a USGC propylene price acceptable here. Further, more in-depth review appears warranted due to the inconclusive result and the downward trends in capital and operating costs. More analysis of future USGC propane and propylene prices is also needed to better define the dehydrogenation option 3 to 5 years hence.

7.3.5.2 Byproduct Propylene •

Each byproduct source has its own replacement feedstock or alternate market price.

Ethylene Plant • •

Raw propylene now goes to USGC with very roughly 3.5 to 4.0 cents U.S. per pound freight cost. Current Gulf Coast processing to PG product cost is estimated very roughly in the order of 7 to 10 cents U.S. per pound.

Oil Refineries • •

Refineries must make up for reduced gasoline production via blending stock or finished gasoline purchase or added crude processing. Raw propylene value will vary greatly refinery to refinery greatly being influenced by expansion and/or other changes needed for different crudes and/or product quality change environmental regulations driver.

Oil Sands • • •

8

Propylene will be replaced by natural gas in fuel gas systems – on balance by gas moving north on the TransCanada system. The byproduct aggregator will have quite different negotiations with each source. To these replacement/replacement values must be added transport to the byproduct propylene processing center, as well as processing costs.

Roughly half that appropriate for a byproduct propylene route.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 75

This study’s very preliminary estimates placed Alberta byproduct propylene at 1 to 2 cents below USGC pricing, assuming grassroots facilities. TCMS will use appreciable common facilities at its Redwater natural gas liquids fractionation and there are other settings with similar synergistic cost lowering opportunities.

7.3.6

Key Selected Derivatives

Key Products (Short-List) •

• • •

PP variations (with ethylene and possible/probably other monomers). • Major polymer group next to PE’s in world importance, with a 5 to 6% per year. • As with PP product types to be produced, a prospective PP producer will have his own select market areas for specific grades, well beyond definition in this study. Mid continent and California markets, for example, could well be emphasized rather than Asian ones. ACN (with ammonia) AA (and probably some derivatives) for super adsorbents. • Pacific Rim (via, say, Kitamat for liquids, Vancouver for PP) plus internal North American demands in each case. Minimum plant size is about 200-kty of propylene in each case matching minimum byproduct supply scenario.

Product costs should all be 1 to 4 cents per pound under USGC prices, with marginally lower transport costs to the Pacific Rim and perhaps marginally higher costs to mid continent markets. Watching Briefs • •

PO and derivatives are complicated by cofeeds, e.g., benzene, and major coproducts such as styrene monomer, but PO is not to be forgotten. Phenol, but benzene supply much more critical than propylene, has significant lower demands, the only example noted in this study.

Other Chemicals •

7.3.7

Companies •

• • • Note:

This study did not show much encouragement for n-butanol, 2-EH and isopropanol as markets are not expanding at any significant rate. (While 2-EH has some local market as the nitrate salt as a cetane improver in oil sand derived diesels; this market may not last and is now well supplied with low cost Asian supply.) However, one very knowledgeable contact indicated he felt oxo chemicals would eventually be produced here with CO and hydrogen available from hydrogen and methanol production units.

Throughout the analysis, certain chemical company names arose several times, often relative to their own core product/market interests. Dow, Shell Chemical, BP Amoco, Degussa for example, are already very active in Alberta. BASF, Huntsman, Solutia were also noted several times and may be enticed here. This is but a starter list of companies with core propylene derivative interests. Such companies will decide which propylene (and related feed) derivatives, if any, are important to them in an Alberta content. Availability of cofeeds such as benzene for a styrene/PO facility and/or phenol will be important to many companies. Utility et al Availability – many ‘newcomers’ will be assuming over-the-fence availability of oxygen, nitrogen, hydrogen, CO, steam, electricity and even plant air as is now almost standard in Europe and on the USGC. Low construction costs should prove attractive.

Note that Alberta sites will be compared with Asian, U.S. and possibly European sites where more or less government financial support is available – e.g., a current largely government funded Netherlands to Ruhr Valley propylene pipeline. (Such assistance at competitive sites has not been considered in this study, but we believe it is an important decision factor, especially to companies not already located in Alberta.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 76

7.4

Summary

Supply – Byproduct •

Minimum 280-kty on average anticipated likely in 2005 (but with significant uncertainty with possible swings of +100-kty overall and +50 to 100-kty on daily basis). Note that a propylene user is likely to discount, to say, 200kty.

Supply – Propane Dehydrogenation •

Propane dehydrogenation is proven not competitive here today, but with better technology is coming closer.

Propylene Pricing •

Pricing in the order of two cents U.S. per pound of PG propylene, below USGC on average for byproduct propylene, assuming grassroots facility – with integration at existing facilities cost could well be less.

7.5

Recommendations

7.5.1

Byproduct Propylene Aggregation

AED should promote and assist in aggregation and all related permitting. Getting the propylene availability story out to prospective users also will need major AED assistance. The limits of byproduct supply must be considered in such ‘story’.

7.5.2

Other Feedstocks

Propane feedstocks for propylene and, perhaps, ACN, and ammonia (for the latter) should need little AED help, if economically attractive. However, potential availability of other cofeeds warrants further study and supplier identification – e.g., benzene in particular, but also dienes for (EPD type polymers) and CO for oxo alcohols. Propane to propylene facility will need quite similar assistance to that of the byproduct processing train.

7.5.3

Utilities For New Plants

Details need to be developed on over-the-fence availability of pipelined oxygen, nitrogen, hydrogen and other gases, steam, plant air, cooling water/water supply generally. Contact points should be well defined and assistance provided.

7.5.4

Company Attraction

While this study short-listed several chemicals, chemical companies will decide on what, if any, propylene related projects they will pursue. Each company has its own criteria for product and site selection, hence, each will need unique packages of Alberta, AIH and SIA attributes and utility, feedstock, land, transport, regulation specifics. Comparison of Alberta to European and other competitive site ‘offerings’ must be very well defined and differences made known to all involved in Alberta petrochemical industry attraction (and retention).

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 77

REFERENCES (a)

Gregor, J. H. et al “Increased Opportunities for Propane Dehydrogenation” Dewitt World Petrochemical Review, March 23 to 25, 1990.

(b)

Gregor, J. H. (UOP), Private Communication re Impurity Handling in Propane Dehydrogenation, February 2000.

(c)

Ecker, H. (UOP), Private Communication re Distillation System Design, February 2000.

(d)

GTS Group International, Alberta’s Petrochemicals – Transportation Assessment for AED updated through January 1999.

ALBERTA DEPARTMENT OF ECONOMIC DEVELOPMENT ALBERTA PROPYLENE UPGRADING PROSPECTS

March 31, 2000 Page 78