Marketing seminars on the first day of the Asia Petrochemical Industry Conference (APIC 2017) currently under way in Sapporo, Japan, focused on the global petchems industry, capacity additions, and trends in petrochemical feedstocks in an era of low-cost oil.
Tony Potter, vice president APAC at IHS Markit says that demand for ethylene derivatives between 2020 and 2030 will grow at 5.0–5.5 million metric tons/year (MMt/y) globally. “In round numbers this means that 50 MMt/y of new capacity or 40–50 world-scale crackers or their equivalent in coal, methanol, or gas-to-olefins based production, will be needed.”
He predicts that the United States will add another 10–12 MMt/year between 2020 and 2030 based on relatively cheap ethane. “This is the second wave and is in addition to the current wave.” The current wave of US crackers will add 10 MMt/y of ethylene capacity by 2020. Asian companies are concerned about the second wave of capacity buildup in North America. In Japan a lot of consolidation in the ethylene chain has already taken place and leading players say that a new wave of consolidation is likely in Japan because of the expansion of cheap petchems manufacturing in the United States.
Potter says this needs to be put into perspective. “Of the 50 MMt/y of new capacity, 10–12 MMt/y will be in North America. That means that 40 MMt/y will have to come from somewhere else. The Mideast will be adding capacity although not at as high a rate as in the past due to shortages of advantaged feedstock. Oman is building a cracker project and Qatar, which cancelled two ethane projects, is expected to add capacity. Abu Dhabi is also planning a large naphtha cracker. A few years ago, industry observers thought that Iraq would become a major producer but political instability there has delayed investment and the first cracker is unlikely to be built before 2030. There is sufficient ethane being flared just around Basrah for what could produce 1.5–2.0 MMt/y of ethylene. With additional LPG cracking, one could envisage a 4–5 MMt/y ethylene industry, just around Basrah. But that is not going to happen any time soon,” Potter says.
Another possible place is Iran, following the partial lifting of sanctions. But the country is very slow in adding capacity. “It can take 8–10 years to develop a cracker while elsewhere in the developed world from the award of an engineering, procurement, and construction contract, we would expect a cracker project to be built within 3–4 years. The absence of project management expertise is an issue in Iran.”
Outside North America there will be growing dependence on naphtha and LPG feedstocks compared with the 2010 to 2020 period, when the Chinese coal-to-olefins took a part of the balance. In China there will be less dependence on coal as new rules come into force. “China is expected to introduce a carbon tax and financing has to be more transparent now. Also, at $50/barrel, coal does not have any cost production advantage relative to naphtha and it is twice to three times more expensive from the capital cost point of view,” Potter says.
There are also a number of other Asian countries with substantial and growing domestic deficits of olefins which will attract investments with India being a prime example. OPAL has just commissioned a world-scale cracker project at Dahej and Reliance Industries, the dominant petchems player in India, is about to bring online its flagship gas cracker at Jamnagar, based on refinery off gas and designed to produce 1.5 MMt/y of ethylene. Other companies in India have also announced plans for new facilities and expansions of existing ones.
Potter says that populous countries in Asia, notably Indonesia, Vietnam, and the Philippines, will also add capacity. “Indonesia will by 2020 be importing close to 3 MMt/y of ethylene containing derivatives. Vietnam is another big net importer and so are the Philippines. Potentially there is a huge demand there and their current per capita consumption of chemicals and polymers is very, very low.”
In Indonesia, Chandra Asri has announced plans to build a 1 MMt/y cracker project, adjacent to its Cilegon operations. Cholanat Yanaranop, president of SCG Chemicals, confirmed on Thursday to CW that SCG is studying a possible joint venture (JV) with Chandra Asri for the new cracker project. SCG owns 30% of Chandra Asri. Cholanat says that the study will be completed end of this year or in the first quarter of 2018. He also confirmed that SCG is buying Qatar out of a JV in Vietnam and will likely hold 71% in the petchems project in Vietnam, which will be built near Ho Chi Minh City by 2022.
Other players are also looking to expand. Lotte Titan is planning to build a cracker in Indonesia and to expand its existing one in Malaysia. Pertamina has been working on JV cracker projects. PTT Global Chemical may revive its project in Indonesia. Petron is planning to expand refining capacity in Malaysia and the Philippines. In Malaysia, Petronas is expected to bring online its Rapid project during 2019.
By Natasha Alperowicz
Source: Chemical Week
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