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Feedstock Challenges and Innovative Routes to
Feedstock
6th Indian Oil Petrochemical Conclave – 2017
Balasubramaniam Ramani, Senior Consultant,
ICIS Analytics & Consulting
1
2
Agenda
ICIS Consulting
Context Setting
• Ethylene Feedstock sources & recent developments
• Propylene Feedstock sources & recent developments
Global Petrochemical feedstock scenario & outlook
• Ethylene Feedstock sources
• Propylene Feedstock sources
• Supply-Demand Gap
• Potential future options for India
Indian Petrochemical feedstock scenario & outlook
Conclusion
Ethylene & Propylene are key building blocks for
Petrochemicals
Global Consumption of
Basic chemicals in 2016 is
estimated at >380 Mn
tonnes; Over 60% of which is
attributed to Ethylene &
Propylene as building blocks
for further conversion.
Ethylene38%
Propylene26%
Butadiene3%
Benzene13%
Toluene7%
Mixed Xylene13%
Global Basic Chemicals Consumption (2016)
Source: ICIS Supply and Demand Database
4
Ethylene derivatives & end-uses / applications
Polyethylene
EDC
EVA
VAM
Ethylene Oxide
EPDM
Packaging, Pipes, Cable Insulation
VCM PVC Construction, Housing Sectors
Foaming applications, Coating, Packaging, Agriculture Industries
Paints, Adhesives, Coatings
MEG
Ethanolamine
Polyol
PET
PUBuilding Insulation, Household Use (for e.g Furniture)
Textiles, Packaging
Detergents, Emulsifiers, Polishes, Pharmaceuticals, Corrosion Inhibitors
Seals, tubes, insulations
Indicates that India is import dependent for the value chain
5
Polypropylene
Acrylonitrile
Propylene Oxide
Cumene
Acrylic Acid
Butyraldehyde
Resins (ABS, SAN, ASA)
Propylene Glycol
Acetone
Rubber (NBR)
Acrylic Fibres
SAP
Acrylic Acid Esters
Oxo Alcohols
Film, Fibres, Appliances, E&E, Automotive, Households, Pipes, Medical, others
E&E, Appliances, Packaging, Auto, others
Automotive
Carpets, Clothing, others
Antifreeze, Solvents
Insulation, Furniture, Coatings, others
Diapers, Hygiene, others
Adhesives, Coatings, Paints
Plasticizers, Solvents
Propylene derivatives & end-uses / applications
Polyether Polyol PU
PhenolBPA
PC
Electrical, Architectural, Security, Transportation applicationsAutomotive, Aerospace, Electrical, Electronics Sectors
Indicates that India is import dependent for the value chain
*India is expected to turn net deficit by 2018
6
Olefin Feedstock routes – Several options &
opportunities for Refinery – Petrochemical integration
NGL
Oil
Coal (CTO)
RefineryLPG
NaphthaGas Oil
FractionationEthane
LPG Ste
am C
rack
er
PD
H
(Propane)
MTO
Butadiene
Metathesis
Butenes
Gasification Methanol
FCC
Split
ter
Ethylene
Propylene
7
Agenda
ICIS Consulting
Context Setting
• Ethylene Feedstock sources & recent developments
• Propylene Feedstock sources & recent developments
Global Petrochemical feedstock scenario & outlook
• Ethylene Feedstock sources
• Propylene Feedstock sources
• Supply-Demand Gap
• Potential future options for India
Indian Petrochemical feedstock scenario & outlook
Conclusion
8
Global Ethylene Supply >>> Steam Cracker Based
Source: ICIS Supply and Demand Database
99%
95%
4%
-
50000
100000
150000
200000
250000
2010 2015 2020 2025
Tho
usa
nd
to
nn
es
Global Ethylene Supply by Production Routes
Steam Cracking CTO/MTO Others
>95% of global Ethylene supply to be Steam Cracker based
Increasing supply from non-traditional routes CTO/MTO that are currently restricted to China
MTO/CTO prospects are questionable in a lower oil scenario, from either narrower spread
between coal and oil based feedstock or lack of imported MeOH feedstock as US-based MeOH
expansions cancelled/delayed in low oil case
9
Global Cracker Feedstock Slate is lightening, primarily
driven by the shale gas boom in North America…
SOURCE: ICIS Supply & Demand database
30% 33%39% 39%
56% 52%46% 47%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2015 2020 2025
Global Cracker Feedstock Slate
Ethane LPG Naphtha / Liquids
Feedstock evolution – regional variations on
ethylene supply (Million Tonnes)
0
10
20
30
40
50
60
70
2010 2015 2020 2025
North America
0
10
20
30
40
50
60
70
2010 2015 2020 2025
Asia
0
10
20
30
40
50
60
70
2010 2015 2020 2025
Middle East
Source: ICIS Supply and Demand Database
0
10
20
30
40
50
60
70
2010 2015 2020 2025
Europe
Feedstock lightening, with increasing ethylene supply from ethane
Naphtha remains the leader, with CTO/MTO gaining share
Ethane remains the main feedstockNaphtha remains the main feedstock, though there may be some lightening
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Global propylene supply sources will have evolved to
be more diversified as new routes have emerged
Source: ICIS Supply and Demand Database
Steam cracking and FCC propylene remain the dominant sources for propylene production.
Lightening of cracker feedstock, coupled with strong demand for propylene derivatives & ample
availability of propane, has given rise to propylene supply from on-purpose production (through
Propane Dehydrogenation - PDH)
Increasing supply also from non-traditional routes CTO/MTO but are currently restricted to China
57%42%
34%
29%4%
17%
8%
-
20000
40000
60000
80000
100000
120000
140000
160000
180000
2010 2015 2020 2025
Tho
usa
nd
to
nn
es
Global Propylene Supply by Production Routes
Steam Cracking FCC PDH CTO/MTO Metathesis Others
Source: ICIS Supply and Demand Database
Regional outlook for propylene supply sources..
Significant variations across regions…
-
10000
20000
30000
2010 2015 2020 2025
North America
Steam Cracking FCC PDH Others
-
5000
10000
15000
20000
2010 2015 2020 2025
Middle East
Steam Cracking FCC PDH Others
-
5000
10000
15000
20000
25000
2010 2015 2020 2025
Europe
Steam Cracking FCC PDH Others
-
20000
40000
60000
80000
100000
2010 2015 2020 2025
Asia
Steam Cracking FCC PDH CTO/MTO Others
Growing supply from non-traditional routes PDH/CTO/MTO mostly due to ChinaOn-purpose propylene production
from PDH is likely to grow
Steam Cracking remains the majority propylene sourcePropylene supply source distribution
remain largely unchanged
13
Agenda
ICIS Consulting
Context Setting
• Ethylene Feedstock sources & recent developments
• Propylene Feedstock sources & recent developments
Global Petrochemical feedstock scenario & outlook
• Ethylene Feedstock sources
• Propylene Feedstock sources
• Supply-Demand Gap
• Potential future options for India
Indian Petrochemical feedstock scenario & outlook
Conclusion
14
India’s ethylene supply is mostly steam cracker based,
with a fairly mixed cracker feedstock slate
Source: ICIS Supply and Demand Database
Around 98% of Ethylene supply in India is Steam Cracker based
With the start up of several mixed feed crackers in 2016-2017, the feedstock slate
has shifted slightly towards more ethane feed. As of 2017, Ethane in particular
accounts for 44% of the feedstock slate in 2017, almost on par with naphtha.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2015 2017Current
2020 2025
India Cracker Feedstock Slate
Ethane LPG Naphtha
0
2000
4000
6000
8000
10000
12000
2010 2015 2020 2025
Tho
usa
nd
to
nn
es
India Ethylene Supply by Production Routes
Steam Cracking Others
15
India could see greater integration between refining and
petrochemical as companies plans to add crackers to their
existing refinery complexes
RELIANCE (HAZIRA)Naphtha; LPG; Ethane930kta
RELIANCE (VADADORA)Naphtha180kta
*“Integrated” with Jamnagar Refineries
IOCL (PANIPAT)Naphtha800kta
*Integrated refinery and petchem complex
RIL REFINERIES (JAMNAGAR)
HALDIA (HALDIA)Naphtha670kta
Integrated Cracker RefineryStandalone Cracker Announced Cracker
IOCL (PARADEEP)Naphtha/Mixed1000ktapotentially 2020 start-up
HMEL (PHULO KHARI)Naphtha/Mixed1200ktapotentially 2025 start-up
*Integrated refinery and petchem complex
*Integrated refinery and petchem complex
OPAL (DAHEJ)Naphtha; Ethane; LPG1100kta
Source: ICIS Supply and Demand Database
16
Various models exist in India in managing the cracker feed;
Some have expanded their flexibility to enhance optimisation
RELIANCE (NAGOTHANE)Ethane; LPG450kta
RELIANCE (DAHEJ)Ethane; LPG365kta
RIL REFINERIES (JAMNAGAR)
BCPL (ASSAM)Ethane; LPG; Naphtha220kta
GAIL (PATA)Ethane Ethane; LPG 450kta 530kta
RELIANCE (JAMNAGAR)Ethane (off gas)670kta
*Integrated with Jamnagar Refineries
*Ethane is imported from the US and received at the Dahej terminal and distributed to feed the 3 crackers
*In-situ ethane
*Ethane comes from imported rich LNG
RELIANCE (HAZIRA)Naphtha; LPG; Ethane930kta
OPAL (DAHEJ)Naphtha; Ethane; LPG1100kta
Crackers relying on US ethane
Refinery
Other Crackers with Ethane feed
Source: ICIS Supply and Demand Database
17
All of India’s propylene supply comes from traditional
routes i.e. Steam Cracking and FCC
Source: ICIS Supply and Demand Database
More than 60% of propylene supply comes from FCC
There has been no announcement of investments in alternative production routes in India,
although there has been some interest
Over the longer term, with growing downstream demand for propylene based derivatives, ICIS
forecasts development of on-purpose propylene production via PDH in the country
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2010 2015 2020 2025
India Propylene Supply by Production Routes
Steam Cracking FCC Propane
18
IOCL (PANIPAT)175kta
HMEL (PHULO KHARI)400kta
Propylene from FCC – Good example of Refinery-Petrochemical
integration; Many refiners are already maximizing their operations
by integrating with propylene and its derivatives
BPCL (KOCHI)65kta
BPCL (MUMBAI)33kta
CHENNAI PETROLEUM (MANALI)80kta
IOCL (MATHURA)20kta/165kta
MRPL (MANGALORE)440kta
RELIANCE (JAMNAGAR)1000kta/450kta/450kta
IOCL (PARADEEP)700ktapotentially 2020 start-up
Propylene Capacity ex FCC
Refinery
Announced/Firm propylene capacity ex FCC
*FCC unit started up. Propylene production expected in 2018
ESSAR (VADINAR)250ktapotentially 2020 start-up
HPCL (VIZAG)74kta
HPCL (VIZAG)320ktapotentially 2021 start-up
BPCL (KOCHI)500ktapotentially 2020 start-upSource: ICIS Supply and Demand Database
19
Indian Olefin Supply-Demand Gap…Expected to further widenWith very limited investments planned, India is expected to see a growing deficit of
olefins derivatives..
By 2020, India’s deficit of ethylene and propylene derivatives is expected to reach
2.3 million tonnes ethylene equivalence and 1.1 million tonnes propylene
equivalence respectively
The deficit is expected to at least triple by 2025 if no further investments are made
-7000
-6000
-5000
-4000
-3000
-2000
-1000
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
tho
usa
nd
to
nn
es in
ole
fin
s eq
uiv
alen
ce
India's Olefins Derivative Net Trade
Ethylene Derivatives Propylene Derivatives
20
Indian Olefin Supply-Demand Gap…Expected to further widenWith very limited investments planned, India is expected to see a growing deficit of
olefins derivatives..
Investment OPPORTUNITIES remain untapped…But what options could India explore to fill this gap?
• Steam Cracking – Naphtha / Mixed feed?• Propane Dehydrogenation (PDH)?• Methanol to Olefin (MTO)?• Coal to Olefin (CTO)?
Could India be more competitive than China for these new business / feedstock models?
21
India is a net exporter of naphtha, mainly to NE Asia, with US being an important market as well in recent years; Naphtha surplus is concentrated in the West
US has become the single largest market for
India’s naphtha since 2013.
Between 2013-2016, India shipped more than 9
million tonnes of naphtha to the US market.
In 2016, India exported more than 3 million
tonnes of naphtha to NE Asia
China, Japan, South Korea and Taiwan have
similar share of the volume
It is worth noting that Singapore also imported
considerable volumes – an annual average of
460kt in the last 5 years
Much of India’s exports would have come from
West India
That said, a shortage of heavy naphtha has
appeared in the West with the start-up of the
mega PX plant in 2017
2610
1911055
2768
10838
2600
144
2196
0
5137
North Northeast East South West
India’s Naphtha Supply and Demand
Naphtha (for end-use) Supply Estimated Demand for Petrochemical
*Petrochemical sector makes up 96%of naphtha demand in FY2015-16
Source: MOPNG; ICIS Consulting
-4000
-2000
0
2000
4000
6000
8000
2009 2010 2011 2012 2013 2014 2015 2016
tho
usa
nd
to
nn
es
India Naphtha Net Exports
NORTHEAST ASIA NORTH AMERICA SOUTH & SOUTHEAST ASIA
MIDDLE EAST EUROPE SOUTH & CENTRAL AMERICA
FORMER USSR
Source: ICIS Supply and Demand Database
22
In both high and low oil scenarios, an Indian naphtha cracker integrated to PE & PP yields higher margins than a similar cracker in China
India’s proximity to major naphtha supplying region Middle East provides an important cost advantage
over China
Fixed cost is also generally lower in India
Furthermore, Polyolefin prices are typically higher in India than in China
Source: ICIS Consulting
>$100Under $500
Naphtha Cracking; India v China - 2014PE Price India PE Price China
>$550
>$800
Naphtha Cracking; India v China - 2016PE Price India PE Price China
India China
23
Mixed feed crackers for feedstock flexibility… with
volatility around crude, increased flexibility in cracker
feed becomes a hedging tool for producers…
Ethane has a clear cost advantage
over naphtha as a cracker feed in a
$100/bbl oil world
However, the cost advantage is
reversed when oil prices are low
That said, given the vast difference in
yields between feeds, precise
management of derivatives sales will
be crucial
Source: ICIS Consulting
0
500
1000
1500
2014 2016
$/t
on
ne
of
PE
Indian Production Costs for Different Feedstock
Domestic Ethane 'Spot' Imported US Ethane Naphtha
Ethane more competitive in high oil
Naphtha more competitive in Low oil
(Unhedged)
24
China has witnessed a spate of on-purpose propylene
capacity start-ups based on imported propane
As much as 4.5mtpa of PDH capacity was added in the last three years, with another
2.3mpta expected by 2020, making up close to 20% of propylene capacity in China
China PDH units are dependent on propane imports. More than half of the imports is
from Middle East, with the US also an important supplier.
In 2016, around 90% of imports to China came from the two regions.
0
1000
2000
3000
4000
5000
6000
7000
8000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
tho
usa
nd
to
nn
es
China PDH Capacity
Around 4.5mtpa of PDH capacity was added between 2014 and 2016
0
2000
4000
6000
8000
10000
12000
2012 2013 2014 2015 2016
tho
usa
nd
to
nn
es
China's Propane Net Import
Source: ICIS Supply and Demand Database
Could India adopt or adapt this business model?
25
In both high and low oil scenarios, an Indian PDH integrated to PP production returns better margins than a PDH in China
India’s proximity to major propane supplying region Middle East provides an important cost advantage
over China
Fixed cost is also generally lower in India
Furthermore, product prices are higher in India than in the Chinese market
Source: ICIS Consulting
>$150
PDH; India v China - 2014PP Price India PP Price China
>$150
>$300
PDH; India v China - 2016PP Price India PP Price China
India China
26
Similar to PDH development, China witnessed the first wave of CTO/MTO capacity start-ups in the last few years
Around 2.3mtpa of CTO/MTO capacity was added in the last three years, with another
2.6mpta expected by 2020, making up close to 20% of ethylene capacity in China
While CTO units utilise the vast coal resources China has domestically, most MTO
units operate on imported methanol.
In 2016, Close to 60% methanol imports come from the Middle East
Source: ICIS Supply and Demand Database
Could India adopt or adapt this business model?
0
1000
2000
3000
4000
5000
6000
7000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
tho
usa
nd
to
nn
es
China MTO/CTO Capacity
MTO CTO
CTO and MTO capacity addition top 1mtpa respectively between 2014-16
0
2000
4000
6000
8000
10000
2012 2013 2014 2015 2016
tho
usa
nd
to
nn
es
China's Methanol Net Import
27
In both high and low oil scenarios, an Indian MTO unit integrated to PE production is expected to yield higher margins than a similar MTO unit in China
India’s proximity to major methanol supplying region Middle East provides an important cost
advantage over China
Fixed cost is also generally lower in India
Furthermore, product prices are higher in India than in the Chinese market
Source: ICIS Consulting
India China
Under $300
>$500
MTO; India v China - 2014PE Price India PE Price China
>$100
>$500
MTO; India v China - 2016PE Price India PE Price China
28
Among Asian producers, India is relatively cost competitive and enjoys better margins than Chinese producers under most feedstock options.
Source: ICIS Consulting
India China
29
Agenda
ICIS Consulting
Context Setting
• Ethylene Feedstock sources & recent developments
• Propylene Feedstock sources & recent developments
Global Petrochemical feedstock scenario & outlook
• Ethylene Feedstock sources
• Propylene Feedstock sources
• Supply-Demand Gap
• Potential future options for India
Indian Petrochemical feedstock scenario & outlook
Conclusion
30
Conclusion
Strong demand fundamentals shall drive future investments in India
Refinery-Petrochemical integration will further enhance competitiveness for
Indian producers
Traditional steam cracking shall remain evergreen
Mixed feed crackers allow for feedstock flexibility
Well diversified business model due to better product mix
Competitiveness further enhanced in the Low-oil environment prevailing
However, huge CAPEX involved
Investments into Non-traditional business modes will also be required
PDH based cluster to facilitate downstream investment into Propylene
derivatives
MTO project based on merchant methanol from Middle east with potential
Back-integration to Methanol in Middle east in future
CTO project based on imported / domestic coal