Raising self-sufficiency in
petrochemicals: Technology options
Much has been said about the feedstock limitations that India’s
petrochemical producers face, given the country’s limited hydrocarbon reserves,
be it oil or gas. Refinery operations at scale – as yet limited to a few
locations – offers some opportunities to tap into product streams at
competitive prices, and imports of feedstock, primarily ethane, are some
strategies producers have adopted to work around the problem. One other option
– famously employed in China – and now mooted for India is to use coal as
feedstock.
Widening gap between demand and supply
India’s demand for petrochemicals is rising and expected to
continue to do so for the foreseeable future. Supply has traditionally lagged
demand for much of the industry’s development – aside of brief periods – and
there are several value chains in which India now has negligible or no
production.
The import dependency for most ethylene (C2) derivatives – with
the exception of 1-butene, LLDPE and HDPE – is about 45%. The situation is even
worse for propylene (C3) derivatives; nearly 95% of all propylene produced is
consigned to PP and the import dependency for other derivatives is close to
100%. The entire national requirement of styrene is currently imported, as are
several speciality grades of PE and PP. Small production of EVA copolymers and
EPDM rubber have ceased and their demands are now fully serviced by imports.
The good news is that some gaps are now beginning to be filled.
In recent months, India has seen the commissioning of its first world-scale
phenol plant, and at least one project for acrylic acid, acrylate monomers and
oxo-alcohols is under implementation. Several refiners are eyeing investments
in petrochemicals as a value-addition and diversification strategy to their
fuel-focussed operations.
But even assuming all projects now talked about come to fruition
in the timelines indicated, India will continue to have deficits for most
petrochemicals. According to estimates made by ICIS, the import dependence for
C2 derivatives (with the exception of PE) will rise to 7-mt in 2025, from about
4-mt in 2017, with several items including styrene, EPDM and EVA continuing to
be fully imported. In the case of propylene derivatives, the situation is only
slightly better; by 2025, the import dependency (with the exception of PP) will
be about 1.5-mt, compared to 1.2-mt in 2017.
Options for ramping up capacity
If all of the expected demand for C2/C3 derivatives is to be met
by domestic production, India will need at least 28 world-scale plants for C2
derivatives (barring PE), and 16 plants for C3 derivatives (excluding PP).
Where can the feedstock for this – ethylene and propylene – come from?
Several approaches can be taken, but the key is producing the
olefins at a cost that will ensure competitiveness of downstream products.
India is geographically unfortunate to have the feedstock-advantaged Middle
East producers close by, and despite their somewhat diminished cost advantage,
they remain formidable competitors.
Brownfield expansions
Brownfield expansions represent a low cost approach to raising
capacity, as they can benefit from sunk costs associated with using existing
infrastructure that will only need to be enhanced. There are limits to the
incremental expansions that can come from debottlenecking, and capital will
need to be plonked to ramp up in any significant manner. Recent reports suggest
that Reliance Industries Ltd. (RIL) is planning to augment its refining capacity
at Jamnagar by another 30-mtpa, taking its total capacity at the site to
90-mtpa. Such an expansion will undoubtedly be capital-intensive, but cheaper
than creating at a greenfield site. The refinery expansion will almost
certainly be dovetailed to downstream petrochemical capacity, the scope and
scale of which will only unfold in time.
Using refinery off-gases & FCC propylene
For refiners with a scale of at least 15-mtpa, recovery of
ethylene from refinery off-gases represents a low cost route to ethylene, which
can then be valorised for non-PE derivatives, in particular. This is an
approach RIL had taken till recently (when it decided to shift its crackers to
imported ethane).
Likewise, propylene recovery from fluidised catalytic cracking
(FCC) can provide significant quantities of this valuable feedstock to support
C3 derivatives capacity, if not PP production. This is a tack several refiners
follow even now (with the propylene destined for merchant sale), and more are
likely to opt for it. BPCL, for instance, has enhanced propylene production at
its Kochi refinery to serve not just its existing customers, but is in the
process of setting up captive plants for derivatives.
PDH – time has come
Propane dehydrogenation (PDH) is yet another option that India
can explore. The technology is now mature, readily available for licensing and
widely practiced in China, mainly for PP production. The markets for LPG – the
primary feedstock – are expected to be weak at least in the near future and
this suggests healthy margins for now. An attempt to cobble together a
consortium of propylene consumers to invest jointly in a PDH project based on
LPG imported from the Middle East fell through some year ago, but should be
revived. While the major refiners such as Reliance and Nayara Energy (earlier
known as Essar Oil) have enough propane to develop world-scale PDH projects on
their own, smaller refineries can also look to pooling resources and supplement
it from gas separation units. In the alternative, propane imports can be easily
arranged from the Middle East, North Africa or USA – all regions with a
surplus.
Imported ethane
Imports of ethane, primarily from the US, is an approach RIL has
taken (as have some European crackers), but the logistics of managing this will
put it out of reach of most players here, especially given the lack of ready
infrastructure to receive the gas.
Gasification of coal
The gasification of coal to produce synthesis gas (a mixture of
carbon monoxide and hydrogen), and then convert it to ammonia, methanol or
olefins is another option, though a capital-intensive one. The technology is
being tried out for urea production at a couple of sites here, but it is as yet
unclear how the high cost of the fertiliser so produced will be compensated to
producers if they are to keep selling urea at the low price dictated by
government policy.
The benefits of coal are obvious: it is a low cost fuel, and is
abundantly available in India, albeit with high ash. Gasification technologies
have matured in the last decade, and though there is not much experience in
handling high ash coals, this can be overcome by blending either with imported
low ash coal or with domestically produced petroleum coke, a low value
by-product of crude oil refining.
The success of China in using coal for making methanol has
enthused India’s planners, but investors here will be stymied by the high cost
of imported technologies and the lack of indigenous options (unlike China).
There are some efforts to develop the technologies here, but with no sense of
urgency. There is loose talk of a methanol economy – using the chemical as fuel
in cars and, in the form of dimethyl ether, as a substitute of LPG – but there
is no roadmap to how it will be made here in a competitive manner at scale. It
is for good reason that an overwhelming share of global methanol capacity is
based on gas; with coal, biomass, or municipal wastes – as suggested by
enthusiasts here – the costs of methanol production will be far higher. A
methanol economy based on such weak fundamentals will need to be propped up by
dole to someone in the value chain!
In short, using coal for petrochemicals poses many challenges –
technological, commercial and environmental. Using it for petrochemicals will
need coordinated actions on the part of policy makers and industry players.
Else it can be a nightmare.
MTO route
Production of olefins from methanol imported from a low cost
producing region (e.g. Iran) could be another option for enhancing olefin
availability in India. MTO technology is now available for licensing, but its
economics in an Indian context will need to be closely examined.
Investors in petrochemicals have several options to ramp up
capacities and widen their product slate. The markets await!
Author: Ravi
Raghavan
Chemical Weekly Issue date: 27th November 2018
No comments:
Post a Comment