Page 131 - CW E-Magazine (19-3-2024)

Point of View

More petrochemical producers eye US ethane

as feedstock

The competitiveness of petrochemicals production is in large measure determined by the cost of feedstock, though other
factors including scale, choice of technology and operational efficiencies also count. Given that the technologies to produce most
basic petrochemicals – notably the olefins and aromatics – come from a handful of vendors (none of which are Indian), technology
choice is less of a differential. Which leaves scale and feedstock access as critical factors determining margins and profitability.

Routes to ethylene
Ethylene is the single most important olefin and is mostly produced by one of three routes: cracking of ethane, which comes
from natural gas or shale gas after stripping out the methane (mainly for energy use); cracking liquid feedstock, such as naphtha
(a fraction of crude oil refining); or from methanol, in so-called methanol-to-olefin (MTO) units. The relative economics of ethylene
production from each of these feedstock is dynamic and determined by several factors, notably the prices of ethane, naphtha (or
crude oil) and methanol (or coal/natural gas, from which it is derived). But some broad generalisations can be made and one is
that cracking ethane is most competitive. This is what gives crackers in the Middle East and in North America (US and Canada)
the lowest costs of ethylene production in the world.

Some of the competitiveness also stems from the fact that cracking ethane gives a product stream composed primarily of
ethylene (the desired olefin), along with some minor amounts of coproducts (which are mostly higher olefins). This is in sharp
contrast to cracking naphtha, which gives a broader product slate including olefins (ethylene, propylene, butylenes), and aromatics
(which contain benzene, toluene and xylenes). While the yield of ethylene from the cracking of naphtha, typically ranges between
29-34%, cracking ethane yields between 80-84% of ethylene. For companies eyeing maximisation of ethylene production to make
derivatives that include mainly polyethylene and monoethylene glycol, ethane is hence the preferred feedstock.

Petrochemical producers elsewhere in the world have jealously eyed the cost advantage enjoyed by crackers operating
in gas-advantaged regions, but could do little to benefit. That is now changing.

Growing trade in ethane
Ethane exports from the US are now rising, and going to countries in North America (Canada), Latin America, Europe, as well
as China, India and Japan in Asia. Reliance Industries Ltd., India’s leading petrochemicals producer, was amongst the early ones
to tie in ethane supplies from the US, and has an efficient supply chain to ferry the feedstock from the US to the West Coast of
India. It has six Very Large Ethane Carriers (VLECs) that it owns in partnership with Mitsui OSK Lines, which transport ethane
in cryogenically cooled conditions as a liquid; storage tanks at the receiving end in India; and pipelines that ferry the ethane for
use in its cracker at Jamnagar. In Europe, INEOS, another aggressive player, has taken a similar route to overcome the serious
feedstock disadvantage the European petrochemical industry is grappling with. It now feeds its cracker in Grangemouth (Scotland)
with imported ethane, bettering its competitiveness over others cracking liquids.

News now comes that two of India’s public sector companies in the oil & gas sector – Gail India Ltd. and ONGC – have signed
a tripartite agreement with Shell Energy India Pvt. Ltd. (see news pages of this issue) to explore opportunities for the import of
ethane and other hydrocarbons. While details of the plan – such as the quantum of imports planned and the end-uses they are
to be put to – have not been revealed, the arrangement will utilise Shell’s import terminal at Hazira. This was originally built to
handle imports of liquefied natural gas (LNG), and will now be modified to handle ethane. The source of the ethane has not been
mentioned, but it is very likely the US.
Ethane exporters
The US and Norway are presently the only countries that ship ethane internationally, but the former is racing ahead in volumes
and geographies shipped to.
Norway’s exports have been falling – going down from 13,000-bpd (barrels per day) in 2020 to 10,000-bpd in 2021 and to

Chemical Weekly March 19, 2024 131

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