Resin - From Ground to Pellet
It All Start With Oil And Natural Gas
Most industrial consumers of finished goods from plastic widgets to poly films know that it all starts there.
But as these consumers watched oil gallop to $147 a barrel this summer, and their plastic products follow suit, there is a renewed urgency to understand exactly how these products are related as a supply chain and as a price chain. Understanding the chemical chain can better help purchasing managers isolate the source of price movements providing better negotiating power and will help plan for the future.
There are three steps from ground to finished good: taking the NGLs from the crude oil or natural gas stream, converting the NGLs into olefins, which go into a reactor to make polyethylene and polypropylene. Let’s talk about this in more detail.
Crude Oil, Natural Gas And NGLs
Petrochemical production starts with the steam cracker. Steam crackers are usually located near refineries. However, there are far fewer steam crackers than there are refineries. While there are currently more than 500 refineries in the United States, there are only 42 steam crackers. Most of the steam crackers in the United States are located in Texas and Louisiana.
Natural gas liquids or NGLs, are the raw inputs, or feeds, that go into a steam cracker. NGLs are liquids that are pulled off of a stream of natural gas or a barrel of oil. Many companies that own oil refineries have steam crackers on the same site to consumer these liquids that come from the refining process. NGLs are mostly transported to the steam crackers by pipeline, but also can be transported by rail.
Olefins And Stream Cracking
NGLs are fed into a steam cracker which produces the co-products ethylene and propylene. Ethylene and propylene are gasses, and as a group are known as olefins. Domestically, ethylene is primarily transported by a complex network of pipelines that connect facilities in Texas and Louisiana. Propylene is also transported by a vast pipeline network, but also is moved by rail and truck. Both can be exported on tankers equipped to carry gas.
The raw materials, or feeds, fed into steam crackers vary globally and also on a site-by-site basis. One thing they all have in common is that they consume, or “crack”, NGLs. This process is called steam cracking, as the chemical unit heats up the NGLs cracking the molecules and making olefins.
People refer to light feeds and heavy feeds when talking about the type of NGL a steam cracker can crack. The primary feedstocks that are used in crackers are ethane, propane, normal butane, ISO butane, and natural gasoline. They are known as the hydrocarbon chain, and are called by the letter C followed up by a number. Ethane, also called C2, is the “lightest” feed, while propane, also called C3, is a little heavier. Butane, also called C4, is heavier still and natural gasoline, also called C5, is the heaviest of the NGLs. The lighter the feed the more ethylene is produced and the less propylene. The heavier the feed, the more propylene is produced and the less ethylene. Some steam crackers have the flexibility to switch between these NGLs, called flexi-crackers, while others are configured to only crack one or two NGLs.
Chemical producers with flexible steam crackers will use lighter feeds when profit margins are better for ethylene and polyethylene. Likewise, they will use heavier feeds when margins are healthier for propylene and polypropylene. Crackers with less flexibility will often increase or decrease production rates based on market conditions.
Ethylene is the principal raw material to produce polyethylene. Polymer grade propylene, or PGP, is the principle material used to produce polypropylene. A stream of PGP is highly pure consisting of 99.5% propylene. Once the ethylene or propylene are produced, it is piped into a separate facility called a reactor and processed into resin pellets. From here, the resin is shipped to processors and converters where it is manufactured into finished plastic products and consumer goods.
More On Propylene Production: Splitter Units
We now know that polymer grade propylene, the raw material to make polypropylene, can be produced as a co-product as a steam cracker cracks the molecules in NGLs. But there are also producers in the US that make PGP from refinery grade propylene or RGP. RGP is a propane/propylene mix that is a result of the refining process. PGP is derived from RGP using a unit called a splitter, which separates the propane from the propylene creating a product suitable to make polypropylene. Many of the splitters are on the same site as the steam crackers and reactors. But there are some stand-alone facilities not on integrated sites. RGP is transported to splitters in the US Gulf coast by a large network of pipelines. It also is brought to the region from refineries around the country by rail and trucks. Splitters are only used to make polymer grade propylene and not ethylene.
When steam cracker operators prefer lighter feeds, those with splitters will split more RGP to make up for the lost PGP production from steam crackers.
Historical Perspective
The US petrochemical industry was built up around the availability of cheap natural gas, which yields more ethane than heavier feeds. Consequently, the first olefins units were configured to crack lighter feeds. By contrast, Europe and Asia were built around cracking heavy feeds such as natural gasoline, which are more prevalent in a barrel of oil. Over the years, many US petrochemical producers re-configured their steam crackers to become more flexible, allowing them to switch between light and heavy feeds. This flexibility has allowed the US to remain a low-cost producer regardless of whether oil or natural gas is high or low.
In the next podcast of this series we will discuss the cost and price relationship between the process stages addressed here and the driver behind each that impact on the final price of finished goods.
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The PetroChem Wire is a daily newsletter serving the petrochemical industry. It counts every major chemical and refining company among its subscribers, as well as many major manufacturing concerns, global conglomerates, industry consultants, equity analysts and government agencies.
Contact:
Mark Quiner, Senior Editor
+1 713 331 0464
mark@petrochemwire.com
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Copyright 2009