Alberta Propylene Upgrade Prospects

8/14/2019 Alberta Propylene Upgrade Prospects

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TABLE OF CONTENTS

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GLOSSARY ................................................................................................................................................................................... vii

DISCLAIMER...............................................................................................................................................................................viii

1.0 EXECUTIVE SUMMARY...............................................................................................................................................9

2.0 INTRODUCTION .......................................................................................................................................................... 11

2.1 Terms of Reference .........................................................................................................................................112.2 General Bases.................................................................................................................................................. 112.3 Propylene Only ...............................................................................................................................................11

3.0 BYPRODUCT PROPYLENE ........................................................................................................................................12

3.1 Availability ..................................................................................................................................................... 123.1.1 Overall.............................................................................................................................................123.1.2 Incremental Propylene from Ethylene Production........................................................................... 143.1.3 Lack of Flexibility ........................................................................................................................... 14

3.2 Byproduct Propylene Processing..................................................................................................................... 14

3.2.1 Preamble.......................................................................................................................................... 143.2.2 Feedstock Handling ......................................................................................................................... 153.2.3 Product Propylene Qualities ............................................................................................................163.2.4 Byproduct Processing...................................................................................................................... 173.2.5 Excess Product Sales ....................................................................................................................... 173.2.6 Byproduct Propylene Valuation ...................................................................................................... 18

4.0 PROPYLENE FROM PROPANE .................................................................................................................................. 20

4.1 Preamble ......................................................................................................................................................... 204.2 Technology......................................................................................................................................................204.3 Integration Potential ........................................................................................................................................214.4 Hydrogen Use ................................................................................................................................................. 224.5 Propylene Handling......................................................................................................................................... 224.6 Production Cost............................................................................................................................................... 22

4.7 Propane from Propylene Cost.......................................................................................................................... 245.0 PROPYLENE CHEMICAL OPPORTUNITIES IN ALBERTA.................................................................................... 26

5.1 Propylene Derivatives in an Alberta Context .................................................................................................. 265.2 Polypropylene (PP) .........................................................................................................................................26

5.2.1 North American Market for Polypropylene (PP).............................................................................265.2.2 Major Producers of Polypropylene (PP).......................................................................................... 275.2.3 Production Technology for Polypropylene (PP)..............................................................................275.2.4 Technical Business Trends in Polypropylene (PP) .......................................................................... 285.2.5 Potential for Alberta ........................................................................................................................ 29

5.3 Acrylonitrile (ACN) ........................................................................................................................................295.3.1 North American Market for Acrylonitrile (ACN)............................................................................ 295.3.2 Major Producers of Acrylonitrile (ACN).........................................................................................305.3.3 Production Technology for Acrylonitrile (ACN) ............................................................................305.3.4 Technical Business Trends in Acrylonitrile (ACN)......................................................................... 31

5.3.5 Potential for Alberta for Acrylonitrile (ACN) .................................................................................315.4 Cumene and Phenol......................................................................................................................................... 32

5.4.1 North American Market for Phenol and Cumene ............................................................................325.4.2 Major Producers of Cumene and Phenol ......................................................................................... 325.4.3 Production Technology for Cumene and Phenol ............................................................................. 335.4.4 Technical Business Trends in Cumene and Phenol ......................................................................... 355.4.5 Potential for Alberta in Cumene and Phenol ................................................................................... 35

5.5 Propylene Oxide (PO) and Glycol................................................................................................................... 365.5.1 North American Market for Propylene Oxide (PO) and Glycol ...................................................... 365.5.2 Major Producers of Propylene Oxide (PO) and Glycols..................................................................37

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5.5.3 Production Technology for Propylene Oxide (PO) and Glycol ....................................................... 375.5.4 Technical Business Trends in Propylene Oxide (PO) and Glycol ...................................................405.5.5 Potential for Alberta with Propylene Oxide (PO) and Glycol ......................................................... 40

5.6 Propylene Ethers .............................................................................................................................................40

5.6.1 North American Market for Propylene Ethers................................................................................. 415.6.2 Major Producers of Propylene Ethers.............................................................................................. 415.6.3 Production Technology for Propylene Glycol Ethers ...................................................................... 415.6.4 Technical Business Trends in Propylene Glycol Ethers .................................................................. 425.6.5 Potential for Alberta with Propylene Glycol Ethers ........................................................................ 42

5.7 n-Butanol......................................................................................................................................................... 425.7.1 North American Market for n-Butanol ............................................................................................ 425.7.2 Major Producers of n-Butanol ......................................................................................................... 425.7.3 Production Technology for B-butanol ............................................................................................. 435.7.4 Technical Business Trends in n-Butanol ......................................................................................... 445.7.5 Potential for Alberta for n-Butanol.................................................................................................. 44

5.8 Acrylic Acid (AA)...........................................................................................................................................445.8.1 North American Market for Acrylic Acid (AA) ..............................................................................445.8.2 Major Producers of Acrylic Acid (AA) ........................................................................................... 455.8.3 Production Technology for Acrylic Acid (AA) ...............................................................................455.8.4 Technical Business Trends in Acrylic Acid (AA) ........................................................................... 465.8.5 Potential in Alberta for Acrylic Acid (AA) ..................................................................................... 46

5.9 Isopropanol/Acetone .......................................................................................................................................465.9.1 North American Market for Isopropanol/Acetone ........................................................................... 465.9.2 Major Producers of Isopropanol/Acetone ........................................................................................ 475.9.3 Isopropanol Production ................................................................................................................... 475.9.4 Technical Business Trends in Isopropanol/Acetone ........................................................................ 485.9.5 Potential for Alberta with Isopropanol/Acetone ..............................................................................48

5.10 2-Ethyl Hexanol ..............................................................................................................................................495.10.1 North American Market for 2-Ethyl Hexanol.................................................................................. 495.10.2 Major Producers of 2-Ethyl Hexanol............................................................................................... 495.10.3 Production Technology for 2-Ethyl Hexanol................................................................................... 495.10.4 Technical Business Trends in 2-Ethyl Hexanol ...............................................................................505.10.5 Potential for Alberta for 2-Ethyl Hexanol ....................................................................................... 50

5.11 Atactic Polypropylene (APP) .......................................................................................................................... 505.11.1 Production of Atactic Olefins .......................................................................................................... 505.11.2 Process Technology......................................................................................................................... 515.11.3 Markets and Outlook ....................................................................................................................... 515.11.4 Investment Potential ........................................................................................................................ 52

5.12 Ranking of Propylene Product Potential .........................................................................................................52

6.0 THREE PRODUCTS WITH POTENTIAL FOR ALBERTA........................................................................................ 55

6.1 Chemicals Selected for Further Analysis ........................................................................................................ 556.2 Polypropylene (PP) .........................................................................................................................................55

6.2.1 Market Potential .............................................................................................................................. 556.2.2 Trade in Polypropylene (PP) ...........................................................................................................566.2.3 Technology Shifts in Polypropylene (PP) Resins ............................................................................ 576.2.4 Cost Competitiveness of Alberta in PP Resins ................................................................................586.2.5 Alberta Potential for Polypropylene (PP) Resins............................................................................. 59

6.3 Acrylonitrile (ACN) ........................................................................................................................................596.3.1 Market Potential for ACN ...............................................................................................................596.3.2 Trade in Acrylonitrile (ACN) .......................................................................................................... 606.3.3 By Product Potential in Canada....................................................................................................... 616.3.4 Technology Shifts in ACN Production ............................................................................................ 626.3.5 Cost Competitiveness of Alberta for ACN Production.................................................................... 626.3.6 Alberta Potential for Acrylonitrile (ACN)....................................................................................... 62

6.4 Acrylic Acid (AA) and Acrylates.................................................................................................................... 636.4.1 Acrylic Acid (AA)........................................................................................................................... 636.4.2 Market Potential for Acrylic Acid (AA).......................................................................................... 64

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6.4.3 Trade in Acrylic Acid (AA) and Acrylates...................................................................................... 656.4.4 Cost Competitiveness of Alberta for Acrylic Acid (AA) Production ..............................................666.4.5 Alberta Potential for Acrylic Acid (AA) and Acrylates................................................................... 67

6.5 Phenol ............................................................................................................................................................. 67

6.5.1 Markets and Outlook for Phenol ..................................................................................................... 686.5.2 Producers of Phenol.........................................................................................................................706.5.3 Process Technology for Phenol ....................................................................................................... 716.5.4 Investment Potential for Product .....................................................................................................71

7.0 CONCLUSIONS............................................................................................................................................................. 73

7.1 Byproduct Propylene Availability ................................................................................................................... 737.2 Byproduct Propylene Processing..................................................................................................................... 737.3 Propylene from Propane.................................................................................................................................. 74

7.3.1 World Situation ............................................................................................................................... 747.3.2 Process for Comparison................................................................................................................... 747.3.3 Yields and Balances ........................................................................................................................ 757.3.4 Sizing ..............................................................................................................................................757.3.5 Propylene Supply Cost .................................................................................................................... 75

7.3.5.1 Deliberate Propane to Propylene Base............................................................................. 757.3.5.2 Byproduct Propylene ....................................................................................................... 757.3.6 Key Selected Derivatives ................................................................................................................ 767.3.7 Companies .......................................................................................................................................76

7.4 Summary ......................................................................................................................................................... 777.5 Recommendations ...........................................................................................................................................77

7.5.1 Byproduct Propylene Aggregation .................................................................................................. 777.5.2 Other Feedstocks ............................................................................................................................. 777.5.3 Utilities For New Plants ..................................................................................................................777.5.4 Company Attraction ........................................................................................................................ 77

REFERENCES ............................................................................................................................................................................... 79

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LIST OF TABLES

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Table 3.1.1-1. Estimated 2005 Propylene Availability .................................................................................................................. 13Table 3.1.1-2. Current Propylene Uses .......................................................................................................................................... 13Table 3.1.1-3. Changes at Principal Prospective Propylene Sources ............................................................................................. 14Table 3.2.3-1. Partial Typical Propylene Specifications ................................................................................................................ 16

Table 4.6-1. Propane Dehydrogenation Capital Costs ...................................................................................................................23Table 4.6-2. Propane Dehydrogenation Operation Costs............................................................................................................... 23Table 4.6.3. Cost Summary............................................................................................................................................................ 23Table 5.1-1. Propylene Derivatives Assessed in Study.................................................................................................................. 26Table 5.1-2. Demand for First-step Derivatives of Propylene in North America...........................................................................26Table 5.2.1-1. Markets for Polypropylene in North America ........................................................................................................26Table 5.2.2-1. North American Polypropylene Producers .............................................................................................................27Table 5.2.3-1. Raw Materials and Utilities Consumption per 1,000-kg of PP...............................................................................28Table 5.2.4-1. North American Polypropylene Capacity Expansions* .......................................................................................... 29Table 5.3.1-1. Acrylonitrile Demand in North American ..............................................................................................................30Table 5.3.2-1. Major North American Producers of Acrylonitrile ................................................................................................. 30Table 5.3.2-2. Material Consumptions per 1,000-kg of Acrylonitrile............................................................................................ 30Table 5.4.1-1. Demand for Cumene............................................................................................................................................... 32Table 5.4.1-2. North American Demand for Phenol, 1998 ............................................................................................................32Table 5.4.2-1. Cumene Producers in North America ..................................................................................................................... 33Table 5.4.2-2. Phenol Capacity in North America......................................................................................................................... 33Table 5.4.3-1. Input Consumption per 1,000-kg of Cumene.......................................................................................................... 34Table 5.4.3-2. Input Consumption per 1,000-kg of Phenol............................................................................................................34Table 5.4.4-1. Phenol Plant Expansions Planned in North America .............................................................................................. 35Table 5.4.5-1. Canadian Imports of Phenol ................................................................................................................................... 35Table 5.5.1-1. Propylene Oxide Markets in North America ..........................................................................................................36Table 5.5.1-2. Propylene Glycol Markets in North America .........................................................................................................36Table 5.5.1-3. Dipropylene Glycol Markets in North America......................................................................................................37Table 5.5.2-1. Propylene Oxide Producers in North America........................................................................................................ 37Table 5.5.2-2. Propylene Glycol Producers in North America ......................................................................................................37Table 5.5.3-1. Consumptions per 1,000-kg of Propylene Oxide .................................................................................................... 38Table 5.5.3-2. Raw Materials Inputs per 1,000-kg of PO with Peroxidation .................................................................................38Table 5.5.3-3. Major Inputs per 1,000-kg of Mono Propylene Glycol ........................................................................................... 39Table 5.5.1-1. Canadian Imports of PO and PG.............................................................................................................................40

Table 5.6.2-1. P&E-type Ether Solvent Capacity .......................................................................................................................... 41Table 5.7.2-1. Major Producers of n-Butanol in North America....................................................................................................42Table 5.7.3-3. Raw Materials Inputs per 1,000-kg of Butanol from Syngas ..................................................................................43Table 5.8-1. Acrylic Acid Demand in North American ................................................................................................................. 45Table 5.8.2-1. Major Producers of Acrylic Acid............................................................................................................................ 45Table 5.8.3-1. Input Consumptions per 1,000-kg of Acrylic Acid................................................................................................. 45Table 5.8.5-1. Acrylic Acid and Ester Imports to Canada .............................................................................................................46Table 5.9.1-1. Isopropyl Demand in North American.................................................................................................................... 46Table 5.9.1-2. Acetone Demand in North American...................................................................................................................... 47Table 5.9.2-1. Isopropanol Producers in North America ...............................................................................................................47Table 5.9.2-2. Acetone Producers in North America ..................................................................................................................... 47Table 5.9.3-1. Balance for 1,000-kg of IPA................................................................................................................................... 48Table 5.10.1-1. 2-Ethyl Hexanol Demand in North American ......................................................................................................49Table 5.10.2-1. 2-Ethyl Hexanol Producers in North America ......................................................................................................49Table 5.10.3-1. Raw Materials Inputs per 1,000-kg of 2-Ethyl Hexanol by Hydrogenation.......................................................... 49

Table 5.11.1-1. Producers of Atactic Olefin Resins....................................................................................................................... 50Table 5.11.3-1. Estimated Market Segmentation for Atactic Polypropylene ................................................................................. 51Table 5.11.3-2. Hot Melt Adhesive Use of Atactic Polypropylene................................................................................................ 51Table 5.11.3-3. Some Major and Potential Users of Atactic Polypropylene.................................................................................. 52Table 5.12-1. Typical Propylene Grade Requirements .................................................................................................................. 53Table 5.12-2. Ranking of Propylene Opportunities in Alberta.......................................................................................................53Table 6.2-1. Polypropylene Plant Overview.................................................................................................................................. 55Table 6.2.1-1. Growth Outlook for PP Resins in North America................................................................................................... 55Table 6.2.1-2. Global PP Market Segmentation.............................................................................................................................56Table 6.2.1-3. Asia-Pacific PP Capacity by Country ..................................................................................................................... 56Table 6.2.2-1. U.S. Exports of Polypropylene ............................................................................................................................... 56

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LIST OF TABLES

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Table 6.2.2-2. Canadian Polypropylene Resin Export Trade .........................................................................................................57Table 6.2.2-3. Major U.S. Polypropylene Export Markets, 1998................................................................................................... 57Table 6.2.3-1. Demand Patterns for mPP Resins ........................................................................................................................... 58Table 6.2.4-1. Competitive Cost Factors for PP Resins in Alberta ................................................................................................ 58

Table 6.3-1. Acrylonitrile Plant Overview.....................................................................................................................................59Table 6.3.1-1. Global ACN Markets .............................................................................................................................................. 59Table 6.3.1-2. Regional ACN Plant Capacities..............................................................................................................................60Table 6.3.1-3. ACN Planned Plant Expansions.............................................................................................................................. 60Table 6.3.2-1. ACN Exports from U.S........................................................................................................................................... 60Table 6.3.2-2. Major U.S. Acrylonitrile Export Markets ...............................................................................................................61Table 6.3.3-1. Outputs of an ACN Plant per kg of Propylene Input .............................................................................................. 61Table 6.3.3-2. Canadian Imports of Sodium Cyanide and Cyanide Salts ...................................................................................... 62Table 6.3.5-1 Competitive Cost Factors for Acrylonitrile Production in Alberta ........................................................................... 62Table 6.4.1-1. Acrylic Acid Capacity in North America ...............................................................................................................63Table 6.4-1-2. Acrylic Acid Plant Overview ................................................................................................................................. 64Table 6.4.2-1. Market Growth Outlook .........................................................................................................................................64Table 6.4.2-2. Expansion of Acrylic Acid Capacity ...................................................................................................................... 65Table 6.4.3-1. Major U.S. Acrylic Acid and Derivative Export Markets, 1998.............................................................................66Table 6.4.3-2. Imports of Acrylic Acid by the U.S........................................................................................................................ 66Table 6.4.3-3. Imports of Acrylic Acid Esters ............................................................................................................................... 66Table 6.4.4-1. Competitive Cost Factors for Acrylic Acid Production in Alberta .........................................................................67Table 6.5-1. U.S. Phenol Supply/Demand, 1996 ........................................................................................................................... 68Table 6.5.1-1. North American Demand for Phenol, 1996 ............................................................................................................68Table 6.5.1-2. Canadian Imports of Phenol ................................................................................................................................... 69Table 6.5.1-3. Regional Phenolic Resin Plants .............................................................................................................................. 69Table 6.5.1-4. Estimated Regional* Demand Growth for Phenol .................................................................................................. 70Table 6.5.2-1. Phenol Capacity in North America......................................................................................................................... 70Table 6.5.2-2. Cumene Producers in North America ..................................................................................................................... 71

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LIST OF FIGURES

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Figure 3.2.2-1. Byproduct Receipt System.................................................................................................................................... 15Figure 3.2.4-1. Byproduct Processing............................................................................................................................................ 17Figure 4.2-1. Propylene from Propane........................................................................................................................................... 21Figure 4.5-1. Propylene from Byproduct Processing ..................................................................................................................... 22Figure 6.3.2-1. U.S. Acrylonitrile Exports, 1996...........................................................................................................................61Figure 7.2-1. Overall Byproduct Propylene Processing................................................................................................................. 74Figure 7.3-1. Propylene from Propane........................................................................................................................................... 74

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GLOSSARY

2-EH 2-ethyl hexanolAA acrylic acidABS acrylonitrile / butadiene / styrene (polymers)ACN acrylonitrileAED Alberta Department of Economic Development

AEF Alberta EnviroFuelsAEUB Alberta Energy and Utilities BoardAIH Albertas Industrial Heartland (Fort Saskatchewan area)APP atactic polypropylene

bbls. barrels (6.29 barrels (barrels) = 1-m3)BPD barrels per dayC2 / C2= ethane / ethyleneC3 / C3= propane / propyleneC4 butanes n-normal, i iso (other includes olefinic C4s)CaCl2

calcium chlorideCO carbon monoxideCO2 carbon dioxideCOS carbonyl sulphideEPD ethylene / propylene / diene (polymer)

EIA Environment Impact Assessment (and Related Application to AEUB)GDP gross domestic productH2S hydrogen sulphideIPA isopropyl alcohol or isopropanolkg kilogramsktonnes kilotonneskty thousands of metric tonnes per year (2,204 pounds per tonne)lbs. poundsm3/d cubic meters per dayMAPD methylacetylene and propadieneMMscf millions of standard cubic feet

mPP metallocene technology polypropyleneMTBE methyl tertiary butyl etherMW megawatts

NaCl sodium chloride (salt)

Ni nickelOSB oriented strand boardPE polyethylenePG polymer gradePO propylene oxidePOSM propylene oxide with styrene monomer (process)PP polypropylene

ppm part per million (by weight) psig pounds per square inchPVC polyvinyl chlorideROI return on investmentSAN styrene acrylonitrileSAP super adsorbent polymerscf standard cubic feedSCO synthetic crude oil

SIA Strathcona Industrial Association (region on East Side of Edmonton)SM Styrene MonomerTPG tripropylene glycolTBA tertiary butyl alcoholTCMS TransCanada MidstreamUSGC U.S. Gulf Coast Texas, LouisianaVOC volatile organic compoundwt weight

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DISCLAIMER

The contents, conclusions, recommendations and numbers in this report are the sole responsibility of T. J. McCann andAssociates Ltd. and its associated consultants. They may or may not be in agreement with views and/or policies of the AlbertaDepartment of Economic Development (AED). It is also to be noted that this study with the sole exception of confirmation ofone data point has been carried out with no related rapport with TransCanada Midstream (TCMS) who are proceeding on a

byproduct propylene collection and purification system.

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1.0 EXECUTIVE SUMMARY

PROPYLENE IS THE MAJOR MISSING PETROCHEMICAL INTERMEDIATE IN ALBERTA.

INTRODUCTION

TransCanada Midstream (TCMS) is currently putting together a very significant byproduct recovery and purification scheme, butno announcements have yet appeared of local derivative facilities. This study independently considered propylene supply optionsand examined a variety of propylene derivatives to define those that appear to fit best in Alberta. At the same time, key chemicalcompanies with propylene derivative interests were identified.

SUPPLY

280-ktonnes a year of propylene were conservatively estimated as available from byproduct sources in 2005. As byproductsources have some risks, ups, and downs, a prudent chemical company would perhaps discount supply to the order of 200,000-kty to guarantee supply to his facility.

Oil sands upgraders, ethylene plants and refineries are the principal sources with a total production of about 400-kty some usednow in fuel gas. Some shopped as a concentrate to the U.S. and some connected to gasoline. Each source has a different set of

supply costs and the different source types have wide ranges of impurities. Each source also has more or less need for on-sitefacilities to separate propylene-rich streams for central processing. Pipeline and rail receipt is envisaged with a major centraltreating and distillation facility to produce polymer grade (PG) propylene with propane and other smaller byproducts from theraw feed. Major salt cavern storage will be needed to smooth out the plant feed and to insure highly reliable product supply.

Very preliminary estimates tend to indicate such byproduct propylene available at about two cents U.S. per pound under the priceon the U.S. Gulf Coast (USGC) before maximizing synergy with existing facilities (as at TCMS).

A route starting from propane was considered for 350-kty of propylene. However, with current propylene product cost slightlyabove USGC prices, it will be attractive only as newer technology and more cost cutting lower capital costs. Such reductions areconsidered quite possible over the next 3 to 5 years and the propylene to propane value difference could widen from 1998 levels(as at present). This option appears to warrant further analysis in a year or two.

KEY POTENTIAL DERIVATIVES

From a long list of 13 chemicals, some with multiple variants and derivative options, polypropylene (PP), acrylonitrile (ACN)and acrylic acid (AA) were singled out for special consideration. Each of these has above average growth rates and the estimated200-kty of propylene would provide a good fit for a world-scale facility in Alberta.

Polypropylene (PP)

PP is produced as solid beads and moved in bulk rail cars to a variety of markets, e.g., injection and blow molding, fibers, films,wire and cable. Demand for PP in several forms, some with ethylene and other comonomers, is growing at 6 to 7% a year worldwide, requiring 350 to 400-kty of added North American capacity each year. Canada currently exports $243 million of PP to theU.S., but imports $450 (1998 figures). While Asian market growth is most pronounced, there are growing PP marketsworldwide.

Dow is moving into new PP technology/product territories, and its acquisition of Union Carbide adds major more conventionalPP technology depth. Shell Chemical is adding BASF, the worlds largest chemical company, to its Montell PP team with two

plants already in eastern Canada. There is a long list of other major PP producers not now represented in Alberta.

New catalysts and other technological developments are dramatically broadening the range of grades and of applications.

Acrylonitrile (ACN)

ACN, a liquid product, demand is growing at 6 to 7% a year in Asia as an intermediate for fibers, various resins, and a variety ofchemicals, such as those used in water treatment. North American markets are generally remote from Alberta, but Alberta isclose to Asian markets via West Coast ports. The propylene and ammonia feedstocks are here at low cost and there are regionalmarkets, in mining for the byproduct hydrogen cyanide, which is often requires expensive disposal.

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BP Amoco is a major player both in ACN technology and production. BP Amoco is developing a new route directly frompropane, bypassing propylene, and, thus, there may be no propylene connection for an Alberta ACN facility.

Acrylic Acid (AA)

Super absorbents, in particular, are driving up AA demand with their 8% per year growth with no sign of a major let up.Nevertheless, there is a variety of other AA derivatives with rising markets. Canada currently imports roughly $50 million U.S.

worth of AA derivatives.

It is likely that a series of derivatives would be produced at an AA facility, although AA can be railed/tankered as liquid toPacific Rim and to mid continent North American markets.

Dow and Celanese have a new German joint venture producing AA and various derivatives. Celanese, BASF and Union Carbide(Dow) currently have three of the four North American plants. Degussa-Hls has a European AA joint venture.

OTHER POSSIBILITIES

Propylene Oxide (PO)

PO and one or more series of derivatives are considered good prospects, but do require isobutane here now or more normallybenzene short in Alberta feedstocks with very major byproducts e.g., styrene in the case of benzene as the cofeed. PO

might well have been one of the three short-listed products if the major cofeed/coproduct situation did not exist. Propyleneglycols and various ethers are good PO derivative prospects.

Phenol

Phenol has major regional markets in the production of resins used in various construction board products. Propylene can be akey feed, along with benzene. An apparent Alberta shortage of benzene must be addressed before phenol production isconsidered.

This study was not bullish on isopropanol and acetone, n-butanol, 2-ethyl hexanol (2-EH) and propyl ethers (from isopropanol)should not be discarded as possible new small-scale Alberta chemical products.

SUMMARY

Alberta does not have merchant propylene at this time.

Over 200,000-tonnes a year can be made available from byproduct sources below USGC costs. (TCMS hasalready started a collection and purification project.)

This quantity well fits individual world scale PP, ACN and AA derivative prospects.

Availabilities of benzene and certain other key chemical intermediates appear to warrant study and promotion, toextend the list of prospective new Alberta chemical products.

Alberta offers low capital and operating costs and shipping costs to the Pacific Rim are below, those from theHouston area, although marginally higher to the mid continent area.

Propylene derivatives should have a strong place in Albertas future.



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2.0 INTRODUCTION

2.1 Terms of Reference

The Alberta Department of Economic Development retained T. J. McCann and Associates Ltd. to undertake a screening level

study of the key prospects for propylene upgrading in Alberta. Appreciable propylene is produced in Alberta as a byproduct inethylene production, oil sands upgrading, and oil refining and, to a minor extent, in other petrochemical intermediate production.However, currently there is no significant propylene chemical derivative production. This study was intended to see if economicsappear attractive for local production of three to be identified important derivatives.

TCMS is building a major propylene byproduct extension to their Redwater natural gas liquids fractionation plant. TCMS is alsoconstructing facilities at Suncors oil sands plant to recover a propylene/propane mix and potentially more or less ethane andethylene. The resulting liquid blend will be delivered to the Redwater site via Suncors oil sands pipeline and a short local line.TCMS will be obtaining byproduct propylene from other sources, but no details were available to this study. While this studyessentially overlooks the TCMS propylene program, its very active presence must be considered by all.

2.2 General Bases

Local propylene derivative markets are, with one or two exceptions, quite small. Overall, Albertas current chemical industry isexport driven producing large bulk commodities and few small-scale specialty products. Thus, this study concentrated on larger-scale propylene derivatives that have growing markets worldwide, accessible from Alberta.

Byproduct propylene is available from sites at Joffre, Edmonton (SIAStrathcona Industrial Associationregion), FortSaskatchewan/Redwater area (AIHAlbertas Industrial Heartland) and the oil sands plants north of Fort McMurray. Due to theunique availability of salt for storage cavern development, relative central location and proximity to a variety of major chemical

production and natural gas liquids fractionation sites, new propylene processing facilities have been assumed in the AIH.

There are current expansion programs at current oil sands plants and, likely, expansions at regional refineries and an upgraderthat will enhance propylene production through to and perhaps beyond the 2005 period. In addition, the Joffre E3 worlds largestethylene unit comes on-stream in 2001. Thus, estimated 2005 byproduct propylene availability is considered as a base, consistentwith project development, permitting, construction, startup of collection and purification facilities, including storage caverndevelopment, with and propylene derivative facility completion(s).

The early screening nature of this study is to be noted.

2.3 Propylene Only

This study has not considered TCMSs propylene collection and purification project as being in or about to be in place. A totallygrassroots approach has been assumed. Herein, only propylene and directly related materials, propane in particular, have beenconsidered in this study, although, some TCMS facilities appear to be planned to capture and process both C 2s and C3s.Certain, lighter and heavier impurities in byproduct propylene-rich streams will be important in most collection, purification and

processing scenario to be better addressed in more detailed studies.



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3.0 BYPRODUCT PROPYLENE

3.1 Availability

3.1.1 Overall

Table 3.1.1-1 summarizes this studys estimates of potentially propylene in Alberta and surrounding areas in 2005. The estimatesare by the study team, but confirmed as reasonable by verbal contacts at all but two sources. The table also notes what the teamconsiders as a likely 2005 availability scenarioto be used in later sections of this report as a base case.

The byproduct availability estimates are conservative they allow for off normal operations, such as shutdowns and relatedevents, occasional upsets, different catalysts and catalyst conditions (at refineries), new approaches to fouling control in ethylenefurnace tubes, below capacity operation on occasion, and below design process severities on occasion or continuing (at least atone major source). Two sources provided ranges to cover likely operating severities with mid points used here and anotheradvised reduced propylene compared to earlier estimates, due to less severe operating conditions. Expansion prospects at threesources were discussed, but it was too early to assess any increase in propylene availability.

Not all sources will be available, nor will suitable commercial terms be negotiated at all sites. We acknowledge that the likelyfigure is only a judgement call.

The accuracy of the total, is perhaps, at the +20% level with individual accounts less certain. Changing conditions in source unitsare to be expected over time and propylene is generally not an economically preferred product at any of the identified sources.Table 3.1.1-2 notes current and prospective alternate uses for propylene at the various sources, without a capture/purify/chemicalderivative scheme(s). Table 3.1.1-3 provides a brief review of what facilities will be required at various sources for propylenerecovery and transfer. Scheduling of in-plant changes will be very tricky and with major turnarounds only every 2 to 2-1/2 years,there could well be delayed availabilities from specific various sites. (However, this is roughly the same timing as for large saltcavern development.)

Alberta EnviroFuels (AEF) currently produce more or less propylenesay 10-ktydepending on the propane content of itsfeedstock C4 streams. This propylene now goes to fuel gas. AEF are reported to be considering changing the plants processesand products from methyl tertiary butyl ether (MTBE), but, as yet, without a public decision. Thus, AEF propylene has beenneglected herein. Huskys Lloydminster Upgrader expansion plans are unknown, hence, no estimate of possible propyleneavailability has been madelikely small in the overall picture, in any case.

Note that the Shell Scotford and Parkland Borden refineries produce no propylene.

At the bottom of Table 3.1.1-1 is this studys judgement of a realistic byproduct availability. The 280-kty may appear small,but prospects perceived to have major challenges economically or major delays to beyond 2005 have been excluded. Onlydetailed buyer to supplier negotiations will resolve economically attractive availability from any source. Hopefully, it may prove

possible to attract at least another 100-kty of economic supply than has been assumed in this study.

A prudent propylene consumer is likely to discount the byproduct availability, say, up to 80-kty to assure him of supply at alltimes, even if one major source drops out leaving a recognized availability of about 200-kty. Even then, major storage will berequired to assure that rate on a daily basis.



14/79

Table 3.1.1-1. Estimated 2005 Propylene Availability

Base Case Judgement

Source(s)

Total ThatMight beAvailable

kty

%Propylenein C3 Mix

PropyleneAnnual

kty

Daily C =3Peak Rate

kty

Overall C3Peak Ratekty (Vol.)

%Propylene

in MixKey

Impurities

UpgradingSyncrude 135 40 MAPD, Sulphur, OthersSuncor 60 29 MAPD, Sulphur, Others (?)

TOTAL 195 37 EthyleneDow 30 90 * MAPD * NovaChem 75 90 * MAPD *

TOTAL 105 90 * MAPD *Alberta Refineries

Imperial 100 65 Some MAPD, Sulphur, Others(?)

Petro-Canada 90 67 Some MAPD, Sulphur, Others(?)

TOTAL 190 66 Some MAPD, Sulphur, Others(?)

Overall Alberta (e) 490 60 Some MAPD, SulphurOut of Province

Refineries/Upgrader

110 65 Some MAPD, Sulphur

Base Case Availability to PurificationEthylene Industry 105 125 140 90 * MAPD*Others (c) 180 220 345 56


15/79

Table 3.1.1-3. Changes at Principal Prospective Propylene Sources

UpgradersSuncor Recover C3= (and C3) from gas streams originating in two cokers, including stabilizer overhead gases. Low

temperature, absorption recovery alternates with deethanizing of liquid product (at least). (Note that hereonly a C3 concentrate is considered, no C2 C3 concentrate as noted in some TransCanada Midstreamdocuments.)

Purify to suit pipeline (avoid contamination in batch pipelining south)at least all H2S must be removed. Assemble batches and buffers if to be used.

Modify pipeline as needed to convey batches of C3 concentrate.Syncrude Recovery C3= (and C3) from gas streams originating in three cokers, including related stabilizer overhead

gases. Purify to suit pipeline (avoid contamination of adjacent batches). Assemble batches for pipeline movement. Define pipeline need new pipeline appears needed.

Mobil/Koch? Project plans indefinite as to potential propylene, hence, neglected.Husky Lloydminster Similar facility needs to Suncor, but not considered as future plans unknown and current C 3= availability

probably too small to warrant consideration. Any transfer will be rail due to small quantities.

EthyleneDow and NovaChem C3 concentrate facilities (and related rail car handling) are already in place.

At Dow, a new small pipeline terminal would be needed.Refineries

Alberta Each of Imperial and Petro-Canada will need: C3 C4 splitterthese will be big. C3 concentrate shipping facilities (pipeline terminal). Additional facilities (or equivalent) to make up for lost gasoline, due to removal of propylene from

alkylation feed. Without C3=, alkylate will have a higher octane allowing reduction in severity andincreased yields in another unit, but this will only make up for a portion of the lost gasoline.

Note new pipeline from refinery row to AIH.Other Refineries

Husky, Prince George No change, now sell mixed C3 C4 to U.S. refineries, splitting at site unlikely to be economic due to smallstream, do at purification site.

Chevron, Burnaby Some C3 concentrate shipping facilities needed.Montana Refineries (4) Similar to Alberta refineries, except new rail loading systems needed.Co-op, Regina Major changes foreseen (without much impact on gasoline volume) beyond this study.

3.1.2 Incremental Propylene from Ethylene Production

Discussions with ethylene producers indicated little potential for enhanced propylene production. While the early production atboth sites at one time was planned for up to 20% propane in the feed with ethane, subsequent expansions have not added topropylene handling facilities and these appear full with byproduct propylene from ethane feedstock at projected throughputs.

3.1.3 Lack of Flexibility

Except as raw propylene streams may be railed to USGCprimarily from ethylene producers, as nowthere will be little/noflexibility in byproduct supply from individual sources. When changes are made as in Table 3.1.1-3 at individual sources, 90%or more of all available propylene will be provided. Thus, there will normally be a surplus of byproduct derived propylene forMidwest or Gulf Coast sale, and/or shipment of more or less ethylene plant raw propylene to the USGC.

The base case 285-kty of propylene in raw feed streams is an annual average and peaks of 330-kty are likely with minima toprocessing at or near 200-kty (using feed cavern storage).

3.2 Byproduct Propylene Processing

3.2.1 Preamble

There will be byproduct propylene coming from a variety of sources via pipeline and rail, all with differing qualities. Sometrucked material is possible, but not considered in this study.

Once propylene capture facilities are in place, the byproduct processor will be receiving all available feeds, with the possiblepartial exception of some from ethylene plant material. Portions of the ethylene plant material could continue to move south, butonly to the extent, that sufficient numbers of railcars continue available. (Reducing such rail fleets appears likely to be importantfinancial inducements for ethylene plant sources.)



16/79

3.2.2 Feedstock Handling

Due to the variety of source qualities and batch receipt of most material, significant raw propylene storage will be needed,possibly along with special withdrawal systems to smooth out feed composition to a byproduct processing facility itself. Suchstorage must also cater to shutdowns at major sources and in the byproduct processing facility. Figure 3.2.2-1 provides the

byproduct feed system assumed in this study.

Figure 3.2.2-1. Byproduct Receipt System

Oil Sands C3Received in

Batches

Suncor or EqualPipeline(s)

C4 or C5 Plus

Interface Processing complete

with Distillation

Tube Surge Storage

Dow Ethylene

Edmonton Refineries

NovaChem Rail

Other Refineries

Pipeline to Processing Site

(Try for continuous transfer)

Averaging Withdrawal System

Suggested

2 Wells Minimum

Salt Cavern Storage

Injection Pumps

Bullets

ByproductPropyleneProcessing

Facility

New Continuous Pipelines

SCO etc.

Oil sand material is received in daily or bi-daily batches from the Fort McMurray area.

The batches are stored at the receipt point and then gradually transferred to the processing facility or tocavern storage.

Interfaces (and buffers if used) are segregated and the C3 content distilled off and the bottoms returnedto the main pipeline.

Local ethylene plant feed will be received by pipeline with Joffre feed by rail. Surface storage will be provided toallow continuous feed of the ethylene plant blend to processing.

Edmonton refinery feed will be received by pipeline on a continuous basis and routed directly to processing.

Other refinery feeds will be received by rail and transferred to surface storage and then to the processing facilitywith balancing via the caverns.

All excess feed will be routed to caverns say two at 500,000 barrels each, to be led to the process as capacity andproduct demand permit.

This study has not attempted to optimize the feed/raw propylene storage system. (That will be a very complex study in itselfe.g., sizing cavern injection pumping will be a major challenge.) The diagram notes a possible cavern withdrawal/filling



17/79

averaging system (such as that of R. W. Temple who provided advice to this study) in at least one cavern to handle the very likelyquality layering.

3.2.3 Product Propylene Qualities

As will be noted later, specific chemical derivative manufacture is based on a specific refinery, chemical or polymerization grade

feedstocks. When PG propylene is not required, such processes can use such higher quality material, but only at a marginaladditional payment compared to their normal quality feedstock, reflecting less byproduct production.

Refinery propylene is foreseen as being used here directly for only a few propylene derivatives that were not identified as havingmajor potential. In addition, even the largest individual propylene-rich streams appear below what is seen here as appropriate tosignificant propylene chemical production in Alberta. Any combination of source types will require some processing and/ordistillation for even a refinery product grade. Thus, while smaller-scale opportunities for refinery grade propylene are definitelyto be encouraged, this study has considered only chemical and PG propylene.

Table 3.2.3-1 provides typical propylene product specifications from the literature, but each potential customer will have his ownspecifications. In practice, certain parameters in the product will regularly be well under formal specifications and customers will

become used to such qualities. They will in effect become defacto standards.

Table 3.2.3-1. Partial Typical Propylene Specifications

Component Min/Max Chemical Grade Polymer Grade

Propylene Min 94.0 wt% 99.5 wt%Propane Max 5.5 wt%Ethane Max

0.5 wt%

Ethylene Max0.5 wt%

50.0 ppm wtC4 Max 0.1 wt% 50.0 ppm wtAcetylenes/Propadiene (MAPD) Max 15.0 ppm (wt) 10.0 ppm wtSulphur Max 10.0 ppm (wt) 5.0 ppm wt*Water and Methanol Max ** ppm (wt) 1.0 ppm wt**CO2 Max 1.0 ppm wtCO Max 0.5 ppm wtCOS Max 0.1 ppm wt*Oxygen Max 1.0 ppm wtHydrogen Max 1.0 ppm wt

Note: The above are not complete specifications with many trace contaminants to be added to both lists, Buyer specs will prevail in all sales at his plant gate.

5-ppm maximum will likely prevail in practice.* COS = Total sulphur minus H2S and mercaptans.** Final drying at customer site.

The primary differences between the two grades are in propane content and trace contaminants (not all shown in the table). Themethylacetylene and propadiene (MAPD) content, is definitely of more concern where PG is standard than when chemical gradeis the normal feed. (Non refinery propylenes and even some refinery propylene may be non-acceptable to refinery grade usersdue to MAPD content.)

In the byproduct, processing scheme assumed in this study, an option for chemical and PG coproduction is shown. In practice,there are major differences only in the C3 splitter system between product grades and a PG capability (today using a single tower)will be a likely decision in any case.

It is important to note that the specifications apply to propylene as delivered to customersi.e., after caverns, pipelines, railcars,etc.



18/79

3.2.4 Byproduct Processing

Each of the feed streams has its own characteristics and processing needs: the system must be able to handle a wide range ofcompositions. The processing proposals here are conceptual for study purposes only.

Figure 3.2.4-1. Byproduct Processing

E

Plant Feed

UpgraderRefinery

Feeds

Purges

(B)

(C)

(D)

(C)

Compressor

Final

Treater

(A)

Hydrogen

thylene Pre

Hydrogenation

Sulphur

Removal

Chemical

Treating

Sulphur

Rich Purge

FinalHydro-

Treating

Hydrogen

Deethanizer

C2 to

Fuel GasC3 C4

SplitterC3

Splitter

Product:(A) Polymer Grade Propylene to Market(B) Chemical Grade Propylene to Market (Optional)(C) Propane to Market(D) C4+ to Market

To Reflux

Due to its very high MAPD contamination ethylene plant raw feed blend will have a hydrotreater to lower MAPD to 100 or lessppm (from an inlet design of 50,000-ppm5%). There will be very appreciable heat generated in this operation and a large cold

recycle will be needed. The MAPD will be converted very largely to propylene, but some hydrogenation to propane may occur,as well as trace polymerization, perhaps, as far as a thick green oil on occasion.

The non-ethylene plant feedstocks require sulphur removal to below 5-ppm. This will be done, probably, via 2 or 3 stages ofprocessing. Byproduct sources have a habit of bringing unanticipated trace impurities e.g., phosphorus, antimony, mercury andnitrogenous compounds. In byproduct processing the chemical treating must consider heavier than propane feedstocks, hence,the somewhat arbitrary location here ahead of C3 C4 separation. Only allowances for such treating are included here.

The final hydrogenation unit will reduce MAPD to below 10-ppm; distillation in turn will reduce this to near zero in the productpropylene. No significant polymer production is anticipated in this hydrogenation step. Butadiene partial saturation to butyleneswill also occur (improving the quality of the small-scale C4 plus byproduct).

The deethanizer removes all the ethane and lighter components to fuel gas and the C 3 C4 splitter produces a C4 plus bottomproduct. (There will likely be too much C4 in the original feed to leave in propane. The original feed C4 will have 50 or sopercent olefins, of value to refiners, but requiring hydrogenation if left in for propane, even if it can be.)

The C3 splitter is assumed to be single tower vapour compression reboiled (heat pumped) system (as described further in the laterpropane dehydrogenation discussion). Blending a bypass of the final C3 splitter with polygrade product will permit a slightlylower (utility) cost chemical grade product if desired.

A final guard bed solid adsorbent treatere.g., for sulphur, CO2, CO, trace metals has been assumed needed for qualityassurance.

3.2.5 Excess Product Sales



19/79

As noted above, buyers are likely to discount byproduct propylene availability and this means regular excesses over localdemands. Variations in byproduct supply will also result in significant short-term excesses, possibly above the ability to smoothout in storage. Rail shipment of excess polygrade product to the U.S. Midwest, California and/or USGC will be needed, and/oralternately possibly raw Joffre propylene could be routed south as less expensive than the polygrade propylene sale route.

3.2.6 Byproduct Propylene Valuation

A. Raw Propylene Before Recovery

Each source plant will have its own unique value for propylene at any given time prior to any consideration of its separation forseparate processing for sale.

Oil Sands

Local marginal natural gas supply cost to displace propylene. Note that lower heating value must be used incalculating the amount of gas required.

The large amount of co-recovered propane, 2 to 3 times the volume of propylene, must also be replaced.

As oil sands processing and related cogeneration systems expands, their incremental gas supplies will be comingfrom farther and farther south on the TransCanada system unless a new line is built, increasing the cost of suchgas.

Like all propylene sources oil sand producers will require a premium over fuel or other replacement costs.

Refineries

Propylene sale from Alberta refineries will reduce alkylate production [C3= + iC4 C7 isomers] and the resultingloss of very important gasoline blending stock must be made up by:

Gasoline purchase from others and/or

Added crude and intermediate processing

Taking propylene out of alkylation does improve the octane of the remaining (C4) alkylate in-turn this allowsslightly higher yields in the parallel catalytic reforming unit. However, this only makes up for a small portion ofthe deficit.

Extraneous olefinic C4s may be available to displace the propylene, but this study has not examined suchpotential nor its costs.

Reduced isobutane demand in alkylation appears economically important, reducing overall refining butanepurchases.

Raw propylene sales from refineries, also reduces related propane sales, but this is not seen as of a great concern.

(Conversely, less isobutane is needed reducing butane purchases.)This study has not attempted a valuation of raw refinery propylene, due to very refinery-specific economic bases

beyond an external reviewers knowledge.

Note: At the Regina Co-op refinery propylene is polymerized, hence, a different propylene replacement situation exists.

Ethylene Plants

Here the situation is clearer as the raw propylene now moves to the USGC. Rail transport south is in the order of3.5 to 4 cents U.S. per pound of propylene and processing costs appear to be in the 6 to 10 cents U.S. per poundrange. However, in some USGC cases, MAPD may be extracted rather than hydrogenated to propylenecomplicating valuation.

Ethylene plant raw propylene value will closely track USGC chemical and polygrade propylene.

B. Capture Costs

As noted in Figure 3.2.4-1, there will be significant facility needs at each oil sands and refinery source. Thesefacilities will have high utility costs electricity for compression, especially for low temperature recovery from fuel gasstreams and steam for distillation, particularly at refineries.

Even in the base case, new processing facilities at oil sand and refinery sources are likely to be in the order of $60 to100 million with operating costs in the $7 to 12 million year range.

C. Transfer Costs



20/79

Any large-scale Alberta byproduct-processing facility will be receiving feed by pipeline (more or less in batches), by rail andpossibly by truck.

There may be a credit for the major reduction in rail cars now used to transport ethylene plant raw propylene to the USGC,although some will be needed for other non AIH/SIA source material.

Raw propylene storage facilities will be large as noted above to cope with the widely fluctuating feed streams from other than

local ethylene plant and Edmonton refineries.

Handling and raw feed storage facility costs appear likely to have capital costs in the order of $40 to 50 million for the base case.(This does not consider a new line from the oil sands area.)

D. Processing Charges

The central facility for the assumed base case could cost in the $60 to 80 million range, but no estimate was attempted in thisstudy, due to wide range of feeds and process alternates to be considered.

E. Overall Byproduct

The capital costs for the base case scheme appear likely to be in the order of $160 to 230 million, without any credit for rail carreduction. Possible operation costs have not been totalled due to their high uncertainties.

Review of the preliminary costs indicates the likelihood of PG propylene available at 1 to 2 cents U.S. per pound under theUSGC long-term average price, assuming all grassroots facilities.

It is to be noted that underlying cost factors do not relate directly to USGC propylene values on a short-term basis. There will bemany ups, and downs, with Alberta costs and USGC propylene values not being in sync. Reference (a), for example, has graphsreflecting very wide swings between USGC propane and propylene with only long-term time averaging of use in estimatingeconomics.

Propylene shipped to the USGC will receive only the contract or spot USGC value, resulting in roughly a four cents per poundshipping penalty at the Alberta source. While this studys prefeasibility level estimates did not show such value for Alberta

byproduct propylene from multiple sources, TCMS and/or other operators may well be able to achieve such pricing for all theirpropylene product. To be conservative, this study assumed an Alberta byproduct propylene price of two cents per pound underUSGC prices.

TCMS will be able to achieve significant cost savings compared to a grassroots project, due to co-location with the existingRedwater natural gas liquids fractionation and salt cavern storage facilities. There appear to be opportunities for integration atother sites, hence, the above cost estimate could well over estimate the required netback on local propylene sales. As such creditswere not fully assessed, this study has assumed a two cents per pound under USGC price for locally delivered PG propylene.



21/79

4.0 PROPYLENE FROM PROPANE

4.1 Preamble

The ready availability of at least 200-kty appears essential for each of the short-listed chemicals discussed below in Section 6.

This much appears likely to be available from byproduct sources in 2005 with an 80-kty cushion (assuming only 5-tky lost topropane in the purification system). However, more than one major derivative plant should be targeted and another route toAlberta merchant propylene should be considered.

Review of the world propylene scene indicates a number of plants now producing propylene from very low-cost propane. WhileAlberta does not fall into that category, construction and operating costs (ex utilities) are generally well below these developingcountry sites. Thus, Alberta propane to propylene warrants consideration.

Enough propylene for the minimum sized facilities for two of the three short-listed propylene chemicals could be produced in acurrent relatively standard single train 350-kty plant. At much above 450-kty we expect a largely two-train design with onlyminor scale advantages.

At 350-kty of propylene from propane, approximately 2,150-m3/d (14,000-BPD) of commercial grade propane will be needed.This compares to Alberta production of 25 to 30,000-m3/d, with over 80% going to export markets. Hence, a 350-kty propylenefrom propane facility should have little problem acquiring feedstock via TCMS, Dow, Amoco and/or Chevron AIH storage at

prevailing prices (probably with some summer over purchases and seasonal storage), even with some diversion to the Alliancepipeline system.

4.2 Technology

Dehydrogenation of propane to propylene via catalytic processes is being practiced in Europe, Saudi Malaysia and Korea. In onecase, a combined propane and isobutane feed is being processed to supply both PP and MTBE feedstocks. 1 However, separate

processing at larger-scale is more economic and strongly recommended.

In the combined feed case and most other current propane dehydrogenation facilities, the UOP Oleflex dehydrogenationtechnology used is very similar to that used for isobutane to isobutylene at AEF. The catalyst regeneration system at AEF is alsocommon to that at the propane units and close to that of Shells continuous catalytic reformer in the Scotford Refinery.

Other process routes to propane dehydrogenation are practiced in one Antwerp unit and licensed for two new smaller Mid East

units. Due to its predominance and local partial usage, here, we have assumed use of UOPs Oleflex technology, based onReference (a) and discussions with UOP staff (References (b) and (c)). There would be four reactors versus three at AEF andmetallurgy would be higher due to more severe conditions when dehydrogenating propane.

1 Alberta EnviroFuels now dehydrogenate a portion of the propane contaminant in its feed butane, but both unreacted propane andpropylene are routed to fuel gas.



22/79

Figure 4.2-1. Propylene from Propane

H2 (C)

(C) Propane to Market

Reflux

Compressor

PolymerGradePropylene

StorageCavern

C3Splitter

Pipeline

from

NGL

Frac / Storage

Pretreatment

Depropanizer

C4+

Hydrogenationof MAPD

Dehydrogenation

FuelGas

H2Purification

H2

Deethanizer

Reboiler

Recycle

Propane with traces of C4+

Fuel Gas

The pretreatment system would reduce sulphur and other contaminants to a very low level to protect the precious metal catalystused in dehydrogenation. Essentially, all C4 and any heavier portions of the propane feed and recycle streams would be removedin the depropanizer. (Note that ethane in the feed carries on through reaction to fuel gas.)

Propane and hydrogen pass through four fired heaters and four moving bed reactors in series as dehydrogenation proceeds to nearthe 40% equilibrium level. The reaction products are then processed to remove small quantities of light decompositioncomponents and hydrogen. A small amount of propadiene/methylacetylene is formed in the reaction and is converted to

propylene in a well-proven low temperature hydrogenation step. The deethanizer insures final control of the ethane content ofthe propylene product and the C3 splitter the propane content.

UOP has standardized on a single tower C3 splitter arrangement compressing overhead vapour before condensing to provide theheat input needed at the tower bottom. (Product is withdrawn part way down the column to insure purity, a small overheadrecycle removes ethane and other trace contaminants.) This arrangement results in lower temperatures and enhanced distillation

properties than normal distillation, and avoids a two very large tower arrangement. The C3 splitter will still be in order of 60meters tall and have up to 250 or so specially designed trays.2 The reboilers will also be special to minimize vapour compressionrequirement. The C3 splitter will be more complex than for chemical grade, but in a new propane dehydrogenation system, theadded costs are more than repaid in the premium for PG product. Chemical grade product could be produced in such a systemwith lower compressor energy inputs, if desired.

4.3 Integration Potential

It is possible to introduce properly conditioned byproduct propylene at the hydrogenation or deethanizer step. However, two C3splitters are recommended for reliability and flexibility over, say 450-kty of total propylene. Hence, parallel byproduct and

propane-based trains appear likely, if more than two major propylene derivative plants emerge. Propylene product storage, utilityand other support systems would be common to both trains.

It is also very realistic to integrate the deethanizer/C3 splitter system with homopolypropylene production to handle the purges ofthat process. Similar fits with other propylene derivative facilities may also be available.

The furnaces in the dehydrogenation system produce large qualities of steamusually used to drive the compressor(s) in thedehydrogenation system. The heat pump compressor of the C3 splitter is usually electric. There are major opportunities forutility integration with other process plants and/or cogeneration facilities.


2UOP has supplied the special trays to over 150 C 3 splitters, most produce polygrade product.


23/79

4.4 Hydrogen Use

Decision economics are usually based on using hydrogen byproduct internally as fuel gas, but in the AIH or SIA, it appears verylikely that hydrogen would be recovered for sale.

4.5 Propylene Handling

Product propylene from byproduct processing and/or propane dehydrogenation has been assumed handled as follows:

Figure 4.5-1. Propylene from Byproduct Processing

Chemical Grade

Polymer Grade Pipelines

Separate

Line

PolymerGradePropylene

Product

Guard

Treating

Rail Loading

Truck Loading

Propylene

UsersNetwork

ProductStorage

Off-specification propylene is assumed routed back to in process or to raw feed caverns in the byproduct case or sold as chemicalgrade via direct railcar loading in the propane route. Note that any/all chemical grade shipments will have their own pipelinesystem.

Two caverns will be needed with their own brine system (separate from other cavern systems to preclude trace impurities). Aswith ethylene the cavern capacities must allow for at least a one-month supply shutdown and a one-month demand shutdown,with flexibility for day-to-day and week-to-week supply/demand in balances. Brine displacement will introduce contaminantssuch as oxygen and a special drying/chemical treating system will be needed to insure delivered product quality. A finaldrier/treater will be recommended at any consuming facility to reinsure polygrade product quality, but is probably not needed forchemical grade product.

Both railcars and trucks will be dedicated to the specific product grade. Rail car unloading facilities will be provided at one ortwo spots for off-spec returns and to allow railcars to be used for peak storage.

4.6 Production Cost

UOP indicate 7% extra capacity inherent in their designs, hence, another 25-kty of added propylene can be expected over time.(Experience indicates UOP claims are generally conservative.) Due to worldwide dehydrogenation technology, competition andongoing catalyst improvements the study expects either an added 10% at least available or 7% less capital cost if facility size isreduced. However, these potential credits have not been considered in the following operating cost estimates.

Reference (a) contained an early 1999 estimate of USGC costs for propane based propylene units producing 150 to 350-kty,starting up in 2002. Here, only the latter size has been considered for two minimum sized derivative units and to takeadvantage of Albertas high propane availability. Nominal capacity of such a facility is unlikely to be discounted, givensufficient product storage capacity say two months of production to handle propylene and conversion units operating cycles.

Propane feedstock cost is discussed in the next section, here the production costs are considered.



24/79

Table 4.6-1. Propane Dehydrogenation Capital Costs($ million U.S.)

UOP Paper This StudyProject Sector USGC AIH

Pretreating 10Battery Limit Propylene Unit 145 145Outside Battery Limit (@ 20%) 29 29Other Project Costs (a) 37 40

Added Storage 6Total 211 230

(a) Catalysts, adsorbents, precious metal inventory, project developments and management, technology license and similar costs.

An SIA or AIH location has been assumed with essentially identical capital costs as on the USGC given optimum use ofprefabrication and excellent project management.3

Added feed processing needs and salt cavern product storage have been added along with a nominal adjustment to other costsfor corporate costs and land. Note that no synergies with other plants were considered, conversely, no hydrogen purificationfacilities are included.

Table 4.6-2. Propane Dehydrogenation Operation Costs

(ex Feedstock)

($ million U.S.)UOP Paper This Study

Estimate Location USGC AIHCatalysts and Chemicals 5 5Utilities - Electricity (a)

- Fuel (a)12 9

Fixed Costs (b) 19 20Total 36 34

(a) Both estimates assume hydrogen and ethane from propane and light process gases provide the bulk of the fuel needs. This study assumed alower electricity cost, as well as lower makeup fuel costs.

(b) Maintenance, operators, technical, administration and related costs. This study added an allowance for interest on inventories and for addedcorporate costs.

Hydrogen recovery and sale would add capital but add very roughly $1 million a year to the plants margin not considered here.

Converting the capital costs to annual cost at a simple 20% per annum to cover provides the next table.

Table 4.6.3. Cost Summary(ex Feedstock)

($ million U.S.)Portion Base Factor Alberta USGC

Capital 227 0.2 45.4 42.2Operating (ex feed) 34 1.0 34.0 36.0

Total 79.4 78.2

@ 350,000-kty Unit Cost 10.3 cents U.S. per pound ($227 per tonne)

The original paper numbers would indicate a USGC facility production at 10.1 cents U.S. per pound, marginally lower at a 20%simple before tax. (The early nature of these calculations is to be noted.)

3 A current study for AED indicates AIH petrochemical facility capital costs 5% below those of the USGC. Such a credit has not beenshown in these estimates.



25/79

4.7 Propane from Propylene Cost

Review of weekly propane and propylene prices as quoted by OPIS for 1998 and 1999, indicated the following annual averages.

Table 4.7-1. Propane and Propylene(Annual Averages in U.S. dollars)

Product/Location/Cost 1997 1998 1999

PropaneMt. Belvieu, Texas

U.S. per U.S. gallon 37.6 26.2 33.3 U.S. per pound 8.9 6.2 7.9$ U.S. per tonne 196 137 174

Edmonton U.S. per U.S. gallon 32.1 17.9 24.7

Differential Mt. Belvieu Edmonton U.S. per U.S. gallon 5.5 8.3 8.6 U.S. per pound 1.3 2.0 2.0$ U.S. per tonne 22 44 45

PropyleneMt. Belvieu, Texas

U.S. per U.S. gallon not calculated 51.0 59.7 U.S. per pound not calculated 11.8 13.8$ U.S. per tonne not calculated 260 304

Propylene/Propane DifferentialsUSGC U.S. per pound not calculated 5.6 5.9

USGC $ U.S. per tonne not calculated 123 130USGC Propylene/Edmonton Propane

U.S. per pound not calculated 7.6 7.9$ U.S. per tonne not calculated 167 175

Source: OPIS Weekly Publications

The Mt. Belvieu (USGC)/Edmonton propane posting differences are related to the traditional eternal trianglebetween Edmonton (the net producer region), Sarnia (eastern consumer hub, including Marysville, Michigan) andUSGC (the mother-of-all-consumers). The economics can best be conceptualized as propane prices being set bythe ability of USGC to clear propane (at a profit over cracker feedstock values) into the Eastern U.S. market base,via TEPPCO pipeline and local distribution) where they meet Sarnia and Marysville-based rail transported LPGs. Thecombined transportation costs to that Eastern market base being about the same from both hubs, means that theSarnia area and USGC prices are about the same level, with seasonal variations. Conway, Kansas is the fourth hub,

sitting on the mid-western side of the triangle, and having a major intermediate influence on the pricing dynamics.

Edmonton pricing discount (relative to these markets) is a function of rail or pipeline transportation costs to thealternative market. Using Sarnia as an example, the discount is approximately the cost of shipping the marginalbarrel in the Cochin pipeline at non-incentive rates, or about 7 to 8 cents U.S. per U.S. gallon. A similar rationaleapplies to the Edmonton long-term differential of about 7 to 8 cents U.S. per US gallon.

This study analyses have not consid

Alberta Propylene Upgrade Prospects

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