PETROCHEMICALS 101 By Ben Gonzalez

OUTLINE
 Petrochemicals
 Hydrocarbon Chemistry
 Value Chain
 Economics
 Olefins
 Aromatics
 Polymers
 Outlook
 Appendix
WHAT ARE PETROCHEMCALS?
 Chemical products derived from petroleum, natural gas, and
coal
 The two most common classes are olefins and aromatics
 Used as building blocks to producing plastics, solvents, foams
fabrics, fibers, nylons and rubbers.
 Some aromatics can also be used as gasoline blending
feedstock.
 Growth in production located where cheap feedstock
HYDROCARBON
CHEMISTRY
CLASSIFICATIONS
 Organic Chemistry – study of the structure of properties,
composition, reactions, and preparation of carbon -containing
compounds, including hydrocarbons.
 Hydrocarbons, compounds that contain only carbon and
hydrogen, are the principal constituents of petroleum and
natural gas, and can be classified into three categories
 Aliphatics – alkanes (paraffins), alkenes (olefins), and alkynes.
 Cycloaliphatics (cycloalkanes or naphthenes)
 Aromatics

1. https://www.britannica.com/science/hydrocarbon
ALKANES
Paraffins - Straight Chain Compounds, saturated hydrocarbons,
having formula C n H 2n+2 .
Formula Name Formula Name
CH4 Methane C6H14 Hexane
C2H6 Ethane C7H16 Heptane
C3H8 Propane C8H18 Octane
C4H10 Butane C9H20 Nonane
C5H12 Pentane C10H22 Decane

Ethane, Propane, Butane, Naphtha, and Gas Oil are used as feed in steam crackers to produce ethylene, propylene, butadiene,
benzene, toluene, and xylene.

1. Leffler, William (2000). Petroleum Refining in Nontechnical Language

2. https://www.britannica.com/science/hydrocarbon
ALKENES
 Olefins – Unsaturated hydrocarbons, containing a carbon -
carbon double bond
 Main Olefins: Ethylene, Propylene, Butylene
 Key characteristic is absence of two hydrocarbons , formula
C n H 2n
 Chemically unstable, can be reacted with some other
compound with ease

1. Leffler, William (2000). Petroleum Refining in Nontechnical Language

2. https://www.britannica.com/science/hydrocarbon
CYCLOALKANES
 Also known as naphthenes
 Class of hydrocarbons bent into ring or cyclic shape with
formula C n H 2n
 Examples: cyclopropane, cyclobutane, cyclopentane ,
cyclohexane, etc.

1. Leffler, William (2000). Petroleum Refining in Nontechnical Language

2. https://www.britannica.com/science/hydrocarbon
AROMATICS
 Based on the benzene ring
 A cyclohexane ring with a hydrogen atom removed from each carbon,
and satisfying valence rules by putting double bonds between
carbons.
 Referred to BTXs: Benzene, Toluene, and Xylenes
 Double bonds make the benzene ring unstable, used as
building block in chemical industry
 Name aromatics came by characteristic smell of BTXs

1. Leffler, William (2000). Petroleum Refining in Nontechnical Language

2. https://www.britannica.com/science/hydrocarbon
 PETROCHEMICAL VALUE CHAIN
Coal
Gasification Methanol Plant MTO
Benzene Cyclohexane Caprolactam Nylon 6
Ethylene
Coal Methanol Propylene Benzene Aniline MDI Polyurethane

Nat Gas NGL

Toluene TDI Polyurethane
Processing Fractionator
Paraxylene PTA
Natural PET
Ethane
Gas Ethylene EO MEG
Sat Gas Steam Ethylene
Refining Plant
Propane Cracking Ethylene Polystyrene
Propylene
Butadiene Ethyl-benzene Styrene
Butane Benzene Benzene
Toluene SBR
Xylene
Various Naphtha Butadiene ABS
Gas Oil NBR
Propylene Acrylonitrile
Crude Cat Cracker Splitter
Ethylene Polyethylene
Propylene Propylene Polypropylene
RGP (PGP)
Ethylene EDC VMC PVC
BTX Extraction
Reformer Unit Benzene Phenol Poly-
Benzene Cumene BPA
Propylene Acetone carbonate
Reformate Toluene
Xylene
The process above goes from left to right, ending at the polymer. The blocks are not
proportional to volume needed to produce the next product.
STEAM CRACKING
 Produces ethylene, the most fundamental
petrochemical
 Uses ethane, propane, butane, naphtha or gas oil.
 Heavier feedstocks produce more co -products,
Crude C4s and Aromatics
 Ethane yields the most ethylene, therefore
requires less feed
 Ethane cracker s typically have the lowest
production costs
 Producti on costs for heavier feeds drop when
prices for co -products rise
 Ethane is the preferred feedstock in regions where
natural gas is abundant
 Where natural gas isn’t abundant, naphtha is
preferred
 STEAM CRACKING YIELDS
Percentage of Product per Unit of Feed 100%
90% Fuel Oil
Ethane Propane Butane Naphtha Gas Oil
80%
1 1 1 1 1 Pygas
70%
Ethylene 0.77 0.4 0.36 0.23 0.18 60% Fuel Gas
50%
C4s
Propylene 0.01 0.18 0.2 0.13 0.14 40%

C4s 0.02 0.03 0.08 0.19 0.1 30% Propylene

20%
Fuel Gas 0.2 0.38 0.31 0.26 0.18
10% Ethylene
Pygas 0.01 0.05 0.18 0.18
0%
Fuel Oil 0.01 0.22 Ethane Propane Butane Naphtha Gas Oil

As previously mentioned, Ethane, Propane, Butane, Naphtha, and Gas Oil are used as feed in steam crackers. Ethane yields the most ethylene, and
yields the least by-products. Heavier feedstock yields less ethylene, but yields more by-products. The feed slate can be mixed in more complex facilities.

1. Leffler, William (2000). Petroleum Refining in Nontechnical Language

STEAM CRACKER ECONOMICS
 Revenue – Costs = Margin

 Revenue – (Variable Costs + Fixed Costs) = Margin

 Revenue = Ethylene Price

 Variable Costs = Raw Materials – Co-Product Prices + Utilities

 Raw Materials = Feedstock + Catalysts

 Fixed Costs = Labor + Overhead + Maintenance + Taxes

 Ethylene – {[(Feedstock + Catalysts) – Co-Product Prices + Utilities] +

[Labor + Overhead + Maintenance + Taxes]} = Margin
PRODUCTION MODEL (EXAMPLE)
Capacity 1,000,000 mt/year
ISBL 1,680,001,633
OSBL 672,000,653
Other 588,000,572
Total Capital Investment 2,940,002,858
Variable Costs Per ton of ethylene Unit Market Price Unit Cost $/mt
Raw Materials
Feedstock
Naphtha 3 mt 500 $/mt 1,500
Catalysts assumed value - 1 mt of ethylene at $5/mt 5.00
Utilities
Power 200 kwh 0.1 $/kwh 20
Fuel 8.15 MMBtu 6 $/MMBtu 48.90
Cooling Water 1 Mgal/mt 0.6 $/Mgal 0.6
Total Variable Costs 1,574.50
Co-Products/By-Products Co-Product Revenue $/mt
Propylene 0.5 mt 800 $/mt 400
Crude C4s 0.3 mt 800 $/mt 240
Pygas 0.58 mt 800 $/mt 464
Fuel Oil 0.06 mt 300 $/mt 18
Hydrogen 0.56 mt 100 $/mt 56
Total Co-Product Credits 1,178
Fixed Costs Cost $/mt
Labor 0.22 25/shift/mt 20 $/hr 4.38
Overhead 75% of Labor Cost 3.29
Maintenance 3% of ISBL 50.40
Taxes 1.5% of Total Capital Investment 44.10
Total Fixed Costs 102.17
Product Revenue $/mt
Ethylene 1 mt 1,000 $/mt 1,000
Production Cash Cost 498.67
Margin 501.33
OLEFINS
ETHYLENE
 Ethylene or ethene with formula C2H4 is the simplest member
of the alkene (olefins) class of hydrocarbons.
 Ethylene is produced by steam cracking.
 Most of ethylene production goes into producing polyethylene,
and is the most widely used petrochemical.
 Ethylene is also an important natural plant hormone, and is
used in the agriculture industry to promote ripening.
OTHER ETHYLENE PROCESSES
 CTO – coal is gasified to produce a syngas which is then
converted to methanol; methanol is then converted to ethylene
and propylene.
 MTO – methanol is converted to olefins;
 Ethanol to Ethylene – dehydration of ethanol from sugar cane
(brazil) or corn (US).
ETHYLENE DERIVATIVES
 Po l yet hy l e n e – t h e l a r g e s t d e m a n d f o r et hy l e n e m a k i n g u p m o r e t h a n h a l f o f
et hy l e n e c o n s um pt i o n g l o b a l ly ; i n c l ud e s l o w d e n s i t y p o l yet hy le n e ( L D P E ) , l i n e a r l o w
d e n s i t y p o l yet hy l e n e ( L L D P E ) , a n d h i g h d e n s i t y p o l yet hy l e n e ( H D P E ). M a j o r
a p p l i c a t i o n s i n c l ud e p a c ka g i n g .

 E t hy l b en z e n e – u s e d to p r o d uce s t y r e n e w h i c h i s u s e d to p r o d uc e p o l y s t y r e n e
p l a s t i c s , A B S / S A N p l a s t i c s , S B R r u b b er, a n d u n s a t u r a te d p o l ye s te r s .

 E t hy l en e D i c hl o r i d e – u s e d to m a ke v i ny l c h l o r id e m o n o m e r to m a ke p o l y v i ny l
c h l o r i d e ( P VC , v i ny l )

 E t hy l en e O x i d e – u s e d to m a ke et hy l e n e g l yc o l w h i c h m a ke s s o l v e n t s , a n d P E T
p l a s t i c / p o l ye ste r w h e n c o m b i n e d w i t h p a r a x y le n e .

 V i ny l A c et a te - u s e d to p r o d uc e a w i d e r a n g e o f a d h e s i v e s a n d p a i n t s .
 E t hy l a l c o h o l ( et h a n o l ) – u s e d i n p h a r m a c e ut i ca l s , c o s m et i cs , d ete r g e n t s , p r i n t i n g
inks, and more.
PROPYLENE
 Propylene or propene with formula C3H6 is the second simplest
member of the alkene (olefins) class of hydrocarbons.
 Propylene is produced at the petroleum refinery in the fluid
catalytic cracking unit (FCC) and steam cracker, both as by -
products.
 Propylene is sold in the merchant market as refinery, chemical,
or polymer grade propylene based on its purity.
 Refinery-grade propylene (RGP) is made up of 65-75% propylene while
the rest is mostly propane.
 Chemical-grade propylene (CGP) is made up of 92% or more propylene.
 Polymer-grade propylene (PGP) is 99.5 wt% minimum propylene.
PROPYLENE BY SOURCE
 Propylene is produced mostly as by -products from steam cracking
and refining in the FCC process; also produced from on -purpose
technologies such as propane dehydrogenation (PDH), olefin
metathesis, coal -to-olefins (CTO), methanol -to-olefins (MTO), and coal
to propylene (CTP).

 In the US, propylene is mostly sourced from the FCC process, then
sent to splitters, due to more cracking of ethane derived from shale
gas

 Globally, the majority of propylene is sourced from the steam

cracking process.
REFINERY GRADE PROPYLENE (RGP)

 In a petroleum refiner y, propylene is a by product of fluid catalytic

cracking (FCC).

 The propylene/propane (PP) stream, also known as RGP, is feedstock to

the alkylation unit for the production of alkylate to be used in gasoline
blending as an octane enhancer.

 RGP is sold in the merchant market to midstream or chemical

companies with splitters to separate the propane from the propylene.

 When RGP spot prices increase, the splitter operator will increase PGP
prices to maintain a margin over the feedstock price.
ON PURPOSE PROPYLENE
 PDH – propane is selectively dehydrogenated to propylene; in spite of
simple chemistr y, industrial implementation is complicated.

 CTO – coal is gasified to produce a syngas which is then conver ted to

methanol; methanol is then conver ted to ethylene and propylene.

 MTO/MTP – methanol is conver ted to olefins; the MTP process produces

more propylene than ethylene

 Metathesis – also known as olefins conversion technology (OCT);

reaction, promoted by catalyst, between ethylene and butene to form
propylene.
PROPYLENE DERIVATIVES
 Polypropylene – produced by process of polymerization where shor t
chains (propylene) are joined to make long chains (polypropylene).
 Propylene Oxide – used to make intermediaries that in turn make
solvents and polyurethanes.
 Acr ylonitrile – used to make rubber, ABS and SAN plastic, and acr ylic
fiber
 Cumene – used to make intermediaries that in turn make
polycarbonate, epoxy and phenolic resins, PMMA , and solvents.
 Acr ylic Acid – used to make super -absorbants
 Butyraldehyde – used to make intermediaries to make plasticisers,
solvents, and acr ylic ester s
 Isopropanol – used to make intermediaries to make PMMA and
solvents.
AROMATICS
AROMATICS
 Benzene with formula C 6 H 6 is composed of 6 carbon atoms
formed in a ring with 1 hydrogen atom attached to each.

 Toluene (Methylbenzene) with formula C 7 H 8 is mostly used as a

solvent and used for enhancing octane in the gasoline blend pool.

 Xylene (Dimethylbenzene) with formula C 8 H 10 exists in three

isomeric forms, used as solvents, gasoline blending, and feed for
the production of dyes, fibers, and films.
 Metaxylene (1,2-Dimethylbenzene) or m-xylene
 Orthoxylene (1,3-Dimethylbenzene) or o-xylene
 Paraxylene (1,4-Dimethylbenzene) or p-xylene
AROMATIC PRODUCTION
 Mostly Produced at the petroleum refiner y and steam cracker.
 In a refinery, benzene, toluene, and xylene are produced in an aromatics extraction
unit using reformate as feed
 Produced in steam crackers that use heavier feedstock like butane, naphtha, and gas
oil; pygas is sent to an aromatics extraction unit to produce benzene, toluene, and
xylene.
 Metallurgical coke production – bituminous coal is fed into ovens and
heated at high temperatures. Coke oven gas is recovered, and cooled.
Light oil is removed from the gas and fractionated to recover benzene,
toluene and xylene.
 On purpose benzene production
 Toluene Disproportionation (TDP) – Toluene and hydrogen are converted in a reactor
with a catalyst to produce benzene and methane.
 Hydrodealkylation (HDA) – less valuable toluene feed is converted to higher valued
benzene and paraxylene, mixed with hydrogen and passed over a catalyst.
BENZENE DERIVATIVES
 Alkylbenzene used to make surfactants, which are used to
produce detergents
 Cyclohexane – used to produce caprolactam, which is used to
produce nylon
 Cumene – used to produce phenol and acetone, which are
used to produce BPA for the production of polycarbonate and
epoxy resins, phenolic resins, PMMA, and solvents
 Ethylbenzene - used to produce styrene which is used to
produce polystyrene plastics, ABS/SAN plastics, SBR rubber,
and unsaturated polyesters
 Aniline – used to produce diphenylmethane diisocyanate
(MDI), which is used to produce polyurethane
TOLUENE AND XYLENE DERIVATIVES
 Toluene Diisocyanate – Used to produce polyurethane for
foams, insulation, and coatings for furniture
 Trinitrotoluene (TNT) – prepared by the nitration of toluene
with a mixture of nitric acid and sulfuric acid for the
production of explosives. Not produced commercially.
 Solvents – used for solvents in adhesives, paints, and
industrial cleaners.
 Orthoxylene – used for the production of plasticisers
 Paraxylene – used to produce PET/polyester
POLYMERS
POLYMERS
 Po l ye t h y l e n e Te r a p h t h a l a t e ( P E T ) / Po l y e s t e r – Ty p e 1 p l a s t i c
p r o d u c e d f r o m M E G a n d P TA f r o m P a r a x y l e n e . U s e d m o s t l y fo r
d i s p o s a b l e s o f t d r i n k s a n d b ot t l e d wa te r a s we l l a s f a b r i c r e fe r r e d
to a s p o l ye s t e r.
 H i g h D e n s i t y Po l ye t hy l e n e ( H D P E ) – Ty p e 2 p l a s t i c p r o d u c e d f r o m
e t hy l e n e . U s e d m o s t l y fo r m i l k j u g s , d e te r g e n t b ot t l e s , j u i c e b ot t l e s ,
to i l e t r y b ot t l e s , toy s … .
 Po l y v i ny l C h l o r i d e ( P VC ) / V i ny l – Ty p e 3 p l a s t i c p r o d u c e d f r o m
e t hy l e n e a n d c h l o r i n e . U s e d fo r c o o k i n g o i l b ot t l e s , p l u m b i n g p i p e s ,
toy s … .
 L o w D e n s i t y Po l ye t hy l e n e ( L D P E ) – Ty p e 4 p l a s t i c p r o d u c e d f r o m
e t hy l e n e . U s e d to p r o d u c e g r o c e r y b a g s , fo o d w r a p s , b r e a d b a g s … .
 Po l y p r o py l e n e ( P P ) – Ty p e 5 p l a s t i c p r o d u c e d f r o m p r o py l e n e . U s e d
to p r o d u c e m e d i c i n e b ot t l e s , e l e c t r i c a l c a b l e i n s u l a t i o n , c a r p e t i n g ,
m a t s , r o p e , Tu p p e r w a r e , p l a s t i c b ot t l e s , te x t i l e s , c h a i r s , a u to
components…
 Po l y s t y r e n e ( P S ) – Ty p e 6 p l a s t i c p r o d u c e d f r o m e t hy l e n e a n d
b e n z e n e ( e t hy l b e n z e n e ) . U s e d fo r p r o d u c t i o n o f p o l y s t r ye n e fo a m ,
d i s p o s a b l e c o f fe e c u p s , p l a s t i c fo o d b ox e s , p a c k i n g fo a m ,
insulation….
http://learn.eartheasy.com/2012/05/plastics-by-the-numbers/
US PETROCHEMICALS
TOP 10 US PETROCHEMICAL
COMPANIES IN 2016
Rank COMPANY CHEMICAL SALES ($ MILLIONS) SECTOR HEADQUARTERS
1 Dow Chemical $48,158 Diversified Midland, Mich.
2 ExxonMobil 26,058 Petrochemicals Irving, Texas
3 DuPont 19,679 Diversified Wilmington, Del.

4 PPG Industries 14,270 Paints, inorganics Pittsburgh

5 Praxair 10,534 Industrial gases Danbury, Conn.

6 Huntsman Corp. 9,657 Diversified The Woodlands, Texas
7 Eastman Chemical 9,008 Diversified Kingsport, Tenn.
8 Air Products 8,554 Industrial gases Allentown, Pa.
9 Chevron Phillips 8,455 Petrochemicals The Woodlands, Texas
10 Ecolab 7,653 Process services St. Paul

Source: http://cen.acs.org/content/cen/articles/95/i19/Top-50-US-chemical-producers.html
THE SHALE BOOM
$/bbl $/MMBtu
160 16
WTI Henry Hub
140 14

120 12

100 10

80 8
Petchem Boom – 1st
60 wave of projects 6
announced
40 4

20 2

0 0

Source: eia.gov

The spread between natural gas and crude prices at the end of 2009 through the end of 2014 incentivizes new ethylene projects.
PROPOSED ETHYLENE PROJECTS
DURING THE US SHALE BOOM
 The US shale boom is
responsible for a renaissance
in the petrochemical industry.
 Ne w Ste am Cr acke r s
 Capacity E xpansions
 Te r minals
 Ve sse ls
 Pipe line s
 Stor age tanks and cave r ns

 All the proposed ethylene

projects, greenfield and
brownfield, are located near
the shale plays.

 Of the proposed projects

outside the USGC region, only
the Shell project in
Pennsylvania has been
sanctioned. The PTTGC
cracker in Ohio is expected to
be sanctioned soon.

Source: http://analysis.petchem-update.com/engineering-and-construction/multimedia-mapping-us-ethane-cracker-construction-projects
MARKET ANALYSIS
 Price Forecast
 Long Term: Mostly tied to the energy value, feedstock price, or margin.
 Short Term: Varies with supply, demand, and inventory fluctuations

 Supply Demand Forecast

 Long Term: Demand is strongly tied to GDP. Supply forecast is based on how much
product is needed to meet the demand. Facilities in forecast should be located in
places with feedstock advantage.
 Short Term: Monitor upcoming projects and maintenance schedule for all facilities on
supply and demand side.

 Outlook
 Global petrochemicals demand is expected to increase faster than refined products.
Demand for refined products is expected to peak soon in the US, and within a decade
or two globally according to multiple industry reports. Global petrochemical demand is
expected to grow between 1-1.5 times faster than global GDP.
LITERATURE
Q&A

If you have any questions, feel free to email us at [email protected].

Follow us on LinkedIn, Facebook, and Twitter!
www.aia-global.org
 Join AIA Today!
Ben Gonzalez
Refining and Petrochemical Market Analyst
THANK YOU www.aia-global.org
[email protected]