Mar-2023

Increasing refinery profitability via propylene maximisation

Case study at medium-sized US Midwest refinery on increasing FCC propylene via ZSM-5-based additive technology.

Nate Hager, Abigail Devaney, Ally Payne, Stephen Amalraj and Bani H Cipriano
W. R. Grace & Co.

Article Summary

Demand growth for gasoline and propylene (C3=) is projected to undergo very different trajectories in North America. Figure 1 shows North American gasoline demand, which is expected to peak by the mid-2020s and thereafter decrease: by 2030, gasoline demand is expected to decrease ~3% from its peak, and by 2040 the decrease will be about 30%.1,2 Meanwhile, estimated propylene growth in North America through 2030 is 2% annually, corresponding to a 17% total growth in that bespoke time period.3 The decrease in fuels demand will certainly challenge refinery profitability.

One strategy for refineries to remain profitable is to pivot towards petrochemicals production using existing assets. An example of this can be seen with efforts to increase FCC propylene production. The following example and discussion can better describe the advantages and challenges encountered when increasing FCC propylene production. Against this backdrop, is a case study of a medium-sized US. Midwest refinery that, through careful planning and investments, set itself up to use ZSM-5 technology from Grace to maximise value when propylene and octane economics are strong.

Advantages and challenges
Propylene is primarily generated via three processes: steam cracking (in this process, ethylene is typically the main product and propylene is a byproduct), propane dehydrogenation (PDH), and FCC operation. Propylene supply from steam crackers, FCC, and PDH stands at 45%, 29% and 16%, respectively, as shown in Figure 2.

In the last 10 years, PDH as a source of propylene grew in importance compared to 2010, when its share of the global supply was only 5%. Propylene yield from steam cracking decreased as the feed slate lightened from naphtha to lower-cost ethane, and growth in propylene supply from refineries slowed as investments in new refinery capacity grew at a slower pace. Significant PDH capacity was added worldwide to meet the growing gap between demand and supply,⁴ especially in China since this country was striving for propylene self-sufficiency.

The main advantage of the FCC vs other technologies is that the FCC has the lowest cost position. This is a widely held view and is shown in Figure 3. When the investment cost needed to build a new PDH is factored in, the attractiveness of an existing FCC increases further.

An ample supply of inexpensive propane from North America provided a tailwind to PDH, but can an ample and inexpensive supply be assumed into the future?

Demand growth for LPG (of which propane is an important component) is expected to be around 1% annualised through 2040.² Propane is used for heating and cooking in addition to being used as a petrochemical feedstock. Further, as nations seek to reduce their carbon emissions, natural gas and propane complement solar and wind and, therefore, will play an important role in the journey towards a lower carbon footprint. On-demand electricity generation and heating from natural gas and propane, respectively, can offset the intermittent nature of wind and solar.⁷

Recently, global demand for propane has been high relative to supply, contributing to rising US propane prices.⁸ Demand has increased from Asia for both heating and propylene production from PDH in China. Since the US has developed capabilities to export propane, US propane exports have been on the rise to meet global demand. In the future, growing propane demand is expected. However, US supply is expected to peak, resulting in a tightening of the demand-supply balance and higher propane pricing, which is sure to challenge PDH economics and widen the advantage for FCC propylene.

Challenges: maximising FCC propylene
Given the favourable cost position advantage of C3= from the FCC, what prevents more North American refineries from increasing the production of C3= from the FCC? Several challenges should be explored in the following detail:

• Access to a propylene market/offtake: Approximately 70% of all propylene is used in the manufacture of polypropylene, while the remainder is used in the manufacture of cumene, acrylonitrile, and oxo-alcohols, among other products. The refineries that will capture the most margin from propylene (and other petrochemical feedstocks) are the ones that are integrated with petrochemical assets: integration allows refineries to capture value further down the value chain. Although refinery-petrochemical integration is an increasing trend, many refineries are yet to integrate, and those considering such an approach may need to evaluate their M&A strategy or build a marketing and sales arm for their petrochemical products. If integration is not possible, refiners may still need to form strategic partnerships with petrochemical producers to secure an offtake for the propylene. On the practical side of things, refineries may require logistics infrastructure to be able to sell propylene: for example, having access to a pipeline or being able to fill rail car vessels.

• Purity specification considerations: In North America, there are different grades of propylene depending on the purity. These include refinery (~70%), chemical (~90%), and polymer grade (99.95%+). Not surprisingly, the polymer grade captures a higher value than the refinery grade. Typically the polymer grade fetches a $0.20-0.30/lb premium over the refinery grade propylene. However, only a small number of refiners in the US have the splitter capability to recover higher purity and hence higher value propylene. Due to the purity requirement, many trays are needed (in fact, a 99.95% purity C3= splitter is typically about 300 ft tall!). The C3= flow must be sufficient to justify such an investment.

• Understanding of capital requirements: Refineries may need to make investments to position themselves to capture the most value from propylene. As previously discussed, these may include investments in purification equipment and logistics capabilities. Importantly, investments may be needed around the FCC itself. For example, if the FCC is operated at nameplate feed rate, the wet gas compressor and downstream handling equipment may be at an upper capacity limit. Therefore, they may not be able to handle increased propylene yield.

To increase propylene at nameplate feed rate, refineries will likely need to undertake a significant investment in wet gas compressor (WGC) equipment. Reduced capital scenarios do exist; for example, when gasoline demand is lower or the FCC competes for feed with other units, FCCs can operate at reduced throughput while staying within the gas compressor limit constraint. Even then, FCCs may be limited by main air blower constraints to reach the necessary severity to attain the highest propylene yields. Catalytic solutions can help alleviate some constraints: for example, increasing C3= yield by employing ZSM-5 technologies as opposed to increasing riser operating temperature (ROT) results in both lower air requirement (due to lower coke yield) and WGC load (due to lower dry gas yield).