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Americas target petrochemicals

The region is playing a more prominent role in global petrochemical capital investments

The global petrochemical sector continues to expand exponentially as developing nations' demand for petrochemical/chemical products continues to increase. In its Oil 2018 report, the International Energy Agency (IEA) forecasts that approximately 25pc of the increase in oil consumption to 2023—nearly 1.7mn bl/d—will be from demand for petrochemical feedstocks.

Growing demand centres in the Asia-Pacific region will be met by billions of dollars of new petrochemical production capacity in Asia, the Middle East and—crucially—North America. These three regions are investing heavily to boost petrochemical processing capacity to satisfy demand, and the US and the Middle East will export products to the world market.

Many non-OECD countries are witnessing petrochemical demand rates increasing higher than GDP growth. Several nations will remain dependent on petrochemical imports, while others are investing to satisfy domestic chemicals demand. Multiple factors will determine the future of the petrochemical industry, including supply/demand factors, plastics recycling, regulations, feedstock costs, partnerships/mergers/acquisitions and digitalisation. In the near term, demand for petrochemicals will continue to increase. In turn, many nations are investing heavily to satisfy domestic petrochemicals demand and/or export petrochemical products to increase revenues.

Hydrocarbon Processing's Construction Box-score Database is tracking nearly 470 active petrochemical projects around the world. The Americas will form a significant slice of these production additions. Much of that comes in the wake of increases in natural gas capacity. According to BP's Statistical Review of World Energy 2018, Canada's natural gas production has increased from 149.6bn cubic metres a year (cm/y) in 2010 to 176.3bn cm/y in 2017. The majority of Canada's natural gas production derives from conventional production in the West Canadian Sedimentary Basin in Alberta and shale plays in British Columbia.

A second wave of new ethane crackers could add more than 5mn t/y of new capacity post-2020

The country's natural gas consumption reached nearly 116bn cm/y in 2017. The significant gap between production and consumption was not a problem until the advent of the US shale gas boom. Historically, Canada would export nearly all its excess natural gas to the US by pipeline. However, because of the shale gas revolution, the US no longer needs to import significant volumes of natural gas from Canada. This scenario has spurred Canada's liquefied natural gas (LNG) export terminal plans, as well as its proposed gas-to-petrochemical projects.

Although the nation's LNG export terminal construction plans are moving ahead at a slow pace, the country's most probable solution for excess natural gas is to utilise it for domestic petrochemical processing capacity growth. Just like the US, the abundance of natural gas feedstock provides the country with price-advantaged feedstock over other global petrochemical producers.

Several capital-intensive petrochemical projects have been announced—for example Inter Pipeline's $3.5bn propane dehydrogenation (PDH) and polypropylene (PP) complex in Strathcona County, Alberta, Kuwait Petrochemical's $4bn propylene/PP complex and NOVA Chemical's $1.2bn polyethylene (PE) plant expansion. Many of these projects are a direct effect of Alberta's Petrochemicals Diversification Programme, which provides producers incentives if they build new petrochemical capacity in the province. The Canadian province's first incentive programme netted 16 projects worth approximately $20bn. A second incentive programme is underway, with economic results expected by the start of 2019.

A second wave of new ethane crackers could add more than 5mn tonnes/year (t/y) of new capacity post-2020. In total, capital expenditures for both ethane cracking project waves could top $50bn by the mid-2020s.

The largest ethylene derivative capacity expansion will occur in the production of polyethylene. By 2020, the US will add approximately 8mn t/y of new PE capacity. Most of this new capacity will be integrated into new ethane cracking operations; however, grassroots PE plants are also being built.

The good news for US producers is that increasing petrochemicals demand from Central and South America will provide an outlet for surplus petrochemical supplies. Due to the crash in crude oil prices several years ago, many Latin American nations still lack the financial ability to invest in much-needed capacity expansions and grassroots facilities. In the near term, many of these countries would rather rely on imports from other countries—primarily the US—than invest in capital-intensive refining and/or petrochemical capacity.

Lee Nichols is Editor/Associate Publisher, Hydrocarbon Processing

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