Prospectus

Q109_76000.302.001

Propylene Technology:
The Next Generation
 Prospectus

Propylene Technology: The Next

Generation
February 2009

44 South Broadway, White Plains, New York 10601, USA

Tel: +1 914 609 0300 Fax: +1 914 609 0399
Contents
Section Page

1 Introduction................................................................................................................. 1
2 Scope of Work ............................................................................................................. 8
3 Report Table of Contents ........................................................................................... 14
4 Approach ..................................................................................................................... 18
5 Contact Information ................................................................................................... 19
6 Authorization Form .................................................................................................... 20

Propylene Technology: The Next Generation i

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Section 1 Introduction

1.1 OVERVIEW
Nexant, a leading, global provider of consulting services to the energy industry, was established
on January 1, 2000. Originally formed from a core group of approximately 130 professionals
drawn from Bechtel’s Technology and Consulting Group, the company has since grown
organically and through acquisitions and now totals over 350. As an independent company with
a number of shareholders, Nexant provides impartial advice to clients in the energy sector.

Nexant’s global headquarters are in San Francisco. The company provides a range of services to
the energy industries, as detailed in our literature and on our website at www.nexant.com. For
more information on the ChemSystems division, please visit www.chemsystems.com.

The foundations of Nexant’s Energy and Chemicals Consulting (E&CC) Division are based on
more than 20 years of experience in the oil and gas industries as part of Bechtel’s consulting
business. In 2001, Nexant acquired the ChemSystems operation from IBM. Now fully
integrated with the Nexant E&CC Division, ChemSystems has been providing management
consulting services to the petroleum and chemical industry since 1964. Our consolidated
expertise and experience is unrivalled by any other specialist consulting firm in the industry.

Chem Systems has a forty-four year history as an independent, industry-expert consulting firm
providing technical, commercial and valuation consulting for the petroleum, refining, and
chemical industries. In 1998, Chem Systems was acquired by IBM, and subsequently in 2001,
Chem Systems was acquired by Nexant, Inc. Nexant maintains Chem Systems’ (now
ChemSystems) intellectual capital and consultant continuity, and continues ChemSystems’
business activity and brand name within Nexant’s Energy and Chemical Consulting Division, in
which we continue to perform the types of work that we have throughout ChemSystems’ history.
Thus, analysis of new technology developments is one of our core activities.

Propylene is one of the key “building block” petrochemicals used as feedstock for a variety of
polymers and chemical intermediates. Major propylene derivatives include polypropylene,
acrylonitrile, propylene oxide, cumene/phenol, oxo alcohols, acrylic acid, isopropyl alcohol,
oligomers, and other miscellaneous intermediates. These are mostly used, in turn, in a wide
range of end-use applications including automotive, construction, consumer durables and non-
durables, packaging and electronics.

In 2003, Nexant analyzed emerging technology for the on-purpose production of propylene in
our report, Technology Developments in Propylene and Propylene Derivatives. This report was
motivated by the expected shortfall in future conventional propylene production capacity and the
emergence of on-purpose production technologies intended to meet that demand. Several of
these technologies have been commercialized, such as propane dehydrogenation; metathesis and
enhanced recovery from refinery streams, and several more are very promising.

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Section 1 Introduction

Since then, additional new technologies and feedstocks, as well as improvements to the emerging
technologies we discussed in our previous report, have appeared, or are in development. These
may significantly change the technology and regional production landscape.

This prospectus describes the background of why emerging propylene technology is an important
and timely issue, the scope of our analysis, and the approach we used in the study. We also
detail our experience and qualifications to perform the study, and how you may subscribe.

1.2 BACKGROUND
As shown in Figure 1.1, global propylene demand grew from 37.2 million tons in 1995 to
approximately 52 million tons in 2000, corresponding to an average annual growth of 5.5
percent. Demand grew at an average rate of 4.6 percent per year from 2000 to 2006, reaching
almost 67 million tons.

Figure 1.1 Global Propylene Demand

160

140

120
AAG 6.7% AAG 4.7%
100
Million Tons

80

60

40

20

0
1995 2000 2005 2010 2015 2020

Q307_71801.002.11-Propylene Prospect us Chart s.xls/ F1

Demand for propylene is expected to grow at almost 5 percent annually for the period 2007-
2015, to more than 100 million tons by 2015. This increase will be driven by the demand for
derivatives, especially polypropylene and propylene oxide, the demand for which is growing at
the rate of 5.5 percent and 4.3 percent, respectively, for the same time period. Propylene
consumption by region is shown in Figure 1.2.

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Section 1 Introduction

Figure 1.2 Global Propylene Consumption Trends by Region

120,000

100,000

80,000
Tousand Metric Tons

60,000

40,000

20,000

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Americas Europe/Middle East/Africa Asia Pacific

XLS: C:\ Document s and Set t ings\ eglat zer\ My

Propylene demand is expected to grow more quickly than supply from traditional sources.
Traditional propylene supply/demand conditions and pricing are strongly dependent on refinery
production and the supply/demand balance, operating rates and feedstock slates in the ethylene
industry. Globally, more than 25 percent of the new crackers started up in the 2003-2007
timeframe are based on ethane and, therefore, will produce little propylene. Moreover, steam
cracker expansions and/or additions cannot keep in pace with propylene demand growth.
Increase in refinery propylene production has also slowed down due to environmental concerns,
further tightening propylene supply.

Propylene is produced commercially on purpose by dehydrogenation of propane, but in most

situations this is an expensive route and usually generally requires favorable feedstock pricing to
be competitive. Only recently has the propylene production from propane dehydrogenation
become a more economically feasible option.

The amount of propylene produced by propane dehydrogenation is still small compared to the
traditional sources.

Propylene is used in a number of major derivatives, as shown in Figure 1.3, with polypropylene
by far the largest end-use.

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Section 1 Introduction

Figure 1.3 Global Propylene Demand by Derivative

Propylene Oxide Acrylic Acid Acrylonitrile
8% 3% 9%
Cumene
4%
Isopropanol
2%

Others
12%

Polypropylene
62%

Q307_71801.002.11-Propylene Prospect us Chart s.xls\ F3

Based on demand growth trends for the key propylene derivatives and limited supplies, the
potentially higher prices of propylene that might result could restrict growth and impact on cross
elasticity of demand in applications in which substitution is possible, e.g., polypropylene versus
polyethylene, polystyrene, and ABS.

Expanded or converted sources of propylene will have to be found, whether as an on-purpose

supply or from redirection of existing capacity. Depending on the demand and alternative value
for ethylene versus propylene, it may be economically advantageous to either produce more
propylene at the expense of ethylene or produce propylene by alternative means.

The primary sources of propylene have been as a byproduct of ethylene production in steam
crackers and from refinery FCC streams. The now commercialized alternative technology of
propane dehydrogenation is only economical under certain conditions in certain areas of the
world. As propylene demand continues to outpace ethylene demand, there is increasing interest
and need in finding or developing alternative sources of propylene without adversely affecting
ethylene availability. Conversion to higher activity FCC catalysts, a proven approach to increase
propylene production, is not always the best solution due to competing economic and technical
drivers to produce motor gasoline and number 2 fuels, FCC’s primary products. New
technologies, using an expanding range of feedstocks, may change conventional propylene
supply dynamics and economics, as well as the competitive regional supply balance.

Major regions will likely respond differently to the tightening propylene supply. While North
America and Europe have a slow demand growth, Asia and the Middle East will experience
more severe shortages in propylene. In Asia, this is driven by China’s large and growing
consumption. This rapid demand growth along with increases in price has resulted in a large

Propylene Technology: The Next Generation 4

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Section 1 Introduction

amount of investment in Asia with approximately 41 percent of new propylene resulting from
alternative sources. A significant amount of the new crackers in the Middle East are ethane
based which will go a long way to satisfying the growth in ethylene, but the region’s investment
in naphtha and distillate crackers is limited, which will limit the amount of propylene produced.
Naphtha crackers currently provide 70 percent of Asia’s propylene supply. This has propylene
producers exploring other technologies to assure there is sufficient propylene supply.

Nexant’s new report, Propylene Technology: The Next Generation, examines and compares the
process technologies and economics of the commercially available and developing technologies
for the production of propylene alone or as a co-product. The report focuses on the economics of
alternate process and feedstock routes to propylene, how they compare to conventional routes,
and how competitive they are. These routes include the conventional processes and feedstocks
that have been practiced for years:

ƒ Conventional steam cracking

ƒ Production and recovery from refinery streams
− High Propylene Catalytic Cracking
− Deep Catalytic Cracking (DCC)
− Catalytic Cracking (conventional)

ƒ Propane dehydrogenation

The conventional technologies are reviewed and evaluated in operating modes that maximize
propylene production. For instance, conventional steam cracking is discussed and production
economics evaluated with an emphasis on cracking severities for the various feedstocks that
favor the production of propylene over ethylene.

These conventional propylene technologies are compared to the newer and developing
technologies for propylene production, some which have been proven commercially, and others
that are near commercialization as well as those in the development stages. Nexant examines
and analyzes newer developments in alternate technology and feedstock sources, and those
technologies that are designed to either produce propylene exclusively or increase propylene
yields from conventional sources.

The evaluation of newer commercial technology includes:

ƒ Olefin Metathesis
ƒ Catalytic Pyrolysis
ƒ High Severity (High Propylene) Fluid Catalytic Cracking
ƒ Natural Gas Based Processes
− Methanol to Olefins (MTO)
− Methanol to Propylene (MTP)

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Section 1 Introduction

ƒ Olefin Interconversion

The evaluation of these technologies includes existing technology developers as well as those
new to the specific technology. For instance, for Methanol to Propylene, Nexant includes
evaluations of the latest technology from existing technology holders ExxonMobil, UOP/Hydro,
and Lurgi, as well as a more recent entrant, Dalian Institute of Chemical Physics (DICP).

There have been several recent technology developments that may prove to be interesting
propylene production options:

ƒ Sinopec Olefin Catalytic Cracking (OCC)

ƒ Sinopec Catalytic Pyrolysis Cracking (CPP)
ƒ ExxonMobil Propylene Catalytic Cracking (PCC)
ƒ Asahi Kasei Chemical Omega Process

Nexant also investigates and evaluates alternate feedstocks for propylene production. The use of
stranded (or remote), low cost natural gas has already been proposed via MTP. Coal is another
alternative, in those countries with plentiful reserves, for MTP as well. Nexant also examines the
use of biomass via promising technologies. Thus, alternate feedstock technologies that are
investigated include:

ƒ Natural gas
− Natural gas to propylene (via natural gas to synthesis gas to MTP)

ƒ Coal
− Coal to propylene (coal to synthesis gas via gasification, and then to MTP)

ƒ Biomass
The practical use of biomass as a raw material for fuels production is becoming a
growing reality. Chemicals production from biomass is also gaining interest and
propylene production has several viable options. Nexant investigated potentially
practical avenues for propylene production such as:

− Hydrocracking natural fats and oils (triglycerides) and isomerization to produce

biodiesel with propane co-product. The propane can be recovered and
dehydrogenated to propylene. This is just one example of potential biomass
routes that will be investigated.
− Gasifying biomass, such as wood, to synthesis gas and then producing methanol
and propylene via MTP:
− Switchgrass fermentation to ethanol followed by dehydration to ethylene and
metathesis to propylene
− Enhanced FCC using soybean oil feedstock

Propylene Technology: The Next Generation 6

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Section 1 Introduction

− Ethanol from corn followed by dehydration to ethylene and metathesis to

propylene

For these and other interesting alternative technologies discovered during our research, Nexant
developed and compared costs of production on a regional basis, taking into account regional
feedstock and conversion costs, regional construction costs, and other factors that can
differentiate production dynamics. Major regions evaluated include the United States, Western
Europe, Southeast Asia, Northeast Asia (China), and the Middle East.

Nexant used its highly regarded methodology for cost of production analysis and comparison on
a consistent basis. This includes inputs of data from sources such as technology holders,
producers and patent disclosures, and our own analysis and simulation of the data to arrive at
commercial-scale cost evaluations. This methodology is summarized in Figure 1.4.

Figure 1.4 Nexant Cost of Production Methodology

Lic
ens
ors

In-ho
use d
a ta
Conventional
Conventional Cost
Cost of
of
Technology
Technology Production
Production
Producer contacts

ent s
lopm •• Cost
Cost of
of Production
Production
t deve
Paten Commercial-scale •• Comparisons
Comparisons
Cost Simulation
Licen
s ors
Emerging
Emerging Cost
Cost of
of
Technology
Technology Production
Production •• Regional
Regional Economics
Economics
alysis •• Delivered
Delivered Cost
Cost
Pate nt An •• Comparisons
Comparisons

Cost
Cost of
of
Developing
Developing Production
Production
Patent Analysis
Technology
Technology

Q407_77801.002.01-Figures.ppt

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Section 2 Scope of Work

Nexant’s overall objective for the Propylene Technology: The Next Generation study is to
assess and evaluate the important technology issues that will affect the future availability and
supply of propylene. The study provides an in-depth quantitative and qualitative analysis of the
various new and developing technologies for the production of propylene, from both
conventional and non-conventional feedstocks. An important part of this assessment and
evaluation is a discussion of the commercial issues including projected impact of these
technologies on regional propylene demand, supply, and trade.

The report analyzes the major commercial and developing propylene technologies, including but
not limited to:

ƒ Steam Cracking
Propylene is the primary ethylene co-product from a steam cracker. Two variables affect
the distribution of co-products: choice of feedstock and severity of operation. Under a
market-limited ethylene production scenario, operators could choose the feedstock that
minimizes the production of ethylene by resorting to more naphthenic naphtha and gas oil
feedstocks.

ƒ Recovery from Refinery Streams and High Severity FCC

Propylene is produced as a dilute stream in propane from the three main refinery
processes, fluid catalytic cracking (FCC), visbreaking/thermal cracking, and coking. The
propane/propylene proportions vary considerably depending on the process, feedstock,
operating conditions and, for FCC, catalyst.

Refineries in developing regions such as East Asia and Latin America have varying
degrees of complexity but on average produce much less FCC propylene. Economic
development in these regions and trends towards use of gasoline fuels will justify refinery
expansions and greater refinery conversion, producing offgas propylene. Additionally, in
both developing and developed regions, including North America, there are a number of
refineries that do not currently recover propylene from FCC offgas. In this case, higher
propylene prices might support investment in new propylene concentration facilities. The
increase in FCC-sourced propylene is viewed as a major likely source of future propylene
demand.

Propylene Technology: The Next Generation 8

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Section 2 Scope of Work

ƒ Propane Dehydrogenation
Propane dehydrogenation technology is readily available from a number of licensors and
is used commercially, especially where propylene is in short supply, e.g., in the Middle
East and East Asia. The economics for this route are highly dependent on feedstock
availability and cost. Nexant estimated and compared the cost of production economics
in the various regions where feedstock availability makes this technology a viable
alternative.

ƒ Olefin Metathesis
Metathesis involves the conversion of ethylene to propylene and, as such, the major
commercial issue is the use of ethylene as a feedstock. Olefins metathesis can be added
to steam crackers in order to boost propylene production via the cracking exchange
reaction of ethylene and by-product mixed butylenes. This technology is available from
various licensors.

Variations on metathesis may include production of propylene from butene only and
dimerization of ethylene to butene for reaction with additional ethylene for regions (such
as the Middle East) where ethylene is the primary cracker product.

ƒ Deep Catalytic Cracking (DCC)

DCC utilizes fluid catalytic cracking principles combined with a proprietary catalyst,
different operating conditions, and other enhancements to achieve its objective of
producing the maximum light olefins from vacuum gas oil.

ƒ Catalytic Pyrolysis Process (CPP)

CPP is a modification of the deep catalytic cracking (DCC) process and can be adjusted
to provide for a maximum output of either propylene or ethylene or an intermediate
composition between these two modes. This is accomplished through a change in the
operating conditions.

ƒ Methanol to Olefins (MTO)/Methanol to Propylene (MTP)

The availability of low cost methanol along with the rise in propylene demand makes the
methanol-to-olefins (MTO) or methanol-to-propylene (MTP) processes viable. Low cost
(advantaged) gas regions generally support ethane cracking rather than heavy liquids
cracking, hence, such regions have ample supply of ethylene but insufficient propylene
supply.

ƒ Olefin Interconversion
Olefin Interconversion is based on the catalytic cracking of C4s and C5s in a fixed or
fluidized bed reactor. The process is compatible with ethylene crackers and FCCs and,
unlike metathesis, does not consume ethylene.

Propylene Technology: The Next Generation 9

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Section 2 Scope of Work

ƒ Alternate Conventional Feedstocks

The MTO/MTP routes to propylene start with the production of methanol from synthesis
gas. Though low cost remote natural gas is a probable source of the methanol, low cost
coal in coal-rich regions is another viable and probable alternative.

ƒ Biomass
Biomass is being investigated for a wide range of chemicals and fuels production. One
such possibility is the hydrocracking of natural fats and oils (triglycerides) and
isomerization to produce biodiesel with propane co-product that can be converted to
propylene. Nexant examined this and other potential uses of biomass, the economics for
the production based on a wide range of feedstock and co-product price scenarios and the
viability of feedstock on a regional basis.

The report includes a critical assessment of the main alternative on-purpose technologies,
comprising a review of the technologies and licensors, commercial experience, and analysis of
the competitive costs of production versus propylene at typical market prices and from
conventional production.

The study includes technology, economic, and commercial evaluations:

Technology Evaluation – A detailed review and status of the various process routes including:
patent review and analysis, technology holders and offerers, licensor package analysis and cost
of production development for what would be considered representative of each technology,
identification of the stage of process package commercial development with a listing of actual
and announced projects.

Economic Evaluation – Cost of production estimates for typical estimated year average 2007
and projected 2015 conditions were developed for each of the developing technologies for
comparison to conventional technology and to other developing technologies for propylene
production. Costs are developed for the major producing regions, the United States, Western
Europe, Middle East, Southeast Asia, and China, as well as for other locations more suited to the
technology and/or feedstock, where applicable, such as for MTO and MTP (i.e., stranded gas
location). A typical cost of production worksheet is shown in Table 2.1 and a theoretical
comparison of production costs, such as for propylene-enhancing (or “add-on”) technologies, is
shown in Figure 2.1.

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Section 2 Scope of Work

Table 2.1 Cost of Production Estimate for Propylene

Process: Recovery from Refinery Propylene, USGC location
CAPITAL COSTS
Battery Limits
Capacity 467 thousand tons/year (ISBL) 56 $ million
Operating Rate 90 percent Offsites (OSBL) 28 $ million
Production 421 thousand tons/year Total Fixed Invest 84 $ million
Analysis Period: 2007.1

PRODUCTION COST SUMMARY Quantity Units Price Annual Cost Unit Cost
(per Ton) (US Dollars/unit) (thousand $) (US Dollars/Ton)
Raw Materials
Refinery Propylene (75%) 1.010 Ton 863.67 366,890 872.30
Catalyst & Chemicals - 4,859 11.55
Total Raw Materials Costs 371,749 883.86

Utilities
Electricity 0.141 MWh 61.41 3,639 8.65
Low Pressure Steam (50 psig) 0.326 ton 23.85 3,270 7.77
Cooling Water 0.116 kton 29.39 1,428 3.40
Total Utility Costs 8,337 19.82

Total Variable Costs 380,086 903.68

Direct Fixed Costs

Labor 10 people/year 45,893 459 1.09
Foreman 0 people/year 52,091 0 0.00
Supervision 1 people/year 62,858 63 0.15
Direct Overheads 45 % total salary cost 235 0.56
Maintenance 2.4 % ISBL 1,351 3.21
Total Direct Fixed Costs 2,108 5.01

Allocated Fixed Costs

General Plant Overhead 60 % direct fixed cost 1,265 3.01
Local Tax/Insurance 2 % (ISBL+OSBL) 1,264 3.01
Total Allocated Fixed Costs 2,529 6.01

Technical Support/Royalty 0 0.00

Total Cash Cost 384,722 914.70

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Section 2 Scope of Work

Figure 2.1 Ethylene Cost of Production with Enhanced Propylene Production

(U.S. dollars per metric ton, USGC, 2007)

1,400

1,200

1,000

800
$/MT

600

400

200

0
Light Naphtha Light Naphtha Light Naphtha Asahi Catalytic
Cracker Cracker + Lummus Cracker + Superflex Pyrolysis Process
Metathesis
Net Raw Materials Utilities Direct Fixed Costs Allocated Fixed Costs Depreciation ROI
Q109_01298.001.01_char t s.xls\ F18.1

The economic comparisons are used to help develop regional production and competitive
dynamics, which ultimately affect the regional propylene demand, especially in the case of
alternate feedstocks. As a measure of regional competitiveness, delivered costs to the United
States, Western Europe and China are estimated from each production region. An example of
regional cost competitiveness is shown in Figure 2.2, with delivered costs, including tariffs and
transportation costs, compared to regional domestic prices.

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Section 2 Scope of Work

Figure 2.2 Delivered Cost of Propylene, China

(U.S. dollars per metric ton, 2007)
2,000

1,500

1,000
$/MT

500

-500
Fractionation

Fractionation

ME Nat gas
CH Refinery

CH Coal

ME Refinery

ME CPP
ME DCC

ME PDH
MTP

MTP

Net Raw Materials Utilities Fixed Costs Depreciation ROI Shipping

Q109_01298.001.01_char t s.xls\ F8.25

Sensitivities are performed for important process variables, including the major feedstocks, and
their effect on competitiveness versus the other feedstocks.

Because the comparison of propylene production costs is complicated by the economics for
conventional steam cracking (for a naphtha cracker, ethylene is the principal product, with
propylene as a co-product), Nexant uses novel comparison approaches. The economics for
byproduct propylene production are not necessarily revealed using industry typical cost of
production analysis. Propylene technology options, especially add-on options such as metathesis
and olefin interconversion, will likely be linked to large-scale conventional steam crackers
whose primary product is ethylene.

Commercial Outlook Overview – Nexant provides a forecast of propylene demand, production

and trade, globally and by major region.

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Section 3 Table of Contents

PROPYLENE TECHNOLOGY: THE NEXT GENERATION

Section

1 Executive Summary .................................................................................................... 1-1

1.1 INTRODUCTION ............................................................................................ 1-1
1.2 COMPARISON BASIS .................................................................................... 1-1
1.3 BYPRODUCT PROPYLENE ECONOMICS.................................................. 1-1
1.3.1 United States ......................................................................................... 1-2
1.3.2 Western Europe..................................................................................... 1-4
1.3.3 Southeast Asia....................................................................................... 1-5
1.3.4 China ..................................................................................................... 1-7
1.3.5 Middle East ........................................................................................... 1-8
1.4 ON PURPOSE PROPYLENE ECONOMICS.................................................. 1-10
1.4.1 United States ......................................................................................... 1-10
1.4.2 Western Europe..................................................................................... 1-13
1.4.3 Southeast Asia....................................................................................... 1-15
1.4.4 China ..................................................................................................... 1-17
1.4.5 Middle East ........................................................................................... 1-19
1.5 REGIONAL COMPETITIVENESS................................................................. 1-21
1.5.1 United States ......................................................................................... 1-21
1.5.2 Western Europe..................................................................................... 1-23
1.5.3 China ..................................................................................................... 1-25
1.6 PRICING SENSITIVITY ANALYSIS ............................................................ 1-28
1.6.1 United States ......................................................................................... 1-28
1.6.2 Western Europe..................................................................................... 1-29
1.6.3 Middle East ........................................................................................... 1-30
1.6.4 China ..................................................................................................... 1-32
1.6.5 Southeast Asia....................................................................................... 1-33
2 Introduction................................................................................................................. 2-1
2.1 OVERVIEW ..................................................................................................... 2-1

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Section 3 Table of Contents

2.2 BACKGROUND .............................................................................................. 2-1

3 Approach and Methodology....................................................................................... 3-1
4 Conventional Propylene Technologies ...................................................................... 4-1
4.1 STEAM CRACKING ....................................................................................... 4-1
4.2 REFINERIES.................................................................................................... 4-4
4.2.1 Recovery from Refinery Streams.......................................................... 4-4
4.2.2 Enhanced FCC ...................................................................................... 4-7
4.3 PROPANE DEHYDROGENATION (PDH) ................................................... 4-18
4.3.1 Chemistry.............................................................................................. 4-18
4.3.2 Process Design ...................................................................................... 4-20
4.4 OLEFIN METATHESIS .................................................................................. 4-37
4.4.1 Chemistry.............................................................................................. 4-40
4.4.2 Process Design ...................................................................................... 4-41
4.5 CATALYTIC CRACKING .............................................................................. 4-51
4.5.1 Selective Olefin Cracking ..................................................................... 4-51
4.5.2 Sinopec’s Olefins Catalytic Cracking (OCC) ....................................... 4-59
4.5.3 ExxonMobil’s Propylene Catalytic Cracking (PCC)............................ 4-62
4.5.4 Asahi Kasei Chemicals Omega Process ............................................... 4-63
5 Developing Technologies ............................................................................................ 5-1
5.1 BIOPROPYLENE............................................................................................. 5-1
5.1.1 NExBTL® – Neste Oil ......................................................................... 5-1
5.2 ENHANCED FCC ............................................................................................ 5-3
5.2.1 UOP – PetroFCC™............................................................................... 5-5
5.2.2 High-Olefins FCC (Petrobras) .............................................................. 5-6
6 Alternate Feedstocks................................................................................................... 6-1
6.1 NATURAL GAS .............................................................................................. 6-1
6.1.1 Methanol-to-Propylene (MTP) ............................................................. 6-1
6.2 COAL................................................................................................................ 6-26
6.2.1 Coal Gasification .................................................................................. 6-26
6.2.2 Commercial Gasification Systems........................................................ 6-32

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Section 3 Table of Contents

7 Economic Bases ........................................................................................................... 7-1

7.1 ECONOMIC BASIS......................................................................................... 7-1
7.1.1 Capital and Operating Costs ................................................................. 7-1
7.1.2 Inside Battery Limits Investment.......................................................... 7-4
7.1.3 Outside Battery Limits Investment ....................................................... 7-5
7.1.4 Contractor Charges ............................................................................... 7-6
7.1.5 Project Contingency Allowance ........................................................... 7-6
7.1.6 Other Project Costs ............................................................................... 7-6
7.1.7 Working Capital.................................................................................... 7-8
7.1.8 Shipping Costs ...................................................................................... 7-8
7.2 PRICING BASIS .............................................................................................. 7-9
7.2.1 Crude Oil............................................................................................... 7-9
8 Propylene Economics.................................................................................................. 8-1
8.1 BYPRODUCT PROPYLENE ECONOMICS.................................................. 8-1
8.1.1 United States ......................................................................................... 8-1
8.1.2 Western Europe..................................................................................... 8-4
8.1.3 Southeast Asia....................................................................................... 8-5
8.1.4 China ..................................................................................................... 8-7
8.1.5 Middle East ........................................................................................... 8-9
8.2 ON PURPOSE PROPYLENE ECONOMICS.................................................. 8-11
8.2.1 United States ......................................................................................... 8-12
8.2.2 Western Europe..................................................................................... 8-15
8.2.3 Southeast Asia....................................................................................... 8-16
8.2.4 China ..................................................................................................... 8-18
8.2.5 Middle East ........................................................................................... 8-20
8.3 REGIONAL COMPETITIVENESS................................................................. 8-22
8.3.1 United States ......................................................................................... 8-22
8.3.2 Western Europe..................................................................................... 8-25
8.3.3 China ..................................................................................................... 8-28

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Section 3 Table of Contents

9 Sensitivity Analysis ..................................................................................................... 9-1

9.1 PRICING SENSITIVTY ANALYSIS.............................................................. 9-1
9.1.1 United States ......................................................................................... 9-1
9.1.2 Western Europe..................................................................................... 9-3
9.1.3 Middle East ........................................................................................... 9-4
9.1.4 China ..................................................................................................... 9-6
9.1.5 Southeast Asia....................................................................................... 9-8
10 Propylene Economics.................................................................................................. 10-1
10.1 GLOBAL OVERVIEW .................................................................................... 10-1
10.1.1 Introduction........................................................................................... 10-1
10.1.2 Uses of Propylene ................................................................................. 10-1
10.2 GLOBAL CONSUMPTION ............................................................................ 10-3
10.3 GLOBAL SUPPLY .......................................................................................... 10-6
10.4 GLOBAL SUPPLY, DEMAND AND TRADE............................................... 10-7
10.5 NORTH AMERICA ......................................................................................... 10-8
10.5.1 Consumption ......................................................................................... 10-8
10.5.2 Supply ................................................................................................... 10-11
10.5.3 Supply, Demand and Trade................................................................... 10-15
10.6 WESTERN EUROPE ....................................................................................... 10-17
10.6.1 Consumption ......................................................................................... 10-17
10.6.2 Supply ................................................................................................... 10-19
10.6.3 Supply, Demand and Trade................................................................... 10-25
10.7 ASIA PACIFIC................................................................................................. 10-26
10.7.1 Consumption ......................................................................................... 10-26
10.7.2 Supply ................................................................................................... 10-29
10.7.3 Supply, Demand and Trade................................................................... 10-38

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Section 4 Approach

The evaluations of conventional technology are based on Nexant’s in-house and published
information regarding process technology, augmented by contacts with licensors, engineering
contractors and other experts in the industry. The evaluations of developing technology are
“built up” from a review of patents, public domain information, and discussions with the
technology development companies and engineering contractors on a non-confidential
information basis.

Nexant used its own proprietary, as well as commercial, state-of-the-art software tools to develop
the technology and economic estimates. We employed well established and accepted chemical
process industry engineering estimating tools and principles as used by major engineering
contractors.

Additional aspects of our approach for this multi-client study are as follows:

ƒ The economic evaluations are premised as typical regional costs of production based on
capital costs that are appropriate for “factored estimates”.
ƒ The economic evaluations do not reflect specific site issues, but portray economics that
are representative of the countries or regions as a whole.
ƒ Commercial information and forecasts were developed from Nexant’s extensive in-house
databases, as augmented with selected regional fieldwork.
ƒ Market projections were developed with the aid of Nexant’s supply/demand computer
modeling systems and databases

This project was managed and most of the work was carried out at Nexant’s White Plains, NY
office. Information and data for other regions was gathered as needed by consulting staff in
Nexant’s regional and representative offices in Bangkok, Beijing, Buenos Aires, Houston,
London, Singapore, Seoul, and Tokyo.

The study was completed in February 2009.

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Section 5 Contact Information

Please visit www.chemsystems.com to authorize engagement of the study or return the following
authorization form to one of Nexant’s offices.

Mr. Edward S. Glatzer Mr. John W. King

Nexant, Inc. Nexant Asia Limited
44 S. Broadway, 4th Floor 22nd Floor, Rasa Tower I
White Plains, NY 10601 555 Phaholyothin Road
USA Kwaeng Chatuchak, Khet Chatuchak
Tel: 1-914-609-0325 Bangkok 10900 Thailand
Fax: 1-914-609-0399 Tel: +662 793 4600
e-mail: [email protected] Fax: + 662 937 0144
Email: [email protected]
Alternative Contacts:
Mr. Michael J. Kratochwill
Tel: 914-609-0331
e-mail: [email protected];

Ms. Tammy Lo
Tel: 914-609-0373
[email protected]

Ms. Heidi Junker Coleman

Tel: 914-609-0381
[email protected].

Mr. Ko Matsuishita Mr. Richard T. Sleep

Nexant – Japan Nexant Limited
Yoshida Building 7F Griffin House
1-2-2 Hirakawa-cho, Chiyoda-ku 1st Floor, South
Tokyo 102-0093 161 Hammersmith Road
Japan London, W6 8BS
Phone: 81-3-3237-3383 United Kingdom
Fax : 81-3-5212-1708 Tel: 44-20-7950-1599
e-mail: [email protected] Fax: 44-20-7950-1550
e-mail: [email protected]

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Section 6 Authorization Form

1. The undersigned (hereafter "Client") hereby the public in a printed publication, which is
subscribes to purchase from Nexant, Inc. already in the possession of Client, or which
(“Nexant”), Nexant’s study, Propylene is received by Client in good faith from a
Technology: The Next Generation, in third party without an obligation of
accordance with the following terms and confidentiality.
conditions. 5. Client shall not republish any of the report
Nexant will provide to Client the following except within its own organization or that of
information and services: its 51 percent or greater owned affiliates.
(a) One (1) bound copy of the report Client further agrees to refrain from any
general publication of the reports, either
(b) Access to electronic downloads of directly or through its affiliates, so as to
the report via a password-protected constitute passage of title into the public
area from www.chemsystems.com domain or otherwise jeopardize common
2. While the information supplied by Nexant to law or statutory copyright in said report.
Client will represent an original effort by 6. Client will be billed by and shall pay Nexant
Nexant, based on its own research, it is a total of US$20,000 (twenty thousand U.S.
understood that portions of the report will dollars). The amount is due upon receipt of
involve the collection of information invoice and payable within thirty (30) days.
available from third parties, both published Late payments shall accrue interest at the
and unpublished. Nexant does not believe rate of 1.5 percent per month. Fees quoted
that such information will contain any do not include any applicable sales tax, or
confidential technical information of third use or value added tax, all of which are for
parties but cannot provide any assurance that the account of Client.
any third party may, from time to time,
claim a confidential obligation to such 7. Additional bound hard copies of the report
information. are available at US$500 each. The complete
report will also be available electronically
3. The information disclosed in this report will on CD-ROM at a cost of US$250.
be retained by Client for the sole and
confidential use of Client and its 51 percent 8. The obligations of paragraphs 3 and 4 shall
or greater owned affiliates in their own terminate five (5) years from receipt of
research and commercial activities, reports.
including loaning the reports on a 9. Unless specified otherwise, there are no
confidential basis to third parties for warranties of any kind for reports and
temporary and specific use for the sole consulting services provided under this
benefit of Client. Agreement. Nexant’s total liability under
4. Client further agrees that it will use this Agreement is limited to the total amount
reasonable efforts to keep the information in paid to Nexant for the reports.
the reports for its sole use; however, this 10. This Agreement will be governed by the
restriction shall not apply to information laws of the State of New York.
which is or becomes generally available to

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 AUTHORIZATION FORM

AGREED TO AND ACCEPTED ON THE TERMS AND CONDITIONS OVERLEAF BY:

CLIENT: NEXANT, INC.

Name Name

Signature ___________________________ Signature ___________________________

Title Title ___________________________

Date Date __________________________

Reports to be sent to:

_____________________________________________________________________

_____________________________________________________________________

_____________________________________________________________________

_____________________________________________________________________

Phone: Fax: _______________________

E-mail address: _______________________________________________________

Number of Copies Desired: ____________ Total Cost: ____________________

If purchase order is required, please provide the purchase order number below:

Purchase Order Number: _____________________________

NEXANT, INC.
44 SOUTH BROADWAY, 4th Floor
WHITE PLAINS, NY 10601-4425, U.S.A.
Fax: 1-914-609-0399
Web: www.nexant.com

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Section 6 Authorization Form

Nexant, Inc.

San Francisco
London
New York
Bangkok
Houston
Washington
Phoenix
Madison
Boulder
Dusseldorf
Shanghai
Beijing

www.nexant.com

e-mail:[email protected]

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