Ethylene Feedstock Costs

Ethylene is an intermediate commodity chemical with four primary uses shown in Table 1.14. The specific end-use distribution for ethylene manufactured in the United States is shown for 2003 to illustrate the uses of commodity ethylene. 

Examination of the table shows that ethylene is primarily used to manufacture polyethylene. For comparison piuposes, the global utilization of ethylene for 2004 was approximately 225 billion pounds with about 130 billion pounds of polyethylene manufactured in 2004, which represents an ethylene utilization of 58% for the manufacture of polyethylene, demonstrating that the United States and global ethylene utilization for polyethylene are comparable. 

The world ethylene production for 1994 was 50 million tons 2000 was 93 million tons 2004 was 110 million tons and the forecast for 2015 is approximately 160 million tons [11]. 

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The ethylene feedstock used in most plants is of high purity and contains 200—2000 ppm of ethane as the only significant impurity. Ethane is inert in the reactor and is rejected from the plant in the vent gas for use as fuel. Dilute gas streams, such as treated fluid-catalytic cracking (FCC) off-gas from refineries with ethylene concentrations as low as 10%, have also been used as the ethylene feedstock. The refinery FCC off-gas, which is otherwise used as fuel, can be an attractive source of ethylene even with the added costs of the treatments needed to remove undesirable impurities such as acetylene and higher olefins. Its use for ethylbenzene production, however, is limited by the quantity available. Only large refineries are capable of deUvering sufficient FCC off-gas to support an ethylbenzene—styrene plant of an economical scale. 

This problem was formulated as an MILP with the overall objective of minimizing total annualized cost of the refinery and maximizing the added value from the PVC petrochemical network. Maximizing the added value of the petrochemical network is appropriate since the feedstock costs contribute to the majority of the total cost. For instance, the feedstock cost of an ethylene plant contributes to more than 87% of the total cost when naphtha is used and 84% and 74% when propane and ethane are used, respectively (NBK MENA Equity Research, 2007). 

Effect of Feed and Value of By-Products on Production Costs. The ethylene production costs for the six feedstocks considered and the relevant by-product dispositions are shown in Tables VII and VIII. 

In Europe. With either premium or fuel by-product prices prevailing, naphtha is very marginally the preferred feedstock. Heavy gas oil appears to be an interesting feed possibility at current price levels. Although the ethylene production cost with this feed is slightly higher than with naphtha, the difference is so small that it could be wiped out by a naphtha price increase of less than 0.1 /lb. 

Figure 3. Effect of feedstock price on European ethylene production costs (1000 MM Ibs/yr ethylene production premium value by-products)...

Figure 3 presents the effect of feed price on ethylene production costs in a billion lb/yr European plant for naphtha, light gas oil, and heavy gas oil feedstocks based on premium by-product valuations. 

Figure 6 indicates the ethylene production costs from various feedstocks in a U.S. billion lbs/yr ethylene plant based on premium valued by-products. If the predicted ethane and propane increases did in fact... 

With these types of increases in production costs arising from higher NGL prices, the heavier feedstocks would become much more competitive at the existing price valuations for U.S. naphtha, heavy gas oil, and by-products. Note from Figure 6 that if propane goes to 1.4 /lb the ethylene production cost would go to 3.3 /lb, whereas the cost from 1.1 /lb heavy gas oil will be slightly less at 3-3.1 /lb, and the cost from 1.6 /lb naphtha would be about 3.4 /lb. 

Figure 6. Effect of feedstock price on U.S. ethylene production costs (1000 MM Ibs/yr ethylene production premium value by-products). Note by-proauct prices as given in Table V. However, for n-butane feed9 the butanes contained in the Ch by-product are valued the same as n-butane feed.

Consumers can also negotiate with feedstock suppliers on upfront payments or payment terms under which they pay a higher price than the lowest market price at the trough, but pay lower prices when product prices spike. An interesting application of this is the potential for an ethane cracker operator to convert the economics of its cracker to those of a virtual naphtha cracker, by paying an integrated gas producer-processor a price for ethane indexed to naphtha-based ethylene production costs. 

There is often no single feedstock choice, since feedstock costs frequently vary erratically over a period of several years. A general guide to the influence of feedstock on capital investment of the entire pyrolysis for ethylene production is shown in Fig. 7. Net raw material costs for an ethylene plant often account for about 50-60% of the production costs, depending on whether the feedstock is a light material such as ethane or a heavier material such as naphtha. 

Figure 9.3 Breakdown of ethylene production cost using naphtha feedstock - OPEN system...

Where P, the unit production cost of the production of interest (ethylene say), is equal to the sum of the unit feedstock costs (F), the unit capital costs (C) and the unit non feedstock operating costs (O). This can he expressed as a fixed-variable equation with the fixed part of the equation representing the return on capital (the unit capital costs, C, independent of tax considerations) together with all the unit nonfeedstock operating costs (O). 

The processes for manufacturing methanol by synthesis gas reduction and ethanol by ethylene hydration and fermentation are very dissimilar and contribute to their cost differentials. The embedded raw-material cost per unit volume of alcohol has been a major cost factor. For example, assuming feedstock costs for the manufacture of methanol, synthetic ethanol, and fermentation ethanol are natural gas at 3.32/GJ ( 3.50/10 Btu), ethylene at 0.485/kg ( 0.22/lb), and corn at 0.098/kg ( 2.50/bu), respectively, the corresponding cost of the feedstock at an overall yield of 60% or 100% of the theoretical alcohol yields can be estimated as shown in Table 11.12. In nominal dollars, these feedstock costs are realistic for the mid-1990s and, with the exception of corn, have held up reasonably well for several years. The selling prices of the alcohols correlate with the embedded feedstock costs. This simple analysis ignores the value of by-products, processing differences, and the economies of scale, but it emphasizes one of the major reasons why the cost of methanol is low relative to the cost of synthetic and fermentation ethanol. The embedded feedstock cost has always been low for methanol because of the low cost of natural gas. The data in Table 11.12 also indicate that fermentation ethanol for fuel applications was quite competitive with synthetic ethanol when the data in this table were tabulated in contrast to the market years ago when synthetic ethanol had lower market prices than fermentation ethanol. Other factors also... 

Furthermore, the in situ branching process offers a feedstock cost advantage, because 1-hexene is more expensive than ethylene per unit mass. This differential can be significant for low- and medium-density polymers. Capital expense can also be lowered because loading and purification equipment for external 1-hexene is not required. The process is also advantageous in remote locations where 1-hexene is less easily obtained. Therefore, the in situ branching process has proven to be very useful in commercial polyethylene manufacture. 

Comparative cost estimates are presented in Table 4 for ethylene oxide processes. The higher cost of ethylene feedstock for the air-based process is a reflection of lower overall yield. More ethylene is required to compensate for the quantity that is oxidized to carbon oxides. This cost advantage for the oxygen-based process is partially offset by the cost of the oxygen and the higher cost for methane ballast gas and other chemicals for the carbon dioxide removal system. 

Figure 6 shows the projected selling price for a 15% return on investment after taxes for the 50,000.000 gal/yr Gulf cellulose alcohol plant and for fermentation corn and synthetic ethylene-alcohol plants of the same capacity (Table VI). The ethylene costs are escalated at 9%, per industry projections, cellulosics at 7%. and according to USDA projections, corn at 5%. Feedstock costs used as a basis for these graphs are (starting 1983 as in Tables V and VI) MSW 14.00/oven-dried ton (ODT), SMW 21.00/ODT, Pulp mill wastes 14.00/ODT, Ethylene 0.18/pound and corn 3.00/bushel. Thus, the total feedstock cost per gallon of ethanol produced is 0,104 in the case of cellulose. 0.75 for ethylene, and 1.20 for corn. By-product credits used escalated from prices listed in 1983 at a 7% rate. 

In all technical PE production processes, the cost for the ethylene feedstock accounts by far for the largest share, typically 70% (for the LDPE autoclave process) to 78% (for the HOPE fluid bed process). Therefore, PE production costs depend heavily on the ethene price, which means, today, on the crude oil price. In the light of this dependency, attempts to produce PE from bioethanol-derived or for coal-derived ethene become understandable. 

One aspect of the ethylene/polyethylene business that has been extremely important since the 1970s has been the enormous variation in feedstock costs arormd the world. In the early years of the polyethylene business, from about 1940-1970, feedstock costs did not vary a great deal aroimd the world due to low-cost crude oil in which crude oil demand did not... 

Since about 1970 through 2010, the low-cost feedstock advantage found in the Middle East resulted in the investment of enormous amounts of capital in the Middle East for the construction of ethylene/polyethylene petrochemical complexes in this region for export to other regions. The high levels of return on capital resulting from the very low ethylene manufacturing costs for the manufacture of polyethylene in the Middle East could not be matched anywhere else in the world. 

Utilization of these vast new natural gas reserves by utility companies to generate electricity, liquefied natural gas (ENG) exporters, natural gas-to-liquids plants (i.e., gas-to-diesel plants), and in applications such as in transportation using compressed natural gas could significantly increase the ethane supply in North America (United States and Canada) bringing down ethane feedstock costs for the manufacture of ethane-based ethylene. 

The price of ethylene from 2004-2010 represents an excellent example of the ethylene price volatility spanning relatively low feedstock costs to relatively high feedstock costs, with the price of ethylene in January 2009 illustrating the weakness in ethylene prices during a global economic recession. This data is summarized in Table 1.18. 

As the highest cost producers, ethylene plants using oil-based feedstock such as naphtha determine the price of ethylene. This type of pricing heavily favors ethylene producers using natural gas-based ethane as feedstock. Costs as of January, 2010 are shown Table 1.19 [17]. 

Unlike ethanol production from corn, ethanol manufactured from sugarcane may be relatively cost-effective as an ethylene feedstock. Dow Chemical announced a sugarcane-to-polyethylene project in Brazil in 2007 that will play a role in evaluating the process economics in the manufacture of polyethylene from a biomass material. 

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