Abundant Feedstock, Market Dynamics Propel Propane Dehydrogenation Projects in North America

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Researched by Industrial Info Resources (Sugar Land, Texas)--North America is seeing a spate of propane dehydrogenation (PDH) projects to produce propylene amid tight supplies and abundant shale-derived feedstock. Industrial Info is tracking seven such projects in various stages in North America, with a total investment value (TIV) of $7.4 billion.

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Production of propylene via propane dehydrogenation has come into vogue in recent years, as a result of growing worldwide demand for propylene for use in plastics and other derivatives; declining propylene output from U.S. refineries and olefin crackers; and abundant (and therefore cheaper) feedstock propane supplies from natural gas liquids (NGL) in North America.

Refineries and olefins crackers have produced most of North America's propylene, but that picture is changing.

Propylene is a byproduct of petroleum refining, but output from refineries has nearly leveled as gasoline demand has fallen off. According to the U.S. Energy Information Administration, U.S. refinery net production of propylene in 2013 totaled 102.47 million barrels, compared with 101.31 million barrels in 2010. Refinery propylene production totaled 33.37 million barrels in the first four months of 2014, compared with 33.93 million barrels in the same period of 2013.

Also, olefins crackers produce propylene as a co-product of ethylene. However, more North American crackers are using ethane as feedstock these days instead of naphtha, due to the abundance of shale-derived natural gas liquids. Use of ethane reduces propylene output by crackers. According to one estimate, propylene from U.S. crackers fell from 7.6 million tons in 2006 to 4.8 million tons in 2012.

Responding to the perceived propylene shortfall, a number of projects for "on purpose" propylene plants have sprung up in North America.

Dow Chemical (NYSE:DOW) (Midland, Michigan) is building its 750,000-ton-per-year Oyster Creek Plant PDH unit in Freeport, Texas, with an estimated investment of $1.2 billion. Dow recently said the project was 30% complete. Full completion is expected in the first quarter of 2015.

Dow is also performing preliminary design work on a second 750,000-ton-per-year PDH unit in Freeport. The $1.2 billion project has a projected completion date of April, 2018.

Other projects, in various phases of development, include:

• C3 Petrochemicals LLC (Houston, Texas) and Ascend Performance Materials LLC's (Houston, Texas) Alvin Chocolate Bayou PDH Unit Addition in Texas. Construction is expected to kick-off in fourth-quarter 2014, with completion in fourth-quarter 2016. Total investment value is $1.2 billion.
• Construction of Enterprise Products Partners Limited's (NYSE:EPD) (Houston, Texas) Mont Belvieu PDH Train No. 4 addition in Texas has kicked off. Completion of the 1.65-billion-pound-per-year (825,000-ton) unit is expected in second-quarter 2016 with a total investment value of $900 million.
• The construction kick-off of the REXtac Odessa Polyolefin Plant PDH/Propylene/Polypropylene Complex addition (Odessa, Texas) is estimated for first-quarter 2017, with a tentative mechanical completion in fourth-quarter 2018 and start up in second-quarter 2019. Total investment value is $860 million. The PDH unit would produce 300,000 tons per year of polymer-grade propylene.
• Formosa Plastics Corporation USA (Livingston, New Jersey), a subsidiary of Formosa Plastics (Taiwan), continues preliminary design work for the 725,000-ton-per-year Point Comfort Plastics Plant PDH Unit Addition in Texas, with a total investment value of $1.2 billion. Construction is tentatively scheduled to kick-off in first-quarter 2015, with completion in second-quarter 2016.
• Williams Energy Canada, a subsidiary of Williams Partners LP (NYSE:WPZ) (Tulsa, Oklahoma), is proceeding with preliminary engineering for the 1 billion-pound (500,000-ton)-per-year PDH unit addition at its NGL/olefins fractionation facility at Redwater, Alberta. The total investment value is $900 million.

Also, Koch Industries (Wichita, Kansas) subsidiary Flint Hill Resources announced in May a deal to acquire propylene producer PetroLogistics LP (NYSE: PDH) (Houston, Texas) in an all-cash transaction valued at $2.1 billion. PetroLogistics owns what it touts as the only operating PDH facility in the U.S., located near the Houston Ship Channel, with an annual production capacity of approximately 1.45 billion pounds (725,000 tons).

View Plant Profile - 1100790.

Globally, Industrial Info is tracking 29 PDH-related projects. China has eight PDH grassroot and expansion projects, with a total investment value of $3.4 billion.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.