Enhance Competitiveness of China’s Propylene Oxide Industry through Innovation and Industrial Chain Extension

By Zhang Jun and Liu Junkai, PetroChina Northeast Petroleum Refinery Engineering Company

PO production outside of China is highly concentrated

In 2012, the global capacity for propylene oxide (PO) was 9.343 million t/a; the total output was 7.586 million tons; the overall operating rate was 81%. Major production areas of PO are Western Europe, North American and Asia. PO production outside China is highly concentrated. Dow Chemical and Lyondell Basell are the two major PO producers in the world. The former has production bases in the United States, Germany and Brazil, mainly using the chlorohydrin route. While the latter has production bases located in the United States, France, Netherland and China, mainly using the co-oxidation route. Currently, of all the total capacity for PO worldwide, the chlorohydrin route accounts for 40-45%, while that uses the co-oxidation route accounts for 55-60%.
In the next few years, many new or expanded PO units will be constructed –  mainly in China, with several others in Saudi Arabia and Belgium. It is expected the global capacity for PO will reach 10.433 million t/a in 2017.

Both supply and demand boom in the domestic market

China started to produce PO in 1960s. The capacity for making PO in China has been increased rapidly in recent years. It increased from 480 kt/a in 2001 to 560 kt/a in 2004. After 2004, it increased even faster, reaching 950 in 2006, 1 260 in 2009 and 1 765 kt/a in 2012. In 2012, the output was 1 567 kt and the operating rate was 88.8%.
Currently, there are more than twenty PO producers, including Sinopec, CNOOC and Shell Petrochemicals Co., Ltd., Befar Group Co., Ltd., Jinhua Group Chlor-Alkali Co., Ltd., Tianjin Dagu Chemical Co., Ltd. and Shandong Jinling Group.  All PO units of joint ventures use co-oxidation route, which also produces styrene, while other PO units running in China use the chlorohydrin route. Major PO producers in China are listed in Table 1.
It is expected that in 2015, the domestic capacity for PO will reach 2 965 kt/a. New capacity to be constructed from 2013 to 2015 is shown in Table 2.
PO consumption in China has increased rapidly since the early 1990s, with an average annual growth rate of 22.6% from 1990 to 2005. Since 2005, the PO consumption has continued to grow, as China’s polyurethane industry has entered a new era. The average annual growth rate was 20.3% from 2005 to 2010 (see Table 3 for details), and it will be around 11% from 2010 to 2015.  The estimated demand for PO in 2015 is 2 780 kt.
The volume of PO imported to China was small before 2009, while import volumes of downstream products like polyether and polyurethane were relatively large. However, the volume has been increased rapidly since 2009, mainly due to the increasing demand for high-quality PO products. The import volume was 254 kt in 2009, up 66.1% year-on-year; 2010, 362 kt, up 42.5% year-on-year. It decreased to 265 kt due to the increase of domestic output in 2011, and it climbed to 515 kt in 2012. The export volume of PO from China has been relatively small in recent years. A few producers, such as CNOOC and Shell Petrochemicals Co., Ltd., Tianjin Dagu Fine Chemical Co., Ltd., Befar Group Co., Ltd. and Jinhua Group Chlor-Alkali Co., Ltd., export small amounts.
The total consumption of PO in China in 2012 was 2.082 million tons, of which that consumed in producing polyether polyols accounted for 76.3%.  That used in the production of propylene glycol and other products (such as isopropanolamine and propanediol ethers) accounted for 8.6% and 15%, respectively.


Table 1    Major PO producers in China, 2012 (kt)

Area    Company     Location    Capacity
Northwest China      Fangda  Jinhua Chemical Technology Co., Ltd.
　　　　　　　　　Huludao of Liaoning    130
                  Shenyang  G-Billow Chemical Co., Ltd.
　　　　　　　　　Shenyang of Liaoning    40
                  Subtotal        170
North China       Tianjin Dagu Fine Chemical Co., Ltd.    
　　　　　　　　　Tianjin    150
                  Hebei Huichuan Light Chemical Co., Ltd.    
　　　　　　　　　Shijiazhuang of Hebei    20
                  Subtotal        170
East China          Befar Group Co., Ltd    
　　　　　　　　　Binzou of Shandong    170
                  Shandong Jinling Chemical Co., Ltd.    
　　　　　　　　　Dongying of Shandong    80
                  Shandong  Eastar Holding Co., Ltd.
                  Dongying of Shandong    50
                  Shandong  Shida Shenghua Chemical Group
                  Dongying of Shandong    40
                  Shandong Dongda Chemical Industry Co., Ltd.
                  Zibo of Shandong    60
                  Zibo Yongda Chemical Co., Ltd.
                  Zibo of Shandong    50
                  Shandong Xinyue Chemical Co., Ltd.
                  Binzou of Shandong    180
                  Nanjing Kumho GPRO Chemical Co., Ltd.
                  Nanjing of Jiangsu    80
                  Jiangsu Zhongshan Chemical Co., Ltd.
                  Nanjing of Jiangsu    40
                  Sinopec Shanghai Gaoqiao Company
                  Shanghai    80
                  Fujian Meizhouwan Chlo-alkali Industry Co., Ltd.
                  Quanzhou of Fujian    40
                 Sinopec Zhenhai Company
                 Zhenhai of Ningbo    285
                 Subtotal        1 155
South China      Sinopec Baling Company    
                 Yueyang of Hunan    20
                 CNOOC and Shell Petrochemicals Co., Ltd.
                 Huizhou of Guangdong    250
                 Subtotal        270
                 Total        1 765


It is expected that by the end of 2015, the PO capacity in China will reach 2 965 kt/a.
      
Sources of technology are diversified

Since PO production using chlorohydrins route has been listed in the Restriction Catalogue of the Industrial Structure Adjustment Catalogue issued by the National Development and Reform Commission, new PO projects should mainly consider the co-oxidation route and the direct oxidation route.
1. Co-oxidation route
The co-oxidation route can be divided into two categories, ethylbenzene co-oxidation (PO/SM) route and isobutane co-oxidation (PO/TBA) route. In addition to PO, the former route also produces styrene, and the latter route also produces tertiary butanol (normally be further transformed to MTBE). PO units using the co-oxidation process have large production scale and investment, and are usually built near large petrochemical plants.
Compared to units using the chlorohydrin route, a co-oxidation unit has advantages like larger capacity per unit and less wastewater discharge, as well as disadvantages like a long production process, high investment, requirements for high-quality raw materials, a strict operating procedure, high anti-explosive standards and enormous quantities of co-generated byproducts. To produce one ton of PO using the co-oxidation route also produces 3.08 tons of MTBE or 2.25 tons of styrene, much more than the output of the major product PO. Therefore, the profitability of a PO unit is heavily affected by the market conditions of byproducts.
The use of MTBE as a gasoline additive is banned in the United States since it can pollute groundwater. Therefore, most co-oxidation PO units outside China use the PO/SM route. While in China, as MTBE is widely used to improve the anti-knocking properties of gasoline, the PO/TBA route still has development space. For example, Wanhua Chemical, one of the major PO producers in China, uses the PO/TBA route.

Table 2     New PO projects to be constructed in China, 2013-2015 (kt/a)
Area    Company    New capacity    Process
East China         Shandong Jinling Chemical Co., Ltd.
                   80    Chlorohydrin route
                  Lubei Sanmu Chemcial Co., Ltd.
　　               80    Chlorohydrin route
                  Shandong Wells Chemical Co., Ltd.
                  80    Chlorohydrin route
                  Shandong Huatai Group
                  80    Chlorohydrin route
                  Wanhua Chemical Group
                  240PO, 740MTBE    Co-oxidation route
                  Jinling Huntsman New Materials Co., Ltd.
                  240PO, 740MTBE?    Co-oxidation route
Northwest China      Jilin Shenhua Group Co., Ltd.
                  300    HPPO
South China          Baling Petrochemical Changling Refinery Plant
                  100    HPPO
Total              1 200    

Table 3    Supply and demand for PO in the Chinese market (kt)

Year    Capacity    Output    Import volume    Export volume    Apparent consumption
2003       520          414         115              -                   529
2004       560          430         190              -                   620
2005       700          513         151              10               654
2006       960          680         120              15               785
2007     1 100          895         147              4                 1 037
2008     1 260          885         153              -                 1 038
2009     1 260        1 035         254              -                 1 289
2010     1 575        1 288         362              -                 1 650
2011     1 765        1 400         265              -                 1 665
2012     1 765        1 567         515              -                 2 082


Currently, Shell (98.9% selectivity) and Lyondell (87.4% selectivity) are two major transferors of PO/SM technology. The processes of the two companies have similar production scale and investment, and most foreign transferees select Shell’s technology which has higher selectivity. Two major transferors of PO/TBA technology are Lyondell and Huntsman. Their processes differ in catalyst, separation process and PO purification unit.
2. Direct oxidation route (hydrogen peroxide to propylene oxide, HPPO)
HPPO uses hydrogen peroxide to oxidize propylene and produce PO. The final products are only PO and water.
At present, two HPPO processes have been successfully industrialized: one was co-developed by Dow Chemical and BASF, and the other was jointly developed by Evonik and Uhde Gmbh.
Using HPPO to produce one ton of PO requires 0.7 tons of H2O2 (converted to 100% pure). Since it is difficult to transport highly concentrated H2O2 over a long distance, normally it is produced on-site. The unit of Jilin Shenhua Group Co., Ltd., which uses technology introduced from Evonik and will be put into operation in the first half of 2014, is the first HPPO unit in China.
In a nutshell, the HPPO route is a promising PO production method. In the future, the development of HPPO technology will focus on the R&D of new high-efficient catalysts.

Development proposals

1. To achieve the integration of upstream and downstream industries.
Since PO is an intermediate industrial material, most foreign PO producers have downstream production units to consume the PO produced. For example, Dow Chemical, a major PO producer, is also a major producer of polyether polyols. About 96% of the PO output of Dow Chemical is consumed by the company itself. Lyondell Basell also has many production units for PO downstream products. Of the total PO output of Lyondell Basell, 36% is consumed by the company itself; 39% is sold to Bayer, a partner of Lyondell Basell; the remaining 25% is sold to other consumers.
Domestic PO producers should learn from foreign enterprises and adjust the production structure of the downstream and upstream industries. Producers of petrochemical products, chlor-alkali and isocyanate should cooperate to form competitive organizations. A good example is Wanhua Chemical. The company has achieved a complete industrial chain of polyurethane and it has production units of propylene, isocyanate, PO, polyester/polyether polyols, polyurethane and polyurethane products. Wanhua Chemical has successfully enhanced its profitability through the integration of downstream and upstream industries.
2. To enhance competitiveness of enterprises through developing green production technologies.
To solve the environmental pollution problems caused by the chlorohydrin process, green production technologies with simple process, less byproduct and minimal impact to the environment should be developed.
At present, although some Chinese enterprises are interested in the HPPO process, their investment hunger cannot be satisfied immediately due to the strict requirements from the technology transferors. Meanwhile, several Chinese institutes and universities are engaged in the development of HPPO process. It is believed that domestic HPPO technology will see tremendous breakthroughs in the near future.
The chlorohydrin route and the co-oxidation route are expected to coexist for a relatively long time. The co-oxidation route will not replace the chlorohydrin route in the short run. Chinese PO producers, mainly using the chlorohydrins route, should make efforts in technical innovation and keep pace with the development of foreign technologies.