Status and Development Prospect of the Propylene Industry in China

By Liu Baohe, North China Branch of Sinopec Chemical Commercial Holding Co., Ltd.


1. Supply/demand status

(1) Production status
The propylene industry in China has developed rapidly in recent years. The capacity increased from 8.166 million t/a in 2007 to 20.82 million t/a in 2013. Meanwhile, the average scale of propylene cracking units grew to 269 kt/a, exceeding the world average of 260 kt/a. Table 1 shows some propylene producers in China in 2013.
Owing to the rapid development of the coal chemical industry, the coal-to-olefin sector has grown considerably in recent years and become a bright spot of the propylene industry. Methanol-to-olefin projects completed and put on stream in 2013 include the 200 kt/a project of Sinopec Zhongyuan Ethylene Co., Ltd. and the 600 kt/a project of Ningbo Heyuan Chemical Co., Ltd. Construction of several other coal-to-olefin units has also started. Examples include the Jinbian oil/gas/coal/salt comprehensive utilization project (the first-phase coal-to-olefin capacity being 600 kt/a) in Shaanxi Yanchang Petroleum Co., Ltd. and the 680 kt/a coal-to-olefin project in Shaanxi Pucheng Clean Energy Chemical Co., Ltd. As oil prices keep going up, the coal-to-olefin route has a cost advantage over the naphtha cracking route and will produce a certain impact on it. It is expected that more coal-to-olefin projects will be launched in future.
By the end of 2013 there were around ten propane dehydrogenation (PDH) units with definite construction plans in China with a total capacity of 5.32 million t/a (only the first-phase capacity calculated in case projects have two phases). The global long-term plan for the capacity of PDH units is 10.93 million t/a. China displays especially high enthusiasm for PDH projects. The release of more capacity will surely impinge on profitability. There is still a considerable shortage of propylene in China today. Even if all the planned PDH capacities start production, they will be insufficient to bridge the gap. The increase of propylene output from naphtha cracking will be very limited. Demand for propylene is huge, compared to other petrochemical products. The overall supply/demand for propylene will be quite sound for many years.
(2) Consumption status
In the three major consumption sectors of propylene, the consumption proportion is 68% for polypropylene, 8% for propylene oxide and 7% for acrylonitrile. The proportions will change little in the next five years. The apparent consumption of propylene in China increased from 9.456 million tons in 2007 to 21.668 million tons in 2013. It is expected that the average annual growth of propylene demand will be 4.4% until 2016, being faster than the capacity growth. The status of tense supply will therefore continue. The main reason is that most ethylene units constructed in recent years no longer use the naphtha cracking process, and there is no byproduct propylene when the propane cracking process is used. Table 2 shows the supply/demand balance of propylene in China in recent years.

2. Development prospects

(1) Accelerated construction of large units
According to the Development Program for the Olefin Industry during the Twelfth Five-Year Plan Period (hereinafter referred to as the “Program”), while further enlarging and strengthening petrochemical industry clusters in the Yangtze River Delta, the Pearl River Delta and the Bohai Rim and renovating and upgrading the propylene industry in Northeast China, efforts will be made to construct ethylene bases in central and western regions and further optimize the distribution of ethylene production. It is defined in the “Program” that the capacity for propylene in China will reach 24 million t/a in 2015 with an average annual growth rate of 5.4%. The average scale of ethylene/propylene co-production units using the naphtha route will reach more than 350 kt/a. Olefins produced by non-petroleum routes will account for over 20% of the total olefin output.

Table 1  Representative propylene producers in China in 2013 (kt/a)

Producer    Capacity
PetroChina Dushanzi Petrochemical Co., Ltd.     670
PetroChina Daqing Refining & Chemical Co., Ltd.     600
Sinopec Zhenhai Refining & Chemical Co., Ltd.     500
Zhejiang Fuling Holding Group    500
Shenhua Ningxia Coal Industry Group    500
Sinopec Maoming Petrochemical Co., Ltd.     470
Fujian Refining & Chemical Co., Ltd.     470
Datang Inner Mongolia Duolun Coal Chemical Co., Ltd.    460
Sichuan Petrochemical Co., Ltd.     450
Sinopec SABIC Tianjin Petrochemical Co., Ltd.     450
Ninngbo Formosa Plastics Co., Ltd.     450
Sinopec Yanshan Company     450
Sinopec Yangzi Petrochemical Co., Ltd.     420
Sinopec Wuhan Petrochemical Co., Ltd.    400
Sinopec Shanghai Petrochemical Co., Ltd.     400
PetroChina Fushun Petrochemical Co., Ltd.     390
PetroChina Lanzhou Petrochemical Co., Ltd.     360
PetroChina Dalian Petrochemical Co., Ltd.    320
Panjin Ethylene Industry Co., Ltd.     300
Yanchang Petroleum Group Yan’an Refinery Plant    300
Baotou Shenhua Coal Chemical Co., Ltd.     300
Ningbo Heyuan Chemical Co., Ltd.     300
Dongying Shenchi Chemical Co., Ltd.      300
Yueyang Xingchang Petrochemical Co., Ltd.     300
Shandong Lijin Petrochemical Co., Ltd.     280
Shanghai SECCO Petrochemical Co., Ltd.     250
Shandong Hengyuan Petrochemical Co., Ltd.     250
Shandong Yuhuang Shengshi Chemical Co., Ltd.     250
CNOOC and Shell Petrochemical Co., Ltd.     240
Sinopec Luoyang Company     230
Shandong Huifeng Petrochemical Co., Ltd.     220

Table 2   Supply/demand for propylene in China in recent years (kt, kt/a, %)

Year    Capacity    Output    Import volume    Export volume    Apparent consumption    Self-sufficiency
2008    8 306    8 330    917    0.2    9 274    90
2009    10 570    8 910    1 548    0.1    10 458    85
2010    17 220    14 500    1 524    -    16 024    92
2011    17 220    16 760    1 755    1.5    18 514    91
2012    17 770    15 929    2 147    -    18 076    88
2013    20 820    19 027    2 641    1.6    21 668    88


The propylene industry in China will continue to promote the development of large-scale units during the Twelfth Five-Year Plan period (2011-2015). With the completion of a group of large petrochemical projects such as Daqing Petrochemical Co., Ltd., Fushun Petrochemical Co., Ltd., Sichuan Pengzhou Petrochemical Co., Ltd., Wuhan Petrochemical Co., Ltd., CNOOC Huizhou Ethylene Project Phase II, Hainan Refining & Chemical Co., Ltd. and Zhanjiang China-Kuwait Refining/Chemical Integrated Project, the total capacity for making propylene in China is expected to reach 24-26 million t/a in 2015. The new capacity will be 2.30 million t/a in Sinopec, 1.10 million t/a in PetroChina and 1.50 million t/a in other companies.
Five to seven large petrochemical projects will be constructed during the Twelfth Five-Year Plan period. These projects will increase China’s ethylene capacity by 3.00 million t/a. The expansion and renovation of existing units will also add to the ethylene capacity by 2.00 million t/a. Moreover, a number of MTO/MTP projects will be constructed to increase the coal-based MTO capacity by 4.50 million t/a and bring its proportion in the total ethylene capacity from less than 8% today to 20% in 2015. The output of propylene in China will also increase from 19.027 million tons in 2013 to 28 million tons in 2015. Table 3 shows the propylene capacity newly constructed or planned for construction in China during the Twelfth Five-Year Plan period.
The average scale of refining and chemical enterprises in China will expand further during the Twelfth Five-Year Plan period. The development of the propylene industry toward high integration of “oil refining, propylene, aromatics and high-end products” will therefore become possible. The construction and development of propylene production in China will highlight the restructuring of downstream derivative products and the production of functional, differential and high-end products with high added value and a ready market so as to meet the needs in the development of new sectors and the transition and upgrading of various existing sectors in China.
(2) Optimization of industrial structure and formation of a supply system with diversified sources
The development of China’s propylene industry demands a huge volume of crude oil. The import of crude oil to China kept increasing in 2013, reaching 281.95 million tons, and the import dependence was 57.4%. The supply shortage of crude oil will surely constrain the development of the ethylene industry. The sustained high price of crude oil will aggravate the tense situation. According to the goal of 24 million t/a for the propylene capacity in 2015, sources of propylene raw materials will have to be expanded. Based on steam cracking, 81 million tons of chemical light oil will be needed each year. To ease the supply shortage of olefin raw materials, various methods have to be used to ensure the supply of olefin resources. Rich coal resources and coal-to-olefin technologies should be taken as the basis to make a moderate development of the coal-to-olefin sector. Efforts should be made to fully employ the advantage of refining/chemical integration and use byproducts from refineries to produce olefins. Makers of PDH should also achieve large-scale commercial production.
PDH has advantages of well-developed technology, good product quality, high conversion rate and small amounts of byproducts. The major defect is that domestic propane producers cannot meet the demand, making import necessary. The advantage of coal-based methanol-to-olefin is that it can use China’s abundant, low-price coal resources. There are however defects such as a large amount of byproducts, high water consumption, poor product quality and inconvenient transportation. The coal-to-olefin industry in China has developed rapidly in recent years. The first MTO unit was successfully wet commissioned in Shenhua Baotou Coal Chemical Industry Park in 2010. The MTP unit of Shenhua Ningxia Coal Industry Group started production in the same year. The MTP unit in Datang Inner Mongolia Duolun Coal Chemical Co., Ltd. and the 600 kt/a MTO unit of Zhongyuan Petrochemical Co., Ltd. were also completed and put on stream in 2011. The rigid requirements on water consumption, energy consumption and environment volume and the prudent attitude of the National Development and Reform Commission have however greatly raised the threshold for the development of the coal-to-olefin sector, so the prospects should be foreseen with cautious optimism.

Table 3  Propylene capacity newly constructed or planned for construction in China (kt/a)

Company    Capacity    Startup Timetable
Jiutai Energy Group     300    2014
Shaanxi Yanchang ChinaCoal Yulin Energy Chemical Co., Ltd.     300    February 2014
Ordos Coal Chemical Project    600    2014-2015
Jining Yanzhou Coal Mining Group     300    2014
Huating Coal Mining Group    200    2014
Qinghai Salt Lake Industry Co., Ltd.     160    2014
Shaanxi Pucheng Clean Energy Co., Ltd.     400    2014
Yannan Energy Chemical Co., Ltd.     300    2014
Shanxi Coking Co., Ltd.     300    2014
Nanjing Wison Chemical Co., Ltd. MTO Unit    160    2014
Zhongyuan Petrochemical Co., Ltd.     200    2014
Shandong Shenda Chemical Co., Ltd.     200    First half of 2014
Yan’an Refining & Chemical Co., Ltd.     250    2016
Henan Hebi Coal Chemical Project    400    To be finalized
Zhong’an Coal Chemical Project    300    To be finalized
Datong Coal Mine Group    300    To be finalized


(3) Greater competition pressure both at home and abroad
Globally, the success made by the United States in shale gas and the vigorous development of the olefin industry by countries in the Middle East, Saudi Arabia in particular, on the strength of abundant resources and the low price of light hydrocarbons, have produced substantial impacts on the olefin sector in China. Raw materials in the Middle East determine the price of polypropylene and its derivatives around the world. Consumption in the Middle East itself is very limited however. Impacts on the olefin sector in China are long lasting and far reaching. The large-scale development of shale gas in the United States has brought adequate, low-price raw material to the olefin sector. If the United States uses its advantages in low-price raw material and technology to expand its own olefin capacity, the world market mode of olefins and their downstream derivatives will surely be affected.
Domestically, the propylene sector in China will form a mode of “four-part” composition featuring traditional byproduct processes, mainly including steam cracking and catalytic cracking, the PDH process, the coal chemical process and imported propylene and derivatives. The most important factor influencing this mode is the emergence of new processes.
In traditional processes propylene is mainly a byproduct in steam cracking units or a byproduct in catalytic cracking units. The production of propylene is restricted by the production of main products. The capacity proportion of propylene produced with these two methods in the world already dropped from 97% in 2001 to 88% today. Ethylene cracking is still the most important source of propylene today. When naphtha is used as raw material, the output of propylene is 50-65% of the ethylene output.
According to projections, the growth of propylene consumption during 2013-2016 will be around 0.2 percentage points higher than the growth of ethylene consumption, and the proportion of the ethylene cracking process will decline constantly. The use of light cracking raw materials in North America, triggered by the shale gas revolution in the United States, will further slow down the growth of propylene output. Although the Middle East is still using heavy raw materials and the output growth of propylene produced with the cracking process will accelerate, the role will be offset by impacts from the use of light cracking raw materials in North America. The output growth of propylene as byproduct in ethylene cracking units will therefore be very limited in the world. Propylene produced in catalytic cracking units is usually used as raw material in polypropylene units. The propylene yield is 4-6% and the production is restricted by the output of refined oil. Because the growth of demand for refined oil around the world has been 1-2% for many years, the problem of capacity insufficiency is even more serious. As the expansion of propylene output by the two major traditional methods is constrained, developing processes with higher propylene output is a way out to solve the supply shortage of propylene today.
It is defined in the “Program” that the output proportion of propylene produced with non-petroleum routes will reach over 20% in 2015. To achieve a scientific and sound development of the propylene sector in China, it is suggested that enterprises should adhere to technical innovation, orderly planning and rational investment, and choose measures according to local conditions on proper occasions, highlight scientific development and the transformation of development mode, firmly grasp restructuring, open up a path of diversified propylene raw materials suitable to Chinese conditions and promote the development of China’s propylene industry.                                    ?