(47a) The New World Order in the Olefins Industry - As a Result of Developments in Advantaged Feedstocks and Technology

The new world order for the ethylene markets can be simplified by three types of market positions: areas supportive of new export-oriented ethylene investments based on advantaged feedstocks (North America and Middle East); areas supportive of new ethylene investments with higher costs based on market naphtha supplies but with very high levels of local demand growth (China, India, and Southeast Asia); and areas of aging existing assets with a high cost basis that will be subject to rationalization, consolidation, and specialization (West Europe, Japan, Korea, and Taiwan).  

• The development of shale gas resources in North America has triggered an ethylene investment renaissance, with the abundance of competitively priced natural gas liquid feedstocks, particularly ethane.   
• Some areas of the Middle East are facing an impending shortage in ethane supplies; as a result, projects in Saudi Arabia, Qatar and eventually Oman will adjust feedstock mix to diversify and include LPGs and naphtha.
• Since China is the largest contributor to the growth of global ethylene demand, the demand outlook for China will have significant impact on the global demand for ethylene as a whole; China will continue to add capacity aggressively, with a significant portion through coal-to-methanol-to-olefins (CTO) plants, resulting in a rise in self-sufficiency.
• The more mature markets in West Europe, Japan, South Korea and Taiwan will go through a period of consolidation, cost cutting and product value creation to increase their competitiveness.

 The new world order evolving in propylene markets is mostly centered around the growing need for and development of two on-purpose propylene technologies: propane dehydrogenation (PDH) and methanol-to-olefins/propylene (MTO/P). Historically, most propylene has been produced as a by-product of ethylene from naphtha based steam crackers or as a by-product of gasoline/distillates from crude oil based refineries. The move away from naphtha as a steam cracker feed source is having a noticeable negative impact on by-product propylene supply, particularly in North America. This region will emphasize production via PDH technology, but PDH technology will emerge as a piece of China's strategy to increase propylene self-sufficiency as well. Based on China's tremendous coal reserves, MTO/P technology will join PDH and other strategies in this high-demand growth economy.