Abstract PEP Review PROCESS ECONOMICS OF COAL-BASED OLEFINS PRODUCTION IN CHINA By R. J. Chang and Jamie Lacson (May 2012)

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1 Abstract PEP Review PROCESS ECONOMICS OF COAL-BASED OLEFINS PRODUCTION IN CHINA By R. J. Chang and Jamie Lacson (May 2012) ABSTRACT China has started or planned several large commercial projects to produce ethylene and/or propylene by integrated coal-methanol-olefin processes or from outsourced methanol. If all planned projects materialize, China will add about 17.7 million metric tons of light olefins production capacity from coal or outsourced methanol by 2016, which will substantially increase its self-sufficiency of light olefins, reduce its reliance on imports of olefins and olefin derivatives, and reduce its dependence on petroleum for its chemical feedstock. The outcome of these projects will not only impact supply and demand dynamics for methanol, olefins, and polyolefins in China but also globally. Several factors will determine the future level of success of the coal-to-olefin projects. Most important of all is process economic analysis of the relative competitiveness of these projects. This review estimates and analyzes the technology, production, and capital costs for Shenhua Baotou coal to olefins, Shenhua Ningxia coal to propylene, and Datang coal to propylene, the three leading coal-to-olefins projects that recently started commercial production. Process economics are presented at three integration levels: coal gasification, methanol production, and finally integrated olefins production. We also evaluate the economics of olefins production based on consumption of outsourced methanol such as Sinopec s Puyang project and compare the results to the economics of integrated coal-to-olefins production. In addition, we compare the process economics of coal and methanol-based projects to those of naphtha steam cracking and propane dehydrogenation technologies for propylene production. Coal gasification consumes a large volume of process water and emits a large amount of carbon dioxide. This review also looks at these key environmental factors that will influence the future of coal-based olefins projects in China IHS PEP Review

2 A private report by the Process Economics Program Review No PROCESS ECONOMICS OF COAL-BASED OLEFINS PRODUCTION IN CHINA by R. J. Chang and Jamie Lacson May 2012 Menlo Park, California 94025

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4 CONTENTS BACKGROUND... 1 INTRODUCTION... 5 Price Spread in CTO and CTP Value Chain... 8 Objective and Scope... 9 SUMMARY... 9 Process Economics Feed and Energy Requirements Capital Investment Costs Production Costs Environmental Factors Conclusions Coal to Syngas Coal to Methanol Coal to Olefins Outsourced Methanol to Olefins Coal to Propylene Outsourced Methanol to Propylene Future of Coal or Methanol-Based Olefin Projects Environmental Considerations TECHNOLOGY REVIEW Air Separation and Compression Coal Gasification Coal and Lignite Properties Gas Cleanup Methanol Synthesis Methanol to Olefins UOP/Hydro MTO Process Total/UOP MTO with OCP DICP Methanol to Olefins Comparison of DMTO and UOP/Hydro Processes Sinopec MTO Methanol to Propylene Lurgi MTP Process ZSM-5 Catalyst IHS iii PEP Review

5 CONTENTS (Concluded) MTP Reactor Design and Operation Product Recovery JGC/Mitsubishi DTP Process SYNGAS PRODUCTION ECONOMICS METHANOL PRODUCTION ECONOMICS COAL-TO-OLEFINS PRODUCTION ECONOMICS COAL-TO-PROPYLENE PRODUCTION ECONOMICS APPENDIX A: PATENT SUMMARY TABLES APPENDIX B: CITED REFERENCES IHS iv PEP Review

6 FIGURES 1 Ethylene Value Chains from Coal, Petroleum, and Gas-Based Feedstocks Propylene Value Chains from Coal, Petroleum, and Gas-Based Feedstocks Historical Price Spread in CTO and CTP Value Chain Total Fixed Capital Cost Comparison of Integrated Olefins Production Total Fixed Capital Cost Comparison of Alternative Propylene Production Technologies Olefins Production Product Values Propylene Production Product Values Coal to Olefins Processing Steps Coal to Propylene Processing Steps Schematic of the UOP/Hydro Methanol-to-Olefins Process Schematic of the DMTO Fixed Bed Process Schematic of the DMTO Process Schematic of the SMTO Process Process Block Diagram of GE Gasifier with Bituminous Coal for Methanol Synthesis Process Block Diagram of Siemens Gasifier with Bituminous Coal for Methanol Synthesis Process Block Diagram of Shell Gasifier with Bituminous Coal for Methanol Synthesis Process Block Diagram of Shell Gasifier with Lignite for Methanol Synthesis Comparative Raw Syngas Molar Compositions for Methanol Synthesis Coal-to-Syngas Capital Costs Coal-to-Syngas Capital Intensity Coal-to-Syngas Cash Costs Coal-to-Syngas Product Value Coal-to-Methanol Production Total Fixed Capital Cost Capital Intensity of Coal-to-Methanol Production Coal-to-Methanol Production Cash Cost Coal-to-Methanol Product Value Cost Structure GE/LP Methanol Cash Cost versus Bituminous Coal Price Siemens/LP Methanol Cash Cost versus Bituminous Coal Price Shell/LP Methanol Cash Cost versus Bituminous Coal Price IHS v PEP Review

7 FIGURES (Concluded) 30 Shell/LP Methanol Cash Cost versus Lignite Price Coal-to-Olefins Production Capital Cost Comparison Coal-to-Olefins Capital Intensity Coal-to-Olefins Production Cash Costs Coal-to-Olefins Product Value Cost Structure GE/MTO Process Economics versus Coal Price OMTO Process Economics versus Methanol Market Price Propylene Production Capital Cost Comparison Propylene Capital Intensity Propylene Production Cash Costs Propylene Product Value Cost Structure Siemens Coal-to-MTP Cash Cost and Product Value versus Coal Price Shell Coal-to-MTP Cash Cost and Product Value versus Coal Price Shell Coal-to-MTP Cash Cost and Product Value versus Lignite Price MTP Process Economics and Outsourced Methanol Price IHS vi PEP Review

8 TABLES 1 Major Integrated Coal-to-Olefins and Coal-to-Propylene Projects in China Major Outsouced Methanol-to-Olefins and Methanol-to-Propylene Projects in China Unit Consumption of Integrated Coal-to-Olefin Production Unit Consumption of Outsourced Methanol-to-Olefin Processes Comparison of the Environmental Impacts of Olefins Production Comparison of Environmental Impacts of Propylene Production Coal and Lignite Properties Gas Cleanup Technology Design Basis for UOP/Hydro Methanol-to-Olefins Process Comparison of Operating Performance of DMTO and UOP/Hydro Processes Alternative Gasifier Streams and Compositions for Methanol Synthesis Coal-to-Syngas Production Economics Production Costs Coal-to-Methanol Production Economics Production Costs Coal-to-Olefins Production Economics Production Costs Propylene Production Economics Production Costs IHS vii PEP Review