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Propylene oxide production costs average $2,000/ton ($2/kg) in order to derive a 10% IRR at a newbuild chemicals plant with $1,500/Tpa in capex. 80% of the costs are propylene and hydrogen peroxide inputs. 60-70% of this $25bn pa market is processed into polyurethanes. CO2 intensity is 2 tons of CO2 per ton of PO today, but there are pathways to absorb CO2 by reaction with PO and possibly even create carbon negative polymers.

Global production of propylene oxide is estimated at 12MTpa in 2022, implying a $25bn pa market at an average propylene oxide cost of $2/kg.

Propylene oxide production costs are modeled in this data-file, and most likely run at $2/kg ($2,000/ton to derive a 10% IRR at a plant costing $1,500/Tpa.

Specifically we have modeled the HPPO process, forming propylene oxide via the exothermic condensation reaction between propylene and hydrogen peroxide, in methanol solvent, catalysed by titanium silicalite (TS-1). Although as noted in the data-file there are alternative production routes, such as the chlorohydrin process and the styrene monomer process PO process. HPPO seems like the front-runner solution for new plants.

Capex costs of propylene oxide plants are estimated based on recent project announcements (chart below). Our base case estimate is $1,500/Tpa of propylene oxide capacity.

Propylene and hydrogen peroxide inputs comprise 80% of the final costs of propylene oxide.

Two thirds of the propylene oxide market today is alkoxylated to form polyols for use as building blocks for polyurethanes.

Vertical integration across petrochemicals? US propylene oxide producers include LyondellBasell (600kTpa at Bayport TX, 550kTpa at Channelview TX), Dow (725kTpa at Freeport TX, 330kTpa at Plaquemine LA) and Huntsman (240kTpa at Port Neches TX).

CO2 intensity of propylene oxide is estimated at 2 tons of CO2 per ton of propylene oxide, which in turn, is largely inherited from the commodity inputs as well. You can stress test this in the data-file.

What is interesting about propylene oxide is the COC epoxide unit is strained, hence it can react with CO2 to form compounds such as propylene polycarbonate (first chart below) or polycarbonate polyols (second chart below). Note that polyurethanes polymerize with diisocyanates to form polyurethanes.

In other words, these propylene oxide reaction products can absorb CO2 and prevent its emission into the atmosphere (effectively a type of CCS).

However the maths in the data-file show that propylene carbonate (first chart above) is 57% propylene oxide by mass (gross emissions of 2 tons of CO2 per ton of propylene oxide in our base case) and 43% CO2 (1 ton of CO2 avoided per ton of CO2) and hence while this building block absorbs CO2, it cannot entirely be said to be carbon negative today.

However, the best route to decarbonize propylene oxide is via decarbonizing the hydrogen peroxide inputs using lower-carbon hydrogen. This is also increasingly incentivized by the US IRA. Companies pursuing this CO2-absorbing polyurethanes include Novomer (acquired by Aramco) and Empower Materials.

Please download the data-file to stress test propylene oxide production costs, as a function of propylene prices, hydrogen peroxide prices, capex, opex, electricity, labor costs, O&M costs, CO2 prices and tax rates. Detailed notes are also laid out in the notes tab.

Naphtha cracking costs $1,300/ton for high value products, such as ethylene, propylene, butadiene and BTX aromatics, in order to derive a 10% IRR constructing a new, greenfield naphtha cracker, with $1,600/Tpa capex costs. CO2 intensity averages 1 ton of CO2 per ton of high value products. This data-file captures the economics for naphtha cracking, which matters, as a cornerstone of the modern materials industry.

Naphtha cracking is the dominant source of petrochemical building blocks, especially in Europe and Asia, and a crucial starting point for producing modern polymers, crucial materials, which are needed for consumers and across our energy transition research.

What is naphtha? Naphtha is the C6-C12 fraction from oil refineries, containing molecules with typical boiling points of 60-200ºC.

What is naphtha cracking? Naphtha is mixed in a 2:1 ratio with steam, super-heated to 700-900◦C to start “breaking bonds”, then quickly quenched to control the product mix, which is later fractionated.

The purpose of the steam is to minimize coking, which deposits carbon on process units and requires shut-downs for maintenance. A more detailed description of the overall process is laid out in the data-file.

A methodological challenge for appraising the costs of naphtha cracking is the complexity. Around 230 reactions, involving 80 chemical species feature in process sheets.

Our suggestion to simplify the complexity of naphtha cracking is to think about yields as comprising 55-60% olefins (ethylene, propylene, etc), 15-20% fuel gases (which are recirculated and burned to provide heat for the highly endothermic cracking reaction and high-pressure steam), 10% aromatics (BTX), 5% pentanes and hexanes, and 10% heavier fractions which are most likely sent back to adjacent refinery units (chart below).

For modelling the economics of naphtha cracking, we consider the olefins and aromatics ‘high value’ molecules and they comprise around 65% of the product mix.

Typical capex costs for naphtha crackers run to $1,600/Tpa of input capacity, which equates to $1,700/Tpa of outputs and $2,500/Tpa of high-value outputs (chart below). Underlying details are in the data-file, based on public disclosures from recent projects.

Economics of naphtha cracking. Generating a 10% IRR at a greenfield naphtha cracker requires a high value product price of $1,300/ton. Generally pricing will be highest for butadiene, then propylene and aromatics, and lower for ethylene. Ethylene is also produced via dedicated ethane crackers.

Naphtha cracking cost breakdown? 60% of costs are associated with naphtha inputs, although this depends on the oil price, which can be flexed in the model. In our recent research, we argue that the rise of electric vehicles will dent demand for naphtha more rapidly than other oil fractions, which may lower feedstock costs and boost margins in petrochemicals, especially creating upside for polyurethanes in the energy transition.

Another c10% of naphtha cracking costs are associated with heat, electricity and CO2 prices, which can also be varied in the data-file. Energy costs are quantified from technical papers, across electricity use and heat use, both measured in kWh/ton (or GJ/ton, if you prefer those units).

CO2 intensity is estimated at around 1 ton of CO2 per ton of high value products in our build-up. Some regions have chosen to add higher CO2 prices than others. Some studies that have crossed our desk report higher CO2 intensities, although often this is a definitional issue, as similar CO2 overall emissions get ascribed to different products (e.g., should CO2 be ascribed by product mass or product value?).

Some of the leading companies providing naphtha cracking process technologies include Lummus, KBR, Technip Energies, Linde, Axens. A useful table of crackers in Europe is published by Petrochemicals Europe. A listed downstream company in Central Europe is also currently expanding its naphtha cracking capacity.

Acetylene production costs are broken down in this data-file, estimated at $1,425/ton for a 10% IRR on a petrochemical facility that partially oxidizes the methane molecule. CO2 intensity is over 3 kg/kg. Up to 12MTpa of acetylene is produced globally for welding and in petrochemicals.

Acetylene is a gas with the composition C2H4 (H-C≡C-H), formed via three main production pathways, used mostly as a petrochemical feedstock, but also in welding and metal-working. The gas was discovered by Edmund Davy in 1836. However, Walter Reppe (1892-1969) of BASF is considered the founder of modern acetylene chemistry, creating a safe process to handle acetylene at 25 bar pressures..

Market sizing data on the global acetylene market is highly variable, with different commentators reaching starkly different numbers. One reason is that many integrated petrochemical facilities produce their own acetylene on site, and only a small share of production is sold onwards. Upper estimates that have crossed our screen imply around 12MTpa of acetylene production in 2022.

Acetylene use in the petrochemical industry consumes around 70-80% of global market volumes. It is an important gas because the C≡C triple bond can easily be vinylated to produce H-X compounds. This pathway yields vinyl acetate, acrylonitrile, acetaldehyde and butane-1,4-diol for polyurethanes such as ‘spandex’. BASF discloses that up to 20 processes at Ludwigshafen use acetylene as an input.

Acetylene use in the welding and metal-working industry consume around 20-30% of global market volumes. This is because of acetylene’s combustion properties, forming a very high flame temperature around 3,000◦C, high enthalpy of combustion of 50 MJ/kg, a fast flame speed of 10-12 m/s versus 2-6 m/s for other gases and a low moisture content in the exhaust gas. Oxy-acetylene flames cut quickly, saving cost. And ferrous metals are often flame hardened, to improve their longevity, which requires a hot and low moisture flame. Although we wonder whether electric arc welding will increasingly displace acetylene.

Production of acetylene occurs via three main pathways. We think the dominant process in the West is partial oxidation of methane, at very hot temperatures, around 2,000-3,000◦C. Another method purifies acetylene by-products from ethane cracking. A third pathway uses a reaction between calcium carbide and water to form C2H2 and calcium hydroxide.

Acetylene production costs are estimated at $1,425/ton in this data-file, in order to earn a 10% IRR on a large production facility, and after reflecting capex costs, feedstock gas prices, heat, electricity, cryogenic oxygen, opex costs and CO2 prices. Production costs are most sensitive to input gas prices, and recent gas prices from 2022 can result in cash costs around $2,500/ton in Europe, almost 2x normal levels.

Energy intensity is high, as the partial oxidation reaction of methane forms large quantities of CO and water vapor. 3 CH4 + 3 O2 → C2H2 + CO + 5 H2O, in order to generate high reaction temperatures that yield acetylene. We estimate the CO2 intensity of acetylene production is over 3 tons/ton (Scope 1+2 basis), which flows through to the embedded CO2 intensity of products in downstream value chains.

Companies producing acetylene include many of the usual suspects in chemicals and industrial gases, such as BASF, Linde, Air Products, Air Liquide, Praxair, LyondellBasell, Asia Technical Gas and many Chinese producers. All of our petrochemicals research is summarized here.

This data-file captures PTA production costs, breaking down the costs of producing purified terephthalic acid (PTA), a chemical intermediate that gets polymerized with ethylene glycol, in order to make PET, for packaging materials (bottles, clam-shells) and for fibers (polyester, the most commonly used textile fiber on Earth).

A PTA price of $800-850/ton is needed to earn a 10% IRR across an integrated petrochemical facility, which first catalytically reforms naphtha into BTXs, then separates out the paraxylene (PX), then oxidizes the paraxylene into crude TA, and finally purifies the PTA.

PTA is most commonly polymerized into PET, the most commonly used textile on planet Earth, also used for packaging materials, as summarized in the chart below and in our polyester note here.

Capex costs across an integrated PTA petrochemical value chain might run to around $1,300-1,500/Tpa, including both the paraxylene line and the PTA line, and our numbers are informed by aggregating capex costs of PTA plants, capex costs of paraxylene plants and capex costs of naphtha reformers (chart below).

The CO2 intensity of PTA is estimated at 1.45 kg/kg (i.e., kg of CO2 per kg of PTA), of which 1.3 kg/kg is embedded in the paraxylene inputs, of which in turn, the largest contributor is process heat for the cracking/reforming of naphtha. Energy costs are a major contributor to PX production costs, but less significant for oxidizing PX into PTA.

How does the cost of feedstock affect PTA economics? Each $10/bbl variation in the oil price reduces the marginal cost of PTA production by around $50/ton, as a rule of thumb. Or alternatively, at constant pricing, $10/bbl lower oil inputs improve full cycle IRRs by around 3 percentage points. Sourcing low cost naphtha could therefore provide a major uplift, especially as the rise of electric vehicles displaces naphtha demand in our oil models.

To reach these numbers, this data-file contains two separate models, which are then added together. The first model captures the production costs of paraxylene, from naphtha as an input. The second model captures the production costs of PTA, from paraxylene as an input.

Notes into the PTA production process are also set out in the final tab of the model. Oxidation of PX into crude terephthalic acid (CTA) takes place at 175-225◦C and 15-30 bar of pressure (to keep PX as a liquid). Separating out the PTA uses a crystallizer, steam heating and pumps/blowers to drive off the liquid. Acetic acid is used as a solvent and small portions are consumed (not recovered).

Other inputs can be stress-tested in the model, such as capex costs, O&M costs, labor rates, uptime and utilization, process efficiency, gas prices, electricity prices, CO2 prices and tax rates. Some sensitivity analysis is plotted above, showing how these variables impact costs, including in different regions. We have also written a summary aggregating all of our plastics research.