In-depth Article ‖ Analysis and Forecast of the Supply and Demand Situation of MTBE and Alkylated Gasoline in China

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In-depth Article ‖ Analysis and Forecast of the Supply and Demand Situation of MTBE and Alkylated Gasoline in China 2016-01-29 Petrochemical Bond – A Platform Dedicated to the Petroleum and Chemical Industry. Petrochemical Bond aims to disseminate new technologies in this industry and contribute to the localization of technologies and equipment! Analysis and forecast of the supply and demand situation of MTBE and alkylated gasoline in China. MTBE is the etherification product of isobutylene and methanol. Isobutylene is primarily found in liquefied petroleum gas. To reduce production costs, the industrial process involves directly subjecting refined C4 streams containing isobutylene to a catalytic addition reaction with methanol. After the reaction, unreacted C4 and methanol are separated, yielding fuel-grade MTBE. This type of MTBE has a high sulfur content; through comparative analysis of the raw materials, it was found that under normal conditions, all the sulfur in MTBE originates from raw material C4. The raw material C4 for MTBE has various sources, primarily coming from the C4 components in liquefied petroleum gas obtained from catalytic cracking, coking, and ethylene plants. The C4 obtained from liquefied petroleum gas in ethylene plants undergoes strict desulfurization during the production process. However, liquefied petroleum gas coming from catalytic cracking and coking units has a sulfur content of over 20 ppm after refining and desulfurization. Moreover, after C3 is removed through gas fractionation and the material enters the MTBE plant, the sulfur content in the MTBE product increases further (studies have shown that the sulfur concentration increases by 3 to 6 times throughout the process of producing MTBE from desulfurized liquefied petroleum gas). The sulfides in MTBE products mainly originate from the C4 feedstocks produced by catalytic cracking and coking. Currently, the sulfur content in MTBE produced from mixed C4 as a raw material varies considerably, typically ranging from 80 to 200 ppm, with some values reaching as high as 2000 to 3000 ppm. When implementing the National III gasoline standard, by strengthening management and monitoring during liquefied gas desulfurization, the sulfur content in MTBE can generally be kept at around 150 ppm. However, as national standards regarding the sulfur content in gasoline become increasingly stringent, the implementation of National Standards IV and V requires that the mass fraction of sulfur in gasoline be kept below 50 ppm and 10 ppm, respectively. While existing advanced desulfurization technologies can help meet these requirements, current LPG desulfurization technologies struggle to reduce the sulfur mass fraction in MTBE to below 50 ppm; it is even more difficult to bring it down to below 10 ppm. Although there are many MTBE plants currently under construction or planned in China, in the future domestic C4 resources will become increasingly scarce, and the actual operating rate of MTBE plants will remain limited. At the same time, due to the diversification of C4 sources, low-sulfur C4 resources will become even rarer; as a result, the amount of MTBE that can meet the gasoline National IV and National V standards will not be large. With the continuous improvement of gasoline standards for vehicles and the reduction in sulfur content, there is an increasing demand for low-sulfur MTBE production technologies, and low-sulfur MTBE will become more sought after. Alkylation technology is an important technique for producing clean gasoline. Alkylated gasoline (with isooctane as its main component), which is a mixture of isomeric alkanes, is produced by reacting isobutane with low-molecular-weight olefins (typically including C3–C5 olefins, with butene being the most commonly used) in the presence of a strong acid catalyst (usually sulfuric acid or hydrofluoric acid). Compared to catalytic gasoline containing large amounts of olefins and reformated gasoline rich in aromatics, it has advantages such as a high octane rating, a small difference between the two octane values, low volatility, no presence of olefins or aromatics, and low sulfur content. By adding it to gasoline, it helps to reduce the levels of harmful components such as olefins, aromatics, and sulfur in the gasoline, while simultaneously increasing its octane rating and anti-knock properties; thus, it is an ideal component for clean vehicle gasoline. Compared to catalytic cracked gasoline, reformed gasoline, isomerized gasoline, and etherified gasoline, alkylated gasoline contains no aromatics or olefins, has almost no sulfur, and features a high octane rating and low vapor pressure, making it the most ideal type of clean gasoline. Although gasoline standards vary across different countries due to differences in the development level of their refining industries, the structure of their refining facilities, and their economic conditions, as well as variations in the timing of the implementation of these standards, overall these standards are moving toward lower sulfur, lower olefin, and lower aromatic content. Alkylation will play an increasingly important role in the improvement of gasoline quality in the future. The proportion of alkylated gasoline in our country is very low. Globally, in the composition of blended gasoline in the United States, catalytic cracked gasoline accounts for 38%, reformed gasoline accounts for 24%, and alkylated gasoline accounts for about 15% ； In California, where the requirements for gasoline quality are the strictest, the proportion of alkylated gasoline ranges from 20% to 25%. Although the gasoline components in the EU are mainly reformed gasoline, the proportion of alkylated gasoline is much higher than that in China, accounting for about 6%. In the composition of blended gasoline in our country, catalytic cracking gasoline accounts for around 77%, reformed gasoline makes up about 15%, while the proportion of alkylated gasoline is only around 0.2%. Due to the high levels of sulfur and olefins, catalytic cracking gasoline has a high specific gravity, which results in high costs and difficulties in upgrading the quality of gasoline in China. As a result, the pace of improving gasoline quality slows down, and the implementation of new standards is delayed; this leads to the awkward situation where China’s current gasoline quality standards remain behind those required for vehicle emissions. Compared to regions with developed refining industries such as the United States and Europe, China has a small number of alkylation units of limited scale; the proportion of alkylated gasoline in gasoline blends is low, resulting in a modest impact on the properties of gasoline products. Therefore, there is significant potential for development in China’s alkylation industry in the future. The production capacity of domestic alkylation units is increasing rapidly. According to statistics, the total production capacity of existing alkylation units in China is 2.345 million tons per year, of which the capacity of alkylation units in Shandong Province amounts to 1.19 million tons per year, accounting for 50.7% of the national total capacity. The capacity of new alkylation units planned to be added over the next 5 years is expected to reach 7.37 million tons per year. If all the aforementioned alkylation units are built and put into operation on schedule, China’s total alkylation capacity could reach 9.7 million tons per year by 2017, which is more than three times the current capacity. In addition to alkylation units, there are numerous other projects in China for the further processing of butane derivatives, such as isomerization, production of sec-butyl acetate, aromatization, production of butadiene, and isobutane dehydration; these projects are either under construction or in the planning stage. The raw materials for these processes all come from butane derivatives such as post-etherification butane derivatives or isobutane. Based on estimates of the ongoing projects for the deep processing of C4 compounds in our country, the demand for C4 compounds after etherification is expected to increase by more than 21.5 million tons over the next 5 years. However, the production of C4 compounds after etherification will increase only by around 10 million tons. As a result, there will be a significant shortage of raw materials for projects related to the deep processing of C4 compounds, including alkylation units, and the actual operational rate of such projects will be limited. We estimate that the actual operating rate of newly added alkylation units in the future will be only between 30% and 50%. Considering the operating rate of existing plants, we estimate that domestic production of alkylated gasoline will be around 4.5 to 5 million tons by 2017. There may be a shortage of alkylated gasoline supply in the future. From 2000 to 2012, the compound growth rate of domestic gasoline production was 6.7%, and in 2012 domestic gasoline production reached 89.756 million tons, representing a year-on-year increase of 10.25%. If domestic gasoline production continues to grow at a rate of 6% per year, it will reach 120 million tons by 2017. With the improvement in the quality of domestic refined oil products, if by 2017 the proportion of alkylate gasoline among domestic gasoline blending components reaches the current EU level (6%), then the total demand for alkylate gasoline will amount to approximately 7.2 million tons, exceeding its production volume in that year. Based on the above calculations, there could be a shortage of over 2 million tons in the supply of alkylated gasoline in our country in the future. Relevant information: 1. Comparison table of aromatic oil, alkylated oil, and national standard gasoline. Table 1: Comparison table of aromatic oil, alkylated oil, and national standard gasoline. Items: National Standard IV, 93# alkylated oil, aromatized oil. Density/g/ml: 0.72–0.75, 0.695–0.700, 0.702. Octane number (research method): 93, 94–98, 92. Initial boiling point/°C: 35, 40, 40. Final boiling point/°C: 205, 195, 193. Saturated vapor pressure/kPa: 42–85, 50, 56. Sulfur content (PPM): no more than 50, 53. Benzene content (volume fraction %): no more than 1.0, none, 0.5–1.5. Gum content (mg/100ml): no more than 5, none, 3.4. Copper corrosion (50°C, 3h)/grade: no more than 1a, 1a, 1a. Induction period/min: not less than 480, not less than 600, 58. Hydrocarbon content/%: Aromatics no more than 40%, olefins no more than 28%; 95% saturated alkanes; olefins 80.7%, aromatics 5.7%. Note: The specifications for National Standard IV 93# gasoline are based on GB17930-2011. The data for aromatized oil and alkylated oil are provided by a single manufacturer; therefore, these figures do not represent all manufacturers. 2. Analysis of the global supply and demand situation for alkylated oils. Alkylated oils are an important component of gasoline; they consist mainly of C8 isoparaffins such as isooctane. High-purity alkylated oils can also be referred to as isooctane. Alkylation in the refining industry is generally a process in which isobutane reacts with C3–C5 olefins in the presence of a strongly acidic catalyst to produce alkylated oil. Since the industrialization of the alkylation process worldwide in 1938, alkylated oils have become an important blending component in the product composition of refineries. The so-called gasoline octane rating refers to the indicator of a gasoline’s resistance to detonation. “The term “octane rating” is named after isooctane, whose octane rating is defined as 100. In fact, since alkylated oils contain some C8 isoparaffins other than isooctane, their octane number ranges from 93 to 97. The octane number of alkylated oil is significantly higher than that of catalytic cracking components, slightly higher than that of reformed gasoline components. It is low in sulfur, free of olefins and aromatics, and oxygen-free; as an oil modifier, it is not restricted by the levels of olefins, aromatics, or oxygen. Adding alkylated oil to gasoline can serve the following purposes: 1) Increase the octane rating of gasoline, filling the gap in octane value caused by the absence of lead ； 2) It dilutes the olefins and harmful impurities such as S and N in the FCC gasoline components, reducing their levels to meet or come close to the specified standards ； 3) It also has a diluting effect on the aromatic content, including benzene, in the reformate gasoline components. Therefore, alkylated oil (or isooctane) is an almost perfect component for gasoline. Global refining capacity increased from 76.07 million barrels per day in 1996 to 88.96 million barrels per day in 2011, with a CAGR of 1.0%. Worldwide alkylation capacity increased from 1.66 million barrels per day in 1996 to 2.10 million barrels per day in 2011, with a CAGR of 1.5%. In 2012, 65% of the world’s alkylation capacity was located in North America. Asia and Europe account for 15% and 14% respectively. The country with the highest alkylation capacity in the world is **the United States**, which reached 1.15 million barrels per day in 2012, accounting for 55% of the world’s total alkylation capacity. In terms of the proportion of alkylation capacity relative to total crude oil processing capacity, North America has the highest share; in 2012, this figure reached 6.2% ； Europe’s alkylation capacity accounts for 1.2% of its crude oil processing capacity ； Asia is 1.0% ； China is only 0.56%. The differences in the composition of gasoline across countries are related to their gasoline quality standards and refining capabilities. U.S. gasoline standards impose the strictest limits on the content of olefins and aromatics, requiring the addition of large amounts of alkylated oils to meet these standards. European gasoline standards impose relatively strict limits on the olefin content, while the limits on aromatic content are generally more lenient; as a result, the proportion of reformed gasoline is high there, the proportion of catalytically processed gasoline is low, and the proportion of alkylated oil is moderate. The National IV standard currently in effect in China sets requirements for the levels of olefins and aromatics that are somewhat lower than those specified by European standards; they are even lower compared to American standards. Moreover, the structure of China’s refining industry results in a high proportion of gasoline produced through catalytic cracking, a low proportion produced through reforming, and an extremely low proportion produced through alkylation. The upgrade of gasoline standards and the improvement in vehicle consumption have led to requirements for higher octane ratings in gasoline components. The octane number of alkylated oils is only lower than that of MTBE, similar to that of reformed gasoline, and significantly higher than that of catalytic cracking gasoline (which accounts for the largest proportion in gasoline composition in China); demand for such oils will be strongly driven by the requirement for high octane numbers. The upgrading of gasoline standards is mainly reflected in requirements such as “reducing sulfur, manganese, and olefins”. This trend will result in a loss of octane rating (a measure of gasoline’s resistance to detonation), and it is necessary to increase the proportion of high-octane components to compensate for this. Among the high-octane components, although MTBE has an octane rating of up to 115, its addition ratio is currently approaching its upper limit in China due to limitations related to oxygen content. As a high-octane alkane component, the proportion of alkylated oil added will increase. In line with the principles for optimizing the components used in oil blending, as gasoline standards are upgraded, we expect that the optimal addition level of alkylated oil will increase from 2% (National III) to 3% (National IV) and further to 6% (National V), representing increases of 63% and 78% respectively. In the long term, the trend of rising automobile consumption will drive demand for high-octane gasoline, which in turn will increase the demand for high-octane components. According to the component optimization model, under the National IV standard, the optimal addition ratios of alkylate in 90#, 93#, and 97# fuels are 0%, 0%, and 22%, respectively. Because, during the increase from 90# to 93#, the rise in octane rating can be achieved to a large extent by increasing the proportion of MTBE ； As the standard rises from 93# to 97#, and since the addition of MTBE has reached its limit (due to oxygen content restrictions), increasing the octane rating requires raising the proportion of alkylated oil and reformed gasoline. Therefore, the rise in demand for higher-quality gasoline due to the upgrade in automobile consumption will actually drive up the demand for alkylated oil. With the advancement of gasoline standard upgrades (National IV standard came into effect in 2014 ； With the implementation of the National V standard starting in 2018, the market size for alkylated oils in China increased from 1.85 million tons in 2013 to 7.5 million tons in 2018, achieving a CAGR of 32% ； The proportion in gasoline increased from 2% to 6%. 2014 and 2018, as key years for standard upgrades, are expected to see a significant increase in demand for alkylated oils. (The assumptions for the calculation include: a CAGR of 7% for domestic gasoline demand, and a gradual increase in the proportion of high-octane gasoline consumption over time, etc.)