Study 181 Full Report PDF

Study No.
181
June 2019
CANADIAN SUPPLY COSTS AND EMISSION PROFILES OF

ENERGY
RESEARCH
PETROCHEMICAL PRODUCTS IN
INSTITUTE SELECTED HUBS
Canadian Energy Research Institute | Relevant • Independent • Objective

Supply Costs and Emission Profiles of Petrochemical i
Products in Selected Hubs
SUPPLY COSTS AND EMISSION PROFILES OF PETROCHEMICAL

PRODUCTS IN SELECTED HUBS
June 2019
ii Canadian Energy Research Institute
Supply Costs and Emission Profiles of Petrochemical

Authors: Evar Umeozor

Sochi Iwuoha
Anna Vypovska
With Contributions from: Mohamed Refaei

Madie Zamzadeh
Funmilayo Atilola
Diane Okenwa
ISBN 1-927037-66-9
Copyright © Canadian Energy Research Institute, 2019

Sections of this study may be reproduced in magazines and newspapers with acknowledgement to the Canadian
Energy Research Institute
June 2019
Printed in Canada
Front cover photo courtesy of Google images
Acknowledgements:
The authors of this report would like to extend their thanks and sincere gratitude to all CERI staff that provided
insightful comments and essential data inputs required for the completion of this report, as well as those involved
in the production, reviewing and editing of the material, including but not limited to Allan Fogwill, Dinara Millington,
James Brown and Megan Murphy. Contributions from the following reviewers and industry are also appreciated:
• Professor Ian D. Gates, University of Calgary • Alberta Industrial Heartland Association

• Dr. Paige M. Morse, Aspen Technology • Chemistry Industry Association of Canada
• Pietro Di Zanno, Di Zanno and Associates • Inter Pipeline Limited
• Matthew Foss, MFoss Consulting • Resource Diversification Council
• Alberta Energy • South Korean Gas
ABOUT THE CANADIAN ENERGY RESEARCH INSTITUTE

Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable
organization specializing in the analysis of energy economics and related environmental policy issues in the energy
production, transportation and consumption sectors. Our mission is to provide relevant, independent, and objective
economic research of energy and environmental issues to benefit business, government, academia and the public.
For more information about CERI, visit www.ceri.ca
CANADIAN ENERGY RESEARCH INSTITUTE

150, 3512 – 33 Street NW
Calgary, Alberta T2L 2A6
Email: info@ceri.ca
Phone: 403-282-1231
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Supply Costs and Emission Profiles of Petrochemical iii
Table of Contents
LIST OF FIGURES ............................................................................................................. v
LIST OF TABLES ............................................................................................................... vii
ACRONYMS AND ABBREVIATIONS .................................................................................. ix
EXECUTIVE SUMMARY .................................................................................................... xi
CHAPTER 1 INTRODUCTION ........................................................................................ 1
Overview .......................................................................................................................... 1
Why and Scope of Study .................................................................................................... 3
CHAPTER 2 PETROCHEMICAL INDUSTRY OVERVIEW ................................................... 5
Petrochemical Processes and Technologies ...................................................................... 5
Ethylene ....................................................................................................................... 5
Propylene ..................................................................................................................... 8
Polyethylene ................................................................................................................ 10
Polypropylene .............................................................................................................. 11
Other Olefins Technologies and Vendors .................................................................... 13
Petrochemical Feedstock Sources ..................................................................................... 13
Feedstocks Supply and Demand ........................................................................................ 14
Ethane and Propane..................................................................................................... 16
Naphtha ....................................................................................................................... 18
Products Supply and Demand ............................................................................................ 20
Ethylene ....................................................................................................................... 20
Propylene ..................................................................................................................... 23
Polyethylene ................................................................................................................ 25
Polypropylene .............................................................................................................. 26
CHAPTER 3 GHG EMISSIONS, MITIGATION AND REGULATIONS ................................... 29
GHG Emissions from the Petrochemical Industry ............................................................. 29
Mitigation Pathways .......................................................................................................... 30
Greenfield Facilities ..................................................................................................... 32
Brownfield Facilities ..................................................................................................... 32
GHG Emissions and Carbon Regulations............................................................................ 35
Canada ......................................................................................................................... 35
Alberta.................................................................................................................... 37
Ontario ................................................................................................................... 37
The United States ......................................................................................................... 38
South Korea.................................................................................................................. 39
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CHAPTER 4 METHODOLOGY ....................................................................................... 41

Petrochemical Processes Input-Output Modelling ............................................................ 42
Costs and Economic Impact Assessment ........................................................................... 43
Supply Cost Model: Components and Method........................................................... 43
General Model Assumptions ....................................................................................... 44
Capital Requirement .............................................................................................. 44
Feedstock Prices..................................................................................................... 44
Labour .................................................................................................................... 44
Location Factors ..................................................................................................... 45
Cost Analysis Framework ............................................................................................. 47
Target Markets: The United States and China ............................................................ 47
CHAPTER 5 RESULTS ................................................................................................... 51
Supply Cost Results: PE and PP Supply Cost Framework, Plant Gate ............................... 55
Supply Costs Per Feedstock Type and Jurisdiction, Plant Gate ......................................... 56
Key Supply Cost Components ............................................................................................ 59
Landed Supply Costs .......................................................................................................... 62
CHAPTER 6 CONCLUSIONS .......................................................................................... 65
BIBLIOGRAPHY ............................................................................................................... 69
APPENDIX A ECONOMIC MODELLING DATA.................................................................. 77
APPENDIX B PROCESS INPUT-OUTPUT DATA ................................................................ 81
APPENDIX C EXISTING FACILITY INVENTORY ................................................................. 83
APPENDIX D FURTHER BREAKDOWN OF RESULTS ......................................................... 89
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Supply Costs and Emission Profiles of Petrochemical v
List of Figures
E.1 Feedstock Compositions for Steam Cracking and Propane
Dehydrogenation Processes ........................................................................................ xii
E.2 Ranges of Process GHG Emissions for Different Process and
Feedstock Options ....................................................................................................... xiii
E.3 Indicative NCNC Supply Costs per Jurisdiction and Feed Type, Plant Gate ................. xiv
E.4 Indicative CTNC Supply Costs per Jurisdiction and Feed Type, Plant Gate ................. xv
E.5 Average Supply Cost and GHG Emissions by Process and Feedstock Options ............ xvi
E.6 Total Annual GHG Emissions from Petrochemical Hubs ............................................. xvii
1.1 Petrochemical Processing Stages for Steam Crackers ................................................. 1
1.2 Relative Gross Margins for Gas and Oil-based Feedstocks.......................................... 3
2.1 Process Diagram of Steam Cracking of Olefins ............................................................ 6
2.2A Process Diagram of Oleflex Technology ...................................................................... 9
2.2B Process Diagram of Catofin Technology ...................................................................... 9
2.3 Process Diagram of a Solution-phase PE Technology .................................................. 11
2.4 Process Diagram of a Typical Bulk-phase Reactor Technology ................................... 12
2.5 Process Diagram of a Typical Gas-phase Technology .................................................. 12
2.6 Schematic Value Chain from Feedstock to Petrochemical Building Blocks ................. 14
2.7 Top 10 NGLs Producing Countries, 2017 ..................................................................... 15
2.8 US Fourth Quarter 2018 Domestic NGLs Production .................................................. 15
2.9 Western Canadian Ethane and Propane Production from Gas Plants ........................ 16
2.10 Western Canadian NGLs Production Forecast by Commodity .................................... 17
2.11 US NGLs Production from Gas Plants, 2018 ................................................................ 17
2.12 US Ethane Production and Consumption .................................................................... 18
2.13 Global Petrochemical Feedstock Supply Growth, 2011-2035 ..................................... 19
2.14 World Consumption of Ethylene by Country/Region, 2018 ........................................ 21
2.15 Global Ethylene Annual Demand Growth .................................................................... 22
2.16 Historical and Forecast Global Ethylene Consumption Growth, 2017 ........................ 22
2.17 World Ethylene Production by Region......................................................................... 23
2.18 Global Base Chemical Total Capacity Forecast by Market........................................... 24
2.19 North American Chemical Capacity Forecast .............................................................. 25
2.20 New and Upcoming USGC Ethylene and PE Plants ...................................................... 26
2.21 Polyethylene and Polypropylene Global Trade Flows by Region, 2017 ...................... 27
3.1 Expected Contributions of IEA Mitigation Levers to
CO2 Emission Reduction by 2050 ................................................................................ 32
4.1 Process Diagram of Integrated Processes for Polypropylene and
Polyethylene Production using Various Feedstocks .................................................... 41
4.2 Yields of Products for Various Single Feedstocks to Olefin Steam Cracker ................. 43
4.3 Supply Cost Analysis Framework ................................................................................. 47
4.4 Global Base Chemical Capacity Forecast by Region .................................................... 48
4.5 China Demand-Supply Balance .................................................................................... 49
4.6 New PE Capacities by Product, 2017 ........................................................................... 49
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5.1 Feedstock Compositions for Steam Cracking and Propane

Dehydrogenation Processes ........................................................................................ 51
5.2 Ranges of Process GHG Emissions for Different Process and Feedstock Options....... 52
5.3 Effect of Electricity Source on the Average GHG Emissions for Process and
Feed Options ................................................................................................................ 54
5.4 Selected Co-product Yields for Various Process and Feedstock Options .................... 55
5.5 Indicative Supply Costs per Cost Analysis Framework, Plant Gate.............................. 56
5.6 Indicative NCNC Supply Costs per Jurisdiction and Feed Type, Plant Gate ................. 57
5.7 Indicative NCCS Supply Costs per Jurisdiction and Feed Type, Plant Gate ................. 58
5.8 Indicative CTNC Supply Costs per Jurisdiction and Feed Type, Plant Gate ................. 58
5.9 Indicative CTCS Supply Costs per Jurisdiction and Feed Type, Plant Gate .................. 59
5.10 Supply Cost Structure for PE Production at the Four Hubs ......................................... 60
5.11 Supply Cost Structure for PP Production at the Four Hubs ......................................... 61
5.12 Shares of Hydrogen and Propylene Co-product Sales for
Each Processing Pathway ............................................................................................. 62
5.13 Average Supply Cost and GHG Emissions by Process and Feedstock Options ............ 63
5.14 Total Annual GHG Emissions from Petrochemical Hubs ............................................. 64
C.1 Alberta Olefin Cracking Feedstock ............................................................................... 87
C.2 Ontario Olefin Cracking Feedstock .............................................................................. 87
C.3 USGC Olefin Cracking Feedstock .................................................................................. 88
C.4 South Korea Olefin Cracking Feedstock ....................................................................... 88
D.1 Indicative Supply Costs by Jurisdiction – NCNC ........................................................... 90
D.2 Indicative Supply Costs by Jurisdiction – NCCS ............................................................ 90
D.3 Indicative Supply Costs by Jurisdiction – CTCS ............................................................ 91
D.4 Indicative Supply Costs by Jurisdiction – CTNC............................................................ 91
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Supply Costs and Emission Profiles of Petrochemical vii
List of Tables
E.1 PE and PP Outbound Average Transportation Costs ................................................... xvi
2.1 Steam Cracker Yields of Petrochemical Feedstocks .................................................... 7
2.2 US Steam Cracker Investments and Capacities by Feedstock Type ............................ 19
2.3 Petrochemical Production Facilities at Three Main South Korean Centres ................ 20
3.1 Intrinsic CO2 Emission Factors for Various Feedstocks ............................................... 30
3.2 Energy Reduction Potential by Country ....................................................................... 31
4.1 Construction Cost Location Factors for NFoiK Petrochemical Plants, 2018
USGC Cost Basis ........................................................................................................... 46
4.2 Construction Cost Location Factors for FoiK Petrochemical Plants, 2018
USGC Cost Basis ........................................................................................................... 46
5.1 PE and PP Outbound Average Transportation Costs ................................................... 62
A.1 Supply Cost Model Input Parameters and Assumptions ............................................. 77
A.2 Indicative SCM Results for Alberta and Ontario Petrochemical Facilities at
Plant Gate..................................................................................................................... 79
A.3 Indicative SCM Results for USGC and South Korea Petrochemical Plants .................. 80
A.4 Current and Anticipated Jurisdictional Carbon Tax ..................................................... 80
B.1 Sample Steam Cracking Feedstocks, Side- and Co-products, Energy Use and
Emissions Data ............................................................................................................. 81
B.2 Naphtha Steam Cracker Yields ..................................................................................... 81
B.3 Primary and Final Energy Requirements of Petrochemical Processes ........................ 82
C.1 Petrochemical Facilities in Alberta, Ontario, USGC and South Korea ......................... 83
D.1 Lower Range of Outbound Transportation Costs for PE and PP ................................. 89
D.2 Upper Range of Outbound Transportation Costs for PE and PP ................................. 89
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Supply Costs and Emission Profiles of Petrochemical ix
Acronyms and Abbreviations

Alberta (AB) Alberta Industrial Heartland
BACT Best Available Control Technology
BPT Best Practice Technology
CAF Cost Analysis Framework
CAGR Cumulative Annual Growth Rate
CAPEX Capital Expenditure
CCS Carbon Capture and Storage
CERI Canadian Energy Research Institute
CO2 Carbon Dioxide
CO2e Carbon Dioxide Equivalent (including all greenhouse gases)
CTCS Carbon Tax, with Co-product sales
CTNC Carbon Tax, No Co-product sales
ECCC Environment and Climate Change Canada
EIA Energy Information Administration (US)
EPA Environmental Protection Agency (US)
EJ Exajoule
ETS Emissions Trading System
FCC Fluid Catalytic Cracking
FoiK First of its Kind
GHG Greenhouse Gas
GHGRP Greenhouse Gas Reporting Program
GWP Global Warming Potential
HDPE High-Density Polyethylene
IEA International Energy Agency
IPCC Intergovernmental Panel on Climate Change
kT Kilotonnes
KT CO2e Kilotonnes of carbon dioxide equivalent
kT/yr Kilotonnes per year
LDAR Leak Detection and Repair
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LDPE Low-Density Polyethylene

LLDPE Linear Low-Density Polyethylene
LPG Liquified Petroleum Gas
Mbpd Million barrels per day
MBTU Million British Thermal Units
m3 Cubic meters
Mt Million tonnes
MTO Methanol-to-Olefins
MTP Methanol-to-Propylene
Mtpa Million tonnes per annum (Million tonnes per year)
Mt CO2e Million tonnes of carbon dioxide equivalent
NCF Net Cash Flow
NCCS No Carbon Tax, with Co-product sales
NCNC No Carbon Tax, No Co-product sales
NGCC Natural Gas Combined Cycle
NGL Natural Gas Liquid
NRCan Natural Resources Canada
OBPS Output-Based Pricing System
ON Ontario
OPEX Operating Expenditure
PDH Propane Dehydrogenation
PE Polyethylene
PP Polypropylene
SC Steam Cracking
SCM Supply Cost Model
SFC Shipping/Freight Cost
STAR Steam Active Reforming
TJ Terajoule
tpy Tonnes per year
US The United States
USGC United States Gulf Coast
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Supply Costs and Emission Profiles of Petrochemical xi
Executive Summary
CERI commissioned this study to quantify greenhouse gas (GHG) emissions from petrochemical
processes and evaluate supply costs of products from various processing pathways and
petrochemical hubs. The hubs assessed are Alberta Industrial Heartland in Alberta,
Sarnia/Corunna (Ontario), the United States Gulf Coast (USGC), and South Korean hubs.
Environmental impact is evaluated in terms of carbon dioxide, methane and nitrous oxide
emissions from the petrochemical sector. The economic impact is assessed through indicative
product supply costs at both the plant gate and at potential destination markets. The United
States and China are considered destination markets.
To achieve the objectives of the study, CERI adopted a hub-level analysis approach. We modelled
hypothetical integrated petrochemical facilities in each of the hubs, observing jurisdictional
differences in the supply cost model and considering various processing pathways for single and
mixed feedstocks. Figure E.1 shows the feedstock options speculatively treated in each of the
hubs to produce polyethylene (PE via steam cracking1) and polypropylene (PP via propane
dehydrogenation2) as the primary/main products for which the supply costs are computed.
1
Denoted in the figure and subsequently as SC
2
Denoted in the figure and subsequently as PDH
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Figure E.1: Feedstock Compositions for Steam Cracking and

Propane Dehydrogenation Processes
Ethane Propane Butane Naphtha
100%
90%
80%
70%
Feedstock Blend
60%
50%
40%
30%
20%
10%
0%
SC_Ethane PDH_Propane SC_Ethane+Propane SC_LPG SC_Naphtha
Process Type
CERI also quantified co-products from each processing pathway and ran four supply cost
scenarios to capture jurisdictional variabilities, carbon tax and the ability to obtain additional
revenues from sales of co-products. The feedstock and process combinations (per Figure E.1), in
addition to their integrated polymerization units, constitute the five hypothetical facilities
assessed for each of the four hubs of focus in our product supply cost modelling.
Emission intensities of processing pathways capture the differences in processing technologies,

fuel types, electricity requirements and sources. Figure E.2 shows the ranges of GHG emissions
for each process and feedstock combination. Natural gas combined cycle (NGCC), coal and cogen
are the three types of electricity sources incorporated in our current modelling, however, NGCC
is used as the benchmark electricity source for most facilities. The process emissions include
those from the production of olefin monomers and the subsequent polymerization step. Process
emissions are expressed in per tonne of the main product.
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Supply Costs and Emission Profiles of Petrochemical xiii
Figure E.2: Ranges of Process GHG Emissions for Different Process and Feedstock Options
2.00
1.80
Process Emissions (t-CO2e/t-product)
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Process and Feedstock Options
The PDH process for on-purpose polypropylene has the lowest GHG emission intensity ranging
between 0.19-0.62 t-CO2e/t. Polyethylene from ethane cracking plants has the next lowest
intensity ranging from 0.54 to 1.35 t-CO2e/t. Polyethylene from naphtha cracking has the highest
GHG intensity ranging between 1.24 to 1.96 t-CO2e/t. However, naphtha cracking has a wider
product spread relative to the other cracking feedstocks. Therefore, if overall emissions were to
be allocated to all high-value products using any of the standard life cycle analysis (LCA) methods
(such as system expansion, substitution or partitioning), the intensities based on each high-value
chemical would be lower. Nevertheless, our approach in this study is to quantify total processing
emissions based on the main product for each feedstock processing pathway.
The primary sources of GHG emissions in a petrochemical plant are process heaters, boilers,
cooling towers, catalyst regeneration vents, gas purge/flare systems, MSS (maintenance, start-
up and shutdown) emissions, and process fugitives. Based on EPA prevention of significant
deterioration (PSD) filings, fugitive emissions may account for up to 5% of total facility GHG
emissions (Trinity Consultants 2012, 2012; US EPA 2014; Chevron Phillips 2018; US EPA 2012;
Environmental Resources Management 2014). Depending on the process and technology in use,
methane and nitrous oxide emissions account for between 0.1% to about 2% of total carbon
dioxide equivalent (CO2e) emissions.
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Figures E.3 and E.4 show two supply cost assessment scenarios where a carbon tax is either
excluded (NCNC) or included (CTNC) without considering the sales of co-products in both cases
in the model. The NCNC scenario captures the jurisdictional impacts of constructing and
operating the petrochemical facilities in Alberta, Ontario, USGC, and South Korea. Polyethylene
and polypropylene average plant gate supply costs for all hubs in NCNC are $1,881/t and
$1,772/t, whereas in CTNC they are $1,918/t and $1,811/t, respectively. The indicative supply
costs are higher when the carbon tax is included in the model. However, other variables such as
feedstock costs and co-product sales revenue have bigger effects on costs compared to a carbon
tax.
Figure E.3: Indicative NCNC Supply Costs per Jurisdiction and Feed Type, Plant Gate
(2018 Constant Dollars)
4500
4000
3500
Supply cost ($/t)
3000
2500
2000
1500
1000
500
0
AB ON USGC South Korea
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Supply Costs and Emission Profiles of Petrochemical xv
Figure E.4: Indicative CTNC Supply Costs per Jurisdiction and Feed Type, Plant Gate
4500
4000
3500
Supply cost ($/t)
3000
2500
2000
1500
1000
500
0
Overall, a carbon tax has the most impact on Canadian supply costs despite the predominant
processing of the lower GHG-intensity gas-based feedstocks in Canadian petrochemical hubs.
Thus, this stems from the higher price of CO2e emissions in Canada, compared to the other
jurisdictions. CERI also assessed two other scenarios with the carbon tax and co-product revenue
(CTCS), and no carbon tax with co-product revenue (NCCS). This is discussed further in Chapter
5.
The availability of cheaper NGL feedstocks in producing areas such as Alberta and the USGC
results in lower PE supply costs for ethane and ethane+propane cracking plants. In the absence
of a carbon tax, PP supply costs at Canadian and USGC facility gates are quite similar – albeit,
slightly higher for USGC plants but more pronounced for a South Korean plant due to feedstock
cost.
Landed supply costs provide a perspective of the indicative supply costs at the destination market
for produced PE and PP using the five feed options and transported to the USGC or China for
sales. The shipping/freight cost (SFC) is added to the supply costs obtained for each of the
assessment scenarios to obtain the supply cost at the destination market. CERI’s SFC estimates
were based on information available in the public domain, as well as feedback from CERI
interviews with petrochemical industry experts. Table E.1 shows the base case shipping/freight
costs (SFC) for transporting PE and PP from the four petrochemical hubs studied by CERI to the
USGC and China. CERI’s base case SFC is based on the average between the low and high SFC
(shown in Appendix A). Canadian hubs have the advantage to ship to China against USGC, and
the advantage to shipping products to the USGC against South Korea.
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Table E.1: PE and PP Outbound Average Transportation Costs
USGC (Texas) China

PE PP PE PP
Origin $/t $/lb $/t $/lb $/t $/lb $/t $/lb
Alberta 13 0.006 18 0.008 23 0.010 28 0.013
Ontario 14 0.006 19 0.009 26 0.012 30 0.014
USGC 8 0.003 11 0.005 31 0.014 35 0.016
South
26 0.012 29 0.013 18 0.008 22 0.010
Korea
If one takes the average supply cost across all the hubs, for each process and feedstock option
under the NCNC scenario, the economic and environmental performance indicators of each
feedstock processing pathway can be visualized and compared – as in Figure E.5 – with reduced
effects of jurisdictional differences on the cost for each process and feedstock combination.
Processes using gas-based feedstocks have lower emissions and supply costs as against LPG and
naphtha, which have higher energy requirements. For the PE and PP production studied here,
steam cracking of ethane feed and propane dehydrogenation have the lowest economic and GHG
emission intensities relative to the other production pathways.
Figure E.5: Average Supply Cost and GHG Emissions by Process and Feedstock Options
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Supply Costs and Emission Profiles of Petrochemical xvii
Considering the compositions of processing capacities in the four petrochemical hubs studied
here, CERI can estimate their total annual GHG emissions at defined utilization levels. In
consonance with our supply cost modelling assumption, we apply a 90% capacity utilization
factor to the most recently available data on processing capacities at the hubs as reported by
(Koottungal 2015) and (Morse 2017). By combining the ranges of emission intensities of each
processing pathway with the total products generated therein, CERI evaluated total annual
emissions in each hub, as shown in Figure E.6.
Figure E.6: Total Annual GHG Emissions from Petrochemical Hubs (2016 capacities basis)
US GC
S.Korea
ON
AB
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Total Annual GHG emissions (kt-CO2e)
Total annual GHG emissions are highest for the USGC, in the range of 19.8 Mt CO2e to 37.4 Mt
CO2e. Seconded by South Korean hubs with emissions ranging between 6.0 Mt CO2e and 9.5 Mt
CO2e. Canadian petrochemical hubs have the lowest annual GHG emissions with the Ontario hub
emitting between 0.5 Mt CO2e to 0.9 Mt CO2e, whereas the Alberta hub emits between 2.1 Mt
CO2e to 5.2 Mt CO2e.
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Supply Costs and Emission Profiles of Petrochemical 1
Chapter 1: Introduction
Overview
The petrochemical industry is a major contributor to global industrial energy demand and the –
usually – consequent greenhouse gas emissions (Griffin, Hammond, and Norman 2018). It is the
highest industrial consumer of energy; accounting for about 42.5 exajoules (EJ) in 2014 of final
energy consumption as feedstock and process fuel. Emissions from the petrochemical and
chemicals sector represent around 7% of global man-made greenhouse gases (GHG) and 5.5% of
the CO2 emissions (Levi and Cullen 2018). There are three primary GHG emissions from
petrochemical facilities: carbon dioxide, methane, and nitrous oxide. Sources of emissions can
also be categorized into process chemistry, heating, and electricity requirements. Direct
emissions are typically from the process chemistry and heating whereas indirect emissions
usually arise from electricity usage. Overall, energy requirements are satisfied with fuel
combustion of dedicated fuel feedstocks and/or processing of by-product gases.
Generally, petrochemical plants break down (or crack) oil or gas-based hydrocarbon feedstocks
at high pressure and temperature into simpler chemical building blocks. Thermal processes such
as steam cracking are central to petrochemicals manufacture where steam and heat are used to
breakdown heavier hydrocarbons into lighter olefins (or alkenes) and aromatics, also called high-
value chemicals, using oil or gas-based feedstocks. Oil-based feedstocks are usually naphtha and
gas oil. Gas-based feedstocks include natural gas, liquified petroleum gases (LPGs) and natural
gas liquids (NGLs) from which methane, ethane, propane, butane, and pentanes can be obtained.
An assembly of such simpler chemicals constitute the derivatives (or polymers) used to create
various plastic products.
Steam crackers are usually designed with the flexibility to take feedstocks of various oil or gas-
based hydrocarbons. Figure 1.1 shows a simplified process diagram of a steam cracker. The
feedstock and steam mixture is sent into a furnace where the cracking reaction occurs. The
products are quenched (cooled quickly) to avoid the further formation of undesired products,
then compressed, refrigerated and separated into its various components of interest in a
fractionator.
Figure 1.1: Petrochemical Processing Stages for Steam Crackers
Source: (Benchaita 2013)
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Most steam crackers in areas where natural gas (and NGLs) are not in abundance have historically
used oil-based feedstocks. But this has started to change as more export quantity NGLs are
available from unconventional sources (like shale or tight reservoirs).
The growth of production from liquids-rich shale and tight formations guarantees relatively
cheaper petrochemical feedstocks from NGLs, as against oil-based feedstocks. Historically, the
prices of crude oil and natural gas were correlated until around 2009-2010 when they decoupled,
and the price of gas has remained relatively cheaper (Morse 2017). Prices of NGL components
such as ethane, propane and butane have also either decoupled from a similar relationship with
oil price or are expected to do so in the near future as logistical constraints are resolved and
market access improves (Morse 2017). However, olefin prices have remained correlated with
crude oil prices – at least, currently – maintaining the impetus for gas-based feedstocks to stay
more economically competitive so long as crude oil remains more expensive than the abundant
natural gas (Morse 2017; Fattouh and Brown 2014).
Petrochemical plants can be built on-purpose where the plants take specific feedstocks for
conversion to the desired product(s), particularly in areas where the desired feedstock is
available. Moreover, petrochemical plants are often integrated with crude oil refineries, where
some of the refinery products (like naphtha and gas oils) are used as feedstocks for the plant.
Some of the desired petrochemical products are also generated as side products from crude oil
refining operations.
When the supply of a petrochemical product is inadequate (either when sourced as a side-
product from refining or co-product from steam cracking), on-purpose plants can be built to
augment the supply. Among other factors, the type of feedstock used for a petrochemical process
affects the product variety and yields. Oil-based feedstocks for steam crackers tend to have a
wider range of products (or co-products) but lower yields of high-value chemicals than gas-
derived (NGL-based) feedstocks. For instance, typical ethylene yields from gas and liquid
feedstocks have been reported to be around 80% and 30%, respectively (Fattouh and Brown
2014).
Depending on the domestic dry natural gas (for heating, etc.) and NGL (for petrochemicals)
market pricing and fluctuations, gas processing operations can be tuned to increase or reduce
the recovery of ethane and other NGL components from dry natural gas (Fattouh and Brown
2014). This allows operators to capitalize on any spread between natural gas and NGL prices if
there is access to the market for the NGL products. Between 80% to 90% of ethane is typically
recoverable from the raw gas stream. Facilities operating in ethane “rejection” mode (due to lack
of or inadequate transport infrastructure or when the ethane price is too low) will remove just
enough ethane in the dry gas stream in order to meet pipeline specifications (Fattouh and Brown
2014). Figure 1.2 compares gross margins for gas and oil-based feedstocks for olefins production.
As indicated, even with the low crude oil prices in 2014, oil-based feedstocks processing still
resulted in gross margin loss of about 40% relative to gas-based feedstocks.
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Figure 1.2: Relative Gross Margins for Gas and Oil-based Feedstocks
Source: (Fattouh and Brown 2014)
In North America, as the abundance of natural gas (and NGLs) from shale and tight resources in
the United States and Canada depresses natural gas prices and the value of its constituent
hydrocarbons, many petrochemical producers are switching to gas-based feedstocks. Producers
in such areas with cheap and stable gas availability see better economic incentives to move from
oil-based feedstocks to gas-based ones. However, gas-based feedstocks, such as ethane or
liquified petroleum gas (LPG), have lower yields of co-products – particularly with respect to
propylene production, even though there is a growing demand for it and its derivatives in North
America and elsewhere. This drives interest to build new on-purpose propylene production
plants in Canada to support growing demands and rising demand opportunities in the US and
other areas. To this end, some petrochemical projects have been proposed in Canada1 to take
advantage of these current opportunities and to further diversify the use of natural resources
through new value-added production.
Why and Scope of Study

Petrochemicals are known to be the primary route for diversifying oil and gas commodities-
dependent economies such that more economic value can be extracted from natural resources.
In Canada, Alberta is the dominant producer of oil and gas and hosts one of the three major
petrochemical hubs in the nation at the Alberta Industrial Heartland. The other two hubs
(Corunna and Sarnia) are in Ontario.
Recently, Alberta embarked on a government-led diversification effort by providing $2.1 billion

worth of incentives to further drive petrochemicals capacity investments in the province; based
on an abundance of cheap NGL feedstocks. At the same time, the Canadian federal government,
along with some provincial governments, has instituted carbon taxation on several industrial
1
These projects include Inter Pipeline’s 525 kilotonnes per year (ktpa) propane dehydrogenation (PDH) facility in
Strathcona County, Alberta and the joint venture Pembina Pipeline Corporation and Canada Kuwait Petrochemical
Corporation 550 ktpa PDH facility in Sturgeon County, Alberta.
June 2019
activities that contribute to the emission of greenhouse gases. It is anticipated that international
trade in petrochemical products will have some form of emissions consideration in the future.
Some stakeholders have indicated that carbon taxation would likely affect the competitiveness
of Canada’s existing and future petrochemical developments, particularly with regards to the
global competitiveness of Canada’s petrochemical products in the US and the Asia-Pacific
markets where export opportunities exist.
Under these prevailing circumstances, this study aims to evaluate the GHG emissions and supply
costs of the predominant petrochemicals production pathways in Canadian, US, and Asia-Pacific
petrochemical hubs. The primary focus is on processes and technologies for ethylene, propylene,
polyethylene, and polypropylene production using various single feedstocks and mixed-
feedstocks including ethane, propane, LPG, and naphtha. Feedstock blends are chosen to reflect
mixed-feedstock flows into petrochemical hubs where such are typically processed – as reported
in the literature (Koottungal 2015). GHG emissions to be addressed are restricted to carbon
dioxide, methane and nitrous oxide. The process emissions and product supply costs are
compared within and across the jurisdictions particularly for the petrochemical hubs in Alberta,
Ontario, US Gulf Coast, and South Korea. In assessing emission footprints of the production
pathways, CERI examined the potential process and technological opportunities to improve
performances of existing and new production facilities. By incorporating the cost of carbon in
each of the jurisdictions, CERI assessed the impact of GHG emissions regulations on the supply
cost of the products at both plant gate and the potential market destinations.
Report Structure
Chapter 2 provides an overview of the industry, focusing on the various petrochemical processes,
technologies, feedstocks, products, and markets that are of interest in this study. Chapter 3
identifies sources of greenhouse gas emissions and potential mitigation pathways to improve the
environmental performance of the sector. Our methodologies for quantifying feedstock
requirements of various petrochemical processing pathways, the products, process GHG
emissions, and the supply costs of products from various petrochemical hubs are presented in
Chapter 4. Presenting both the process and economic modelling techniques facilitates the
discussion on the effects of technical decisions on costs. Chapters 5 and 6 discuss the results and
overall conclusions from the analyses.
June 2019
Chapter 2: Petrochemical Industry

Overview
In 2018, CERI published Study No. 169 (CERI 2018a), which investigated the processes and
economic impacts of methane to derivatives petrochemical subsector. This study builds on the
existing studies by considering petrochemical feedstocks other than methane (or natural gas).
Petrochemical Processes and Technologies

Ethylene
Ethylene is the predominant petrochemical for producing various derivatives and end-use
products. The three major chemical processes for ethylene production are:
• Steam cracking of oil and gas-based feedstocks

• Dehydration of ethanol
• Methanol-to-Olefins
Although steam cracking of oil-based feedstocks generates more co-products, it offers relatively
lower ethylene yields compared to cracking of gas-based feedstocks.1 With the abundance of
unconventional gas in Canada, gas-based feedstocks are the focus of ongoing and future
petrochemicals development projects. The availability and lower cost of gas feedstocks also make
gas (and NGLs) feedstocks more desirable for the petrochemical sector in other North American
hubs that are beneficiaries of processed gas supplies from prolific onshore shale and tight gas
fields. As most North American ethylene producers transition to steam cracking of gas
feedstocks, fewer co-products (mainly propylene) are generated overall which depresses the
supply of such products despite the current and growing demand.2 Therefore, on-purpose
propylene production3 plants are expected in many hubs4 to address the market gap.
Steam cracking of ethane and/or propane for ethylene production has three essential
operations: cracking reaction and quenching, product compression and drying, and separation of
products and co-products. The quench is needed to stop further reactions that form undesired
products after the steam cracking. Figure 2.1 shows a simplified process diagram of an ethane-
propane cracking for ethylene production. Actual commercial technologies for steam cracking
might differ in design according to each vendor but the basic processing principles are generally
the same.
1
See Table 2.1. A complementary schematic comparison of the petrochemical yields from various feedstocks is
also later presented in Chapter 4 of this report.
2
Propylene demand growth is presented in the “Products Supply and Demand” section of this report.
3
A discussion on on-purpose propylene production is provided in (Fielden 2013)
4
See (Fielden 2014)
June 2019
Ethylene production is a non-catalytic, high-temperature process relying on cracking saturated

hydrocarbons into olefins. In the process, the feedstock is mixed with steam and then thermally
cracked into ethylene and co-products in a furnace at temperatures of 750oC to 875oC, depending
on the feedstock. The change occurring during the reaction is mainly dehydrogenation of the
feedstock achieved within a short residence time (less than one second) to maintain the desired
product yields and avoid undesired products. The presence of steam in the reaction is important
for good product yields and elimination of coking deposits on reactor walls which limits the
efficiency of the process. Consequently, carbon dioxide, carbon monoxide, and hydrogen are also
generated.
Figure 2.1: Process Diagram of Steam Cracking of Olefins
Source: (Siemens 2013)
The effluent of the cracker must be cooled immediately (quenched) to avoid further reactions
that lead to loss of product quality. Water or oil can be used for the cooling and heat recovery
for other uses. Subsequently, gaseous products are separated from heavier products, dried,
purified and compressed. Heavier products are condensed and fractionated into the various
components. Unconverted products are recycled back to the cracking furnace. Some of the co-
products, such as hydrogen, are used to fuel the furnace and maintain the process. Co-products
may also be purified and sold as high-value chemicals within adjacent processes in any of the
petrochemical hubs. Processing gaseous mixtures of light end hydrocarbons has the
characteristic of producing mainly ethylene and propylene, whereas processing liquid feedstocks
coproduces propylene and aromatics. Table 2.1 shows the typical product yields of various
feedstocks.
June 2019
Table 2.1: Steam Cracker Yields of Petrochemical Feedstocks (%)
Yield by Weight Ethane Propane Butane Naphtha Gasoil

Hydrogen and methane 13 28 24 26 18
Ethylene 80 45 37 30 25
Propylene 2 15 18 13 14
Butadiene 1 2 2 5 5
Mixed butenes 2 1 6 8 6
C5+ 2 9 13 8 7
Benzene 0 0 0 5 5
Toluene 0 0 0 4 3
Fuel Oil 0 0 0 2 18
Ethanol dehydration is considered a process for environmentally cleaner production of ethylene

using bio-ethanol. Although ethanol from any source could be used, the primary goal is non-
petroleum-based manufacture of ethylene. Global efforts to improve sustainability and mitigate
global warming drives the interest to develop renewable ethylene production pathways. Ethanol
dehydration is an endothermic process with better yields at higher temperatures and pressures
– typically around 250oC and 20 bar. This method of producing ethylene has relatively higher
costs than the conventional steam cracking method. BP Chemicals Technology and Chematur
Technology have developed commercially available ethanol to ethylene processes. One
limitation of the technology is that there needs to be enough ethanol production, so it is more
suitable to countries with large ethanol production such as Brazil and the US. Also, from a life
cycle perspective, the environmental benefits of such processes are still subject to debate. If the
scope of impact assessments were to cover the cultivation stages, overall cycle emissions balance
would depend on the type of agricultural feedstocks, land-use change, energy inputs and source
intensities. There are also concerns about the impact on food availability and water use.
Methanol-to-Olefins (MTO) process is another alternative route to ethylene production using

methanol feedstock which can be sourced from various raw materials such as natural gas,
biomass or coal. At the moment, commercial coal-to-olefins (CTO) plants are mostly in China and
South Africa. Coal units require larger capital outlays and are usually integrated to polymer close
to the coal mine, to ease transportation of final products to markets (Morse 2017). As of 2015,
MTO and CTO represented about 4% of global ethylene production capacity and is expected to
reach 15% by 2022 (Jones et al. 2016; Morse 2017). Aside from their high capital costs, CTO
developments also raise more environmental concerns.
MTO technologies have been developed by vendors such as Norsk A/S and UOP LLC (Intratec
2019). MTO can also be used to produce propylene (methanol-to-propylene, MTP). Lurgi MTP is
a commercial technology that produces polymer-grade propylene and ethylene, along with
blending stock gasoline and LPG co-products (Air Liquide 2017). A detailed discussion of the MTO
process is available in CERI Study No. 169 (CERI 2018a).
June 2019
Propylene
Propylene is produced either as a co-product or on-purpose (as earlier indicated). The sources of
propylene as a co-product (or by-product) are the steam cracking of naphtha,5 LPG, or from fluid
catalytic cracking (FCC) units in refineries (ICIS 2010). Cracking severity and feedstock blend
alterations can be used to improve propylene yields relative to ethylene in steam crackers to
between 25-45%, whereas catalyst performance enhancements are used to improve propylene
production from refinery FCC units.
Due to the existing and future demand growth for propylene,6 on-purpose technologies and
projects are being developed and sanctioned to primarily produce propylene using processes
such as propane dehydrogenation (PDH), methanol-to-propylene (MTP) and metathesis (ICIS
2010).
Propane dehydrogenation (PDH) is the primary, direct, commercial route to convert propane to
propylene but it requires a low-cost supply of the feedstock for economic viability. It is a high-
temperature process occurring at 500-700oC in the presence of a catalyst. In comparison to
propylene generation as co-product from crackers, the PDH process entails separate capital
investment for the on-purpose propylene and is, therefore, considered more capital-intensive.
Thus, process innovations have targeted a reduction in capital and operating costs.
PDH is an endothermic process that offers very high propylene yields of around 90% (Intratec
2019). Several PDH technologies have been developed such as:
• Oleflex by UOP
• Catofin by CB&I Lummus
• STAR by Uhde GmbH
The Oleflex process technology can be described in terms of the major operations such as the
reaction and product recovery steps. The propylene yield is enhanced by higher temperatures
and lower pressures using a moving-bed system for continuous catalyst circulation and
regeneration. Typical operating conditions are about 650oC at about atmospheric pressure, with
propylene yields of up to 90% (wt.). The new PDH plants to be built in Alberta by Inter Pipeline7
and Pembina8 have selected this technology. Figure 2.2A shows a sample flow diagram of the
Oleflex process design.
5
A complementary discussion on steam cracking of naphtha is provided in the “Petrochemical Feedstock Sources”
section of this report.
6
Propylene demand growth is presented in the “Products Supply and Demand” section of this report.
7
See (Inter Pipeline 2019)
8
See (Pembina Pipeline Corporation 2019)
June 2019
Figure 2.2A: Process Diagram of Oleflex Technology
Source: CERI
Catofin technology is another dehydrogenation-based propylene production design. It uses fixed-

bed reactors, with at least two of them to alternate between online and offline operating states
to enable catalyst regeneration. The two primary steps in the process include reaction and
regeneration and recovery of products. Figure 2.2B shows the Catofin process diagram. Typical
propylene yield is around 85% (wt). Catofin has a lower electricity requirement than Oleflex, but
higher fuel requirements (Maddah 2018). Hence, the combined GHG intensity of each of them
would depend on the carbon contents of the primary energy sources.
Figure 2.2B: Process Diagram of Catofin Technology
Source: CERI
The STAR (steam active reforming) technology is also based on the PDH principle but uses oxy-
dehydrogenation to convert the hydrogen co-products from the reformer reactor into water,
thereby releasing more heat for the reaction and altering the reaction equilibrium to effect higher
propylene yields. STAR consists of five main operations including reaction, product recovery, CO2
June 2019
capture, gas separation, and fractionation to separate ethane, propane and the propylene
product.
Metathesis involves a disproportionation reaction where ethylene and butenes from various
sources are converted to propylene. For olefin crackers producing insufficient propylene co-
product to meet supply contracts or to justify the addition of propylene polymerization units, this
process can be used to convert some of the ethylene main product in order to augment
propylene production. This process has already been integrated into some existing commercial
olefin crackers (ICIS 1997; BASF 2019). An example of the metathesis process application is in
Olefins Conversion Technology (OCT) by CB&I Lummus. It involves a fixed-bed catalytic reaction
occurring around 300oC, with two primary operations involving feed purification and reaction,
and product recovery.
Methanol-to-Propylene (MTP) process generates propylene under the presence of a zeolite

catalyst. It involves two reaction steps where the methanol is converted to dimethyl ether (DME)
and water. The methanol-water-DME system is then sent into an MTP reactor along with
superheated steam at around 480oC and 1.3 bar, to produce a propylene-rich product mixture
(Air Liquide 2017). Various MTP technologies have been licensed by Lurgi GmbH, Mitsubishi
Chemical Corp. and JGC Corp. (Intratec 2019). Since methanol is the feed for MTP technologies,
its availability is essential and is typically from natural gas (methane) to derivatives processes. A
further discussion of the MTP process route is provided in (CERI 2018a).
Polyethylene
Polyethylene (PE) is the largest volume commodity polymer, globally, produced from the
polymerization of ethylene. There are three main types: low-density polyethylene (LDPE), linear
low-density polyethylene (LLDPE), and high-density polyethylene (HDPE) that are differentiated
by their molecular structures and the degree of branching. This degree of branching also
determines the mechanical properties of the polymers. The three main processes for PE (whether
HDPE, LDPE, or LLDPE) production are categorized in terms of the reaction system as slurry,
solution, or gas-phase technologies.
LDPE is produced at higher pressures relative to HDPE, which can be produced at standard
atmospheric pressure. LDPE has a lot of long-chain branching which influences the rheological
properties, giving it more fluidity. The two primary routes to LDPE production are tubular and
autoclave technologies (Intratec 2019). There are various designs of these technologies by
different vendors (LyondellBasell 2018).
LLDPE production accounts for about 30% of global PE outputs. LLDPE production requires the
addition of alpha-olefins (butene, hexene, and octene) in the presence of a catalyst. Nova
Chemicals uses a solution-phase technology called SclairTech to produce LLDPE. HDPE could also
be produced with this technology by changing the additive copolymer (or alpha-olefin co-
monomer). Figure 2.3 shows the flow diagram of a solution technology like SclairTech. Various
June 2019
PE specs are also produced using gas-phase technologies such as Innovene G by Ineos
Technologies and Unipol licensed by Univation Technologies (Intratec 2019).
HDPE is mainly produced through slurry technologies. HDPE has fewer branching in its molecular
structure which gives it stronger mechanical strength. HDPE also has a higher molecular weight
compared to LDPE. Although gas-phase and solution technologies could be used, slurry
polymerization is known to be the most effective in terms of conversion rates. Most of the
existing HDPE technologies are improvements of the Ziegler process which was first used to
produce HPDE and subsequently commercialized by Phillips Petroleum Company (now Chevron
Phillips Chemical Company). Alpha-olefins are also used as co-monomers in some grades of HDPE.
Figure 2.3: Process Diagram of a Solution-phase PE Technology
Source: CERI
Polypropylene
Polypropylene is produced using gas-phase, bulk-phase, or a hybrid of both technologies. Gas-
phase reactions may occur in a fluidized-bed or stirred-bed reactor (Intratec 2019). In the bulk-
phase reactor, polymerization is done using liquid propylene in tubular loop channels. This
reduces the chances of polymer deposition on reactor walls. Figure 2.4 shows the diagram of a
bulk-phase technology with three main operations: purification and reaction, degassing and
pelletizing, and final monomer recovery (Intratec 2019). Spheripol technology by LyondellBasell
is regarded as the leading bulk-phase technology (JPPC 2016; LyondellBasell 2018).
June 2019
Figure 2.4: Process Diagram of a Typical Bulk-phase Reactor Technology
Source: CERI
The Unipol polypropylene process is a leading gas-phase fluidized-bed polymerization reactor

design originally licensed by DOW Chemicals until 2013 when the technology and licensing was
bought by WR Grace. Figure 2.5 shows the process diagram of gas-phase technology similar to
the WR Grace Unipol process, which comprises of three primary operations: purification and
reaction, degassing and pelletizing, and vent recovery.
Figure 2.5: Process Diagram of a Typical Gas-phase Technology
Source: CERI
The Novolen process is another PP technology that has a stirred-bed reactor design developed
by Lummus Novolen which uses a Ziegler-Natta catalyst. Process temperature is about 80-120oC
and comprises of three main operations, including purification and reaction, degassing and
pelletizing, and vent recovery (Intratec 2019).
June 2019
Other Olefins Technologies and Vendors

• BASF-Total Cracker (metathesis): A metathesis unit is used to boost propylene production.
There is an existing unit built in Port Arthur, Texas.
• Superflex Process marketed by Kellogg Brown & Root: Converts hydrocarbons in the C4
to C8 range into propylene.
• Deep Catalytic Cracking (DCC) licensed by Stone & Webster: Produces ethylene and
propylene from gas oil and de-asphalted oils.
• Mobil Olefin Interconversion (MOI) by ExxonMobil: Converts butanes/butenes, light
pygas and light naphtha under zeolite catalyst into propylene and ethylene in a fluidized-
bed reactor.
• Lurgi Process: Converts C4 and C5 alkenes (olefins) into propylene and ethylene.
• Olefin Cracking Process (OCP) by Total: Converts heavier olefins from methanol-to-olefins
(MTO) into lighter olefins – mainly propylene.
• Methanol-to-Propylene (MTP) process by Lurgi: Methanol from various sources (such as
coal, natural gas, refinery hydrocarbons, and biomass) is converted into propylene. There
are many commercial units in China and South Africa (Morse 2017; Air Liquide 2017).
• Spheripol Process: Licensed by LyondellBasell is a polypropylene production technology
having a high yield of the product and high selectivity catalyst for the process. This
technology accounts for about 45% of deployed polypropylene technologies
(LyondellBasell 2018).
Petrochemical Feedstock Sources

As earlier indicated, ethane, propane, liquefied petroleum gas (LPG), and naphtha are the main
feedstocks used to produce ethylene and propylene which are two major chemical building
blocks in the petrochemical manufacturing process. Ethane and propane NGLs are extracted
either from the gas stream in natural gas processing plants, off-gas plants, crude bitumen
upgraders or as side-products from refineries (CERI 2016, 2018b). Ethane is mainly used to
produce ethylene while propane is used partly for heating purposes and as a petrochemical
feedstock mix (with ethane) to co-produce mainly ethylene and propylene.
Naphtha is an intermediate hydrocarbon liquid by-product containing paraffin, naphthenes, and

aromatic hydrocarbons. Light naphtha (also called light straight-run [LSR] naphtha) consists of
molecules such as pentanes plus that have primarily five carbon atoms (or slightly more) per
molecule. It is derived from the crude oil distillation process in refineries9 or from NGLs
separation in an NGL fractionation plant (McKinsey n.d.). Steam cracking of light naphtha10
(Figure 2.6) results in the production of ethylene, propylene, and a C4 stream that includes
butadiene, isobutylene, and n-butenes (Petrochemicals Europe n.d.). Light naphtha from NGLs
fractionation is often called natural gasoline or pentanes plus (McKinsey n.d.).
9
The refining process also yields other products such as Liquid Petroleum Gases (LPGs) and gas oils that equally
serve as petrochemical feedstock for steam crackers (CERI 2016).
10
Includes heavy paraffinic naphtha that is less suited for catalytic reforming.
June 2019
Figure 2.6: Schematic Value Chain from Feedstock to Petrochemical Building Blocks
Source: CERI
Heavy naphtha contains mainly hydrocarbons with more than six carbon atoms (primarily
between 7 to 9 carbon atoms per molecule) and is usually catalytically reformed into benzene,
toluene, and xylenes which are also building blocks in the petrochemicals value chain (Figure 2.6).
Most heavy naphtha generated in a refinery comes from the atmospheric distillation unit
(McKinsey n.d.). Olefinic hydrocarbon containing naphtha derived from FCC, visbreakers and
coking processes in refineries are called cracked naphthas. Naphtha composition (paraffinic,
naphthenic, and aromatics content) varies, depending on the feedstock origin (Bishara,
Stanislaus, and S. Hussain 1984).
Feedstocks Supply and Demand

Of the three national jurisdictions considered in this study (Canada, US, and South Korea), Canada
and the US are two of the top 10 NGL-producing countries, with 847 thousand barrels per day
(kbpd) and 3.7 million barrels per day (Mbpd) of production, respectively (Figure 2.7). NGL
comprises of mainly ethane, propane, and butane. Other than methane, NGL is an essential gas-
derived feedstock for the petrochemical industry.
Based on 2017 data, the Province of Alberta hosts about 144,000 thousand cubic meters of NGLs
reserves, being about 60% of Canada’s NGLs reserves (CAPP 2018). More than 80% of the western
Canadian NGLs production comes from gas processing plants, with the NGLs production from
western Canadian gas processing plants expected to exceed 900 Mbpd by 2028 (CERI 2018b).
About 90% of the raw gas processed in western Canada is in Alberta which is Canada’s largest
petrochemical hub (CERI 2018a, 2018b).
June 2019
Figure 2.7: Top 10 NGLs Producing Countries, 2017
Source: (CERI 2018a) (Modified)
In the United States, around 80% of the 2018 total domestic NGLs production was from natural
gas processing plants (EIA 2019). Most of the gas processing plants are located along the US Gulf
Coast (USGC), in the West Texas/Oklahoma area, and in the Rockies (CERI 2014) with the USGC
being the largest petrochemical cluster in the US, as well as North America (CERI 2018a).
South Korea lacks domestic energy reserves and relies on naphtha production from crude oil
imports to meet the feedstock requirements for its petrochemical sector (CERI 2015; EIA 2018).
South Korea will be further discussed in the feedstock demand section.
Figure 2.8: US Fourth Quarter 2018 Domestic NGLs Production
Data source: (EIA 2019). Figure by CERI
June 2019
Ethane and Propane

Ethane production11 from western Canadian gas processing plants was 246 Kbpd in 2017, with
Alberta contributing over 90% (Figure 2.9). All the ethane produced in Alberta is consumed within
the Alberta petrochemical sector (AER 2019). CERI (2018b) concluded that the long-term demand
for ethane from western Canada will be a function of the degree of expansion and modification
of existing petrochemical facilities. Ethane supply to eastern Canada averages 70 Kbpd, mainly
from the US Marcellus and Utica shale plays (CERI 2014). However, the US currently supplies
ethane to Alberta crackers from North Dakota (Morse 2017).
Propane production from western Canadian gas processing plants was 210 Kbpd in 2017, with
Alberta contributing 88% (Figure 2.9). Western Canadian ethane and propane production are
expected to remain above 200 Kbpd between 2018 and 2028 (Figure 2.10). The ongoing Inter
Pipeline and Pembina PDH plant projects will be soaking up 22.3 Kbpd and 23.4 Kbpd of this
volume, respectively. Additionally, the new AltaGas terminal in British Columbia is on schedule
to start exporting 1.2 million tonnes per year (40.8 Kbpd) of propane to Asia this year. Currently,
about 85% of total Canadian propane production is exported (CKPC 2019). No remaining
established reserves of ethane and propane are currently reported from eastern Canada (CAPP
2018).
Ethane and propane account for more than 70% of all domestic US NGLs production (EIA, 2019).
In 2018, the US produced an annualized quarterly average of 1.7 Mbpd of ethane and 1.4 Mbpd
of propane from natural gas processing plants (Figure 2.11). Unlike the Canadian case, ethane
production in the US exceeds consumption (Figure 2.12).
Figure 2.9: Western Canadian Ethane and Propane Production from Gas Plants
Source: (CERI 2018a)
11
CERI (2018b) provides a discussion of the volume of ethane that is left in the natural gas stream which is not
shown in Figure 2.9.
June 2019
Figure 2.10: Western Canadian NGLs Production Forecast by Commodity
Figure 2.11: US NGLs Production from Gas Plants, 2018
2
1.8
1.6
Production (Mbpd)
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Q1 Q2 Q3 Q4
Ethane Propane Butanes Natural Gasoline (Pentanes Plus)
Source: (EIA 2019)A. Figure by CERI
June 2019
Figure 2.12: US Ethane Production and Consumption
Naphtha
In 2016, naphtha accounted for 42.5% of the global feedstock supply for ethylene production,
however, this market-leading position is expected to decline below 40% by 2021 (IHS Markit
2017b) as ethylene production (especially in the North American petrochemical sector) becomes
increasingly focused on cost-advantaged NGL feedstocks such as ethane (Figure 2.13). The global
estimated net increase in naphtha demand by 2035 is 1.8 Mbpd (CERI 2015).
Naphtha only makes up about 4% of the refined products from Canadian refineries (CERI 2014)
and is not a major feedstock for the western Canadian petrochemical sector which relies primarily
on ethane feedstock. The eastern Canadian (Ontario) petrochemical sector, however, utilizes C2
to C5 feedstocks to produce ethylene, propylene and other co-products (e.g., butylene and
butadiene).
In the US, naphtha and ethane dominate the petrochemical feedstocks, however, due to the
lower-cost ethane production from shale and tight gas activities, several expansion projects have
been planned to switch from naphtha to ethane feedstock for steam crackers (IHS Markit 2017;
also see Table 2.2).
Naphtha is the predominant feedstock used in the South Korean petrochemical sector for the
manufacture of ethylene, propylene and other derivatives (Nam 2017; CERI 2015, see also Table
2.3).
June 2019
Figure 2.13: Global Petrochemical Feedstock Supply Growth
Source: (IHS Markit 2017a)
Table 2.2: US Steam Cracker Investments and Capacities by Feedstock Type (tonnes)
Construction Hydrogen/
Year Operator Location Feedstock FS Quantity Ethylene Propylene Crude C4 Pygas
Type Fuel
2014 BASF Porth Arthur, LA Expansion Naphtha 324700 100000 52601 25976 35717 55199
2014 Westlake Calvert City, KY Conversion Ethane 251355 195000 7038 7038 195000 195000
2015 Westlake Lake Charles, LA Expansions Ethane 145657 113000 4078 4078 2476 22023
2016 Formosa Point Comfort, TX New Ethane 1031200 800000 28874 28874 17530 155917
2016 ExxonMobil Baytown, TX New Ethane 1933500 1500000 54138 54138 32870 292345
2017 Aither West Virginia New Ethane 350812 272158 9823 9823 5964 53043
2017 Shell Monaca, PA New Ethane 1933500 1500000 54138 54138 32870 292345
2017 Dow Freeport, TX New Ethane 1611250 1250000 45115 45115 27391 243621
2017 Chevron Cedar Bayou, TX New Ethane 1933500 1500000 54138 54138 32870 292345
2017 Sasol Lake Charles, LA New Ethane 1546800 1200000 43310 43310 26296 233876
Proposed
11062274 8430158 353253 326628 408984 1835714
Capacity
June 2019
Table 2.3: Petrochemical Production Facilities at Three Main South Korean Centres
Ulsan Yeochun Daesan

Year Built 1970s 1979 1980-90
Annual 3-unit naphtha 5-unit naphtha crackers 3-unit naphtha
Production crackers with 1,130 with 2,890 thousand crackers with 1,680
Capacity thousand tonnes of tonnes of ethylene thousand tonnes of
ethylene annual annual production ethylene annual
production capacity capacity production capacity
Source: (Park and Patel 2018)
Products Supply and Demand

According to the (IEA 2018), the combined global ethylene and propylene production is about
255 million tonnes per annum (Mtpa). As earlier mentioned, ethylene and propylene form two
of the basic chemicals12 that constitute the main building blocks for most of the chemical
industry. According to the (IEA 2018), the combined global ethylene and propylene production is
about 255 million tonnes per annum (Mtpa).
Ethylene
Ethylene is the most globally produced petrochemical building block. The world consumed over
150 million tonnes (Mt) of ethylene in 2017 (WoodMackenzie 2018b) and will need almost 200
Mt by 2025 to meet global demand (Figure 2.14).
12
The other chemical building blocks include ammonia, methanol, benzene, toluene, and mixed xylenes.
June 2019
Figure 2.14: World Consumption of Ethylene by Country/Region, 2018
According to (IHS Markit 2018), demand growth is expected in the range of 6.5 million tonnes
(Mt) per year between 2020 and 2025 (Figure 2.15). They suggest that to meet this demand
(primarily driven by Asia – Figure 2.16), 7.0 million tonnes per year of capacity additions are
needed (assuming sustainable operating rates of ~90%). IHS Markit argues that this capacity
growth requires new ethylene production assets, given the inability of the base load system
during 2016/17 to keep pace with demand.
Alberta’s four petrochemical plants have a total ethylene-producing capacity of 4.1 Mtpa. One of
these plants is in Fort Saskatchewan. The other three are in Joffre and combine to form the
world’s second-largest ethylene complex. Together, these four Alberta plants account for almost
80% of Canada’s total installed ethylene-producing capacity, with the remaining 20% located
near Sarnia, Ontario (NEB 2018).
Between 2016 and 2019, a combined 11 Mtpa of ethylene capacity from new and existing facility
expansion is expected in Canada and the United States, mainly riding on the back of access to
cheap ethane feedstock from shale and tight gas plays (Hays 2018).
As of 2010, South Korea, with an ethylene capacity of 7.6 Mtpa, ranked among the top 5 countries
in the world, making it a key contributor to northeast Asia (NE Asia) ethylene supply (Figure 2.17).
As of 2015, South Korea’s ethylene capacity had reached 8.64 Mtpa, being 5.4% of the global
share (Nam 2017).
June 2019
Figure 2.15: Global Ethylene Annual Demand Growth (Mt)
Source: (IHS Markit 2018)
Figure 2.16: Historical and Forecast Global Ethylene Consumption Growth, 2017 (% Share)
June 2019
Figure 2.17: World Ethylene Production by Region
Source: (IHS Markit 2016)
Propylene
The world consumed over 100 Mt of propylene in 2017 but will need 135 Mt by 2025 to meet
anticipated global demand growth (WoodMackenzie 2018a). The world total propylene capacity
is expected to exceed 100 Mt by 2024 (Figures 2.18). In North America, 20 Mt of propylene was
produced in 2013. However, propylene capacity is expected to increase to 38 Mt in 2023 to
account for 30% of the global market (Economic Plant 2017). In Canada, propylene accounts for
about 6.4% of the petrochemical production13 (Figure 2.19).
13
Ethylene is the primary petrochemical product made in Canada (regardless of the feedstock) and accounts for
51.6% of the relative petrochemical production (tonnes basis) (Statistics Canada 2011).
June 2019
Figure 2.18: Global Base Chemical Total Capacity Forecast by Market
The ongoing Inter Pipeline and CKPC projects in Alberta will bring an additional 525 and 550 Ktpy
of propylene, respectively, to the total Canadian production (CKPC 2019; Chemicals Technology
2016). However, Inter Pipeline will only polymerize about 15% of their production and sell the
rest to North American Polypropylene (NAPP) under a 25-year service agreement (Chemicals
Technology 2016). CKPC, on the other hand, plans to convert all their propylene product into
polypropylene (CKPC 2019).
June 2019
Figure 2.19: North American Chemical Capacity Forecast
Polyethylene (PE)
The global PE capacity is expected to increase from 108.3 Mt in 2016 to 150 Mt by 2027, with
production also growing from 93 Mt to 133.6 Mt by 2027 (Mistry 2017). Between 2017 and 2027,
the cumulative annual growth rate (CAGR) for PE demand is expected to range from 0.7% in
western Europe (the lowest regional growth) to 5.3% in Asia (the highest regional growth) (S&P
Global Platts 2019, also see Figure 2.21). From the S&P analysis, over the same period, the North
American PE demand CAGR is forecasted to be 1.9%, with the price for 65% of the US PE
production driven by oil prices (RTi 2018).
From 2016 to 2019, approximately 6.8 Mtpa of additional PE capacity is expected to be added in
Canada and the US, with an additional 3.28 Mtpa after 2020 (Hays 2018). With a PE capacity that
reached 23 Mt in 2017, the US in the same year exported 3.47 Mt of PE (Hays 2018). Several
upcoming PE plants are planned for the USGC (Figure 2.20).
June 2019
Figure 2.20: New and Upcoming USGC Ethylene and PE Plants
Source: (ICIS 2018)
Polypropylene (PP)
The global PP capacity is expected to increase from 76.6 Mt in 2016 to 89 Mt by 2023, with a
gradual speculative capacity of about 9.8 Mt required by 2027 for market balance at an 88% rate
(Mistry 2017). Although the global demand for PP is expected to annually average around 3%
between 2017 and 2027 (Mistry 2017), for the same period, the cumulative annual growth rate
for PP demand will vary in different global regions, from 0.6% in western Europe (the lowest
regional growth) to 4% in Asia (the highest regional growth) (S&P Global Platts 2019, also see
Figure 2.21). Most of the growth in Asia comes from northeast Asia (particularly China) where
demand-driven, on-purpose capacity has grown the fastest at around 24% over the last seven
years (Morse 2017).
June 2019
Figure 2.21: Polyethylene and Polypropylene Global Trade Flows by Region, 2017
Canada Russia
USA
China
India
Australia
Source: (S&P Global Platts 2019). Modified by CERI.
June 2019
June 2019
Chapter 3: GHG Emissions, Mitigation and

Regulations
GHG Emissions from the Petrochemical Industry
The petrochemical industry (including the processes required to produce ethylene and
propylene), requires a substantial amount of energy use and emits considerable amounts of
greenhouse gases. Emissions are produced during carbon dioxide separation from the feedstock,
de-coking the furnace and reaction system, fuel combustion, and methane leaks throughout the
production stages and flare operations.
There are three primary sources of GHG emissions from petrochemical plants, including:
• Heating demand emissions,

• Electricity demand emissions, and
• Process chemistry emissions.
While heating and electricity are easily recognized from the primary energy consumption to
produce heat and power for the process, process chemistry emissions occur when GHGs
generated from reactions and processing operations in the plant are released as part of the
process or unintentionally released to the environment. The main GHGs from petrochemical
facilities are carbon dioxide, methane, and nitrous oxide. Heating and process chemistry
emissions are often seen as direct emissions, whereas emissions due to electricity usage are
usually considered as indirect emissions. Some petrochemical plants are equipped with
cogeneration facilities for the in-house generation of heat and power.
Carbon dioxide is the predominant GHG emitted routinely from the petrochemical sector.
However, GHG emissions intensity usually vary, depending on the type of petrochemical process
and technology in use, in addition to feedstock type. The majority of emissions arise from the
overall energy use of the processes, unlike process chemistry emissions which are created from
the chemical conversions and separations of feedstocks or products. Depending on the type of
process, technology, feedstock and primary energy source, energy use emissions may account
for between 75% to over 90% of total emissions (Tao Ren, Patel, and Blok 2006).
For olefin cracking, the furnace is usually the highest source of GHG emissions due to fuel
combustion at a petrochemical facility. Apart from cracking furnaces, other sources include
boilers, vapour destruction units, cogeneration units, flares and incinerators, emergency
generators, and process area fugitives (US EPA 2012; Trinity Consultants 2012; Dow Chemical
Company 2014; Environmental Resources Management 2014; RTP Environmental Associates
2014).
In many plants, a portion of the feedstock is used as fuel for the process. In such cases, heating
emissions can be estimated based on embodied carbon in the feedstock. Table 3.1 shows the
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intrinsic CO2 emission factors for the feedstocks considered in this study. It can be observed that
ethane has the lowest intrinsic CO2 emission factor.
Table 3.1: Intrinsic CO2 Emission Factors for Various Feedstocks
Feedstock Type CO2 Emission Factor (Kg CO2/MBTU)

Hydrogen 0.00
Methane 52.28
Ethane 59.58
Propane 63.07
LPG1 64.20
Naphtha 66.51
Source: (Benchaita 2013), CERI
Mitigation Pathways (Processes and Technologies)

Mitigation strategies for petrochemical emissions are often described – depending on the
country – in terms of the attributes of the processing technologies as Best Practice Technology
(BPT), Best Available Technologies (BAT), or Best Available Control Technology (BACT). Although
BPT and BAT are often used interchangeably, BATs still need to be de-risked due to their limited
or zero commercial level deployment whereas BPTs are already in common use (Benchaita 2013).
BACT is mainly used in the US for benchmarking of new projects for Environment Protection
Agency (EPA) approval.
Over the last decade, various studies have attempted to identify opportunities to improve
efficiency and reduce emissions from the petrochemical sector by comparing the performances
of existing facilities to BPTs. An EPA study (IEA 2009) investigated 57 processes to highlight the
total estimated energy saving potentials by applying BPTs that meet heating electricity and
processing requirements. The study reported various energy saving potential for petrochemical
industries in various countries, as shown in Table 3.2.
1
Based on propane (30%) and butane (70%) compositions
June 2019
Table 3.2: Energy Reduction Potential by Country

Final Process Energy and Feedstock Use Final Process Energy and Feedstock Use
Definition (Including Electricity) (Excluding Electricity)
Reported BPT Reported BPT
Energy Energy 2 Improvement Energy Energy Improvement
Country EEI EEI
Use Use Potentials Use Use Potentials
(PJ/yr) (PJ/yr) (PJ/yr) (PJ/yr)
USA 7321 5655 0.77 22.70% 6412 4928 0.77 23.10%
China 5323 5332 1 (-0.2) % 4301 4514 1.05 (-5 )%
Japan 2252 1959 0.87 13% 2053 1800 0.88 12.30%
Korea 1562 1594 1.02 (-2.1%) 1416 1477 1.04 (-4.3%)
Saudi Arabia 1369 1058 0.77 22.70% 1369 1058 0.77 22.70%
Germany 1241 1209 0.97 2.60% 1064 1068 1 (-0.3%)
India 1096 1133 1.03 (-3.3%) 1096 1133 1.03 (-3.3%)
Benelux Union 1092 1147 1.05 (-5.1%) 1004 1077 1.07 (-7.3%)
Taiwan 859 738 0.85 14.10% 736 640 0.87 13.10%
Canada 843 766 0.91 9.20% 776 712 0.92 8.20%
France 714 631 0.88 11.50% 627 561 0.9 10.50%
Brazil 651 576 0.88 11.60% 572 513 0.9 10.40%
Italy 457 408 0.89 10.60% 389 354 0.91 9.10%
World 35217 29940 0.85 15.00% 31529 26990 0.86 14.40%
Source: (IEA 2009)
There are five main mitigation pathways via BPT or BACT. These include:
• Energy efficiency (e.g., CHP, better combustion practice, recycling, etc.)

• Fuel switching (e.g., bioenergy, low carbon fuels, etc.)
• Leak detection and repair (LDAR)
• Decarbonization of electricity (e.g., use of renewable electricity, clean electricity, etc.)
• Carbon capture, and storage (e.g., from the cracking process, from the power source, etc.)
The International Energy Agency (IEA 2018) identified five emission mitigation levers for the
petrochemical industry as alternative feedstocks, energy efficiency, plastic recycling, coal to
natural gas, and carbon dioxide capture, utilization and storage (CCUS). Figure 3.1 shows the
expected contributions from the mitigation levers to achieve CO2 emission reduction of 45% by
2050, even as the industry grows by 40% over this period (IEA 2018). Plastics recycling is expected
to usher a reduction of 9% through improvements in collection rate, yield rate and displacement
of virgin hydrocarbon demands in the petrochemicals supply chain. The largest reductions are
expected from CCUS (35%), coal to natural gas feedstock transition (25%, mainly from Asia), and
2
EEI is Energy Efficiency Index
June 2019
energy efficiency improvements (25%). CCUS is expected to deliver the most reduction of all the
mitigation levers.
Figure 3.1: Expected Contributions of IEA Mitigation Levers to

CO2 Emission Reduction by 2050
Source: (IEA 2018)
Greenfield Facilities
Greenfield facilities have the advantage to implement cost-effective BPTs as they are relevant for
new facility builds. Maximum savings in energy consumption and emissions are achieved by
deploying BPT in new projects. However, this could present a major cost hurdle in terms of initial
capital investment needed (Bazzanella and Ausfelder 2017). This calls for simultaneous
considerations of economic, efficiency and environmental performances of the mitigation
options to be adopted.
Brownfield Facilities
Brownfield facilities have limited mitigation options, especially for older facilities. Any
improvement would be incremental. Improvement opportunities for existing facilities are
dependent on anticipated technological advances in areas such as catalyst systems design,
reactor optimization through advanced process modelling, control and digitalization, and heat
integration (Bazzanella and Ausfelder 2017). Based on industry reports, incremental
improvements in integrated facilities can improve yields by between 2% to 5%, decrease energy
intensity by between 0.2% to 1% per year, and improve product quality by up to 50% (Bazzanella
and Ausfelder 2017).
Carbon capture and storage (CCS): CCS is considered as a mitigation pathway that could remove
50% to 90% of the CO2 emissions from a source (Adams et al. 2017). The CO2 must be captured,
compressed and stored permanently. Depending on the energy source for the capture plant, net
emissions could increase by about 20% to 30% for a natural gas combined cycle (NGCC) powered
capture (Equistar Chemicals LP, 2012, Griffin et al. 2017) and up to 38% for coal combustion
power plants (Adams et al. 2017). There are now commercial facilities capturing CO2 for
June 2019
enhanced oil recovery (EOR) and permanent storage in saline aquifers. The Boundary Dam CCS
plant removes CO2 from a power plant for EOR applications in Saskatchewan. The Alberta Quest
CCS project – also in Canada – was commissioned in 2015 and has since captured and stored
about 4 Mt of CO2 as at May 2019. Experiences gained from building and operating these facilities
are helping to de-risk CCS technologies and new projects globally. The major risk factors include
the total cost of implementation, the possibility of stored CO2 leakage, and uncertainties about
the maintenance and monitoring of a CCS site, post-injection. These projects will need more time
for operation and management to consolidate current understanding of their performance and
durability.
Nonetheless, deployment of CCS mitigation in the petrochemical sector has yet to fully catch on.
Even though it is common for permit applications for new petrochemical facilities to cite CCS for
emission mitigation in their BACT analysis, none has ever gone ahead to deploy CCS in their final
designs. Moreover, project feasibility studies have suggested that the cost of capture and
compression, alone, would increase the total capital cost by more than 25% (US EPA 2012; Adams
et al. 2017). Currently, apart from the utilization of captured CO2 for enhanced oil recovery or as
feedstock for chemical industries, there is no incentive to recover capex. Therefore, it will only
be done on regulatory compliance grounds.
Energy Efficient Design and Operation: Energy efficiency can be a major option to reduce
emissions, even with increased production. For instance, the European chemical industry total
production increased by 78% between 1990-2014. However, fuel and power consumption fell by
22% (Bazzanella and Ausfelder 2017). Energy use by the furnace accounts for about 60% of total
requirements of an olefin manufacturing plant, whereas thermal efficiencies of most furnaces
are between 75-90%, although more often in the lower range. Due to design and operational
constraints, theoretical maximum efficiency is said to be about 92% high heating value (HHV)
(Trinity Consultants 2012).
Integrated energy efficient designs can optimize steam, fuel, and overall energy use of a steam
cracker. By integrating energy use, waste heat can be minimized in the plant. Designing for and
maintaining efficient heat transfer attributes in the furnace and boilers also minimize fuel
consumption, saving money and cutting emissions (US EPA 2012). These can be realized by
leveraging the opportunities to improve energy efficiency by reducing heat losses from 1) flue
gas, 2) process effluent, and 3) firebox walls. Other opportunities include (RTP Environmental
Associates 2014; Morse 2019):
• Maintaining the correct proportions of nitrogen in the combustion air and fuel mixture;
nitrogen absorbs heat from the combustion, reducing the efficiency
• Providing the temperature required to initiate and complete combustion
• Generating adequate turbulence or interaction between combustion fluids to achieve
proper mixing
• Ensuring appropriate residence time for the combustion reaction to complete and for
heat transfer
June 2019
• Periodic tune-ups and maintenance, continuous monitoring, routine process cleaning and
maintenance, and reduced decoking cycles
• Maintaining optimal operating rates (e.g., calibration of oxygen analyzers, temperature
measurements, flow measurements, and replacement of furnace radiant section tubes)
• Avoiding the use of intermediate tankage to provide feed from one unit to another
• Processing lower intermediate product quality specifications, without affecting or
degrading operations and final product quality
• Deploying different catalysts that are more active or more selective, or having longer
lifetimes
• Implementing structured packaging in columns to improve separation and reduce energy
use through less recycling, pumping, and heating
• Applying the concept of transfer of efficiencies for rotating equipment with significant
electricity requirements by utilizing higher efficiency power sources (such as hydro)
• Informing decision making through digitalization and process analytics via artificial
intelligence, advanced process control and optimization.
Fuel switching: the use of renewable or low carbon fuels for the process has been reported to
reduce facility emissions by between 20% to 40% (US EPA 2012; IEA 2018). When combined with
energy efficiency, it can provide significant GHG reduction for a petrochemical facility. Commonly
switched fuels would be natural gas or hydrogen for coal or diesel. Steam crackers yield up to
4.3% hydrogen which can be co-burned with the main fuel in the furnace to reduce emissions
(Benchaita 2013). Some operators have reported burning fuel blends of 25% to 85% hydrogen
contents in their plants (US EPA 2012) RTP Environmental Associates, 20143).
However, at higher hydrogen contents, combustion temperature also increases, triggering the
generation of more NOx emissions. Up to 60% higher NOx emissions than from firing low
hydrogen content fuels can occur. Consequently, additional investments in ultra-low NOx
emission burners and selective catalytic reduction might be needed (RTP Environmental
Associates 2014). Some studies (Griffin, Hammond, and Norman 2018; Bazzanella and Ausfelder
2017) have highlighted fuel switching to renewables such as biomass. This will reduce/remove
emissions but can drive other environmental concerns such as soil erosion, water shortage, use
of pesticides and eutrophication from fertilizers. There are also issues related to logistics and
transport of fuel feedstock from long distances that might cancel the avoided emissions.
Decarbonization of electricity and electrification: emissions due to electricity use in the plant is
an indirect source and depends on the intensity of the generator. Where grid electricity is used,
the average grid emission intensity can give a good idea about the impact of electricity
requirements. The use of renewable and clean electricity can cut electricity use-related
emissions.
Electrification of processes offers the opportunity to adopt electricity-based processes instead of

burning fuels directly. This has been of interest to some companies for steam generation. This
3
Shell Chemical Appalachia’s ethane cracker plant, which is currently under construction in Pennsylvania, US.
June 2019
would require the replacement of natural gas-fired boilers with electric boilers or hybrid boilers
(Bazzanella and Ausfelder 2017). This can reduce fuel consumption by up to 60% (Bazzanella and
Ausfelder 2017; DOE 2015). Hybrid boilers can switch between natural gas and electricity; with
fast response time and lower direct emissions. They can take advantage of cheaper off-peak
electricity and can absorb surplus supplies of intermittent renewable power generation, as a
component of demand-side management (Bazzanella and Ausfelder 2017; DOE 2015). The main
challenge is that electricity cost might become very high for processes requiring high
temperatures.
Leak Detection and Repair (LDAR): Leak detection and repair can be used to combat fugitive
emissions from the facilities due to releases of process fuels (such as natural gas – methane, fuel
gas, and cracked gas), process chemistry emissions, or GHGs entrained in the feedstock which
leaks from any part of a petrochemical plant. LDAR programs can be achieved through:
• Leakless/sealless technologies
• Direct sensing and measurement
• Remote sensing and measurement
• Auditory, visual, olfactory monitoring and assessment
There is much left to be understood on LDAR effectiveness and the best approaches for deploying
the technologies and operator training requirements needed to reduce emissions. Facility
coverage area and potential emission sources need to be inventoried in order to improve
effectiveness.
GHG Emissions and Carbon Regulations

Canada
Key legislation and regulations
The Canadian Environmental Protection Act (CEPA) (1999) is an important part of Canada’s
federal environmental legislation (including climate change action and carbon management
legislation).
• Greenhouse Gas Reporting Program (GHGRP) under Section 46 of the CEPA: Operators of
facilities that meet the criteria identified in the annual Notice with respect to reporting of
greenhouse gases, published in the Canada Gazette, are required to report their GHG
emissions to Environment and Climate Change Canada (ECCC) on an annual basis. All
facilities that emit 10 kT of CO2e/year or more are required to submit a report to ECCC by
June 1 of each year. The program is mandatory for those who meet the requirements and
has collected data from facilities since 2004 (ECCC 2019).
Greenhouse Gas Pollution Pricing Act (2018) implements a federal carbon pricing system that
includes two key elements: 1) a charge on fossil fuels that would be paid by fuel producers or
distributors, and 2) an output-based pricing system (OBPS) for industrial facilities that are
emissions-intensive and trade-exposed (Government of Canada 2018).
June 2019
• The aim of the OBPS is to minimize competitiveness risks for emissions-intensive trade-
exposed (EITE) industrial facilities while retaining the carbon price signal and creating
incentives to reduce GHG emissions.
• The charge would not be applied to fuels used at industrial facilities that are registered
under the OBPS. Instead, they would pay the carbon price on the portion of emissions
that exceed an annual output-based emissions limit.
• In jurisdictions where the backstop applies, the OBPS will apply to industrial facilities that
emit 50 kT CO2e or more and for which an output-based standard is specified (regulated
facilities), or that emits between 10 and 50 kT CO2e per year and whose application for
voluntary participation is approved (opt-in facilities).
• Facilities whose emissions are below their annual facility emissions limit will receive
surplus credits from the federal government. Facilities whose emissions are above their
limit will have three options to meet its obligation: 1) paying a charge to the federal
government (set at the same level as the fuel charge), 2) submitting surplus credits, and
3) submitting eligible offset credits.
Canadian Environmental Assessment Act (2012) does not require a federal environmental
impact assessment for the construction, operation, decommissioning and abandonment of
petrochemical projects. However, the environmental assessment process is mandatory for
industrial facilities located in a wildlife area or migratory bird sanctuary, as well as a railway yard
with seven or more tracks or a total track length of 20 km or more.
Several regulations that may impact petrochemical facility development are currently being
adjusted or are under review. These include:
• Multi-Sector Air Pollutants Regulation

• Proposed Federal Methane and Carbon Emissions Reduction Programs
• Greenhouse Gas Reporting Changes
• Canadian Environmental Assessment Agency Bill C-69
Major policy documents

• Pan-Canadian Approach to Pricing Carbon Pollution (2016)
• Pan-Canadian Framework on Clean Growth and Climate Change (2016)
• Federal Actions for a Clean Growth Economy: Delivering on the Pan-Canadian Framework
on Clean Growth and Climate Change (2016)
• Technical Paper on the Federal Carbon Pricing Backstop (2017)
• Guidance on the Pan-Canadian Carbon Pollution Pricing Benchmark (2017)
• Carbon Pricing: Regulatory Framework for the Output-Based Pricing System (2018)
June 2019
Alberta
Climate Change and Emissions Management Act (CCEMA) (2003)
• Carbon Competitiveness Incentive Regulation (AR 255/2017) under the CCEMA outlines
the mechanism of the hybrid carbon pricing system in Alberta. The system is composed
of an output-based allocation (OBA) system and a provincially mandated carbon levy.
Both the OBA benchmark and carbon levy progressively tighten to drive emissions out of
the economy. Several compliance options other than directly paying the mandated levy
are provided (Province of Alberta 2018).
• Specified Gas Reporting Regulation (AR 251/2004, amended in 2018) requires facilities
that emit 10 kT CO2e/year or more to submit annual reports on their emissions. Facilities
subject to this Regulation report their GHG emissions through the federal government’s
Single Window Information Management System (Government of Alberta 2019).
Climate Leadership Implementation Act (2017)
• Climate Leadership Regulation (2016)
Environmental Protection and Enhancement Act (EPEA) (2000): Alberta Environment and Parks
regulate petrochemical facilities under the EPEA through industrial approvals.
• Environmental Assessment (Mandatory and Exempted Activities) Regulation under the

EPEA lists activities that are required for the environmental impact assessment process.
A provincial assessment is mandatory for the construction, operation or reclamation of
an ethylene or ethylene derivative manufacturing plant, as well as a benzene,
ethylbenzene or styrene manufacturing plant (Government of Alberta n.d.).
Ontario
Environmental Protection Act (1990)
• Greenhouse Gas Emissions: Quantification, Reporting and Verification Regulation

(O.Reg. 390/2018) under the Ontario Environmental Protection Act requires facilities
(including petrochemical production) generating more than 10 kT but less than 25 kT of
CO2e/year to report their total GHG emissions annually. Facilities emitting 25 kT of
CO2e/year or more are required to have their emission reports independently verified
(Government of Ontario 2019b).
• Proposed Industrial Emission Performance Standards (2019) under the Ontario
Environmental Protection Act will impose a carbon tax like emissions standard on
industrial facilities. Implementing an Ontario Emission Performance Standard will
provide flexibility for Ontario circumstances as an alternative to the federal OBPS
portion of the federal Greenhouse Gas Pollution Pricing Act. The program is expected
June 2019
to be in place by summer 2019 and to have it apply to emissions as of January 1, 2019

(Government of Ontario 2019a).
Currently, without the Industrial Emission Performance Standards in place, the federal backstop
with OBPS is applied in Ontario after the provincial government revoked the Cap and Trade
Regulation (Ontario Regulation 144/16) through the Climate Change Mitigation and Low-carbon
Economy Act, 2016 and the Cap and Trade Cancellation Act, 2018. Large industrial emitters are
also required to report their annual GHG emissions under the federal GHGRP through the Single
Window Information Management System (ECCC 2019).
Major policy documents

• Technical Standards to Manage Air Pollution (2018), Chapter 7.0 Petrochemical – Industry
Standard. The purpose of this technical standard is to identify and implement best
available controls to minimize air emissions of benzene and 1,3-butadiene from Ontario
petrochemical facilities. With respect to facilities, this industry standard applies to every
facility that is part of a class identified by NAICS code 325110 (Petrochemical
Manufacturing) (Government of Ontario 2018).
• Ontario’s Five-Year Climate Change Action Plan 2016-2020 (Government of Ontario 2016)
The United States

The Clean Air Act (1970) is the comprehensive federal law that regulates air emissions from
stationary and mobile sources and requires the EPA to set National Ambient Air Quality Standards
for six common air pollutants. For major sources, Section 112 requires that the EPA establish
emission standards (Maximum Achievable Control Technology standards) that require the
maximum degree of reduction in emissions of hazardous air pollutants. Major sources are
defined as a stationary source or group of stationary sources that emit or have the potential to
emit 10 tonnes per year or more of a hazardous air pollutant or 25 tonnes per year or more of a
combination of hazardous air pollutants (US EPA 2017).
Greenhouse Gas Reporting Program (GHGRP, referred to as 40 CFR Part 98) requires reporting of
GHG data and other relevant information from a total of 41 categories (including petrochemical
production) of large industrial emitters in the United States. Facilities are generally required to
submit annual reports under Part 98 if GHG emissions from covered sources exceed 25 kT
CO2e/year (US EPA 2018).
• 2015 Revisions and Confidentiality Determinations for Data Elements Under the
Greenhouse Gas Reporting Rule (Final Rule, 81 FR 89188, 2016) finalize amendments to
specific provisions in 29 subparts of the Greenhouse Gas Reporting Rule (including
Subpart X Petrochemical Production) to be phased in over the 2016, 2017, and 2018
reporting years. Under the Mandatory Reporting of Greenhouse Gases rule, owners or
operators of facilities that produce petrochemicals (acrylonitrile, carbon black, ethylene,
ethylene dichloride, ethylene oxide, and methanol) must report emissions from
June 2019
petrochemical processes and all other source categories located at the facility for which
methods are defined in the rule (US EPA 2016).
• Subpart X - Petrochemical Production Monitoring Checklist. In addition to the monitoring
requirements under 40 CFR subpart C for the Tier 3 (for CH4 and N2O emissions) and Tier
4 Calculation Methodologies (for CO2) and the requirements under 40 CFR subpart Y for
flares, other applicable parameters for each petrochemical production process unit must
be monitored (US EPA 2009).
• Subpart X - Technical Support Document for the Petrochemical Production Sector:
Proposed Rule for Mandatory Reporting of Greenhouse Gases (2008). For this GHG
reporting rule, the petrochemical production source category only considers the
production of acrylonitrile, carbon black, ethylene, ethylene dichloride, ethylene oxide,
and methanol, because production of GHGs from these processes has been recognized
by the Intergovernmental Panel on Climate Change (IPCC) to be significant compared to
other petrochemical processes (US EPA 2008).
National Emission Standards for Hazardous Air Pollutants for Source Categories: Generic
Maximum Achievable Control Technology Standards and National Emission Standards for
Ethylene Manufacturing Process Units: Heat Exchange Systems and Waste Operations (2005, 40
CFR Part 63, Subpart YY).
South Korea
The Clean Air Conservation Act (1995), Article 35
The Chemicals Control Act (in force since 2015) focuses on chemical reporting and chemical
accident prevention (ChemSafetyPro 2019).
The Act on Integrated Control of Environmental Pollution-Generating Facilities (2015)

integrates the governmental licensing/approval systems for certain pollution-generating facilities
currently regulated by various environmental laws such as the Clean Air Conservation Act. The
facilities eligible for an integrated license/approval are those that 1) emit at least 20 t/year of air
pollutants, or 2) discharge at least 700 m3/day of industrial effluent (Kwon et al. 2017).
The Act on Registration and Evaluation, etc. of Chemical Substances (K-REACH) (2013, amended
in 2018, in force since 2019). Under amended K-REACH, any person who intends to manufacture
or import a new chemical substance or at least one t/year of an existing chemical substance shall
register the chemical substance according to the specific requirements (ChemSafetyPro 2018).
The Framework Act on Low Carbon, Green Growth (2010, amended in 2013) provides the legal
base for the subsequent implementation of the Korea Emissions Trading Scheme (KETS, see
below) (International Carbon Action Partnership 2019).
June 2019
The Act on Allocation and Trading of Greenhouse Gas Emissions Allowances (the Emissions
Trading Act) (2012), along with its Enforcement Decree (2012), introduces a system for trading
GHG allowances through market mechanisms, and stipulates government actions, institutions,
and timelines for the KETS (International Carbon Action Partnership 2019).
• The Master Plan for the Emissions Trading Scheme and the Phase I National Allowances
Allocation Plan (2014) were announced in 2014 to implement the Emissions Trading Act.
The Korea Emissions Trading Scheme (KETS) was launched in 2015 and is currently in its second
phase, which runs from 2018 to 2020. The KETS became the first nationwide mandatory
emissions trading system (ETS) in East Asia and the second largest carbon market after the
European Union ETS. The KETS covers 591 of South Korea’s largest emitters from 64 subsectors
(including the petrochemical industry) which are responsible for approximately 68% of national
GHG emissions. Under this system, the inclusion thresholds are more than 125 kT CO2e/year for
a company, and more than 25 kT CO2e/year for a facility. As of 2018, the allowance price (average
secondary market price) was equal to US$20.62 per t/CO2e (International Carbon Action
Partnership 2019; Asian Development Bank 2018).
The Greenhouse Gas and Energy Target Management System (launched in 2012) enables the
mandatory collection of verified emissions data from establishments and businesses that emit
large quantities of GHGs or consume large amounts of energy but are not included in the ETS.
From 2014, it has been applicable to businesses emitting 50 kT CO2e/year or more, or consuming
200 TJ of energy or more, and to establishments emitting 15 kT CO2e/year or more, or those
consuming 80 TJ of energy or more (Ministry of Environment, Republic of Korea 2017).
June 2019
Chapter 4: Methodology
In order to quantify GHG emissions and calculate supply costs for the petrochemical products
and their derivatives examined in this study, CERI considers hypothetical integrated
petrochemical facilities located in each of the hubs of interest to transform single and mixed
feedstocks into the desired final products.
The following feedstock and final product scenarios are assessed:
A. Ethane-only to polyethylene and co-products

B. Ethane+propane feedstock mix to polyethylene and co-products
C. LPG-only (propane + butane) to polyethylene and co-products
D. Naphtha-only to polyethylene and co-products
E. Propane-only to polypropylene and co-products
For an integrated facility, polyethylene is considered the main product of steam cracking whereas
polypropylene is the main product of propane dehydrogenation. Figure 4.1 shows the
petrochemicals processing pathways analyzed for the feedstock scenarios. The co-products
evaluated are propylene (from steam cracking), ethylene (from PDH), hydrogen, and methane
(fuel gas). The PDH process consumes only propane as feedstock to produce propylene, which
then polymerizes. Overall material balance is achieved to determine total amounts of the rest of
the other co-products.
Figure 4.1: Process Diagram of Integrated Processes for Polypropylene and Polyethylene
Production using Various Feedstocks
As earlier indicated, CERI’s approach is to use petrochemical hub-level analysis to evaluate the
effect of location (e.g., feedstock availability, supporting infrastructure, access to destination
markets for products) and carbon regulations on the supply costs of PE and PP products.
June 2019
For NGL-derived feedstock blends, CERI utilized the quantities of products estimated for a generic
facility from a process input-output model to determine the main product, co-product, and other
side-product yields. Product supply costs were calculated using a supply cost model. Further
details of the modelling are presented in the following sections.
Petrochemical Processes Input-Output Modelling

The purpose of a process input-output model is to estimate product yields for the various
feedstock options into the petrochemical plant. We assume that this is a hypothetical facility
located in each of the hubs in the three countries (Canada, the US and South Korea) considered
in this report. Process options are based on either steam cracking or PDH along with a
polymerization unit. The polymerization unit is intended for the primary (main) product. We
assume that co-products are recovered for sales.
For our chosen plant capacity and depending on the feedstock-process-product combinations
and the technologies examined, published data on yields are used to evaluate feedstock
consumption and quantities of co-products and other less valuable side products. Co-products of
interest are hydrogen, methane, ethylene, propylene and aromatics, whereas the other side-
products of interest are the greenhouse gases such as CO2, CO (fully oxidized to CO2) and N2O.
Levi and Cullen (2018) used a similar approach to map global flows of various feedstocks into
various chemical products.
Figure 4.2 shows the typical yields of petrochemical products from steam crackers according to
industry reported data (LyondellBasell 2018). Apart from the emissions generated from the
chemical conversion of some portions of the feedstocks into side-products, the other two sources
of emissions are from fuel consumption for heating and electricity. Although some petrochemical
plants may have in-house electricity generation, electricity emissions are usually considered
indirect emissions from the plant operations.
GHG emissions from heating and electricity requirements can be determined from the primary
energy consumption to provide these energies.
Total facility emissions can be computed for both direct and indirect emission sources. Carbon
dioxide equivalent emissions of methane and nitrous oxide are calculated using IPCC(AR5) global
warming potentials (GWP) of 28 and 265, respectively.
Further information and the data sources for product yields of various processes and
technologies, in addition to their electricity and heating requirements, are provided in
Appendices B and C. The process model uses industry estimates of propylene (and
polypropylene) yields from PDH plants of 80%. Data on two commercial PDH technologies
(Oleflex and Catofin) were utilized. Data on polymerization technologies are obtained from
vendors and industry reports.
June 2019
Figure 4.2: Yields of Products for Various Single Feedstocks to Olefin Steam Cracker
(product yield is for each feedstock)
Source: (Lyondellbasell, 2018, modified by CERI)
Costs and Economic Impact Assessment

CERI utilized a supply cost model (SCM) to assess the costs related to the production of PE and
PP petrochemical products from crackers that utilize single feedstock or feedstock mixes (as
earlier mentioned). The supply cost assessment considered the costs associated with PE and PP
shipments to the US and China destination markets to provide a landed supply cost.
Supply Cost Model: Components and Method

CERI’s supply cost model (SCM) comprises the following sub-modules:
1. Project description: This module captures the information on capacity and feedstock
2. Project costs: Captures costs associated with
a. Capital expenditure (CAPEX),
b. Construction time (years), and
c. Operating expenditure (OPEX)
June 2019
3. Inflation, return and exchange rates:1 This module accounts for CAPEX, OPEX and price
inflation. The discount and exchange rate form the other components of this module.
4. Taxation: The fiscal parameters in this module include the government corporate tax
(Federal and Provincial), capital depreciation rate, and carbon tax.
Two additional modules complement the SCM, namely:
Cash flow model: This module accounts for the cash flow in the build phase and during
operations.
The net cash flow is discounted over a given duration (30 years in this study) with a discount
rate (internal rate of return [IRR] of 10% in this study).
Transportation costs: This module is assessed separately to allow CERI to determine the plant
gate (or free on board [FOB]) supply cost and landed supply costs. Transportation costs refer
to the cost associated with getting the product to the destination market. The cost associated
with transporting feedstock to the cracker2 is captured as part of the OPEX in the SCM.
The supply cost will be the cost in dollars per tonne ($/t) in 2018 constant dollars that sets
the net present value of the NCF to zero.
General Model Assumptions

The following general assumptions underpin the data input and components in CERI’s SCM
(Appendix A).
Capital Requirement
It is assumed that the funds required to construct the petrochemical complexes are available
through 100% equity financing. Therefore, no debt servicing is involved.
Feedstock Prices
CERI used 2018 regional prices of the various feedstocks included in our process model and
inflated future prices by 2%. Feedstock prices in South Korea (importing country) are estimated
by adding transportation costs to the prices in USGC (exporting country).
Labour
All the plants modelled are assumed to have been constructed and operated in the four
petroleum hubs using non-union labour. Using unionized workers would result in higher cost
levels which vary as a function of the location (Petrochemical Update 2019).
1
(Bank of Canada 2019)
2
Referred to as the feedstock transport cost
June 2019
Location Factors
One of the challenges of running the SCM for the USGC, Alberta, Ontario, and South Korea for
the petrochemical complexes represented by feedstock scenarios A to E was the unavailability of
readily accessible detailed construction cost data. To compensate for the paucity of data, CERI
applied location factors (Table 4.1) on a US cost basis to the cost values retrieved from reference
studies, data sources or CERI estimates for petrochemical plants constructed in the USGC (Sasol
2017; Compass International 2018; Petrochemical Update 2019). The location factor takes into
account the following variables in different locations (Compass International 2018):
• Disparities in construction materials and labour rates

• Productivity differentials
• Differences in the utilization of construction equipment and power tools
• The importation of construction materials and major capital equipment/machinery
• Design costs
• Exchange rates
• Freight costs
• Taxes
• Import duties
CERI classified the location factors used in the study on whether the petrochemical complex is
the first of its kind (FoiK) or not the first of its kind (NFoiK) in the location. Location factors are
higher for Foik projects (Table 4.2) as a steep learning curve is expected in dealing with the
government policies, regulatory requirements and/or local challenges. In determining a base
case location factor for FoiK projects, it is considered that the FoiK impact on the construction
cost would be moderated or accentuated by the presence or absence of supporting
infrastructure, access to labour, and industrial construction know-how. In this study, a greenfield
petrochemical plant constructed in Ontario is assumed to be a FoiK project and hence assigned
a FoiK construction cost location factor – since no new projects have been built/slated for the
Sarnia hub recently.
The location factor was also used to estimate the cost information where the construction cost
was unavailable in the USGC but available for plants in other petrochemical hubs.
June 2019
Table 4.1: Construction Cost Location Factors for NFoiK Petrochemical Plants, 2018
USGC Cost Basis
Location Location Factor Remarks

Canada – Alberta 0.983 For Canada-based chemical, process,
Industrial Heartland or manufacturing facilities (utilizing
some imported materials and
equipment)
Canada – Ontario 0.984 For Canada-based chemical, process,
(Sarnia and Corunna) or manufacturing facilities (utilizing
some imported materials and
equipment)
South Korea 0.965 For South Korea-based chemical,
process, or manufacturing facilities
(with a high-content of imported
engineered equipment6).
Table 4.2: Construction Cost Location Factors for FoiK Petrochemical Plants, 2018
USGC Cost Basis
Location Location Factor Remarks

Canada – Alberta 1.1 CERI estimate. Considers the existence
Industrial Heartland of an industrial cluster in Alberta, the
presence of supporting infrastructure,
relatively easier access to labour and
know how.
Canada – Ontario 1.15 CERI estimate. Considers the existence
(Sarnia and Corunna) of an industrial hub with supporting
infrastructure, however, access to
labour and know how may be more
challenging.
South Korea 1.02 CERI estimate. Considers the existence
of an industrial cluster in the Alberta,
the presence of supporting
infrastructure, access to labour and
know how.
3
Compass International, 2018
4
ibid
5
ibid
6
The location factor is 0.92 if there is limited importation of equipment. However, CERI’s base case scenario for
South Korea assumes elevated levels of equipment and construction materials import.
June 2019
Cost Analysis Framework

CERI evaluated the supply costs at the plant gate for greenfield projects constructed in Alberta,
Ontario, USGC, and South Korea. The cost analysis was sub-divided into four evaluations to
highlight the key factors affecting the supply costs for each facility in the petrochemical hubs
studied. The evaluations apply to the plant gate supply cost given the criteria below:
• No carbon tax, no co-product sales (NCNC)

• No carbon tax, with co-product sales (NCCS)
• Carbon tax, no co-product sales (CTNC)
• Carbon tax, with co-product sales (CTCS)
The inclusion of shipping (outbound transportation) costs for each evaluation yields the landed
supply cost at the two destination markets considered in this study (USGC and China).
Considering the five feedstock scenarios (earlier indicated) and CERI’s cost analysis framework
(CAF), a total of 80 supply cost model7 runs were performed in this study.
Figure 4.3 provides an overview of the four supply cost evaluations performed for the five
feedstock types in Alberta, Ontario, USGC, and South Korea.
Figure 4.3: Supply Cost Analysis Framework
Source: CERI
Target Markets: The United States and China

As the shipping/freight cost is usually absorbed by the PE and PP producer, CERI evaluated supply
costs by considering that the PE and PP produced are landed at a destination market.
7
Twenty initial models were initially constructed and subsequently modified to test each of the CAF criteria shown
in Figure 4.3.
June 2019
Two target markets were considered in this study. First, the US which was earlier presented in
the feedstock and supply-demand sections of this report. Secondly, the Chinese market.
China’s base chemical capacity is expected to exceed 100 Mt by 2024, forming a major proportion
of the Asia-Pacific combined chemical capacity of more than 200 Mt, the world-leading chemical
capacity by 2024 (Figure 4.4). Despite their large percentage share of the global chemical
capacity, the Asia-Pacific region is expected to have a PE deficit of ~27 Mt and ~10 Mt of PP by
2027 (Figure 2.21).
Figure 4.4: Global Base Chemical Capacity Forecast by Region
Source: CERI, 2018 (Modified)
For a region with a cumulative annual demand growth rate of 5.3% for PE and 4% for PP as at
2017 (Figure 2.21), China, the world’s largest chemical market (BASF 2018), is a logical target
market for PE and PP products from the Middle East, North America and other Asia-Pacific net
petrochemical product exporters such as South Korea (CERI 2016; also see Figure 4.4). Figure 4.5
shows China’s PP and PE demand-supply balances.
As shown in Figure 4.6, China’s potential 2.58 Mt of PE capacity outlook is second only to the US
which has a world-leading new PE capacity of approximately 4.5 Mt due to the influx of cheap
feedstock (primarily ethane) from shale gas fields.
June 2019
Figure 4.5: China Demand-Supply Balance (‘000 tonnes)
2017 (estimate) 2016 (estimate) 2015
PP Supply
PP Demand
PE Supply
PE Demand
0 5000 10000 15000 20000 25000 30000

Source: ICIS - Widjaja and Tan, 2017.
Figure 4.6: New PE Capacities by Product, 2017 (‘000 tonnes)
Source: ICIS - Widjaja and Tan, 2017. Modified by CERI.
Note: HDPE = High-density PE, LDPE = Low-density PE, LLDPE = Linear low-density PE.
June 2019
June 2019
Chapter 5: Results
Feedstock options are designed to capture jurisdictional varieties of petrochemical feedstock
demands and availability. Canadian petrochemical hubs in Alberta (AIH) currently use mainly
ethane feedstock from NGL sources, whereas in Ontario there is some variety with about 30%
ethane, 32% propane, 28% butane and about 10% naphtha. USGC feedstock blend comprises
about 32% naphtha, 36% ethane, 18% propane, and some butane and gas oil. Naphtha is the only
feedstock used by the South Korean petrochemical industry. Figure 5.1 shows the feedstock
options utilized in the process model. LPG feed is assumed to be composed of 30% propane and
70% butane. Ethane-only, ethane and propane mix, LPG, and naphtha are feeds to the steam
cracker (SC) while propane-only is feed to the PDH process.
Figure 5.1: Feedstock Compositions for Steam Cracking and

Propane Dehydrogenation Processes
Ethane Propane Butane Naphtha
100%
90%
80%
70%
Feedstock Blend
60%
50%
40%
30%
20%
10%
0%
Process Type
Source: CERI
These feedstock and process combinations, in addition to their integrated polymerization units,
constitute the five hypothetical facilities assessed for each of the four hubs of focus in our
product supply cost modelling. Although some of the hubs (like Alberta and South Korean hubs)
do not currently process all the feedstock options included here, our approach is designed to
June 2019
provide insights on the impacts of jurisdictional differences on economic and environmental

performance indicators of the processing pathways considered.
Steam cracking (SC) of olefins and propane dehydrogenation (PDH) are the two primary
processing pathways evaluated in this study. Oleflex and Catofin are the PDH technologies
included for on-purpose polypropylene production. There are various steam cracking
technologies available for processing various feedstock mixtures into olefins and co-products.
CERI used data covering many olefin cracking technologies reported in industry reports,
regulatory filings and academic literature.
Emission intensities of processing pathways capture the differences in processing technologies,

fuel types, electricity requirements and sources. For instance, Catofin has a lower electricity
requirement but higher fuel use, whereas Oleflex has lower fuel use but higher electricity
requirement (Maddah 2018). On the basis of fuel use alone, Oleflex is less GHG emitting.
However, on an overall energy requirement basis, Catofin generates fewer emissions. Figure 5.2
shows the ranges of GHG emissions for each process and feedstock combination. NGCC, coal and
cogen are the three types of electricity sources incorporated in our current modelling, however,
NGCC is used as the benchmark electricity source for most facilities. The process emissions
include those from the production of olefin monomers and the subsequent polymerization step.
Process emissions are expressed in per tonne of the primary/main product.
Figure 5.2: Ranges of Process GHG Emissions for Different Process and Feedstock Options
2.00
Process Emissions (t-CO2e/t-product)
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Process and Feedstock Options

Source: CERI
June 2019
The PDH process for on-purpose polypropylene has the lowest GHG emission intensity ranging
between 0.19 to 0.62 t-CO2e/t covering both Oleflex and Catofin technologies. Polyethylene from
ethane cracking plants has the next lowest intensity from 0.54 to 1.35 t-CO2e/t. Polyethylene
from naphtha cracking has the highest GHG intensity ranging between 1.24 to 1.96 t-CO2e/t.
However, naphtha cracking has a wider product spread relative to the other cracking feedstocks.
Therefore, if overall emissions were to be allocated to all high-value products using any of the
standard LCA methods (such as system expansion, substitution or partitioning), the intensities
based on each high-value chemical would be lower. Nevertheless, our approach in this study is
to quantify total processing emissions based on the main product for each feedstock processing
pathway.
The primary sources of GHG emissions in a petrochemical plant are process heaters, boilers,
cooling towers, catalyst regeneration vents, gas purge/flare systems, MSS (maintenance, start-
up & shutdown) emissions, and process fugitives. Based on EPA prevention of significant
deterioration (PSD) filings, fugitive emissions may account for up to 5% of total facility GHG
emissions (Trinity Consultants 2012, 2012; US EPA 2014; Chevron Phillips 2018; US EPA 2012;
Environmental Resources Management 2014). Depending on the process and technology in use,
methane and nitrous oxide emissions account for between 0.1% to about 2% of total carbon
dioxide equivalent emissions. In order to determine process chemistry emissions of methane and
nitrous oxide, we calculate fuel and electricity emissions and then evaluate the difference
between the latter and the total reported carbon dioxide equivalent emissions for similar
processes, as listed in Appendices B and C.
In order to compare the effect of the electricity source on GHG emissions, Figure 5.3 shows the
average process emissions for the three electricity sources considered. Average emissions are
calculated for all the technology options available for processing the feedstocks into various
products while meeting the heating and electricity requirements from various sources. Heating
is provided by burning fuel gas, which is supplemented with natural gas when the fuel gas is
insufficient. When cogen is used, some of the heating requirement is satisfied with the provision
of high-pressure steam from the generator. CERI’s process model assumes cogen overall
efficiency of 80% (40% electricity and 40% heat), consistent with industry reported information
(AUC 2016; BASF 2019). NGCC efficiency of 55% is applied, along with supercritical coal efficiency
of 40%.
Average process emissions are lowest in all the cases for PDH and propane feed, but highest for
steam cracking and naphtha feed. For PE production, steam cracking and ethane feed processing
has the lowest GHG emission intensity irrespective of electricity source. PDH using either coal or
cogen has an average intensity of 0.52 or 0.26 t-CO2e/t. Steam cracking of either ethane or
naphtha has intensities of about 0.90 or 1.60 t-CO2e/t (with coal power) and around 0.59 or 1.25
t-CO2e/t (with cogen), respectively.
On the basis of NGCC as the benchmark electricity source, electricity and fuel emissions for the
various processing pathways represent, respectively, 27% and 73% for SC_Ethane, 51% and 49%
June 2019
for PDH_Propane, 14% and 86% for SC_Ethane+Propane, 14% and 86% for SC_LPG, or about 13%
and 87% for SC_Naphtha.
Figure 5.3: Effect of Electricity Source on the Average GHG Emissions for
Process and Feed Options
1.60
Average Process Emissions (t-CO2e/t-product)
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Coal+Heat NGCC+Heat Cogen

Source: CERI
We broadly categorized all products from the steam cracking reactor or the propane
dehydrogenation reactor into the primary/main product, co-products, and side-products which
are not valuable (i.e., not among the high-value chemicals). Depending on the process, the main
product in our analysis is either ethylene or propylene. For steam cracking technologies, ethylene
is the main product which is further polymerized into PE. For the PDH technologies, propylene is
the main product polymerized into PP. Our supply cost model assumes that co-products are sold
at their local market values. Figure 5.4 shows the co-products from each process and feed options
included in our CAF scenarios for co-product sales.
The major co-products assessed include propylene (from steam cracking), ethylene (from PDH),
methane and hydrogen (from both SC and PDH), in addition to others such as butadiene, butenes,
and aromatics (benzene and toluene). The other side-products include carbon dioxide, carbon
monoxide, nitrous oxide, nitrogen, oxygen, hydrogen sulphide, water, etc.
June 2019
Apart from the co-products shown in Figure 5.4, the other co- and side-products represent about
4% of total product yields from ethane cracking, about 9% of the ethane-propane mix cracking,
13% of LPG cracking, 15% of PDH products and about 32% of naphtha feed cracking.
Figure 5.4: Selected Co-product Yields for Various Process and Feedstock Options
1.40
Co-products (tonne per tonne of main product)
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Propylene Methane Hydrogen Ethylene

Source: CERI
Supply Cost Results: PE and PP Supply Cost Framework, Plant Gate

Based on the supply cost assessment performed using the CAF criteria discussed earlier, CERI’s
SCM shows that plant gate supply costs are the highest in the CTNC evaluation (PE $1918/t; PP
$1811/t), followed by NCNC (PE $1881/t; PP $1772/t). PE and PP supply costs are lower in the
CTCS (PE $1398/t; PP $1601/t) and NCCS (PE $1361/t; PP $1562/t) assessments, with the NCCS
being the least supply cost of the four CAF criteria evaluated.
Figure. 5.5 provides an overview of the plant gate supply costs from the cost analysis framework.
The supply costs represent the average supply cost for the PE produced by all the petrochemical
complexes evaluated in this study per CAF criteria. CERI’s engineering process model quantifies
both the primary product and co-products from each petrochemical complex. For steam cracking,
June 2019
PE is considered as the primary product and PP is one of the co-products. For PDH, PP is the
primary product and PE is one of the co-products. Therefore, the PP cost shown in Figure 5.5 was
derived from the average PP supply cost from the four propane to PDH facilities modelled in this
study.
Figure 5.5: Indicative Supply Costs per Cost Analysis Framework, Plant Gate
4000
3500
3000
Supply Cost ($/t)
2500
2000
1500
1000
500
0
NCNC NCCS CTNC CTCS
PE PP
Source: CERI
Supply Costs Per Feedstock Type and Jurisdiction, Plant Gate

A more detailed breakdown of the supply costs based on the CAF criteria, feedstock type, and
jurisdiction reveals informative supply cost differences as shown in Figures 5.6 to 5.9.
The NCNC supply costs (Figure 5.6) represent CERI’s supply cost estimates without the effect of
carbon taxes and revenue generated from selling co-products. Therefore, the NCNC CAF results
capture the jurisdictional impacts of constructing and operating the petrochemical facilities in
Alberta, Ontario, USGC, and South Korea. The impacts observed from considering just co-product
sales (NCCS) or carbon tax (CTNC) are represented respectively in Figures 5.7 and 5.8, while Figure
5.9 depicts the combined effects of both carbon tax and co-product sales on supply costs. The
results indicate that the supply cost is most sensitive to the value of co-products. A carbon tax
has the most impact on Canadian and South Korean supply costs, relative to USGC where there
is no carbon tax. Overall, a carbon tax has the most impact on Canadian supply costs despite the
predominant processing of the lower GHG-intensity gas-based feedstocks in Canadian
petrochemical hubs. Thus, this stems from the higher price of carbon dioxide equivalent
emissions in Canada, compared to the other jurisdictions.
June 2019
Availability of cheaper NGL feedstocks in producing areas such as Alberta and USGC results in
lower PE supply costs for ethane and ethane+propane cracking plants. In the absence of a carbon
tax, PP supply costs at Canadian and USGC facility gates are quite similar – albeit, slightly higher
for USGC plants but more pronounced for a South Korean plant due to feedstock cost. Moreover,
while LPG processing would be unfavourable in South Korea on economic terms, naphtha
processing is most competitive relative to the other hubs. The supply costs are also presented by
jurisdiction in Appendix D.
Figure 5.6: Indicative NCNC Supply Costs per Jurisdiction and Feed Type, Plant Gate
4500
4000
Supply cost ($/t)
3500
3000
2500
2000
1500
1000
500
0
Source: CERI
June 2019
Figure 5.7: Indicative NCCS Supply Costs per Jurisdiction and Feed Type, Plant Gate
4500
4000
Supply cost ($/t)
3500
3000
2500
2000
1500
1000
500
0
Source: CERI
Figure 5.8: Indicative CTNC Supply Costs per Jurisdiction and Feed Type, Plant Gate
4500
4000
3500
Supply cost ($/t)
3000
2500
2000
1500
1000
500
0
Source: CERI
June 2019
Figure 5.9: Indicative CTCS Supply Costs per Jurisdiction and Feed Type, Plant Gate
4500
4000
Supply cost ($/t)
3500
3000
2500
2000
1500
1000
500
0
Source: CERI
Given that our supply cost model has the plant utilization factor ramping from 70% in the first
year, 80% in the second year and 90% afterwards, we also assessed the sensitivities of our results
to plant utilization at a 35% level in the first operating year. For PP production in each hub, the
average impact on supply cost is +$20/t (AB), +$20/t (ON), +$21/t (USGC), and +$21/t (South
Korea). For PE production in each hub, the average impact on supply cost is +$13/t (AB), +$15/t
(ON), +$12/t (USGC), and +$19/t (South Korea). Overall average impact on PP supply cost due to
the lower plant utilization across hubs of 35% is +$21/t, whereas for PE it is +$15/t.
Key Supply Cost Components

From CERI’s analysis, the key components affecting PE supply costs are feedstock cost (75.19%),
capital cost (9.26%), and operating costs (10.19%). Other components such as electricity and
corporate tax contribute 0.76% and 1.95%, respectively. Similarly, as for PP, the key elements are
feedstock cost (77.47%), capital cost (12.46%), and operating costs (3.52%). Electricity and
corporate tax contribute 1.99% and 2.51%, respectively.
A carbon tax increases the supply cost by an overall impact of 1.53% and 1.57% for PE and PP,
respectively. In the CTCS CAF scenario, the overall impact of a carbon tax on the supply cost is
moderated because of the revenue generated from co-product sales. Figures 5.10 and 5.11 show
the breakdown of supply cost elements for PE and PP, respectively, across the four petrochemical
hubs.
June 2019
Figure 5.10: Supply Cost Structure for PE Production at the Four Hubs
June 2019
Figure 5.11: Supply Cost Structure for PP Production at the Four Hubs
The average revenue share from hydrogen sales from PE production across the four hubs is
14.06% while the average revenue share from propylene sales is 15.61%. Average revenue share
from hydrogen sales from PP production via PDH is 11.63%. Ethylene co-production from PDH
amounts to about 0.0015 tonne per tonne of propylene main product. Naphtha yields about 10%
aromatics, including benzene and toluene. Our current supply cost numbers are not net of the
aromatics yields.
Figure 5.12 shows the indicative revenue shares of propylene and hydrogen co-product sales for
PE and PP production from their respective feedstock options. Ethylene constitutes about 0.1%
of the co-product revenue shares from PDH plants in the 4 jurisdictions, which amounts to a
reduction in the supply cost of up to $1.5/t in 2018 constant dollars.
June 2019
Figure 5.12: Shares of Hydrogen and Propylene Co-product Sales for Each Processing Pathway
Landed Supply Costs

The landed supply costs provide a perspective of the indicative supply costs at the destination
market for produced PE and PP using the five feed options and transported to the USGC or China
for sale. The SFC ($/t) is added to the supply costs obtained for each of the CAF assessments to
obtain the supply cost at the destination market. CERI’s SFC estimates were based on information
available in the public domain, as well as feedback from CERI interviews with petrochemical
industry experts.
Table 5.1 shows the base case SFC costs for transporting PE and PP from the four petrochemical
hubs to the USGC and China. CERI’s base case SFC is based on the average between the low and
high SFC (shown in Appendix A). Canadian hubs have the advantage to ship to China against
USGC, and the advantage to shipping products to USGC against South Korean.
Table 5.1: PE and PP Outbound Average Transportation Costs (base case)
USGC (Texas) China

PE PP PE PP
Alberta 13 0.006 18 0.008 23 0.010 28 0.013
Ontario 14 0.006 19 0.009 26 0.012 30 0.014
USGC 8 0.003 11 0.005 31 0.014 35 0.016
South
26 0.012 29 0.013 18 0.008 22 0.010
Korea
June 2019
A further break down of the SCM results are presented in Appendix D.
If we take the average supply cost across all the hubs, for each process and feedstock option
under the NCNC scenario, the economic and environmental performance indicators of each
feedstock processing pathway can be visualized and compared – as in Figure 5.13 – with reduced
effects of jurisdictional differences on the cost for each process and feedstock combination.
Processes using gas-based feedstocks have lower emissions and supply costs as against LPG and
naphtha, which have higher energy requirements. For the PE and PP production studied here,
steam cracking of ethane feed and propane dehydrogenation have the lowest economic and GHG
emission intensities relative to the other production pathways.
Figure 5.13: Average Supply Cost and GHG Emissions by Process and Feedstock Options
Our analysis boundary does not cover upstream emissions from natural gas and NGL supply
chains, so this comparison should be taken in this context. There is still an active debate in the
literature about relative upstream intensities of gas against oil, and conventional versus
unconventional resources (Umeozor et al. 2018; Yeh et al. 2017; Zavala-Araiza et al. 2018;
Johnson et al. 2017; Barkley et al. 2017; Laurenzi et al. 2016; Kasumu et al. 2018).
Considering the compositions of processing capacities in the four petrochemical hubs studied
here, CERI can estimate their total annual GHG emissions at defined utilization levels. In
consonance with our supply cost modelling assumption, we apply 90% capacity utilization factor
June 2019
to the most recently available data on processing capacities at the hubs as reported by
(Koottungal 2015) and (Morse 2017). By combining the ranges of emission intensities of each
processing pathway with the total products generated therein, CERI evaluated total annual
emissions in each hub, as shown in Figure 5.14.
Total annual GHG emissions are highest for USGC, in the range of 19.8 Mt CO2e to 37.4 Mt CO2e.
Seconded by South Korean hubs with emissions ranging between 6.0 Mt CO2e and 9.5 Mt CO2e.
Canadian petrochemical hubs have the lowest annual GHG emissions with the Ontario hub
emitting between 0.5 Mt CO2e to 0.9 Mt CO2e, whereas the Alberta hub emits between 2.1 Mt
CO2e to 5.2 Mt CO2e.
Figure 5.14: Total Annual GHG Emissions from Petrochemical Hubs (2016 capacity basis)
US GC
S.Korea
ON
AIH
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Total Annual GHG emissions (kt-CO2e)
June 2019
Chapter 6: Conclusions
This study investigated economic and GHG emissions attributes of petrochemical processing
pathways using steam cracking and propane dehydrogenation, integrated with polymerization
units. Five feedstock options including single and mixed feedstocks such as ethane, propane,
ethane and propane, LPG (propane and butane), and naphtha which are used to produce olefins
and various co-products were analyzed using supply cost and GHG intensity as performance
criteria.
CERI used a process data-based model to quantify feedstock consumption for each processing
pathway, product yields for the main/primary products and co-products, process energy
requirements including heating and electricity, and GHG emissions from the processing
operations, including CO2, N2O, and CH4. GHG emissions from petrochemical facilities depend on
the types of fuel in use, feedstock processed, and process/technology design and operational
attributes. Fugitive emissions are also of concern for petrochemical plants due to the variety of
potential sources of leakage. However, fugitive emissions are smaller in comparison to energy
use emissions. Furthermore, non-CO2 GHG emissions typically account for less than 1% of total
carbon dioxide equivalent emissions.
We also calculated indicative plant gate supply costs under each processing pathway, assuming
that hypothetical polyethylene and polypropylene integrated facilities are located in four
petrochemical hubs in Alberta, Ontario (Sarnia/Corunna), US Gulf Coast and South Korea. Using
market information on current and anticipated demand growth regions, CERI selected the US and
China as potential destination markets for the products. Supply costs at the destination markets
are also calculated on a FOB basis in order to assess the competitiveness of products from each
petrochemical hub at the destination markets.
By observing jurisdictional explicitness in the modelling input parameters, the cost of

constructing and operating each plant in the selected hubs are evaluated. Among the important
supply cost modelling variables are capex, opex, feedstock cost, revenues from the primary
product and co-product sales, carbon tax, and transportation costs to move products to the
destination markets.
Alberta and USGC hubs have the advantage of cheaper NGL feedstock due to their location, and
as such PE is produced in these areas at the lowest supply costs. Feedstocks are relatively more
expensive in Ontario and South Korea. Even with a carbon tax in Alberta, plant gate cost of PE
production from ethane feed is lower than in USGC despite not having a carbon tax.
The observation is different in the case of propylene and PP from PDH due to the current
abundant supply and ease of moving propane to various demand locations. Plant gate PP supply
costs are similar across the four hubs, although slightly cheaper in Canada. This signifies that
competitive landing costs at destination markets would be crucial for all volumes destined for
export.
June 2019
Canada currently exports about 85% of annual propane production and imports PP for the local
plastics market. Thus, there is an existing and growing domestic PP demand to fulfill. The two
ongoing PDH projects by Inter Pipeline and CKPC in Alberta will together produce about 630 KTA
of PP for the local market. Of this volume, Inter Pipeline will contribute about 80 KTA and sell the
rest of its product in the form of propylene under a service contract with North American
Polypropylene. When completed, these two projects will leave about 124 Mbpd of propane for
export. Depending on the development of additional export terminals, the future supply-demand
balance for propane in western Canada is challenging to predict. The balance is further
complicated by the source supply for any new west coast LNG projects. If more PP demand
opportunities arise in proximate markets, Alberta may have the ability to add more PDH capacity.
Relative to other jurisdictions, the Canadian petrochemical sector predominantly utilizes gas-
based feedstocks. However, this is now a growing trend in other areas with the abundance of
NGLs mainly from shale and tight reservoirs. In these hubs, gas-based feedstocks offer both
economic and environmental advantages. Companies using gas-based feedstocks have witnessed
wider margins as costs have stayed quite low while revenues have followed oil prices. Processing
lighter feedstocks also generates less GHG emissions. The availability of natural gas is also driving
the growth of gas power plants, reducing the carbon emissions of electricity grids if coal is
displaced. The combined effect is a lowering of GHG intensity products from the petrochemical
industry.
Yet, there are other issues like plastics pollution which face the industry. If these challenges
instigate major global policy efforts to regulate the impacts of various petrochemicals processing
end-use products, recycling could become an essential environmental impact mitigation option.
However, careful consideration is needed to determine if there are net energy penalties from the
recycling operations and the availability of commercial-scale technologies to reintegrate plastic
wastes. The IEA estimates that recycling will result in about 9% reduction in emissions in their
future scenarios (IEA 2018).
Social, political and regulatory uncertainties are growing sources of concern for the industry.
Recently, the Canadian government announced a ban on single-use plastics. Canada has also
proposed a Clean Fuels Standards (CFS) regulation under the Canadian Environmental Protection
Act 1999, to reduce GHG emissions from fuel use across various economic sectors (including the
petrochemicals industry). The CFS policy is designed to use a lifecycle approach in quantifying the
emissions from fuels used for heating, electricity and transportation in the affected sectors.
CERI’s recent study on fuel decarbonization estimated various cost impacts for gaseous, liquid
and solid fuels under different decarbonization scenarios ranging from $0.94 per GJ to $3.51 per
GJ (CERI 2019). If implemented, this may erode the current feedstock pricing advantage available
to Canadian petrochemical hubs – particularly Alberta – since the additional costs would be
passed down to buyers and users of the affected products and services. Other impending issues
that may affect feedstock pricing, demand and supply are tightening International Maritime
Organization (IMO) fuel standards, crude oil-to-chemicals process innovations, and peak oil
demand.
June 2019
In the meantime, stakeholders and operators can focus on the cost-effective options for
improvements such as design and operational energy efficiency levers, feedstock switching,
electrification of process systems, digitalization, and implementation of facility survey programs
to identify and plug any GHG leaks.
June 2019
June 2019
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https://www.sasol.com/investor-centre/lake-charles-chemicals-project/final-
investmentdecision.
Siemens. 2013. “Petrochemical Industry Ethylene Plant.” Siemens Industry, Inc.
https://www.industry.usa.siemens.com/automation/us/en/process-instrumentation-and-
analytics/process-analytics/pa-brochures/documents/piaap-00002-0713-ethylene.pdf.
S&P Global Platts. 2019. “Global Trade Flows, 2017: Polyethylene and Polypropylene.”
https://www.spglobal.com/platts/en/products-services/petrochemicals/market-data-
petrochemicals.
Sproule Associates, GPMI. 2019. “Forecast Archives - Sproule.” Sproul. 2019.
https://sproule.com/forecasts/archives.
Statistics Canada. 2011. “Petrochemicals Industrial Profile.” Government of Canada | Statistics Canada.
November 17, 2011. https://www.ic.gc.ca/eic/site/chemicals-chimiques.nsf/eng/bt01135.html.
Trading Economics. 2019. “Naphtha Summary.” 2019.
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Trinity Consultants. 2012. “Equistar Chemicals LP. Channelview North OP-1. Permit 2933 - GHG
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https://archive.epa.gov/region6/6pd/air/pd-
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June 2019
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Zavala-Araiza et al. 2018. “Methane Emissions from Oil and Gas Production Sites in Alberta, Canada.”
Elementa 6 (1). https://doi.org/10.1525/elementa.284.
June 2019
June 2019
Appendix A: Economic Modelling Data

Table A.1: Supply Cost Model Input Parameters and Assumptions
Jurisdiction Alberta Industrial Heartland Ontario – Sarnia/Corunna
Feedstock Ethane - Ethane + LPG-only Naphtha Propane Ethane - Ethane + LPG-only Naphtha Propane
only Propane (PDH) only Propane (PDH)
OPEX inflation (%) 2
Feedstock price ($/gal) 0.121 0.50 0.78 1.92 0.66 0.572 0.812,3 1.11 1.61 0.91
2
Feedstock price inflation (%) 2
Discount rate (%) 1024
2
Plant utilization (%) 70% (1st yr.), 80% (2nd yr.), 90% (rest)
2
CAPEX allocation/year during 20% (1st yr.), 30% (22nd yr.), 50% (3rd yr.)
the plant build-out 2
2
Note: All dollar references are in $US.
2
2
2
2
2
2
2
2
2
2
1
Source for Alberta feedstock prices: Sproule Associates, 2019
2
Source for Ontario ethane, LPG and Naphtha feedstock: (IEA 2018); 2016 Asia Pacific estimates converted to 2018 dollars.
3
Source for ethane + propane and propane (PDH) feedstocks: NEB, 2019.
4
CERI’s discount rate is consistent with the discount rate reported in the literature (Ren, et al. 2008; Andre et al. 2012) for cost-assessing similar petrochemical
plants.
June 2019
Jurisdiction United States Gulf Coast South Korea
OPEX inflation (%) 2
Feedstock price ($/gal) 0.355 0.726 0.75 1.427 0.89 0.848 0.939 2.6510 1.24 0.97
2
Feedstock price inflation (%) 2
2
Discount rate (%) 10
2
Plant utilization (%) 70% (1st yr.), 80% 2
(2nd yr.), 90% (rest)
2
CAPEX allocation/year during 20% (1st yr.), 30% (2nd yr.), 50% (3rd yr.)
the plant build-out 2
2
Note: All dollar references are in $US. 2
2
2
2
2
2
2
2
2
2
5
OPIS, 2019
6
Sproule Associates 2019.
7Trading Economics, 2019.
8
Source for South Korea ethane, and naphtha prices: (IEA 2018); 2016 estimates converted to 2018 dollars.
9
Source for South Korea ethane + propane and propane prices: (IEA 2018)
10https://www.globalpetrolprices.com/lpg_prices/
June 2019
Table A.2: Indicative SCM Results for Alberta and Ontario Petrochemical Facilities at Plant Gate (2018 Constant Dollars)
Jurisdiction Alberta Industrial Heartland Ontario – Sarnia/Corunna
Supply cost ($/t) 1754 1774 990 1189 1108 1736 1756 985 1196 1100
Construction period (yrs.) 3
Facility lifetime (yrs.) 30
3
Plant capacity (mtpa) 1.50 1.50 0.75 1.45 0.525 1.50 1.50 0.75 1.45 0.525
30
Project CAPEX ($ billion) 7.84 7.97 2.16 2.75 3.50 3 7.84 7.97 2.16 2.875 3.50
OPEX ($/t) 322 329 179 313 151 30 322 328 179 327 151
3
Cash cost ($/t) 686 688 606 614 625 668 670 601 608 617
30
3
30
3
30
3
30
3
30
3
30
3
30
June 2019
Table A.3: Indicative SCM Results for USGC and South Korea Petrochemical Plants (2018 Constant Dollars)
Jurisdiction USGC - Texas South Korea
Supply cost ($/t) 1768 1069 924 843 799 1711 1736 975 1107 1080
Construction period (yrs.) 3
Facility lifetime (yrs.) 30
3
Plant capacity (mtpa) 1.50 1.50 0.75 1.45 0.525 1.50 1.50 0.75 1.45 0.525
30
Project CAPEX ($ billion) 7.84 7.97 2.16 2.75 3.50 3 7.84 7.97 2.16 2.875 3.50
OPEX ($/t) 337 322 180 216 148 30 314 323 174 275 145
3
Cash cost ($/t) 670 575 575 575 575 666 668 600 604 615
30
3
30
Table A.4: Current and Anticipated Jurisdictional Carbon
3 Tax ($/tCO2e)
2018 2019 2020 2021 30
2022 2023 2024 2025
3
Alberta 24 32 32 32 40
30
40 40 40
Ontario 16 32 32 32 40 40 40 40
South Korea 21 21 21 21 21
30 21 21 21
USGC 0 0 0 0 03 0 0 0
30
3
30
June 2019
Appendix B: Process Input-Output Data

Table B.1: Sample Steam Cracking Feedstocks, Side- and Co-products, Energy Use and
Emissions Data (kg-product per kg-feedstock)
Description Ethane Propane Naphtha

Ethylene 0.803 0.465 0.324
Propylene 0.016 0.125 0.168
Process Energy Use1 0.3142 0.249 0.264
Steam Cracker Fuel (PJ) 16.5 9.4 11.3
Methane Produced 0.061 0.267 0.139
Hydrogen Produced 0.060 0.015 0.011
CO2 Emissions (MtCO2) 0.34 0.57 0.55
Source: (Griffin, Hammond, and Norman 2018)
Table B.2: Naphtha Steam Cracker Yields (kg-product per kg-feedstock)
Product Yield % Ethane (C2) Propane (C3) Butane (C4) Naphtha (C5+)
Ethylene 0.8 0.4 0.36 0.23
Propylene 0.03 0.18 0.2 0.13
Butylene 0.02 0.02 0.05 0.15
Butadiene 0.01 0.01 0.03 0.04
Fuel Gas 0.13 0.38 0.3 0.26
Py Gasoline 0.01 0.01 0.06 0.17
Gas Oil 0 0 0 0.02
Total 1 1 1 1
Source: (Jones, Laroche, and Ginyard-Jones 2016)
1
Amount of the feedstock used as fuel
2
For ethane, only 80% of fuel is ethane – supplemented with natural gas
June 2019
Table B.3: Primary and Final Energy Requirements of Petrochemical Processes

In Final Energy Terms (GJf/t) In Primary Energy Terms (GJp/t)
Process Electricity Feedstock Fuel Steam Total Electricity Feedstock Fuel Steam Total
Ethylene (Steam 0.3 45 18.1 -1.4 62 0.7 45 18.1 -1.5 62.3
cracking)
Propylene (steam 0.3 45 13.1 -1.4 57 0.7 45 13.1 -1.5 57.3
cracking)
Propylene (FCC) 0.1 45 2 47.1 0.1 45 2.2 47.3
Polyethylene, high 0.9 1 1.9 2.2 1.1 3.3
density (HDPE)
Polyethylene, low 3.5 -2.1 1.4 8.8 -2.4 6.4
density (LDPE)
Polyethylene, 0.4 1.6 2 1.1 1.8 2.9
linear low density
(LLDPE)
Polyethylene 0.7 4.1 4.8 1.8 4.1 5.9
terephthalate (PET)
Polypropylene (PP) 0.9 0.1 1 2.2 0.1 2.3
Polystyrene (PS) 0.4 0.5 0.9 1 0.5 1.5
Polyvinyl chloride 0.6 0.5 1.2 2.3 1.6 0.5 1.4 3.5
(PVC)
Synthetic rubber & 2.5 19.9 22.4 6.2 22.1 28.3
latex
Total 10.6 135 32.2 25 202.8 26.4 135 32.2 27.4 221
Source: IEA, 2009, Modified by CERI
June 2019
Appendix C: Existing Facility Inventory

Table C.1: Petrochemical Facilities in Alberta, Ontario, USGC and South Korea
Location Product Feedstock Process/ Plant CO2 (tpy) CH4 (tpy) N2O (tpy)
Technology Capacity
(kT/yr)
AB LDPE, EVA Ethylene 143 127291.00 4.05 501.83
LLDPE Ethylene 500 38717.61 17.92 0.10
LLDPE Ethylene 859 1026360.37 105.55 11.53
Ethane 1285
LAO Ethylene Oligomerization 250 165697.86 4.52 4.18
Process
MEG Ethylene 350
EO/EG Ethylene 310
EO/EG Ethylene 285
Ethylene Ethane 726 3064835.55 323.46 48.05
Ethylene Ethane 816
Ethylene Ethane 1270
LLDPE Ethylene 1112
LLDPE & Ethylene 431
HDPE
styrene Benzene 450 832724.59 345.45 8.11
monomer
MEG, EO/EG Ethylene 450
PGP SGL 68
ON Ethylene C2, C3, C4, C5+ 300 271712 25 5

HDPE Ethylene 470
Butyl Rubber Styrene 150 11665.6 19.8 0.13
Ethylene C2, C3, C4, C5+ 839 992166.999 432.117 11.046
HDPE, LLDPE Ethylene SCLAIRTECH™ 204
technology
HDPE Ethylene NOVAPOL 211 49911 2 1
processing
technology
LDPE Ethylene NOVAPOL 170
processing
technology
Styrene Ethylene 431 107113 8 1
monomer
USGC Ethylene Naphtha AspenTech 860 1645557.3 503.46 38.308
June 2019
Propylene Naphtha AspenTech 860

Ethylene, PE C2, C3, C4, C5 AlphaPlus® 1,500
normal
Ethylene C2, C3, C4, 855 1849883.9 256.91 33.618
Naphtha
Ethylene - 1,950 1330941.3 230.68 21.787
Ethylene Ethane, Propane 630 3427350.3 4629.27 8.045
Ethylene C2, C3, Naphtha 1,010
Ethylene Ethane, Propane 520 2356681 4482.7 33.637
Ethylene C2, C3, Naphtha 740
Ethylene C2, C3, Naphtha 590
Ethylene - 410
Ethylene Ethane CB&I's SRT® 680 848337.5 481.77 5.197
Ethylene C2, C3, C4, 781 2388186 390.09 14.187
Naphtha
Ethylene Ethane, Naphtha 875 350941.4 10.83 1.817
Ethylene Ethane, Naphtha 875
Ethylene C1, C2, Naphtha 771 522040.4 321.36 33.612
Ethylene C1, C2, Naphtha 1,189 1070675.6 130.3 16.426
Ethylene C1, C2, C3, Naphtha, gas oil, residue 1,000 86690.2 2.685185 0.413
185
Ethylene C1, C2, C3, Naphtha, gas oil 2,200 10024900 915.65 83.186
Ethylene C1, C2, C3, Naphtha, gas oil 900 5913437.8 618.42 40.328
Ethylene Ulsan 634 963782 195.58 21.868
Ethylene Ethane, Propane, Naphtha 816 3703562.8 367.9 25.655
Ethylene Ethane, Propane, Naphtha 725
Ethylene - 180 1226556.1 166.72 12.659
Ethylene Ethane, Propane, Naphtha 1,752 2211835.2 238.01 25.953
Ethylene Gas 151 40926.8 58.82 0.067
Ethylene Ethane 471 771012.7 14.55 1.941
Ethylene - 1,179 4139973.2 594.77 37.326
Ethylene Ethane, Naphtha, gas oil 1,451 897494.5 16.91 2.071
Ethylene Ethane 567 193580 5.01 0.71
Ethylene Ethane, Propane 630
Ethylene Ethane, Propane 884 777950.8 8.59 0.859
USGC Propylene Propane Total 748 1,289,357 57 8

Reactor charge Heater 280,168 12.99 2.54
Waste Heat Boiler Burner 19,522 0.98 0.2
Regeneration Air Heater 650,704 23.89 4.25
Regen Air Comp. Gas Turbine A 124,897 2.32 0.23
Regen Air Comp. Gas Turbine B 124,897 2.32 0.23
VOC from Reactors 5,580
Coke Burn 60,000
June 2019
Auxiliary Boiler 16,321 0.82 0.16
Process Fugitives 0.25
Nat. Gas Pipeline Fugitives 13.04
Process Flare, Routine 2,818 0.04 0.01
Process Flare, MSS 4,426 0.16 0.03
Fire Water Pump Engine 16 0.0007 0.0001
Raw Water Pump Engine 8 0.0003 0.0001
USGC ethylene Ethane Total 1500 2,208,353 140 27

Steam Cracking Furnaces (8) 206,000 11.9 2.4
VHP Boiler 127,000 6.5 1.1
VDU 2,400 0.046 0.0046
Low Profile Flare 27,000 2.1 0.42
Emergency Generator Engines 274 0.011 0.002
Fugitive Process Emissions
West ethylene, Ethane Total 1,176,671 78 12

Virginia Propylene,
polyethylene
Pyrolysis 565,453 38.2 10.63
Furnaces –
Normal
Operation (5)
36,567 2.29 0.64
Thermal Oxidizer Burner 66,988 1.28 0.36
Cracker Process - Oxidizer 489,307
Main Flare Pilot (2) 423 0.008 0.008
Ethylene Storage Flare Pilot (2) 206 0.004 0.004
Cracker Storage Flare Pilot (2) 206 0.004 0.004
Oxygen Flare Pilot (2) 103 0.002 0.002
Ethane Cracker Plant Fugitives 121
ethylene, Propylene, polyethylene RTO Burner 10,306 0.2 0.19

PE Process – Oxidizer 1,632
PE Plant Fugitives and Flares 35.6
Low-Pressure Flare Pilot (2) 206 0.004 0.004
Catalyst Activator 5,153 0.099 0.094
USGC Ethylene Ethane Total 300,694 132 176

Cracking Furnace 300400 119 176
Decoking Pot 281
OP2 Fugitives 13 13
June 2019
USGC Ethylene Ethane Total 641,492 18 2

Cracking Furnaces (5) 278,357 5.19 0.52
Cracking Furnaces (3) 301,855 5.63 0.56
Low Pressure Flare, 14,034 0.22 0.02
Pressure-Assisted Flare, 43,910 2.13 0.42
TOX 3,320 0.06 0.007
Process Area Fugitives 0.02 3.82
Cooling Tower 1
CT-936
Heat Exchanger
System
Backup Diesel& Generators (2) 16 0.001 0.0001
South Ethylene Naphtha 700

Korea
Ethylene Naphtha 320
Source: (Government of Ontario 2019b; ECCC 2016, 2019; US EPA 2018; Koottungal 2015; Trinity Consultants 2012; US EPA
2012, 2014; Environmental Resources Management 2014; Dow Chemical Company 2014; Enterprise Products Operating LLC
2012; CERI 2016)
June 2019
Figure C.1: Alberta Olefin Cracking Feedstock
0%
Ethane
Propane
Butane
100% Naphtha
Gas Oil
Other
Figure C.2: Ontario Olefin Cracking Feedstock
10% 0%
30%
28%
Ethane
Propane
Butane
32%
Naphtha
Gas Oil
Other
June 2019
Figure C.3: USGC Olefin Cracking Feedstock
7% 3% Ethane
36% Propane
Butane
32%
Naphtha
Gas Oil
4% 18%
Other
Figure C.4: South Korea Olefin Cracking Feedstock
0%
Ethane
Propane
Butane
Naphtha
100% Gas Oil
Other
June 2019
Appendix D: Further Breakdown of Results

Table D.1: Lower Range of Outbound Transportation Costs for PE and PP
Polymer Product (Low)
PE PP PE PP
USGC (Texas) China
Alberta 12 0.005 15 0.007 20 0.009 23 0.010
Ontario 13 0.006 16 0.007 21 0.010 25 0.011
USGC 5 0.002 8 0.004 27 0.012 30 0.014
South
21 0.010 23 0.010 15 0.007 18 0.008
Korea
Table D.2: Upper Range of Outbound Transportation Costs for PE and PP

Polymer Product (High)
PE PP PE PP
USGC (Texas) China
Alberta 14 0.006 20 0.009 25 0.011 33 0.015
Ontario 15 0.007 22 0.010 30 0.014 35 0.016
USGC 10 0.005 14 0.006 34 0.015 40 0.018
South
30 0.014 35 0.016 21 0.010 25 0.011
Korea
June 2019
Figure D.1: Indicative Supply Costs by Jurisdiction – NCNC
4500
4000
3500
Supply cost ($/t)
3000
2500
2000
1500
1000
500
0
Figure D.2: Indicative Supply Costs by Jurisdiction – NCCS
4500
4000
3500
Supply cost ($/t)
3000
2500
2000
1500
1000
500
0
June 2019
Figure D.3: Indicative Supply Costs by Jurisdiction – CTCS
4500
4000
3500
Supply cost ($/t)
3000
2500
2000
1500
1000
500
0
Figure D.4: Indicative Supply Costs by Jurisdiction – CTNC
4500
4000
3500
Supply cost ($/t)
3000
2500
2000
1500
1000
500
0
June 2019
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Study No.

CANADIAN SUPPLY COSTS AND EMISSION PROFILES OF

Canadian Energy Research Institute | Relevant • Independent • Objective

SUPPLY COSTS AND EMISSION PROFILES OF PETROCHEMICAL

Supply Costs and Emission Profiles of Petrochemical

Authors: Evar Umeozor

With Contributions from: Mohamed Refaei

Copyright © Canadian Energy Research Institute, 2019

Front cover photo courtesy of Google images

• Professor Ian D. Gates, University of Calgary • Alberta Industrial Heartland Association

ABOUT THE CANADIAN ENERGY RESEARCH INSTITUTE

For more information about CERI, visit www.ceri.ca

CANADIAN ENERGY RESEARCH INSTITUTE

CHAPTER 4 METHODOLOGY ....................................................................................... 41

5.1 Feedstock Compositions for Steam Cracking and Propane

Acronyms and Abbreviations

LDPE Low-Density Polyethylene

Figure E.1: Feedstock Compositions for Steam Cracking and

Ethane Propane Butane Naphtha

Emission intensities of processing pathways capture the differences in processing technologies,

Process and Feedstock Options

AB ON USGC South Korea

AB ON USGC South Korea

Table E.1: PE and PP Outbound Average Transportation Costs

USGC (Texas) China

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Total Annual GHG emissions (kt-CO2e)

Figure 1.1: Petrochemical Processing Stages for Steam Crackers

Source: (Benchaita 2013)

Source: (Fattouh and Brown 2014)

Why and Scope of Study

Recently, Alberta embarked on a government-led diversification effort by providing $2.1 billion

Chapter 2: Petrochemical Industry

Petrochemical Processes and Technologies

• Steam cracking of oil and gas-based feedstocks

Ethylene production is a non-catalytic, high-temperature process relying on cracking saturated

Figure 2.1: Process Diagram of Steam Cracking of Olefins

Source: (Siemens 2013)

Table 2.1: Steam Cracker Yields of Petrochemical Feedstocks (%)

Yield by Weight Ethane Propane Butane Naphtha Gasoil

Ethanol dehydration is considered a process for environmentally cleaner production of ethylene

Methanol-to-Olefins (MTO) process is another alternative route to ethylene production using

Figure 2.2A: Process Diagram of Oleflex Technology

Catofin technology is another dehydrogenation-based propylene production design. It uses fixed-

Figure 2.2B: Process Diagram of Catofin Technology

Methanol-to-Propylene (MTP) process generates propylene under the presence of a zeolite

Figure 2.3: Process Diagram of a Solution-phase PE Technology

Figure 2.4: Process Diagram of a Typical Bulk-phase Reactor Technology

The Unipol polypropylene process is a leading gas-phase fluidized-bed polymerization reactor

Figure 2.5: Process Diagram of a Typical Gas-phase Technology

Other Olefins Technologies and Vendors

Petrochemical Feedstock Sources

Naphtha is an intermediate hydrocarbon liquid by-product containing paraffin, naphthenes, and

Feedstocks Supply and Demand

Figure 2.7: Top 10 NGLs Producing Countries, 2017

Source: (CERI 2018a) (Modified)

Figure 2.8: US Fourth Quarter 2018 Domestic NGLs Production

Data source: (EIA 2019). Figure by CERI

Ethane and Propane

Source: (CERI 2018a)

Figure 2.10: Western Canadian NGLs Production Forecast by Commodity

Source: (CERI 2018a)

Figure 2.11: US NGLs Production from Gas Plants, 2018