After two of the worst years the polyolefins industry has ever seen, it seems like an inopportune time to consider building new polyolefins plants. But many companies are doing just that, either to time the start-up to catch the top of the business cycle or to get in on the ground floor of emerging markets.

	SCALE Plants such as this one use Basell's Spheripol process. BASELL PHOTO

Technology licensing companies are preparing for the rush to build. And to make their offerings more attractive to potential licensees, they are designing plants as big as possible to reduce production costs but flexible enough to accommodate diverse markets.

Increasing demand during the remainder of the decade will call for perhaps 100 or more new polyolefins plants. According to consultants at Nexant/ChemSystems, global polyethylene demand is expected to increase from about 55 million metric tons in 2002 to 87 million in 2010. Polypropylene demand is projected to increase from about 35 million metric tons to nearly 60 million in the same period.

John R. Verity, president and chief executive officer of Univation Technologies, the Dow Chemical/ExxonMobil joint venture that licenses the Unipol high-density and linear low-density polyethylene (HDPE/LLDPE) process, notes that the last gilded age for the licensing business was the mid-1990s. He says interest is building again. "The whole licensing business has been quiet for the past four to five years," he says. "Now more people are actively considering projects. We're talking to more people now about new projects than we were a year ago."

Peter S. Williams, business group manager for polyolefins licensing at BP, agrees. "It has been a lean time for the past couple of years," he says. "We're clearly seeing more activity."

According to Jorge Bühler-Vidal, director of North Brunswick, N.J.-based Polyolefins Consulting, choosing a polyolefins production process is complicated. There are about 25 different polyethylene technologies available and eight for polypropylene. The weeding-out process can take a long time. "Often people get paralyzed by the number of choices," he says.

Scale, dictated by both technology and feedstock availability, is probably the most important factor. "One thing is true for any technology: The larger the plant, the better," Bühler-Vidal says. "You want to build the largest plant you can get away with because that will reduce your cost per ton. If you decide you want to build a 450,000-metric-ton plant and there are licensors who have never built anything close to that size, you will probably feel uncomfortable and just eliminate them."

Polyolefin plants are getting huge. Univation has built 500,000-metric-ton plants, Verity says, and 600,000-metric-ton lines are within reach.

Williams says BP completed an LLDPE line in Grangemouth, Scotland, that has been operating at rates of more than 320,000 metric tons per year with C₆ comonomer, and BP plants can run at higher rates with C₄. He says BP's Innovene polypropylene process, which it obtained through its acquisition of Amoco, has both flexibility and scale because it allows for quick changes between grades. BP has built plants of 350,000 metric tons and has designs of more than 400,000 metric tons available.

Basell's Spheripol polypropylene process has designs that range from 40,000 to 450,000 metric tons. Steve Stanley, Dow's business director for polypropylene licensing and catalysts, says Dow has a program to reduce the total investment cost and increase the size of Unipol PP plants, which can be as large as 415,000 metric tons. "We have been able to reduce total cost per ton by 25% with these efforts," he says.

THE POTENTIAL MARKET, often dictated by geography, is another major factor in choosing a technology. Most future polyolefins plants will be built in Asia, the Middle East, and developing economies such as those in Eastern Europe or Latin America.

For developing economies, a plant will have to produce many polymer grades for the local market, often to displace imports, Bühler-Vidal says. "Your plant becomes a drugstore," he says. "You want to be smart about what you produce, but you still have to produce almost everything."

Verity says that because such licensees are looking for flexibility, Univation constantly aims to improve Unipol. "Our goal on the product side is to be able to make any product that a licensee could want in a gas-phase reactor unit," he says.

For example, Univation recently developed a metallocene technology to make bimodal HDPE in a single gas-phase reactor. Bimodal polyethylene has a wide molecular weight distribution and is used for film and pipe. The polymer is traditionally made in multiple reactors that perform two different polymerization reactions.

Because Univation scientists found two different catalysts that work under the same conditions, Unipol technology customers can now make bimodal polyethylene in a single reactor, offering a capital cost savings of 20%, Verity says. The company has already done commercial-scale runs of the catalysts and hopes to start marketing them later this year.

In the Middle East, where feedstock availability isn't a problem, producers want to make high volumes of commodity products at low cost. "You run at the highest rates possible and just leave everything alone," Bühler-Vidal says.

He advises clients to go with well-proven technologies because established technologies are better supported in the long run. "You don't want to be left with an orphan technology," he says. "It happens once in a while that the licensor loses interest. If you have technologies with large numbers of plants, even if there are mergers and acquisitions, someone will always be interested in keeping those technologies up-to-date."

Basell has provided technology for 147 plants, between its Spheripol polypropylene and Hostalen, Spherilene, and Lupotech G and T polyethylene processes. Univation has licensed technology for 92 Unipol polyethylene reactors. BP has 25 Innovene PE plants and eight Innovene PP plants running.

There is help, though, for firms stuck with abandoned processes. ExxonMobil Chemical, for example, offers a leading low-density polyethylene (LDPE) technology. Licensing Manager Arnold C. van Ek says that even though the company sells its own process, it assists companies using competing technologies that are no longer supported. For example, ICI built many LDPE plants around the world and then got out of the licensing business. ExxonMobil recently signed an agreement with Thai Polyethylene Company to upgrade an old ICI line.

Catalyst producer Engelhard has a different strategy for dealing with licensee dependence on the licensor. It has established a business that supplies catalysts compatible with all polypropylene processes. In addition, Engelhard has polypropylene catalyst supply arrangements with BP and with Novolen Technologies, a polypropylene licensing business that was once part of Basell.

Deon A. Carter, Engelhard's global commercial director of polyolefins, says that with its own high-activity Lynx Ziegler-Natta catalyst system, Engelhard hopes to establish itself as a merchant catalyst supplier in a market where most licensees get catalyst from the licensors that designed their plants.

"In the late 1990s, polypropylene licensees relied on their licensor and didn't have an alternative," Carter says. One result was high catalyst prices from monopoly suppliers. "There was a market screaming out for an independent catalyst supplier. That is the sort of market we came to fulfill."

Novolen, which is controlled by ABB Lummus and has 4.75 million metric tons of annual capacity under license, also pitches its independence. Gilbert Wiesner, Novolen's licensing manager, says that not being tied to a major polypropylene producer--as is Basell's licensing business--gives it an edge. "Novolen is the only independent licensor providing all the developments and improvements directly to licensees," he says.

By being a part of ABB, Wiesner notes, Novolen can offer upstream technology such as propane dehydrogenation, which is becoming a popular propylene source in the Middle East because the region has little propylene as a by-product of refining or naphtha cracking.

But licensing isn't all HDPE/LLDPE and polypropylene. According to ExxonMobil's van Ek, there is plenty of interest in good old high-pressure LDPE, which was the polyethylene technology standard until the late 1970s when Unipol and other low-pressure polyethylene processes started emerging.

BACK THEN, the bet was that LDPE would be eclipsed by the new technology. "We thought that by 1985 we would shut down our high-pressure plants because they would not be economical," van Ek says. "The fact is we have not done that. Not only have we kept capacity running, but since that time a lot of capacity has been added in the world." Today, LDPE commands about a third of the global polyethylene market. He expects two new LDPE plants to be built per year, driven by a 2% growth rate and replacement of older units.

LDPE has a reputation for being more expensive to make than LLDPE. According to van Ek, this may be true for existing plants, which are smaller, 100,000-metric-ton-or-less plants, but it is not true of the new units that can produce 300,000 metric tons or more. He says ExxonMobil is currently negotiating licenses for two 400,000-metric-ton plants, and he believes that a 500,000-metric-ton LDPE plant is possible.

Likewise, Basell has constructed a 320,000-metric-ton LDPE line in Aubette, France, using its Lupotech T technology. The company says a 400,000-metric-ton design is available for new projects.

Robert J. Bauman, a consultant with Nexant/Chem Systems, agrees that, indeed, LDPE plants are cheaper than comparably sized LLDPE plants. "The capital cost is close and the operating cost is lower," he says, explaining that licensing fees push up the cost of making LLDPE. Catalyst costs--LDPE only uses organic peroxide initiators--are higher for LLDPE, while equipment costs are higher for LDPE, he says.

Moreover, many LLDPE users blend in some amount of LDPE when they make films, van Ek points out. "In India, it is easier to sell LDPE because they have a lot of small converters. If you give them a bag of LDPE, they can make film out of it," he says. "If you have a bag of LLDPE, you have to help them and you still have to blend it with LDPE."

Van Ek does concede that LDPE is losing some ground to LLDPE. "In the volume markets--the garbage bags and the lining materials where people are looking for the thinnest wall thickness--that is where LLDPE is predominant and has replaced LDPE completely," he says.

Univation is betting that its new EZP catalysts will help LLDPE make further inroads into the LDPE market. It claims that the catalysts yield LLDPE with processibility and clarity close to that of LDPE and the impact strength of metallocene-catalyzed polymers. Agricultural and food-packaging films are potential applications.

BP has also been developing an "easy process" slate of single-site catalysts for high-strength film markets. "Innovene metallocene resins have a unique combination of high strength with good processing characteristics, which allows them to be run at full rates in fabricators' extruders without the need to blend with low-density or use expensive processing aids," Williams says.

Whatever technologies licensees choose when they start building again, Bühler-Vidal says the decision boils down to one thing: "Ultimately, if you build any kind of plant, you must believe that it makes economic sense."

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