US PDH plants could help fulfil future hydrogen needs

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Focus story by Al Greenwood

HOUSTON (ICIS)–The wave of propane dehydrogenation (PDH) plants proposed for the US will create a new source of hydrogen for refineries, helping them meet stricter sulphur regulations.

While PDH plants are intended to produce propylene, they still produce hydrogen gas as a byproduct.

Already, the owner of the sole PDH plant in the US, PetroLogistics, is providing Praxair at least 93% of the hydrogen that it produces at its 1.45bn lb/year (658,000 tonnes/year) plant, according to the company’s registration statement.

Companies have announced plans to build seven major PDH plants in the next several years in the US and Canada.

Out of these proposed plants, Air Products has secured a deal under which it will process 40 million cubic feet/day (40 mcf/day) of hydrogen off-gas from Enterprise Products’s 750,000 tonnes/year plant that it plans to build in Texas.

“It is certainly something that can be done and should be done,” said consultant Peter Fasullo, principal at En*Vantage.

Even if just four of the plants furthest along in development are built in the US Gulf coast, they could provide 180 mcf/day of hydrogen gas, assuming that their rate of off-gas production equals that of the Enterprise plant.

That combined production would exceed the on-purpose hydrogen plant that Praxair built to serve Valero’s refinery in Louisiana.

The US is going to need that extra hydrogen.

The country has recently adopted new Tier 3 gasoline standards that intend to reduce sulphur levels to 10 parts per million (10 ppm) from 30 ppm. To remove that extra sulphur in the fuel, refineries need hydrogen gas.

US refiners will need an extra 100-200 mcf/day of hydrogen to meet the Tier 3 requirements, according to Daniel Yankowski, president of global hydrogen for Praxair. Yankowski made his comments during an investor-day conference held in autumn 2013.

Another source of hydrogen demand would come from increased diesel production. Among refinery products, diesel consumes the most hydrogen.

More hydrogen demand could also come from expanding petrochemical production, Yankowski said, as many ethylene derivatives require hydrogen, among other industrial gases.

In addition, companies have proposed adding methanol and ammonia capacity to the US Gulf coast. Typically, such plants produce their feedstock in a steam reformer. However, the capacity of a methanol or ammonia plant could exceed the capabilities of the site’s steam reformer. When that happens, the companies rely on outside hydrogen.

Such was apparently the case with OCI’s recently restarted methanol and ammonia complex in Beaumont, Texas. Praxair has signed a long-term agreement to supply 25 mcf/day of hydrogen to the site, Yankowski said.

On the refining side, all of this new demand comes at a time when refiners are producing less hydrogen.

US hydrogen production from refineries peaked in 2004 at 3.26 billion cubic feet/day (3.26 bcf/day), according to the Energy Information Administration (EIA).

Since then, refinery production has fallen, reaching 3.05 bcf/day in 2013.

It is difficult to determine whether the decline will continue. Refineries make hydrogen gas from on-site steam reformers and from catalytic reformers, which also produce octane-boosting blendstock.

US refiners have had to adjust operations of their catalytic reformers because of ethanol blending mandates and lighter crude oil. Because catalytic reformers produce hydrogen, these adjustments can affect output of the gas.

For hydrogen production as a whole, the PDH plants themselves provide a source of uncertainty. It is unclear how many of the announced PDH plants will actually be built.

Rising engineering and construction costs could make some of the plants unfeasible, Fasullo said.

Already, PetroLogistics had abandoned plans to increase propylene capacity by 1.6bn lb at its PDH plant in Houston.

The economics for these PDH plants will receive little help from hydrogen sales − regardless of what happens to US demand for the gas. That is because PDH plants derive most of their revenue from propylene sales.  

According to PetroLogistics – which is in the process of being acquired by Koch Industries subsidiary Flint Hills Resources – propylene made up 97% of its Q1 revenue of $220m. The remainder was made up of hydrogen, C4 and C5+.

Regardless, some of the PDH plants will be built, and their sites are close to the refineries that need hydrogen.

Among the seven major plants, all were proposed for the Gulf coast except the Williams PDH unit in Canada. Canada itself needs hydrogen to clean and upgrade production from its oil sands.

For the Gulf coast, the region already has the infrastructure that can transport the hydrogen gas to customers.

In 2102, Air Products started its 180-mile (290km) hydrogen pipeline that connects the company’s Texas and Louisiana systems.

Altogether, the pipeline connects 22 hydrogen plants that have a total capacity of 1.2 bcf/day.

Moreover, the pipeline supplies hydrogen to about 90% of the refineries in the Gulf coast.

Praxair also has a pipeline integrating its Texas and Louisiana operations. Integrated into this network is a 2.5 bcf hydrogen storage cavern.

Neither Praxair nor Air Products responded to requests for comments regarding the outlook for hydrogen in the US.