An ongoing process of integration of naphtha crackers in Japan has been compelled by a loss of competitiveness. Japan's chemical companies are in competition to develop new olefin production processes. This competition is being intensified by the emergence of a steady stream of serious issues faced by them, as per ICIS Chemical Business. Also, the growing role of shale gas-based feedstocks is raising concerns over the resulting shortages of specific fractions from crackers. Additionally energy conservation has become more pressing in Japan since the 2011 earthquake and tsunami and associated nuclear disaster at Fukushima that subsequently led to the closure of the country's nuclear power industry.

Japan's total number of crackers will be reduced to 12 and its ethylene capacity to 6.7 mln tpa by the end of 2016, down 15% from the end of 2013. Most of facilities already mothballed or to be permanently shut down are outdated and less profitable. Low ethylene operating rates reduce earnings of the petrochemical business while optimisation of ethylene production leads to improvement of business performances. In May, Japan's largest petrochemical company Mitsubishi Chemical permanently stopped operations at its No 1 ethylene plant at the Kashima complex, leaving just its No 2 cracker in operation. Sumitomo Chemical is scheduled to permanently shut its cracker in 2015, and Asahi Kasei Chemicals will shut down a cracker in 2016 and consolidate its ethylene business into Mitsubishi Chemicals'. Production of derivatives is to be stopped along with such moves. In addition, Mitsui Chemicals is scheduled to withdraw by the end of March 2015 from the Keiyo Ethylene joint venture with Maruzen Petrochemical and Sumitomo Chemical, which operates a 740,000 tpa cracker.

At the same time, petrochemical companies have been adjusting their product ranges to keep pace with changing market requirements. The diversification of cracker feedstocks including the shale oil/gas revolution is both a challenge and an opportunity for them to expand overseas, pioneer new processes and develop new biomass-based routes. New competitive cracker feedstocks will be available from the US shale oil/gas revolution, production of olefins from coal in China and the Middle East's petrochemicals derived from associated gas produced at oil fields. The Japanese government is steering a process of consolidation for domestic refineries, which in Japan's highly integrated infrastructure lie at the core of its petrochemical complexes. Domestic demand is steadily shrinking in Japan as downstream user industries such as automotive, electrical appliances and semiconductors transfer production overseas. METI is appealing for the industry to reduce oil-refining capacity and reorganise. However, the weak spot of the industry is its dependence on imported naphtha amid problems of overcapacity.
The industry has been able to maintain its global position by withdrawing from unprofitable derivatives and shutting down out-of-date production facilities. Furthermore, its innovative production and catalytic technologies are rated highly in both domestic and overseas markets. The ability of the industry to innovate has the potential to offset the handicap of its heavy reliance on imported feedstock. Innovative chemical production processes could be a source of steady revenue streams, paving the way to new businesses for the major Japanese chemical companies as they lose their traditional standing in commodity sectors to newcomers in emerging markets. Western majors including Dow Chemical (US), LyondellBasell (Netherlands) and BP (UK) have positioned commodity petrochemical licensing businesses including polyolefins as a prime source of earnings.

The petrochemical industry is regarded in Japan as a traditional heavy engineering and energy-intensive sector. It is typified by thermal decomposition processes notably naphtha cracking. Japanese chemical producers have for years pursued novel chemical production processes offering lower costs and reduced energy consumption. Examples include catalytic reactions, membrane separation and biological refining as substitutes for thermal decomposition. Some signs of success are emerging. Regular naphtha cracking involves the thermal decomposition of naphtha at 850°C to produce ethylene and other fractions. A new catalyst-based process to crack naphtha at lower temperatures is under development in a cooperation between government, industry and academia. Production of ammonia has to date been based on the Haber-Bosch process invented in the early 20th century. Now a group led by Michikazu Hara, professor at the Tokyo Institute of Technology, is working on a new process designed to lower drastically the pressure needed from the current 10-15 MPa to about 1 MPa.
Major domestic petrochemical companies are also seeking to upgrade their own olefin production processes to promote energy saving and build their licensing businesses. Mitsubishi Chemical has established an ethylene-to-propylene (ETP) process capable of producing propylene from ethylene in a single step. The process uses ethanol and methanol as feedstock in addition to ethylene. Conventional processes to convert ethylene into propylene include steps to dimerise ethylene into butane, and propylene is then produced from the resultant butene and ethylene. Mitsubishi Chemical has also pioneered a more efficient process to produce 1-hexene as a raw material for linear low-density polyethylene (LLDPE), involving ethylene trimerisation with a chromium-based catalyst. The company is now offering the process for licence in Asia.
Asahi Kasei Chemicals has started marketing its E-FLEX process in partnership with French engineering company Technip. The technology produces propylene and benzene from ethane, crude ethylene and ethanol and is capable of converting crude ethylene derived through ethane cracking into propylene using a fluidised-bed reactor packed with zeolite catalysts. It has been shown in demonstrations to achieve an ethylene/propylene conversion ratio of some 30%. It is capable of producing aromatics as well by changing catalysts and operating conditions.
JX Nippon Oil & Energy is developing a high-severity fluid catalytic cracking (HSFCC) process for production of light olefins such as propylene and butene through decomposition of heavy crude oil. When combined with an olefin conversion unit (OCU), it will in theory raise propylene yields to 27-28%, nearly five times the rate of an existing FCC unit. The decomposition temperature is 600-700° Celcius, offering better energy efficiency than a cracking furnace.
Mitsui Chemicals is working with the Institute of Chemical & Engineering Sciences, a research institute in Singapore, to develop a dehydrogenation process to produce propylene, butene and butadiene from liquefied petroleum gas (LPG). A pilot plant has been installed in Singapore to support scaling up of the process.

(Source Courtsey: ICIS)