butane is used as a feedstock for ethylene production, its
high cost relative to lighter feedstocks such as ethane and
propane will likely cause further declines in butane use. 1
In light of this dwindling domestic demand, North American producers are looking to export this increased butane
production to feed the growing global market. The necessary export infrastructure, however, is insufficient for the
future expected volumes of butane. While efforts are under
way to increase NGL export capacity, 2 the cost to handle
and transport the incremental volumes will contribute to a
large butane discount compared with heavier products such
These factors have contributed to butane selling at an increasingly wide discount to gasoline in the past 2 years, a
trend that will likely continue. For US refiners, alkylation
represents an attractive opportunity to capitalize on this discounted butane supply and improve overall refinery profitability.
The alkylation reaction combines light olefins such as propylene ( C3=), butylene ( C4=), and amylene (C5=) with isobutane (iC4) in the presence of a strong acid catalyst, typically
sulfuric or hydrofluoric acid, to form an alkylate—a mixed
paraffin, high-octane, low-vapor-pressure gasoline blend
component. Fig. 2 shows an idealized alkylation reaction for
isobutane and 2-butene.
Actual alkylation reactions are complex, and the final
quality of the alkylate depends on such variables as the type
of olefins contained in the feedstock and the operating conditions. Alkylation, however, is one of the few NGL processing technologies that convert a paraffin to a heavier hydrocarbon molecule without first converting the paraffin to a
more reactive compound such as an olefin or alcohol.
Due to its low vapor pressure, the alkylate product allows for the direct blending of additional butanes (or other
high-vapor-pressure, low-octane compounds) into the gasoline pool. Alkylates possess high octane values and near
ideal T50 and T90 boiling ranges. In addition, they consist
of almost entirely paraffin compounds and contain no toxics
such as sulfur, aromatics and olefins—all compounds that
are restricted in current clean-burning transportation fuels.
These properties have earned alkylate the industry nickname “liquid gold” for its ability to help refiners upgrade less
desirable gasoline blendstocks into on-spec or premium-grade gasoline.
Estimating the value
While the economic incentive to alkylate butanes varies
with a refiner’s particular configuration and market, it is
clear that refiners need to consider these sources of highly
discounted butanes as an additional cost-advantaged feedstock in future operations.
Refiners can ascertain whether alkylation is the most ap-
Estimating alkylation margin
A reasonable estimate of the gross margin for alkylation is
calculated through the use of a mass balance and generally available posted spot pricing. For waterborne barge
deliveries in the US Gulf Coast (USGC), alkylate spot pricing is available from Platts ( www.platts.com). Mont Belvieu
posted pricing, less transportation cost, is an accurate
proxy of spot normal butane and isobutene prices for this
The gross margin can be calculated as follows:
Gross margin = (vol alkylate x price alkylate) – [(vol iC4 x
price iC4) + (vol nC4= x price nC4)]
= Price alkylate – [(0.65 x price iC4)] + (0.564 x price
With the alkylation reaction in Fig. 2 and the following
Platts and Mont Belvieu spot pricing on July 10, 2012:
• Alkylate pricing premium to USGC conventional
regular unleaded waterborne: $0.440/gal
• USGC conventional regular unleaded waterborne:
• Isobutane Mont Belvieu: $1.362/gal
• Normal butane Mont Belvieu: $1.284/gal
• Vol alkylate = 1.000
• Vol iC4 = 0.650
• Vol nC4 = 0.564
The gross margin can be calculated as follows:
Gross margin = [($0.440 + $2.692)] – [(0.650 x
$1.362)+(0.564 x $1.284)]
= $1.621/gal, or
= $68.09/bbl alkylate
propriate means of monetizing their butane supply with a
number of basic calculations outlined in the sidebar (above).
With this methodology, one can calculate the gross margin
for a US Gulf Coast refiner processing isobutane and mixed
butylenes (priced at spot Mont Belvieu pricing) to producing
alkylate at Platts’s minimum specifications.
Fig. 3 illustrates the 30-day running average of the alkylate margin upgrade calculated with this method. As shown,
alkylate margins exhibit a consistent seasonal variation,
with maximum values realized during the summer gasoline
season and minimum levels during the winter gasoline season (when gasoline Reid vapor pressure specifications do not
restrict direct butane blending into gasoline).
This figure shows an upward step change in alkylate margins in the last 2 years, a reflection of the increasing butane
discount to gasoline that results from the current increasing
surplus of butanes in the US.
It should be noted that isobutane, due to its higher oc-