Archive for the ‘petrochemicals’ Category

The world is flat … at least for global ethylene producers while oil prices are low

On Jan. 20, WTI and Dated Brent closed at $26.54/b and 25.96/b, respectively, the lowest we have seen oil prices since 2003. Since then we have seen prices rise and hover around the $30/b level.

Unlike ethane, naphtha is highly correlated with the price of oil. Therefore, fluctuations in global oil prices will have a major impact on steam crackers, more so in Europe and Asia where most producers utilize naphtha as a feedstock for producing ethylene.

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The impact of Saudi ethane price increases on competitiveness

At the end of December, Platts reported that Saudi Arabia increased the price of gasoline, domestic gas for power generation and ethane feedstock in its 2016 budget, part of a broader program to cut subsidies and reduce its budget deficit. As a part of this, the ethane price more than doubled from the long-standing fixed price of $0.75/MMBtu to $1.75/MMBtu, according to the official Saudi Press Agency.

So what does this mean for Saudi Arabia’s position as the world’s lowest-cost ethylene producer?

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Ethane cash cow a red herring for European petchems producers

In the next few weeks the first ship bringing US shale gas to Europe will arrive on the southern shores of Norway, marking an end to Ineos’ search for cheap feedstock to power its European petrochemical assets.

Plagued by $100/b oil, European petrochemical producers in 2012 were struggling with margins and started looking abroad for cheaper feedstock options. The contracting European margins coincided with plentiful and inexpensive supplies of ethane-rich natural gas in the United States.

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The cyclical nature of spreads and effects on PDH propylene

Propane prices are cyclical, peaking during the winter and bottoming out during the summer, and propane/propylene spreads hit their lowest during the winter and their highest during the summer. After all, feedstock prices are the biggest component of production costs in this industry.

While last winter was an anomaly, due to the drastic drop in global oil prices impacting many commodities, propane prices dropped alongside other prices. This year we are seeing the return to normalcy regarding propane pricing, but at a time when Asia is seeing low propylene prices, margins have deteriorated, and PDH units are feeling the impact the most.

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Petrochemical implications of easing sanctions on Iran

Earlier this month, the US and its negotiating partners announced steps to move ahead on what is known as “adoption day,” intended to show readiness for sanctions relief for Iran. However, relief will only begin on “implementation day,” the day when the International Atomic Energy Agency certifies that Iran lived up to its commitments according to the nuclear deal completed in July.

According to the US CIA’s The World Factbook, Iran has the world’s second largest supply of conventional natural gas reserves, much of which is rich in ethane. Given that the rest of the Middle Eastern countries are experiencing limited supplies in ethane, this presents a huge opportunity for the Iranian petrochemical sector as sanctions are eased.

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The effects of ethane steam crackers on the blink

The price of oil certainly has some effect on the petrochemical prices throughout the value chain, but supply/demand fundamentals will always be the biggest driver. It is the unplanned outages that create uncertainty, and that was certainly the case this year.

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Canada’s petchem sector looks for expansions on back of domestic feedstock

Prior to the drop in oil prices during the second half of 2014, the shale revolution was putting the US in a position to become less dependent on foreign oil, fueling job creation in the oil and gas industry, and creating a manufacturing renaissance. Many countries attempted to replicate the same success that the US experienced in shale. However, the US and Canada are the only major producers of commercially viable natural gas from shale formations in the world.

While large-scale commercial production of shale gas has not yet been realized in Canada, at least to the degree that the US has attained, many petrochemical companies are exploring the opportunities from the new supply of natural gas liquids derived from shale gas developments in Canada.

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To build, or not to build, that is the question with ethane crackers

The US is experiencing a renaissance in petrochemicals due to the abundance of ethane from shale gas. As a result, we saw many announcements of ethylene capacity expansions and ethane based projects in the US to utilize more of the shale gas based ethane. Why? Ethane based crackers sit low on the ethylene production cost curve.

So what do you do if you are a naphtha cracker high on the cost curve producing in Europe and Asia?

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Friday night lights, provided by petrochemicals

Many athletes, from Pop Warner to the NFL, participate in American football each fall. Petrochemicals play a vital role in the game, from the plastics in the equipment used to play the sport to the artificial turf to the souvenirs and cups used for beverage consumption every game. In honor of the return of football season and the games that will be played across the country tonight, let’s take a look at the plastics that make up the typical football uniform, field, and ball.

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Ineos sends Europe a fracking message about gas; next stop, upstream

As the champagne bottles smashed into the side of the two newly-built ships that in November will bring the first cargo of US shale gas into Europe, billionaire chairman of Ineos Jim Ratcliffe sent a clear message to European lawmakers whose energy policies have stalled his plans to frack for gas in Europe.

Emblazoned down the side of the two freshly-named vessels — the Ineos Insight and Ineos Ingenuity — were the words “Shale Gas for Manufacturing” and “Shale Gas for Chemicals.”

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