CERI: Consultant foresees global petrochemical recovery

By Jim Stott
Special Correspondent-Calgary

CALGARY, June 10 -- The global petrochemical industry will begin a fundamental demand recovery by Dec. 31, and the US likely will become a net petrochemical importer by 2009, a consultant forecast.

Chemical Market Associates Ltd. Pres. Gary Adams told a Canadian Energy Research Institute (CERI) conference Monday that the global petrochemical market suffers from poor profitability following 7 years of declining earnings.

The pace of petrochemical capacity additions is low, he said, blaming geopolitical uncertainties, global warming concerns, corporate scandals, tension in the Middle Eastern, and the Sept. 11, 2001, terrorist attacks on the US.

Adams believes that petrochemical capacity additions in the US and Canada will be flat or will decline until 2010 for lack of financial incentives. The petrochemical industry must become international in its focus, he advised.

Global markets
China will become a major petrochemical market because its imports are expected to increase faster than its capacity growth. China is apt to set the "world's market floor" price, Adams said.

Meanwhile, he expects significant increases in petrochemical capacity among Middle East nations, but he does not expect that this will affect the petrochemical market until at least 2007.

The Middle East needs to create jobs and infrastructure, prompting a regional build in low-cost petrochemical capacity, he said. The limiting factor in Middle Eastern petrochemical capacity growth is the timing of natural gas developments.

Feedstock prices
Peter Lougheed, former Alberta premier, expects that petrochemical producers will see higher feedstock prices soon because a recovering US economy will mean increased US gas demand.

Canada already supplies about 15% of US gas needs. Lougheed said contributors to upward feedstock prices include the lead time required to bring northern gas to market and declining Western Canada gas production.

Lougheed also foresees a growing concern about ethane supplies available for petrochemicals. He called for a review of ethane policies, adding that Alberta's government already is considering oil sands production as a petrochemical feedstock.

"Petrochemicals from oil sands should be done if it makes sense. Using oil sands production would be an incredible new page for the petrochemical industry," Lougheed said.

An adviser to the Aboriginal Pipeline Group, Lougheed expects completion of arrangements within weeks for APG to take an ownership position in the Mackenzie Valley gas pipeline.

Lougheed does not expect a line from Canada's Mackenzie Delta to be completed until 2007-08. If an Alaskan Highway gas pipeline to the US were to be built, then ethane could be stripped from the gas for Alberta petrochemical use, he noted.

The Alaska Highway pipeline would move North Slope gas south to Alberta. Industry spokesmen have said the 2,100-mile line could be completed no earlier than 2011-12. It could require a farther 1,500-mile line to move the gas from Alberta into the Chicago market if there is not sufficient capacity in existing lines (OGJ Online, Mar. 4, 2003).

The Mackenzie line would have 1.2 bcfd capacity with expansion to 2 bcfd, and the Alaska line 4.5 bcfd capacity.

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