IEA: Ethylene, propylene producers having mixed 2011

By OGJ editors

During this year’s first half, ethylene and propylene producers in countries that comprise the Organization for Economic Cooperation and Development enjoyed good margins, supported by strong demand, according to the latest monthly Oil Market Report, released by the International Energy Agency. In second-half 2011, however, those margins have weakened.

In North America and Europe, the IEA report says, margins have remained high on low feedstock prices and stable demand. OECD Pacific margins, on the other hand, turned negative on expensive naphtha and lower Chinese demand.

In the short term, US ethane-based natural gas crackers have been enjoying cheap feedstock prices, while naphtha crackers have benefited from surplus naphtha from gasoline blenders. In the medium term, the US shale gas bonanza is revitalizing interest in new ethane-based crackers, particularly near the US Gulf Coast and the Marcellus and Utica basins.

Currently, the report noted, three US Gulf ethylene producers are tweaking their units to take more ethane and increase capacity by a cumulative 590 tonnes/year by 2014 (OGJ, July 4, 2011, p. 100). In addition, “ambitious plans are afoot” to take advantage of expected abundant ethane, extracted from shale gas, with a couple of new world-scale gas crackers planned for 2015.

Plans exist to lock in almost 200,000 b/d of ethane from Marcellus and Utica producers to an Ontario cracker (OGJ, Feb. 7, 2011, p. 110), while Enterprise Products Partners LP is advancing a competing, 1,230-mile project to transport 125,000 b/d of feedstock to the Gulf Coast (OGJ Online, Nov. 4, 2011). North American ethylene producers can expect relatively cheap, gas-based feedstock persisting through in the medium term.

In Europe, says IEA, healthy summer margins sprang more from relatively inexpensive naphtha than strong end user demand. As 2011 draws to a close, the weight of weak underlying petrochemical demand, exacerbated by the debt crisis, is “injecting a harsh dose of reality” into the sector. The short-term breathing space afforded European producers by cheap feedstock may dissipate in the longer term, says IEA.

Fundamentally, as is the case for the refining sector, OECD operators will come under increasing pressure from world-scale capacity expansions under way in non-OECD countries. A combination of weak end user demand and more expensive oil-related feedstock will likely leave OECD European capacity “vulnerable to closure.”

Weak plants

IEA data show that smaller-than-average naphtha crackers—those with average 2011 ethylene production of less than 523,000 tpy and cracking the most expensive feed—are, under the assumption that with all else being held equal, the least economical or more vulnerable.

In 2011, for example, IEA’s analysis shows that 60% of the most vulnerable crackers in the world are in the OECD and it is expected that in 5 years the region will hold 66% of the least competitive crackers.

If it looks farther ahead, if capacity additions continue as scheduled, OECD Europe could see 45% of its ethylene capacity as vulnerable by 2016.

Something has to give, says IEA, in the face of a “tidal wave of new and more competitive capacity” in the emerging markets: either expansions will fail to materialize, or there will be compensatory closures.

Considering that, on the one hand, the feedstock cost advantage is in North America and the Middle East, while the strongest demand growth prospects are in Asia, IEA says Europe’s vulnerability makes it the likeliest place to see rapid shutdowns in the foreseeable future.

Related Articles

Severance tax would backfire, Pennsylvania association leaders warn

12/17/2014 Enacting a severance tax aimed at Pennsylvania’s unconventional natural gas activity would substantially harm the commonwealth beyond the industry ...

New York state moves to ban hydraulic fracturing

12/17/2014 High-volume hydraulic fracturing will be banned in the state of New York, Gov. Andrew Cuomo’s administration announced Dec. 17, citing health risks...

EIA: US proved oil, gas reserves continue to climb

12/15/2014 US proved reserves of oil and natural gas have increased by 9% and 10%, respectively, according a recent report from the US Energy Information Admi...

US Forest Service takes no stance on fracturing in national forest

12/12/2014

The US Forest Service has dropped a proposal that would have banned hydraulic fracturing in the George Washington National Forest.

Southwestern makes $5.4 billion bet on Marcellus

12/12/2014 Southwestern Energy Co. is purchasing Appalachian assets from Chesapeake Energy Corp. in a deal that more than doubles its leasehold in the Marcell...

Study links methane contamination in water wells to poor well construction-not fracing-in Marcellus

12/12/2014 A new study found that fugitive gas contamination at eight clusters of water wells in the Marcellus and Barnett shale regions might be linked to we...

Watching Government: Did Maryland go too far?

12/08/2014 Maryland finally proposed a strategy to regulate unconventional natural gas exploration and production on Nov. 25. The question quickly moved from ...

US proved oil, gas reserves continue to climb

12/04/2014 US proved reserves of oil and natural gas have increased by 9% and 10%, respectively, according to the US Energy Information Administration. The 3....

Southwestern continues Marcellus expansion

12/03/2014 Southwestern Energy Co., Houston, has signed an agreement to purchase oil and gas assets, including 46,700 net acres, in northeast Pennsylvania fro...

White Papers

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Available Webcasts



The Future of US Refining

When Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

When Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST



On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected