Ethylene-producing assets that have access to low-cost natural gas feedstocks, such as the ones in North America, will lead the competition in global ethylene markets, Wood Mackenzie researchers said, adding that ethylene producers will have to utilize different strategies depending on their location in order to stay competitive.
“The key competitive differentiator for ethylene producers is access to low-cost feedstocks or proximity to local demand,” said Stephen Zinger, WoodMac’s head of chemical research in the Americas.
“Through 2030, advantaged cracker investments will continue in the Middle East, sharply increase in North America, and then later develop in Russia and the Caspian,” according to Zinger.
WoodMac expects China will continue to have the fastest demand growth for ethylene and ethylene derivatives and will satisfy this demand through increases both in domestic production capacity (coal-to-olefins and naphtha cracking) and imports from producers around the world with advantaged feedstocks.
North American renaissance
In the next 10 years, WoodMac expects total investment in ethylene and derivatives to reach a record $40-50 billion in North America, during which time global ethylene demand will grow by 3.3%/year, on average.
With North American ethane feedstocks used for ethylene production increasing to about 65% of total feedstock in 2013 from under 50% in 2005, WoodMac anticipates shale gas resources to boost ethane to over 80% of total feedstock consumption.
“The development of shale gas resources in North America has triggered an ethylene investment renaissance, with the abundance of competitively priced NGL feedstocks, particularly ethane,” Zinger said.
At the same time, WoodMac expects North American demand for ethylene derivatives to grow more slowly than planned ethylene capacity increases, which will lead to derivative exports more than tripling over the next 15 years.