NPRA '03: Hedging can offset price volatility, says Shell
01 April 2003 16:56 [Source: ICIS news]
SAN ANTONIO, Texas (CNI)--The beneficial role of hedging as a means of ameliorating the worst effects of feedstock price volatility was underlined here by Shell Chemicals executive vice president for business units and procurement Rein Willems.
He said that Shell had used hedging techniques in the US to help offset the recent huge rises in natural gas prices.
In an interview with CNI on the sidelines of the 28th annual National Petrochemical and Refiners Association (NPRA) International Petrochemical Conference (IPC), Willems expressed some surprise at remarks made Monday by Peter Huntsman, president and chief executive of the Huntsman group.
Huntsman had questioned the efficacy of hedging against the extreme volatility experienced this year in US natural gas prices, describing the practice as expensive and “risky at best”.
However, Willems said Shell had successfully hedged its own feedstock costs and through Shell Chemical Risk Management (SCRiM) had also helped other companies manage raw material expenses. SCRiM is one of several companies which offer price risk management for a range of chemicals including ethylene, propylene, styrene and their derivatives.
Willems agreed, nonetheless, that the historic advantage which cheaper natural gas availability had given US chemicals producers had probably disappeared forever.
“If you look at the longer term scenario, gas won’t be cheaper [than heavier feedstock alternatives such as naphtha].”
He calculated that natural gas at about $4/m Btu would be in calorific value parity with oil at around $24/bbl – the likely longer term trend price for crude.
The IPC conference opened Sunday and concludes today.
By: Neil Sinclair
+44 20 8652 3214
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