NOVA benefits as US ethane costs rise - CEO

21 May 2008 20:29  [Source: ICIS news]

TORONTO (ICIS news)--Canada's NOVA Chemicals expects continued strong profit margins in coming months as the ethane feedstock advantage it enjoys at its plants in Joffre, Alberta – compared with US Gulf Coast producers – will widen further, CEO Jeff Lipton said on Wednesday.

 

US petrochemicals producers were increasing their demand for ethane as high oil prices drove up the cost of naphtha-based feedstock, Lipton told analysts at an investor conference in New York.

 

“[US] ethylene producers are using as much ethane – the lowest-cost feed – as possible, and as little naphtha as they can possibly use,” he said.

 

However, this shift towards ethane would inevitably drive up ethane costs for NOVA’s US competitors, said Lipton.

 

Ethane supplies were behind consumption, inventories were falling, and the market would get even tighter in June as there were only every few ethylene plant outage expected, resulting in increased ethane pricing going forward, he said.

 

Meanwhile NOVA continued to enjoy access to low-cost ethane in Alberta, and this advantage would widen with higher US ethane costs.

 

With oil prices at high levels, NOVA’s production in Alberta was very competitive even against Middle East producers, he added.

 

“We expect to continue to outperform almost all of our olefins and polyolefins peers around the world by a significant margin,” said Lipton.

 

The outlook for ethane and related feedstock in Alberta was very promising, he added.

 

He pointed to new natural gas developments north-eastern British Columbia and opportunities to obtain feedstock from Alberta’s oil sands projects.

 

Longer-term, planned natural gas pipeline projects from Canada’s northern Mackenzie Delta and Alaska - now expected online around 2018 – offered another huge opportunity.

 

The natural gas and ethane content from the Alaska pipeline alone would be enough to support two new world-scale ethylene plants in Alberta, he said.

 

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By: Stefan Baumgarten
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