US producers seen to pay more for natgas liquids

17 September 2008 23:22  [Source: ICIS news]

BOSTON (ICIS news)--US petrochemical producers will have to pay an increasing premium for natural gas liquids (NGLs) feedstocks as new sources of natural gas will not contain these products, an industry consultant said on Wednesday.

There is a shift in production from natural gas associated with oil production to gas from coal beds, shale and tight sands, said Andrew Swanson, vice president, chemicals of Nexant.

Natural gas liquids - ethane, propane and butanes - are important chemical feedstocks, which are extracted from the rich natural gas associated with oil production, he explained at the Chemical Purchasing Summit, organised by ICIS and Purchasing magazine.

However, coal beds, shale and tight sands are poor sources of NGLs, producing a sweet (no sulphur) but dry gas.

Swanson concluded that the chemical industry will pay an increasing premium for NGLs over their heating value.

However, the cracking of NGLs in the US is attractive compared to liquids. Swanson showed cash costs of a US leader cracker being 40cents/lb for ethane compared to 80cents/lb for gas oil. He also showed ethane cracker margins rising while naphtha cracker margins have been falling.

This was driving the industry into the cracking of light gases but was also keeping the prices of co-products from naphtha cracking high.

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By: Peter Taffe
+44 20 8652 3214

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