03 December 2008 21:04 [Source: ICIS news]
DUBAI (ICIS news)--The CEO of Canada's NOVA Chemicals is bucking the overwhelming industry consensus of a severe global overcapacity situation, saying on Wednesday that ethylene (C2) and polyethylene (PE) supplies will fall short of demand by 2012.
“Most observers are spending their time lamenting a large expected surplus of ethylene capacity over the next few years,” said Jeffrey Lipton, CEO of NOVA, at the Gulf Petrochemical and Chemical Association (GPCA) forum.
The global petrochemical industry have raised fears of a flood of material from new facilities in the Middle East that would further depress the already battered sector.
“I suspect industry consultants’ demand forecasts will prove to be too low [as] PE represents about 60% of global ethylene demand and that share is growing rapidly,” he said. Lipton presented a graph that showed the compounded annual growth rate of PE demand to be growing at 5% per annum from 1991-2007.
Lipton also highlighted that global PE demand continued to rise steadily even through periods of recessions in the early 1990s and 2000s.
Moreover, PE demand has room to grow among the 5.7bn people in emerging economies, as consumption is an average of 6kg/person (13lb/person), Lipton said. In developed economies, PE consumption is 36kg/person.
“Demand for PE is only scratching the surface of its potential,” he said.
Lipton estimated that six crackers (1m tonne/year each) are required per year from 2009 to 2020 to meet his estimates of growth in PE demand.
He also expected that ethane would be increasingly used as a feedstock in place of naphtha as the petrochemical industry would face intensifying competition from the fuels sector, which will, in turn, drive up costs of the relatively heavier feedstock.
“Ethane has little use outside of our industry and, because of that, we can buy it for advantageous prices where supplies are available,” he said while acknowledging the pipeline constraints in using natural gas as a petrochemical feedstock.
Lipton also highlighted the vast natural gas fields available for extraction from the western regions of Canada, especially along the Horn River Shale which has an estimated proven reserve of 50 trillion cbf. In addition, existing infrastructure would ease and lower the cost of ethane feedstock.
The GPCA forum ends on 4 December.
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