US ethane demand to grow in 2010 on lower feeds costs - exec

09 September 2009 17:30  [Source: ICIS news]

HOUSTON (ICIS news)--Ethylene production demand for natural gas liquid-based (NGL) cracking will continue to grow well into 2010 due to NGL feedstocks providing higher profit margins than crude oil derivatives, an industry official said on Wednesday.

“We’ve seen a soft rebound in demand for ethane coming from the petrochemical sector, as facilities are making the conversion to NGL cracking,” said Randy Fowler, vice president and chief financial officer for midstream operator Enterprise Products Partners.

Fowler addressed attendees at Barclays Capital 2009 CEO Energy/Power Conference in New York.

Fowler said that ethylene production slumped about 15% in late 2008 and early 2009, down to 46-47bn lb/year, but has since rebounded to 52bn lb/year levels. That compares with the 5-year average of 54bn lb/year.

Naphtha and gasoil-based crackers are currently the least profitable feedstocks for ethylene production, he said, adding that he expects NGL-based cracking to continue to grow.

“Ethane demand currently sits at 850,000 bbl/day, which is the highest since early 2000,” Fowler said.

The conversion to NGL-based cracking for ethylene production, while not a new venture, appears to be gaining traction in the US chemical sector.

LyondellBasell subsidiary Equistar Chemicals said on 21 August that it would transition its Corpus Christi, Texas, olefins plant to nearly all lighter feedstocks by early 2010.

Historically cheap natural gas prices have led to the economic feasibility of converting ethylene production plants to utilise the lower-priced NGLs instead of crude oil-based products such as naphtha and gas oil. As a result, that will lead to a rebound in ethane demand, according to Fowler.

“We expect demand for ethylene to return to about the 54 to 55bn lb/year level in 2010,” Fowler said.

Enterprise Products transports natural gas, NGLs, crude oil and petrochemicals through about 36,000 miles of onshore and offshore pipelines. It also holds interest in several crude oil and natural gas production sites, such as the Independence Hub.

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By: Steven McGinn
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