Canada's Alberta running short of ethane - analyst

04 December 2009 17:43  [Source: ICIS news]

TORONTO (ICIS news)--One of the Aberta province's four ethylene crackers may have to shut down unless more ethane supply can be found in the region, a top Canadian petrochemicals analyst said on Friday.

Based on current trends, the industry could face a 70,000 bbl/day ethane gap by 2015 in meeting the ethylene plants’ requirements, said John Cummings, an independent Toronto-based petrochemicals analyst.

Canadian production of natural gas, from which ethane is extracted, was already declining because of the depletion of conventional sources when the recession and the discovery of large amounts of shale gas in the US caused prices to decline relative to oil, Cummingssaid in a research report to clients.

These factors, coupled with the Alberta drilling industry’s anger at the provincial government for raising royalties, and consequent decline in drilling activity, caused the decline to accelerate, Cummings said.

A cracker shutdown would inevitably hit downstream production of polyethylene (PE), ethylene glycol and other chemicals.

In response, the industry could shut down some ethylene glycol production to concentrate on polyethylene output, he said.

On the up side, Cummings pointed to initiatives such as the provincial government’s "incremental ethane extraction programme" to provide incentives for investments in ethane extraction, as well as the use of off-gases from oil sands upgraders.

“The Alberta government is strongly in favour of using the off-gases to produce petrochemicals and could use some of its incentive programmes to further this aim,” he said.

Construction costs for projects boosting ethane were down as a result of the recession, creating opportunities, he added.

Another possible source of ethane could be shale gas from British Columbia province, Cummings said. Some shale gas in the US does contain liquids, he said.

On the other hand, Alberta’s petrochemicals industry should not look to additional ethane in gas from proposed pipelines from Alaska and Canada’s Mackenzie Valley to resolve its short-term supply problems, he said.

Neither of the two pipelines was likely to be economic under the present gas pricing scenario, he said. 

“Of course, the price of gas will eventually rise again and the projects may at that point look economic,” he added.

Major petrochemicals producers in Alberta include NOVA Chemicals, Dow Chemical, Shell and MEGlobal.

For more on NOVA, Dow and other producers visit ICIS company intelligence
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By: Stefan Baumgarten
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