InterviewUS to remain long on natural gas for 100 years

14 September 2010 21:59  [Source: ICIS news]

The US to remain long on natgasBy Ivan Lerner

NEW YORK (ICIS)--The US will likely remain long on natural gas for 100 years, a trend that should help the nation's petrochemical industry maintain its ethane advantage, a consultant said on Tuesday.

Natural gas in the US has become more and more available, and “we are just beginning to access the natural gas in shale”, said Joe Pilaro, president of US-based petrochemical consultancy BRAE Partners.

Much of the shale gas is wet gas, so called because it has a relatively high proportion of natural gas liquids (NGLs), Pilaro said. Such NGLs are very suitable for ethane extraction.

North America has always had good access to natural gas, giving its petrochemical industry an advantage over regions such as Europe, which rely on naphtha as its primary petrochemical feedstock, Pilaro said.

The US will remain long on natural gas “for a very long time - 100 years. I don’t see any change in the dynamics” between US and Europe, Pilaro said.

“Europe is always going to be at a disadvantage … [and] has had a competitive disadvantage [since] forever. That is why the US was at one point exporting roughly 10% of ethylene derivatives to Europe,” he added.

While the 1m tonne/year ethylene terminal at Zwijndrecht, Belgium, proposed by UK-based chemical major INEOS will be massive, the company has not said where the ethylene will be sourced.

Expected to start in 2012, INEOS’s new terminal is estimated to cost €80m-100m ($103m-128m) to build.

Pilaro said he expects INEOS to make a deal of some sort, perhaps a joint venture (JV), with a Middle Eastern supplier.

“If I were running INEOS today, I’d be spending time in Kuwait trying to make a deal with them,” he said.

The terminal could make INEOS the “largest buyer of ethylene in Europe today,” free of European suppliers. They would love to have the independence,” said Pilaro.

He added: “If INEOS wants to remain in a competitive position … they have to have ethane-based ethylene available to them – and they know that.”

It will take a long time to happen, but Pilaro said that eventually “the European producers with naphtha plants are going to go out of the derivatives business” because of cost.

“The highest cost plant goes first,” he said.

($1 = €0.78)

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By: Ivan Lerner
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