US ethane market to be flooded in 1-2 years – energy editor

02 February 2012 21:48  [Source: ICIS news]

NEW YORK (ICIS)--The US ethane market will be flooded in 1-2 years as natural gas liquids (NGL) production accelerates and fractionation and pipeline capacity is built, the editor-in-chief of US-based Energy Business Watch said on Thursday.

“There had been some delay in [natural gas] fractionation capacity coming on, but this will build out rapidly. In short order there will be lots of ethane sitting behind the pipelines,” said Andrew Weissman at a meeting of the Chemical Marketing & Economics Group in New York.

“Ethane prices will continue to go down and the market will be flooded a year or two from now,” he added.

US ethane prices were 52.75 cents/gal as of Thursday – down sharply since the fourth quarter when they peaked at almost 95 cents/gal.

NGL production will accelerate in the coming months as the plummeting price of natural gas has caused drillers to shift away from dry-gas to liquids-rich-gas production, Weissman said.

On 23 January, US-based natural gas producer Chesapeake Energy announced that it would cut its drilling budget for dry gas from $3.1bn (€2.4bn) in 2011 to $900m in 2012, reallocating capital to liquids-rich plays.

“Don’t be surprised if NGL production doubles or triples in a short period of time,” Weissman said.

“If you have liquids-rich gas, you can give away the dry gas for free [and still make money],” he added.

Weissman projects that US natural gas prices are “nearly certain to fall below $2/MMBtu” but that this level will not be sustainable in the long term.

He projects natural gas prices of $3.50-4.00/MMBtu over the long run.

US producers use ethane as feedstock for ethylene.

($1 = €0.76)

By: Joseph Chang
+1 713 525 2653

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