13 February 2012 22:09 [Source: ICIS news]
HOUSTON (ICIS)--US Gulf ethane production is anticipated to hold relatively steady even though prices have reached their lowest levels since August 2010, an analyst said on Monday.
Gulf coast ethane traded at a low of 45.50 cents/gal on 10 February, a drop of 46% from 3 January, when ethane traded at 83.75 cents/gal.
Analyst Ron Gist with Purvin & Gertz said US Gulf prices could fall much further before processors would stop recovering ethane from natural gas. Ethane could sell for about 25 cents/gal and still be profitable to sell in most of the US, he said.
The recent drop in ethane prices is a result of low demand, said Anne Keller, an analyst with Midstream Energy Group. Ethane is the primary feedstock for ethylene, and multiple ethylene plants are going through or preparing for turnarounds.
In the midwest, ethane is selling for 14-15 cents/gal, causing producers to lose 5 cents/gal by extracting ethane from the natural gas stream, said analyst Dan Lippe with Petral Consulting Company. Producers in Calgary, Alberta, in Canada are also losing money.
On the Gulf coast, ethane buyers know what the costs are for extracting ethane from natural gas, Lippe said. The buyers do not want producers to stop extracting ethane because the limited supply would drive prices up. Accordingly, the buyers are paying enough for ethane to allow production to continue, Lippe said.
The cost to extract, ship and fractionate ethane on the Gulf coast is 21-23 cents/gal, Lippe said. Therefore, there is still a profit for ethane sold for 45.50 cents/gal.
On the US Gulf, there are two active turnarounds, while a third cracker is down for unplanned maintenance and several more have turnarounds approaching.
Flint Hills Resources had shut down its Port Arthur cracker in Texas as a result of a steam disruption, according to sources.
Flint Hills has 621,000 tonnes/year of ethylene capacity at the site. Market sources said the unit could be off line for two weeks.ExxonMobil began its two-month maintenance in Baytown on 1 February, while Dow Chemical started a 45-day turnaround at its St Charles unit on 19 January.
Market sources said LyondellBasell is preparing to take one of its Channelview crackers in Texas down for a 60-day turnaround at the end of February. The company has two units at the site, each with 873,000 tonnes/year of capacity.
BASF, INEOS, DuPont and Chevron Phillips Chemical are among the other US producers with scheduled maintenance in the next few months.
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