26 April 2012 19:36 [Source: ICIS news]
HOUSTON (ICIS)--The huge gap between oil and natural gas prices are among the several factors that could add up to $2bn (€1.52bn) to the earnings of US-based Dow Chemical by 2017, its chief executive said on Thursday.
While oil prices have remained high, US natural gas prices have been near all-time lows because of the advent of shale gas.
"Never before have we seen an oil-to-gas spread as attractive as what we see today," said Dow CEO Andrew Liveris. He made his comments during an earnings conference call.
Liveris said he expects that starting in the second half of this year, ethane prices will be pressured down, as more than $6bn in fractionation and pipeline investments begin to come on line in the US.
This will increase ethane supplies faster than what crackers can absorb, Liveris said.
Every 10 cent/gal reduction in ethane adds nearly $200m/year to Dow's earnings before interest, tax, depreciation and amortisation (EBITDA), Liveris said.
Meanwhile, operating rates for the ethylene industry could exceed 90% as rising demand gains traction and producers delay start-ups of new capacity, he said.
"All of these dynamics are a real game changer for our industry and, of course, for Dow," Liveris said.
"In fact, we anticipate this value, coupled with our current feedstock investments, will translate into an additional $2bn in EBITDA in 2017," he said.
Those feedstock investments include new US plants that can use ethane and propane as feedstock.
($1 = €0.76)
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