28 May 2012 00:00 [Source: ICB]
A changing global feedstock and energy picture is having a profound effect on chemicals. Currently, US producers find themselves in an advantaged position, given the abundance of ethane from shale. Natural gas and ethane costs have come down sharply while petrochemical prices have tracked the price of crude oil.
LyondellBasell's Channelview plant in Texas could have neighbours
It is feedstock advantage, however, that is reshaping the petrochemical landscape. Investments are starting to flow in different directions.
Typically, new cracker capacity is built to take advantage of a feedstock position - based on availability and projected cost - and market growth.
The most recent wave of new capacity built across the Middle East was the subject of years of debate. Built largely to produce polymers and glycols for export to China and the wider world, the largest slug came on stream in 2010.
Subsequent additions are well down on what was at one time planned due to a combination of factors, including the recession and changing feedstock availability. The major ethylene capacity additions in the next few years will be in China and, to a lesser extent, across wider Asia. New cracker and coal-to-chemical projects in China will add close to 7.5m tonnes/year of additional ethylene capacity from 2012-2015, according to ICIS data.
Increasing volumes of ethane from shale gas, however, have shifted global investment patterns. Lower-cost natural gas and ethane in the US - prices driven down by increased gas availability from the fracking of major shale deposits - have transformed the outlook for the petrochemical industry.
Project announcements indicate that US ethylene capacity could increase by as much as 28% by 2017, based on an analysis by ICIS.
A major change in global investment patterns in petrochemicals is taking place, US-based consultancy Nexant claimed earlier this month.
With the advent of shale, the cost competitiveness of different plants in different regions has changed considerably. Producers are faced with more choice, but also more complexity and a tougher call on their investment dollars.
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