20 June 2012 10:44 [Source: ICIS news]
LONDON (ICIS)--An oversupply of ethane in the ?xml:namespace>
Bernstein said that during late 2010 and 2011, exploration and production (E&P) management teams looked at their success in gas supply, and began a process of redeploying capital.
“Amid the disparity in pricing, with natural gas anaemic and crude strengthening to a record differential, the ‘shift to liquids’ became a major theme in the North American E&P space,” the analyst said.
“One of the biggest potential misconceptions, in our view, is that recent reductions in natural-gas directed drilling expenditures, due to low gas price, could result in lower NGL production,” it added.
Bernstein said it believed the opposite to be true, adding that in 2012 much of the industry’s capital has shifted to NGL operations, which is likely to increase production.
The analyst said that ethane and propane prices have fallen substantially in the past year and will likely remain low since the chemical industry is unable to consume the supply.
Bernstein added that this has meant that capacity to consume ethane and propane in crackers is not keeping up with production.
“Looking forward, announced capacity additions and debottlenecking will likely not keep up with ethane production growth of 6-7% CAGRs [compound annual growth rate],” it said.
“Ethane supplies appear to have increased to the point where the
It said consumers of ethane and propane should continue to benefit from the low-cost of ethane and propane, as it will improve the profitability of ethane cracker owners such as Dow Chemical, LyondellBasell, and
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