US natgas supply is finite, prices may hit $5/MMBtu – consultant

14 September 2012 17:04  [Source: ICIS news]

BOSTON, Massachusetts (ICIS)--The US has a limited supply of natural gas and prices will rise in the long run, a consultant said on Friday.

“Natural gas is not infinite and it is not free. We see an equilibrium price of about $5/MMBtu,” said Fred Peterson, president of US-based consultancy Probe Economics. 

Demand for natural gas will increase from the residential, commercial, industrial heat, electric and transport sectors, along with the chemical sector, he added.

As such, building on-purpose propylene and butadiene (BD) plants in the US using propane dehydrogenation (PDH) and butane dehydrogenation (BDH) processes, respectively, is a risky proposition, the analyst said.

In the event of cheaper oil prices and a revival in naphtha production, “PDH would be hung out to dry”, said Peterson.

“It’s a risky business investing in this marginal process and the same goes for BDH. Customers may need them now, but maybe not tomorrow,” he added.

On-purpose propylene and BD units would ideally be owned or have their output contracted to large buyers looking to secure supply and place a ceiling on prices, the consultant said.

“Many years ago a large propylene buyer built a PDH unit in Europe just to keep C3 producers honest. There were times when it didn’t even run,” Peterson said.

By: Joseph Chang
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