28 November 2012 11:01 [Source: ICIS news]
DUBAI (ICIS)--The Middle East will retain its cost advantage in petrochemical production compared with North America that are now using shale as feedstock, even if natural gas prices were to increase, a consultant said late on Tuesday.
US ethane-based crackers will have a measureable advantage over naphtha, but the cost of production will not be as low that in the Middle East, said Bruce Burke, Nexant Americas senior vice president for Americas, at a pre-conference seminar at the 7th Gulf Petrochemicals and Chemicals Association (GPCA) forum.
The use of cheaper shale gas as feedstock, however, is one of the key drivers supporting a rebound in the North American chemicals sector, he said.
North America will rank second to the Middle East at having the lowest cost of producing polymers with the advent of shale gas as feedstock for production, Burke said.
Shale reserves in North America are also now more accessible as better techniques at extracting gas have been developed, including horizontal drilling.
Consequently, production of shale gas in the US is expected to roughly double from 2010 levels in a decade.
“The shale gas will be the large component of gas supply in the future,” Burke said.
With a dramatic increase in availability of ethane supply in North America, gas will be more competitive compared with crude, and by implication, naphtha, he said.
Burke said that wholesale north American gas prices will likely hover at around $5- 6/MMbtu in the next few decades.
Although ethane production is concentrated in the east coast, while petrochemical production is in the Gulf coast (south), the distance is unlikely to hamper the growth of the region’s petrochemical industry, Burke said.
“Just in recent weeks, a western European company has bought from the US for 15 years of ethane supply to Europe. There will not be much difference in moving ethane from the east coast of the US to Europe and to the Gulf Coast,” he said.
But the switch to ethane-based petrochemical production in North America has been leading to lower output of naphtha by-products such as propylene, butadiene and aromatics, he said.
The three-day 7th GPCA forum ends on 29 November.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
Asian Chemical Connections