GPCA '12: N America could drive low gas prices for next decade

29 November 2012 11:28  [Source: ICIS news]

DUBAI (ICIS)--North America could be the driver of sustained, low natural gas prices for at least the next decade because of the abundance of economical supply in the region, a senior executive of Nova Chemicals said on Thursday.

Besides the plentiful supply, the presence of supportive regulatory environment, supporting resources and strong demand responses are additional factors to facilitate North America to move towards low cost, Randy Woelfel, CEO of Nova Chemicals said in the seventh Gulf Petrochemicals and Chemicals Association (GPCA) forum held on 27-29 November.

The low natural gas pricing is a result of the new natural gas supply emerging from the region, he said.

Cost of US Gulf ethane will be more than halved in 2012 to near 20 US cents/lb (15 euro cents/lb) from four years ago at over 40 US cents/lb, Woelfel said.

“2012 is a new ball game. [Although] Saudi economics is still historically based at the first place, the US Gulf ethane is closing the gap,” Woelfel added.

“Shale gas will be the catalyst for long-term natural gas supply growth,” Woelfel said.

With new “fracking” methods, shale gas drilling becomes more economical, while by products such as natural gas liquids that are of high market value further motivates extraction, boosting shale gas supply further, he said.

“Shale gas volume has nearly doubled in just five years to 831 trillion cubic feet [tcf] today in [the North America’s shale gas basins],” Woelfel said.

Apart from the growth in supply, the demand in North America will increase by more than 40% by the year 2030 in terms of primarily exports, power generation and industrial consumption, he said.

“Today, 70% of the [petrochemical] industry is running on ethane, with the balance operating on propane and butane,” he said.

He added that consequently, there are long-term growth opportunities for ethylene derivatives.

“Ethylene producers are pretty excited now, as we have come from a sunset industry to a sunrise business,” Woelfel said.

There will be a slew of new polyethylene [PE] capacity addition until the end of 2020, adding 40% of capacities from now, he said.

The last world-scale PE plant built in the US was in 2000.

“The increase in PE supply will be heading into the growing domestic demand that is estimated at a rate of 2-4%, while the balance will be entering the global market later this decade,” Woelfel said.

($1 = €0.77)


Author: Ong Sheau Ling

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