FocusUS ethane hits new lows on high production, waning demand

11 December 2012 19:17  [Source: ICIS news]

US ethane hits new lowsHOUSTON (ICIS)--US ethane prices have hit all-time lows in recent days, as production continues to grow while demand levels out.

Ethane spot prices rose slightly from a historic low of 22.75 cents/gal on Monday to trade at 23.00 cents/gal early on Tuesday.

Monday’s price was the lowest since ICIS began tracking ethane nearly two years ago.

Spot ethane prices have fallen 71% since the beginning of the year, when they were around 78.00 cents/gal.

There are two primary reasons for the large drop in ethane prices this year, said consultant Susan Starr.

First, ethane production has continually increased throughout the year as a result of massive shale formations rich in natural gas liquids (NGLs), such as the Marcellus shale in the northeast US and Bakken shale in North Dakota.

Second, the US has nearly reached its limit of cracker conversions, where the plants are retooled to run lighter feedstocks, such as ethane.

Starr said there are a few more cracker conversions and expansions that will take place over the next couple of years but not nearly enough to take care of all the extra production.

“Production just keeps increasing,” she said. “And it’s going to continue to keep increasing.”

While there may be some sporadic demand growth over the next couple of years, Starr said there will not be any significant increase in demand until some of the announced cracker projects come on line around 2017.

Dow Chemical, Chevron Phillips Chemical, ExxonMobil, Shell, Sasol and Aither Chemicals have all announced that they are either considering or pursuing projects.

Recently, the use of ethane as a feedstock to make ethylene has grown substantially.

Ethane usage as a feedslate was in the mid-40s% in the 1990s. This year ethane makes up 58.8% of the feedslate, according to Jacobs Consultancy’s Hodson Report.

“The recent trend towards lighter feeds is expected to continue, due to the abundance of ethane and propane from relatively inexpensive natural gas, resulting from the increasing production of shale gas,” Jacobs said in the report.

By: Bobbie Clark
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