11 February 2013 00:00 [Source: ICB]
As you look over the impressive list of planned projects for North American liquefied natural gas (LNG) exports, it is hard not to see a parallel in the heavy project slate for planned new worldscale crackers in the US. Both are being driven by the US shale gas boom. Yet there is the potential for one to threaten the other.
Unlimited US LNG exports could create volatility in natural gas and natural gas liquids (NGLs) prices, contends US-based Dow Chemical. While LNG exports for fuel would consist primarily of dry gas, in which process NGL are stripped out, LNG containing ethane and propane could be shipped out as well.
"It is not a given that NGL will always be stripped out prior to shipping," said Kevin Kolevar, vice president of government affairs and public policy at Dow. "For example, Japan has specs for wet gas concentrate in LNG. And to what extent would other countries look to use wet gas? We have not heard assurances from the oil and gas community that they would strip out the NGL."
This is an important aspect for the chemical sector - one we will explore in upcoming issues. There is an argument that LNG exports could actually increase NGL supplies, precisely because the NGL are stripped out.
Dow contends that it supports some LNG exports but is concerned that an unchecked level of exports could drive up prices and volatility in gas and NGL. "The fact that so much capacity is being planned to come on in a compressed timeframe causes concern," said Kolevar.
Dow estimates that over a 10-year timeframe, the US could export up to 5-6bn cubic feet/day of natural gas through LNG without disrupting the market, if that capacity comes on line in a linear fashion.
That would amount to 38-46m tonnes/year of LNG. Yet, there is a total of 154.9m tonnes/year of LNG export capacity being planned in the US, according to ICIS analysis. There is virtually no chance of this coming on in a disciplined, linear fashion - and neither will the wave of new worldscale ethane crackers.
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