Executive confidence still strong: Grant Thomson

22 March 2013 13:40  [Source: ICB]

With US natural gas values low and tumbling ethane prices in the US, Canada's NOVA Chemicals is poised to capitalise on the ethane price advantage. "Companies that succeed in this business are the ones that react to what is happening out there," says Grant Thomson, president of olefins and feedstock at NOVA Chemicals in Calgary.

Chemical manufacturers in North America are enjoying a major cost advantage over producers in other regions that has not been seen for more than a decade. In Europe and Asia, where ethylene production is based mainly on naphtha, producers have been hit by rising naphtha costs.

The Canadian petrochemicals industry is short on ethane - a key natural gas component and vital ingredient for chemicals producers. "We have seen declining border flows, especially on those flows going east in the last five to 10 years," Thomson says. "And that has led to ethane shortages here in Alberta."

After decades of volatile natural gas prices that limited industrial demand, shale gas offers North American competitiveness, prompting new investment. Companies are getting innovative and importing ethane from North Dakota and Marcellus shale, and recovering off-gases from bitumen upgraders, according to Thomson.

"We are going to be bringing ethane in from the Bakken area," explains Thomson who adds that the Vantage pipeline, which will be operated by NOVA, is in the process of being built. The Vantage pipeline is a high vapour pressure pipeline that will carry ethane from a source near Tioga, North Dakota in the US, northwest to a site near Empress, Alberta, in Canada, according to the US Department of State.

The conduit is expected to have the capacity of 40,000 bbl/day, expandable to 60,000 bbl/day of liquid ethane from existing natural gas facilities in North Dakota to the Alberta Ethane Gathering System in Alberta, according to the federal agency. The pipeline is expected to be up and running by the end of 2013, says Thomson.

NOVA also plans to diversify its feedstock portfolio with plans to get feedstock from off-gas flows from the oil sands. "We are putting facilities in place to be able to extract the ethane out of that liquids-rich stream and use that as another major source of feedstock and with that we are going to be maximising our ethylene production and building a derivative plant here in Alberta," he says. Thomson adds that the company is planning to spend about $2bn of capital in projects over the next few years.

These include a 1bn lb/year (454,000 tonnes/year) polyethylene (PE) project in Alberta, which is expected to be finished by the end of 2015, and a $250m conversion of its Corunna cracker facility in Ontario to a 100% light feed plant to take advantage of the low-cost gas environment. The plant will only use natural gas liquids (NGLs) and is expected to be finished at the end of this year.

NOVA is also in the early engineering phase for some of the eastern assets looking at the expansion of the ethylene facility, Thomson says.

In the US, six new 100% gas-fed crackers are scheduled to come on stream over the next five years, in 2016-2017, with another due around 2019-2020. The new crackers, expansions of existing facilities and restarts of previously shut-down facilities could add 10.2m tonnes/year to US ethylene capacity - a 38% increase.

US ethane prices have tumbled in the last year, enabling sharp increases in margins for ethylene and its derivatives. Average US ethane prices declined by nearly 50% in 2012 compared with 2011 and Nova has positioned itself to take advantage of privileged feedstocks.

"NOVA is going to continue to do what we do well," says Thomson. "We make ethylene and we make PE and we want to continue to take advantage of competitively priced feedstock."

By: Leela Landress
+1 713 525 2653

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