24 May 2013 13:53 [Source: ICIS news]
LONDON (ICIS)--Any European petrochemical producers that set out to replace naphtha feedstock with ethane imported from the US face overcoming a number of obstacles to make the move viable, Erste Group Bank said on Friday.
“This only makes sense if you can reach a cheap cost of [delivered] ethane feedstock, as normally ethane crackers are built closer to the source of feedstock, with shipping not a real option,” said Tamas Pletser, an analyst at Austria-based Erste.
“If you liquefy it, you may end up with the same selling cost as you have for LNG [liquefied natural gas], and that would make no sense at all,” Pletser added.
Ethane, Pletser also noted, is lighter than, for instance, liquefied petroleum gas (LPG), so shippers required bigger containers for the same volumes.
Around 3% of the capacity of Europe’s crackers currently run solely on ethane feedstock, according to New York-based institutional investor research consultancy Alembic Global Advisors.
“Our analysis suggests that if the region started importing US ethane an incremental 8% of European ethylene capacity [already using ethane and other natural gas liquids (NGLs) as feed] could be switched over to using ethane as a feedstock in a cost effective manner and at most another incremental 39% could make the switch, but at a much higher capital outlay,” said Hassan Ahmed, an analyst at Alembic.
American ethane – the low cost of which, thanks to the shale boom in the US, is widely recognised by analysts to have caused a petrochemical renaissance among American producers – would be in oversupply even if there was a significant uptick in exports of the gas to Europe, the consultancy added.
There are four gas-fed ethylene crackers in Europe, the biggest being ExxonMobil’s 830,000 tonne/year plant in Mossmorran, Scotland.
INEOS Europe – a business within Switzerland-headquartered chemical major INEOS – which owns two of the four crackers, has signed several deals aimed at securing ethane from the US for its production.
Austria’s Borealis, which owns the 625,000 tonne/year plant in Stenungsund, Sweden, which can crack ethane at 15% of capacity, said it has entered the investigation phase to confirm the viability of bringing in American ethane.
Italy’s Versalis – part of ENI – is another European producer looking at shipping ethane from the US.
But it is INEOS Europe, with its dedicated gas crackers, that has the most advanced plans. In January, it entered into 15-year shipping agreements with Copenhagen-based petrochemical gas transporter Evergas for the delivery of ethane into Europe from the US.
Under the agreements, Evergas will build and operate medium-sized carriers with a cargo capacity of 27,500 cbm, dedicated to the transportation of ethane from Marcus Hook, Pennsylvania, to INEOS's gas cracker in Rafnes, Norway.
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