Shale boom causing disruptions in by-product supply, prices

20 June 2013 05:28  [Source: ICIS news]

HOUSTON (ICIS)--Accessibility to shale resources has led to abundant and cheap natural gas, but the flood of ethane is pushing large amounts of naphtha out of the crackers, leading to lower output of propylene, butadiene (BD) and aromatics when compared to ethylene, a consultant said on Wednesday.

Propylene could have a global shortage of about 3m tonnes/year by 2015 and 14m tonnes/year by 2025, said John Corrigan, a partner with consulting firm Booz & Company.

BD (C4) and benzene (C6-12) could each have a global shortage of about 1m tonnes/year by 2015. That amount could reach 4m tonnes/year for BD and 6m tonnes/year for benzene by 2025, Corrigan said during the ICIS US Aromatics and Derivatives Conference.

In the US, substitution of cheaper lighter feedstock over more expensive heavy naphtha has already caused price disruptions in propylene and BD, Corrigan said.

However, benzene prices have remained relatively stable, and supply is affected to a lesser extent because its production is based on multiple processes, he added.

On a global scale, North American shale gas development is causing  a decoupling of oil and gas prices, so Europe, Asia and other regions that rely on heavier feedstock are exposed to oil price fluctuation, Corrigan said.

“Naphtha is not doing well because it’s having to compete with very cheap butane and propane,” he said.

European and Asian petrochemical businesses are disadvantaged, and by 2015, many of their small or stranded crackers could come under threat because of the new and competitive capacity, he added.

The ICIS US Aromatics and Derivatives Conference concludes on Thursday.

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By: Tracy Dang
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