06 December 2013 09:46 [Source: ICB]
The group is taking bold steps to improve the profitability of its Europe ethylene operations
On a press trip to Grangemouth, Scotland, and Rafnes, Norway, last week, INEOS spelled out in more detail its US ethane strategy for boosting the profitability of European ethylene-chain businesses.
Grangemouth should have a secure future
At Grangemouth, INEOS had taken a gamble on North Sea gas continuing to flow strongly to feed its NGL unit. But flows have receded to less than 50% of its requirements, forcing the company to cut production at the KG cracker. The petrochemical complex would have closed by 2017 unless the plan was put into action, according to INEOS.
At Rafnes, a new ethane storage tank is under construction and cracking capacity will be increased by 50,000 tonnes/year to 620,000 tonnes/year. A 15-year contract for US ethane has already been struck. The whole plan relies on the availability of cheap, US ethane and INEOS claims the initiative will reduce cash costs for ethane to near US levels, or around half the European average. In a presentation, the group claimed ethylene costs would fall from around $950/tonne now – based on European ethane prices – to just over $500/tonne. It estimates that US ethylene cash costs are just over $400/tonne. However ICIS Consulting estimates that estimates that the cash cost of producing US ethylene from ethane to be $244/tonne for 2013, down from $343 in 2012 and $695 in 2011. This shows the impact of falling US ethane prices on production there.
INEOS director, Tom Crotty, claimed that even accounting for the cost of transporting the gas in specialised tankers, the cost of production would be a fraction of European equivalents.
One thing is for sure, European naphtha-based crackers are under pressure as the region is squeezed between low cost Middle East production (ethylene cost around $350/tonne according to INEOS) and the new threat from the US. The INEOS plan is a bold attempt to revive the fortunes of its facilities.
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