Shale imports to reduce Rafnes C2 costs to near US levels: INEOS

Tom Brown

03-Dec-2013

INEOS Bambles, Rafnes site (Source INEOS - Copyright All rights reserved by INEOS Group)RAFNES, Norway (ICIS)–Switzerland-headquartered chemicals producer INEOS said on Tuesday that the successful import of shale-derived ethane stocks from the US to its Rafnes, Norway site could reduce its cash costs for ethylene (C2) production to near US levels.

INEOS Olefins and Polymers Europe business director Geir Tuft told reporters that the cash cost of ethylene production at the site is likely to fall to a little over $500/tonne once it has access to shale-derived feedstocks from the US.

The current ethylene production cost at the site is around $950/tonne (€703/tonne), well below the European average, he added.

The shift to lower cost feedstocks is likely to take place upon completion of a new gas tank and associated infrastructure at the site.

The company has already locked down one 15-year contract with US firm Range Resources for 400,000 tonnes/year of ethane from the US, for use at Rafnes.

With an estimated capacity of 17,000 tonnes, the tank will bring the site’s total gas storage capacity to 30,000 tonnes, according to the company.

The tank is expected to be completed in December 2014, when the first shale gas-bearing ships are expected to arrive, a site worker told ICIS, with shipments to being in earnest in the first quarter of 2015.

INEOS chairman and CEO of Olefins & Polymers Europe Calum MacLean told ICIS on Monday that the company recently locked down another shale gas contract, and is in discussions for others, with deliveries to be utilised at Rafnes as well as at Grangemouth, in the UK.

The facility is being constructed by TGE Gas Engineering, which is also bidding against Babcock International for the front-end engineering and design (FEED) contract for a 33,000 tonne unit which may be constructed at the company’s Grangemouth, UK site.

Three gas tankers are under construction for the company by Evergas, and INEOS recently agreed to move forward with a fourth. An additional two Evergas tankers are under consideration, depending on whether INEOS decides to move forward with shale gas import infrastructure developments at Grangemouth.

Speaking on the sidelines of a press briefing at the site, INEOS director Tom Crotty said that a 50,000 tonne/year capacity expansion of its cracker, expected to be completed by the end of 2015, would lead to an incremental reduction in the cost of ethylene, but the main price fall would be accomplished upon completion of the tank, when shale gas starts to flow into the site.

($1 = €0.74)

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