ICIS WEBINAR: Ethane remains the most favoured cracker feedstock

HOUSTON (ICIS)–Although the global ethylene cash cost curve has been flattened in recent weeks due to the impacts of the coronavirus outbreak, ethane remains the most favoured cracker feedstock, said James Wilson, senior analyst at ICIS. He gave his remarks in a webinar, part of a series hosted by ICIS.

The significant drop in crude oil prices following the coronavirus outbreak and subsequent lockdown measures, which caused a large drop in demand for transportation fuels, resulted in a flattening of the global ethylene cost curve, leading to no major cost advantage for ethane crackers relative to naphtha crackers.

Wilson noted that while cost-based models show healthy margins for naphtha, difficulties in placing cracker co-products, especially butadiene (BD), are putting some limits on the margins available to naphtha crackers in real world situations. As a result, observed cracker feedstock runs have been lighter than might be implied by cost models.

Another factor affecting the profitability, moving forward, of various feedstock routes will be the direction of oil prices. Lower oil prices make heavier feedstocks, such as naphtha and liquefied petroleum gas (LPG), more competitive relative to lighter feedstocks such as ethane.

Wilson commented that the current low oil prices are not likely to remain durable over the longer term, predicting that oil prices would strengthen through the second half of 2020. Higher oil prices will shift production economics back toward ethane-based crackers.

Another factor in favour of ethane-based production is that variable costs for ethane production remain low at various oil price levels, while naphtha-based producers need a lower oil price to remain competitive.

Ethane-based production also requires lower levels of feedstock input compared with naphtha. A little over one tonne of ethane is required to produce a tonne of ethylene, while over 3 tonnes of naphtha are needed to produce a tonne of ethylene.

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