EPCA ’16: Global markets will adjust quickly to latest US cracker wave – Patel
Nigel Davis
03-Oct-2016
LONDON
(ICIS)–Global markets will adjust quickly to new ethylene
and polyethylene capacities coming on stream in the US based
on shale gas economics, LyondellBasell CEO Bob Patel said on
Monday.
In an interview with ICIS on the sidelines of the 50th
European Petrochemical Association (EPCA) meeting, Patel also
suggested that ethylene cycle tightness may be buoyed later
this decade if coal to olefins and methanol to olefins plants
in China do not come on stream as planned, because of water
use and other environment related issues.
Even 18 months ago, 2017 was seen as the on-stream date for
many of the new US crackers under construction on the US Gulf
Coast.
Those on-line dates appear to have been pushed out, he
suggested, towards 2018, so the capacity additions could be
smoothed, thereby maintaining a degree of tightness in the
global ethylene market. There may be some excess in 2018/19,
he said but not a lot of new investment has been announced
beyond that.
For ethylene, unlike the C3 and C4 chains, the global cost
curve is fundamental, he said. And while demand for
polyethylene remains significant in China and is likely at
some stage to grow strongly in Africa, the US is currently
the place to invest to produce the polymer.
“We [the US-based chemical industry] will be exporting a lot
more to Asia post-2018,” the LyondellBasell CEO added, but
the region would absorb more commodity-oriented products for
film, blow-moulding and injection moulding applications, for
example.
There would not be a wave of polyethylene imports to Europe,
he suggested, because of grade requirements and a need to
maintain close customer relationships.
Ethylene producers need to have a view on the potential for
coal to olefins and methanol to olefins production in China
and the position of new plants in China on the global cost
curve, Patel said. Cost-per-tonne production costs for MTO
producers in China at the current oil price help determine
global ethylene operating rates.
Patel believes that ethane feedstock supply and ethane costs
are likely to adjust very quickly when the new US crackers
come on stream, with particular wet gas supply flexibility in
the proximity of the US Gulf coast in the Eagle Ford shale
deposit in Texas.
There is enough ethane to support all the new crackers under
construction, he suggested, although if ethane costs do rise,
LyondellBasell has the feedstock flexibility to take
advantage of competitively-priced propane and butane.
Because the ethane cost advantage is not as great as it was
when oil touched $110/bbl, Patel believes that the second
wave of cracker investment in the US – projects that have
been announced but where there is no steel in the ground –
will be challenged.
“Today it is not obvious that all the new crackers should be
built in the US,” he said earlier in a presentation to the
EPCA meeting.
“The key [to investment decisions] is to look through the
cycles,” he said, and invest for the long term.
With its cracker debottlenecking project at Corpus Christi
due online soon, LyondellBasell will have added close to 1m
tonnes of ethylene capacity to its US total at about half the
capital cost of a similar greenfield investment, Patel
said.
He admitted, however, that construction costs for its latest
expansion were “meaningfully higher” because of decline in
construction and field engineering quality.
This has been driven by the speed at which some of the new
investments were realised and the demand pressure on key
construction and engineering personnel such as welders and
pipe fitters.
LyondellBasell is preparing to make an investment decision in
the US for the construction of a propylene oxide/tertiary
butyl alcohol (PO/TBA) plant using its proprietary
technology. Its high density polyethylene (HDPE) expansion in
Texas and the PO/TBA plant are current investment
priorities.
The PO/TBA investment at Pasadena, Texas, and nearby would be
for 1bn lbs/year of PO and 2bn lbs/year of TBA.
“We are thinking about a global market place,” Patel said
earlier on Monday when referring to the La Porte, Texas, HDPE
plant. It will be able to produce multi-modal products using
process technology developed in Frankfurt and Italy helping
converters use less resin.
“The future is about applying what we are really good at,”
Patel said to the ongoing investments and what he described
as the next wave of value creation for the company.
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