US oil resurgence boosts CP Chem optimism for ethane

Interview article by Al Greenwood

COLORADO SPRINGS, Colorado (ICIS)–The resurgence of US oil production has made Chevron Phillips Chemical more optimistic about the outlook for ethane supplies, the company’s CEO said on Monday.

Oil production is important to the chemical industry because it also results in associated gas, which is rich in ethane and other natural gas liquids (NGLs), that the US plants use for feedstock.

Following the decline in oil prices, US companies reduced production, raising concerns about ethane supplies. While the US would have enough ethane to supply the new crackers being built, there were concerns about how expensive this ethane would be.

However, US producers have successfully cut costs, allowing them to make money even with oil prices well below $60/bbl.

The result has been a resurgence in crude production in the US. The nation’s oil and gas rig count rose for the 20th consecutive week, reaching 916.

US oil production is now at 9.34m bbl/day, close to the all-time record hit earlier in the decade, according to the Energy Information Administration (EIA).

Moreover, oil production is rising in areas that are relatively close to chemical plants. These areas are already well served by infrastructure and processing plants that can ship the resulting NGLs to crackers along the Gulf Coast.

These oil-producing regions include the SCOOP (South Central Oklahoma Oil Province), the Eagle Ford and the STACK (Sooner Trend Anadarko Canadian Kingfisher). But the standout is the Permian.

“What’s happening there is nothing short of phenomenal,” said Peter Cella, CEO of Chevron Phillips Chemical. He made his comments on the sidelines of the American Chemistry Council’s (ACC) Annual Meeting.

The Permian has been producing oil for close to a century, Cella said. He estimates that so far, companies have extracted 30bn bbl of oil and 14 trillion cubic feet (TCF) of gas from the Permian. There could be another 20bn bbl coming out.

This new generation of wells is producing tight oil, and as these wells age, they produce a larger proportion of gas, he said.

The Permian already has plenty of gas-processing capacity and NGL pipelines to take product to the Gulf Coast.

However, midstream companies have plans to build more.

DCP Midstream is planning an additional large-scale expansion of the Sand Hills natural gas liquids (NGL) pipeline from the Permian to the Gulf Coast.

Targa Resources plans to build a new common carrier natural gas liquids (NGL) pipeline from the Permian Basin to Mont Belvieu, Texas, the nation’s NGL hub.

Enterprise Products plans to build a pipeline to transport natural gas liquids (NGL) from the Permian Basin to Mont Belvieu.

A group of former executives from Energy Transfer Partners (ETP) has launched Aspen Midstream, having secured a $200m commitment from EnCap Flatrock Midstream and the management team of the new company.

EnCap has since made another equity commitment to create Cardinal Midstream III.

EnLink and Natural Gas Partners created a joint venture to build a processing plant in the Delaware basin.

Enterprise announced several projects back in June 2016

The annual meeting runs through Wednesday.

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