INEOS joins US in next shale-driven wave of projects

20 June 2017 21:56 Source:ICIS Chemical Business

INEOS’s new expansion projects in Europe will rely on feedstock imported from the US, with the company taking further advantage of the influx of feedstock from the opposite side of the Atlantic.

PDH UNIT

On 12 June, INEOS announced plans to spend $2bn to build a propane dehydrogenation (PDH) unit in Europe and to expand its gas crackers at Grangemouth in the UK, and Rafnes in Norway.

These plants will tap into the significant investment by INEOS in shale gas logistics infrastructure. According to the company on 13 June, the new PDH project will rely on shale gas with a proportion coming from the US.

BUTANE STORAGE

In March, INEOS said it had signed a contract with Oiltanking Antwerp Gas Terminal (OTAGT) to construct the largest butane storage tank ever built in Europe. The tank will allow INEOS to import butane from the US and world markets in very large gas carriers (VLGCs) for its cracker in Cologne, Germany with the possibility of extending supply to its joint venture cracker at Lavera in southern France. It also gives the company the option to trade butane in Europe.

“These projects represent the first substantial investments in the European chemicals industry for many years,” said INEOS chairman and major shareholder, Jim Ratcliffe.

“It has only been made possible because of INEOS’ massive $2bn investment in our Dragon Ships programme which allows us to import ethane and LPG (liquefied petroleum gases) from the US in huge quantities.”

US NATURAL GAS LIQUIDS

Even though the INEOS projects are in Europe, they will rely on growing supplies of natural gas liquids (NGLs) in the US, joining the second wave of new plant announcements that are relying on this expanding source of feedstock.

Before the announcement by INEOS, Dow Chemical said it would increase the capacity of its new cracker in Freeport, Texas, to 2m tonnes/year.

ExxonMobil and SABIC picked a site in Corpus Christi, Texas, where it may build a cracker and other downstream units. NOVA Chemicals is also creating a joint venture with Borealis and Total to build a 1m tonne/year cracker in Port Arthur, Texas.

US NGL RESURGENCE

The wave of new plant announcements illustrates the magnitude of the recovery in natural gas liquids production in the US.

Output fell following the decline in crude prices, which forced US companies to reduce oil production. Oil wells are an important source of natural gas liquids from associated gas.

But oil companies have since cut costs, allowing profitable shale oil exploration and production at a much lower crude price. US crude production has since recovered despite the decline in oil prices.

The result is reflected in the US oil and gas rig count, which recently increased for the 21st straight week.

The increase in drilling activity has caused production of oil, ethane and propane to increase, according to the Energy Information Administration (EIA). Looking ahead, US natural gas liquids production should continue increasing, given the wave of announcements from midstream companies.

Companies are expanding natural gas liquids pipeline capacity and building new gas processing plants to handle the increase in associated gas production from the Permian oil wells in west Texas.

As recently as 12 June, another midstream company announced plans to build a gas processing plant in west Texas.

Since west Texas is relatively close to the US Gulf and its petrochemical plants, it is an ideal source of new natural gas liquids production.

ADDITIONAL PRODUCTION

Already, west Texas is well served by midstream infrastructure. The new pipelines and gas plants will accommodate additional production of natural gas liquids. Of course, a pipeline will not connect the Permian to the expanded crackers or new propane dehydrogenation plant announced by INEOS.

Instead, these will rely on the terminals along the US Gulf Coast and at Marcus Hook, Pennsylvania, on the east coast that can ship ethane and liquefied petroleum gases overseas to Europe.

Already, the US is the world’s largest exporter of liquefied petroleum gases, and much of these exports are feeding crackers in Europe. Last year, US ethane arrived at the INEOS crackers in Grangemouth and Rafnes.

This first wave of US feedstock allowed European producers to change to lighter feedstock or to replace dwindling supplies of ethane from the North Sea.

This second wave will allow INEOS to increase capacity. It also incorporates Europe in the second wave of US-fuelled petrochemical projects.

By Al Greenwood