Selected material from an article by Shailaja Nair in Dubai (Platts) on November 29th.
The first barrel of ETHANE from the Bakken field will go to Nova Chemicals’ Joffre, Alberta facility to be value added and converted into polyethylene next year, according to CEO Randy Woelfel. His company is well placed to exploit all that the developing shale oil and gas sector has to offer as its 2.8 million tonne per year Joffre facility, which had the biggest ethylene production capacity when it was built in 2000 and is close to the Bakken and Montney shale plays as well as the oil sands.
Its other plant at Sarnia, Ontario, the 1.5 billion lb/year (680,000 tonne per year) Corunna cracker, is near the Marcellus and Utica shale plays in Pennsylvania, Ohio and West Virginia. In its NOVA 2020 strategic plan released a little over a year ago, Nova Chemicals, a wholly owned subsidiary of Abu Dhabi’s International Petroleum Investment Company, had said it planned to take advantage of emerging ETHANE feedstock supply from the Marcellus shale and expand its ethylene and polyethylene capacities.
New gas will go to export — there are 15 LNG export projects in some stage of discussion — power generation and industrial demand, but a major chunk will go into petrochemical production, he said.
Consider, traditionally the price of oil to methane gas has fluctuated in the 6:1 energy parity ratio, but in the second quarter of this year, in a dramatic shift, the oil to gas ratio spiked to 50:1. “Even as we relaxed back to something that seems a bit more steady state with gas at $3.50/Mcf and crude oil at $85/barrel for WTI, we are still at 25, well above fuel parity,” he said.
Even as Saudi Arabia remains the most profitable in petrochemical production, retaining its cost advantage, the US Gulf Coast and Canada are closing the gap, Woelfel said. The US Gulf Coast especially has rapidly forged ahead to optimize the amount of pure ethane it can use as feedstock and “today the industry is sitting on something in excess of 70% of pure ETHANE with essentially the balance of the industry running propane and butane,” he added.
Last month, Price-Waterhouse Cooper, PwC, said in a report that shale gas could enable “US manufacturers to lower their raw materials and energy costs as much as $11.6 billion annually by 2025.”
Considering how much longer other regions will take to reach the stage the North American shale gas sector is at today in terms of development and momentum, it looks set to retain its lead position, Woelfel said. “So ethylene producers are naturally very excited. We have gone from being a sunset industry to suddenly a sunrise business.” he added.
The last world-scale polyethylene plant in North America was built by Nova and that was in 2000. All the announcements of new projects and expansions means a 40% increase in PE production just by the end of this decade, Woelfel said. Based on industry reports, PwC estimated in its October report that the US chemicals industry has invested $15 billion in ethylene production, increasing capacity by 33%.
Regulation not a show stopper
Shale gas does lead to strong responses from regulators and the community, Woelfel said. Well safety, water usage, land destruction are all hot topics, but he sees increasing knowledge and communication as making people become more comfortable with the sector. And the money they get in the mailbox is a help, he said, adding that on balance “the regulatory environment is not a show-stopper.”
Talking of a brave new world, Woelfel said that if he was the one giving advice to a young Dustin Hoffman in the 1967 Oscar-winning film The Graduate, he would whisper “shale” instead of “plastics” as the business to be in. Summing up the advantages of the shale gas boom, Woelfel said: “There is a lot of good news for a lot of industries, but no better news for one industry than for petrochemicals.”
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Ineos to build new ethane tank in Norway for US supply
Selected material from an article by Monicca Egoy, Platts (London), December 4th.
The Ineos chemical company will construct a new ETHANE storage tank at its Rafnes site in Norway for ETHANE coming from the US starting in 2015. This ETHANE will be used to run the company’s crackers in Europe.
The storage tank will boost the existing storage capacity at Rafnes, which hosts a 560,000 tonne per year ETHANE cracker.
Tom Crotty, Ineos group director, told Platts news service in an interview in October that the company is planning to boost the capacity of the Rafnes cracker to around 700,000 tonnes per year to accommodate the US ETHANE gas supply.
The US ETHANE will also be fed into the company’s 720,000 tonne per year Grangemouth cracker in the UK, he said, but added that “complex logistics” are involved and have to be sorted out to bring the gas to the site.
Ineos said in late September that it had signed a 15-year ethane supply agreement with Range Resources, an oil and natural gas producer in the eastern US and “pioneer” in the Marcellus Shale play. The ETHANE will be lifted from the Marcus Hook facility, located near Philadelphia, from 2015, when the delivery to Rafnes will begin.