Ethane

Home>Topics>Ethane
Refine Results
  1. All
  2. Articles
  3. Online Articles
  4. Magazine Articles
  5. Videos
  1. Petrochemical Op-Ed: Chemical Imbalance

    How’s this for understatement: "The oil price slide of the last two years has been something of a shock to the petrochemical industry." Shock – and awe. The price of petchem products has dipped to near 2008/09 recession levels, pushed down by in part by oil spot prices currently hovering at the $40 bbl (WTI) mark, and global crude futures closing at 11-year lows. Energy markets have always been changeable, but the while crude’s decline has been all over the news, there’s more to the story than low prices for Brent and WTI. Today’s price shocks in oil and elsewhere are being driven by baseline shifts in the global dynamics of energy market supply and demand . Unfortunately, while the risk profile of energy trades is increasing, the ability of petrochemical companies to manage portfolio risk has remained pretty much the same. What changed? Petchems have always been caught in a classic double whammy. Feedstock prices – oil, natural gas, and key intermediates like ethylene and naptha – determine production costs for finished products. But petrochemical production is also energy-intensive, with manufacturing infrastructure that needs its own hedging strategy to mitigate energy costs. That situation isn’t new. What is new is the number of feedstock options PetChems now have to choose from, and a whole slew of attached complexities that have to be managed across the value chain. Unconventional sources of oil and natural gas (via shale) offer abundant sourcing choices for both.  Renewables are increasingly a factor in electricity generation, and their built-in unpredictability adds uncertainty to power pricing. Extreme weather events are on the upswing and land without warning, dramatically disrupting energy markets and utility business plans. It all adds up to multiple exposures that PetcChem companies have to manage across oil, natural gas, power, and even the intermediate commodities they produce. Sometimes the expected price correlations between them simply fall apart Sources of volatility On the oil front, Iran’s gradual return to major export markets has the potential to drive prices lower. Production from other troubled countries like Iraq and Libya can be expected to be chaotic, affected without warning by disruptions related to political and social unrest. Meanwhile, the shale boom has also brought new supply chain management issues – namely high production-decline rates. It’s quite normal for peak production at Shale wells to drop by up to 80 percent within a year. That means shale oil supply needs constant oversight and new production sources need to be continually lined up. On the upside, new shale and other light tight oil production can be launched relatively quickly – so quickly that pundits have speculated the US could replace Saudi Arabia as the world’s go-to swing producer. On the downside, shale producers have shown a preference to park their investments when oil prices are low, leading to rushed supply ramp-ups when oil prices rise. When you add OPEC’s apparent determination to keep production up it’s a recipe for more supply-demand shocks, and a witches brew of rapid price spikes and rapid price declines. Oil may be down, but gas is even cheaper Shale continues to push down natural gas prices and that’s been the case for some time. A less-publicised development has been rapid growth across the segment of the petrochemical industry that uses abundant – and now very cheap -- natural gas to produce key ingredients found in everything from liquid fuels to fertilisers to plastics. Over the last three years, the EPA has issued permits to build or expand no less than 105 oil, gas, or chemical plants that will use shale gas or oil as a feedstock. And there are another 15 pending applications. Shell Chemical recently signed a site option agreement to build a petrochemical complex in western Pennsylvania with a world-scale ethane cracker to produce ethylene. Cheap gas means margins are high for petchem manufacturers making gas-based intermediates and end products, and likely to stay that way in the near term. But like oil or any other commodity, gas prices can fluctuate. Given the volumes at stake, even small price changes can mean huge benefits or losses, depending on the direction. Renewables cloud the power picture Power utilities are putting more and more emphasis on generation from solar, wind, and hydro in response to growing end user demand. That means getting to grips with an increasingly distributed and complex system of generation that can manage inputs from all the people creating their own electricity at home. And while renewables have always come with built in volatility due to their reliance on optimal weather conditions, recurring bouts of extreme weather have shown they can cause huge swings in demand, generation capacity, and price per kilowatt hour over an extended period. My colleague Ken Vorwald goes into much more detail on that subject here, but suffice to say all of this has had an impact on electricity prices, making them less predictable over the long term and the hedging strategies for petrochemical power consumption more complex to design and manage. How Petchems should react The collapse of oil and gas prices has actually exposed a fatal weakness in the petrochemical industry: too many companies without the capability to respond quickly when energy price shocks hit. The growing number of options available for feedstocks and fuels create a complex operating environment where greater volatility exposure to price swings in oil, natural gas, and power is the new normal. There is now a pressing need to make better informed decisions that ensure manufacturing costs and raw material prices are maximising the crack spread and overall margins for finished products. The problem is fixable. A petrochemical producer with the right tools in place can expand margin in a falling price environment by identifying sourcing savings ahead of declines in product pricing. When prices go back up, margins can be still protected by raising prices faster than costs rise. The key is to have visibility of risks and changing market conditions, and stay steps ahead of the competition. Commodity management to the rescue Trying to predict energy market moves can be a mugs game, but effective commodity management systems can analyse a company’s trading history against the specific risk factors in its portfolio. From there different scenarios and likely future outcomes can be modelled, with insights derived from  these core capabilities: Analyzing portfolio exposure to measure how various feedstock price scenarios will impact the value of oil, gas, and other energy trades Monitoring price indicators to identify impending shocks Minimizing risks by modelling the cost alternatives for financial hedging, contracts, as well as the logistical risks attached to replacement feedstocks Performing simulations on portfolio to guide trades under different price scenarios; for example, what do we do if the price of natural gas goes up 7 per cent or 11 per cent next year? By applying this and other ‘what  if’s’, petchems can make educated assumptions about costs and prices based on where the market is going. Raising the visibility of market risks is absolutely essential if chemical producers are going to manage the crack spread and control feedstock and energy costs effectively. Only with commodity management systems and processes in place to provide critical business intelligence, transact and capture data in real time, then analyze it to make optimal decisions around trade execution, position management, and physical logistics, will this happen. The level of uncertainty that continues to define energy markets should banish any complacency around trends that dominated during normal conditions. Despite the lessons of the past 18 months it’s still an open question which petchem companies will push ahead of the competition, and which will watch profitability slide. About the Author Michael Hinton, Senior Vice President of Allegro Development Corporation and an expert in Petrochemical and Oil Industry risk management.

    Online Articles

    Online Articles

    Wed, 21 Sep 2016

  2. Regulators approve permits for restart of Louisiana ethane cracker

    Indorama Ventures Olefins LLC (IVO), a subsidiary of Thailand’s Indorama Ventures Public Co. Ltd. (IVL), Bangkok, has secured approvals from US regulators to proceed with its plan to renovate and restart a dormant ethane cracker in Westlake, La., just west of Lake Charles in Calcasieu Parish.

    Online Articles

    Online Articles

    Wed, 31 Aug 2016

  3. Ethane production expected to increase as petrochemical consumption and exports expand

    Ethane production is expected to increase from 1.1 million barrels per day (b/d) in 2015 to 1.4 million b/d in 2017, accounting for two-thirds of total U.S. hydrocarbon gas liquid (HGL) production growth.

    Online Articles

    Online Articles

    Fri, 1 Apr 2016

  4. Westlake Chemical, Axiall complete merger

    Westlake Chemical Corp., Houston, has completed its previously announced acquisition of Axiall Corp., Atlanta, to become the third-largest chloralkali producer and the second-largest polyvinyl chloride (PVC) producer in North America.

    Online Articles

    Online Articles

    Tue, 6 Sep 2016

  1. EPP secures additional ethane export volumes

    Online Articles

    Online Articles

    Wed, 11 Nov 2015

  2. Tallest lift completed for Gulf Coast ethane cracker

    The tallest lift has been completed for the 1.5 million-tonne/year ethane cracker at Chevron Phillips Chemical Co. LP’s Cedar Bayou petrochemical complex at Baytown, Tex.

    Online Articles

    Online Articles

    Tue, 3 Nov 2015

  3. Study confirms cost hike for Sasol’s Louisiana petchem complex

    Sasol Ltd. has completed a detailed review of its integrated ethane cracker and downstream derivatives complex under construction in Westlake, La., near Lake Charles, the results of which confirm a $2.1-billion increase in costs from the company’s original estimate of $8.9 billion at the time of ...

    Online Articles

    Online Articles

    Fri, 26 Aug 2016

  4. US ethane exports ‘imminent’ amid flood of supply from shale plays

    US ethane production, forecast to reach 2.5 million barrels per day (b/d) by 2024, will cause supply to exceed domestic demand, making exports “imminent,” according to a report from Bentek Energy, an analytics and forecasting unit of Platts.  

    Online Articles

    Online Articles

    Tue, 11 Nov 2014

  5. Construction under way for Texas ethane cracker

    Ingleside Ethylene LLC, a 50-50 joint venture of Occidental Chemical Corp. (OxyChem) and Mexichem SAB de CV (Mexichem), has started construction on a planned ethane cracker to be built at OxyChem’s existing plant in Ingleside, Tex.

    Online Articles

    Online Articles

    Wed, 17 Dec 2014

  6. Willbros awarded ethane export pipeline construction project

    Willbros Group Inc. says that HSC Pipeline Partnership LLC (a subsidiary of Enterprise Products Partners LP) has awarded it a contract to construct a 15.5-mile, 24-inch ethane pipeline from Enterprise's storage facility near Mont Belvieu in Chambers County, Texas, to Enterprise's Morgan's Point ...

    Online Articles

    Online Articles

    Fri, 5 Jun 2015

  7. Thailand’s PTTGC pondering ethane cracker in Ohio

    Ohio Gov. John R. Kasich reported Apr. 22 that PTT Global Chemical (PTTGC), Thailand’s integrated petrochemical and refining company, and its project partner, Marubeni Corp. of Japan, have selected a site in Belmont County, Ohio, for the possible construction of an ethane cracker.

    Article

    Article

    Wed, 22 Apr 2015

  8. Oil and Gas News: Shell commits to western Pennsylvania ethane cracker plant

    Shell Chemical Appalachia says it is building a petrochemical plant in northwestern Pennsylvania that will create up to 6,000 construction jobs and 600 permanent jobs once it begins production early next decade.

    Online Articles

    Online Articles

    Tue, 7 Jun 2016

Get More Results