(Platts) – The rush by European buyers to import cheap ethane from the US may grind to a halt following the recent collapse in crude prices, according to Mark Garrett, CEO of Austrian chemicals giant Borealis.
So far Ineos, Sabic and Borealis have committed to bringing in gas drilled from the huge shale deposits in the northeast of the US. But those deals were signed when naphtha was trading at a $700/mt premium over ethane. That premium has now sunk to below $400/mt.
“I think the people with the difficult decisions to make now will not do it,” Garrett told Platts in an interview.
Imported gas will be cracked in European petrochemical plants that are on the coast, such as Rafnes in Norway, Steningsund in Sweden and Grangemouth and Wilton in the UK.
This is due to reduced shipping costs and the difficulty of transporting ethane across land.
This, according to Garrett, means it may be more profitable to import ethylene for polymerization rather than ethane to crack.
Light gas feedstock, ethane, has seen a loss in profitability amid falling alternative feedstock prices in 2014.
Naphtha, the primary feedstock for olefin production in Europe, was assessed at $532.75/mt CIF NWE Monday, compared with $937.75/mt CIF NWE at the start of 2014.
In the past four months, two huge petrochemical complexes in Qatar have been shelved amid falling prices.
Industries Qatar in September canceled its $5.5 billion Al Sejeel project, while Shell and Qatar Petroleum last month shelved their $6.5 billion Ras Laffan project, citing “the current economic climate prevailing in the energy industry.”
Garrett, whose own company has invested heavily in the Middle East through its Borouge joint venture with Abu Dhabi National Oil Company, said he expects other companies to review their investments following the near 40% collapse in oil prices since September.
“There will be more announcements as long as oil stays at $50-60/barrel,” he said. Front-month Brent futures were trading at around $60.90/bbl mid-morning Tuesday.
By Amar Carmody, Edited by Jonathan Fox
