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Competitiveness of NGL Feedstocks and Derivatives

By LBCG

Feb 07, 2016
 

Anticipated global supply and demand dynamics of NGL Feedstocks and Derivatives.

 
 

 

 

 

 



 

Matthew George

Head of Petrochemical Exports

Indian Oil Corporation


 

Why are NGL feedstocks and the global export opportunities so important in the industry right now?

 

MG. The abundant supply of shale gas in North America has reenergized the North American petrochemical industry, unleashing a wave of capital investment in new facilities. Since many shale fields contain, in addition to oil and natural gas, large quantities of natural gas liquids (NGLs), such as ethane, propane and butane, major new supplies are entering the market at low costs.


This low-cost feedstock has already shifted profit pools from gas producers and processors to petrochemical manufacturers. However, in view of the recent fall in crude prices, the balance may shift back, so petrochemical executives are making long-term capital decisions in a time of tremendous uncertainty.


Industry executives in China, Rest of Asia and Europe are all watching carefully as they make investment decisions that depend on the amount of natural gas, NGLs and polymers consumed in and eventually exported by the US.

 

 

What are the main plant projects that you are currently working on at this time in India? Can you give a brief description?

 

MG. Indian Oil Corporation has recently commissioned a new 15MMTPA refinery on the eastern coast and we are also in the process of commissioning a 700KTPA Polypropylene unit with propylene derived from the FCC. Additionally, we are also looking at investments in acetic acid as also a new grassroots refinery, which is expected to provide feedstocks for one more cracker.


 

What are the main considerations on selecting a country to export goods to?

 

MG. Price netbacks are obviously very important so supply chain costs and ease of shipments including infrastructure availability is critical. Payment security is important too and the banking system in the destination country needs to be robust.

 

 

What are the key logistical challenges when exporting feedstock to India?

 

MG. Port congestion in India is a fairly common phenomenon. Also ship berths which can handle gas vessels, shoreside terminals and distribution infrastructure like pipelines and railheads are also inadequate and needs upgrading.

 

 

What do you anticipate learning about in Global NGL feedstock and derivatives conference?

 

MG. Developing an understanding of how the industry views the viability of NGL feedstocks in view of the recent Crude crash.

 

 

What are the implications of seasonal demand variables on the capacity of naphtha and ethane?

 

MG. India, being a country of fairly uniform weather, seasonal demand variations are less. However, the monsoons are a time when demand pattern undergoes changes, as well as festival times. It is important to note that especially when shipping naphtha or ethane, the monsoon is to be taken note of and all weather berths are a requirement.

 

 

Is there an opportunity to export either naphtha, ethane, propane or butane to India and if so why?

 

MG. India has a robust double digit growth in polyolefins and the feedstock availability as things stand now just doesn’t match up. If India wants to remain relevant as a manufacturer of building blocks and petchems, we need to look at feedstocks. So I would say opportunities for export for all the above products do exist once downstream investments are tied up in the long term.

 

 

Which region are you mostly looking to import the majority of your naphtha and ethane from?

 

MG. Middle East and US

 

 

Almost all of the major petrochemical and productions companies are involved in large-scale global export of feedstock, but what would you say to smaller companies that are considering export opportunities?

 

MG. It all depends on how the NGL versus crude scenario pans out. I feel that in an evolved scenario, size doesn’t matter as the smaller size players will consolidate in the form of common use infrastructure like shore terminals, pipelines and ships.

 

 

What do you see as being the next area of progress in the NGL and feedstock space?

 

MG. I expect that the relevance of Naphtha as a feedstock will remain for some time to come in Asia and the Middle east, especially when one considers the co-products of naphtha cracking like butadiene and propylene. Once the current crude shock is over and some semblance of normalcy is attained, the relevance of NGLs – ethane especially, will see a rapid rise and ethane will continue as an advantaged feedstock. We are also seeing a wave of on purpose propylene projects in China, US etc, therefore the expected propylene shortage seems to be a myth. A new class of vessel, the Very Large Ethane Carrier (VLEC) with Type B containment systems (Self-supporting prismatic tanks) of around 90000 CBM capacity will be the transportation of choice for ethane movements in view of the volumes involved.

 

 

 



 

Hardi Schuck

Supply Chain Director

Braskem


 

Why are NGL feedstock and the global export opportunities so important in the industry right now?

 

HS. In the past, NGLs were basically produced to supply the domestic market in the USA. Export capacity was limited and US prices were higher than other alternatives in the international market. Since the development of shale gas, NGL production has increased and new opportunities came to the market. There is more product availability and US prices became more competitive. In this new market reality, players are searching to find the best market opportunities and in some cases the international market shows better alternatives for producers.

 

 

What are the main plant projects that you are currently working on at this time in Latin America? Can you give a brief description?

 

HS. Braskem has a joint venture with Idesa in Mexico; an ethane cracker and polyethylene units. The startup is going to happen in the first quarter of this year. The Braskem Idesa project is a 1 million ton ethylene capacity cracker based on ethane produced in Mexico.

 

 

What are the main considerations on selecting a country to export goods to?

 

HS. The main considerations to select a destination are competitive commercial conditions and logistic infrastructure.

 

 

What are the key logistical challenges when exporting feedstock to Brazil or Mexico?

 

HS. Brazil is short in all NGL’s: ethane, propane, butane, natural gasoline and heavy condensates; there are different restrictions for each product. For ethane, the main challenge is to move cryogenic material and the infrastructure associated. For LPG, logistics are more developed. To move the material heavier than C5 (natural gasoline and condensate) the challenges are arbitrage opportunities and competitive freight rates.

 

 
What do you anticipate learning about in Global NGL feedstock and derivatives conference?

 

HS. Understanding USA export availabilities and constrains.

 

 

What are the implications of seasonal demand variables on the capacity of Naphtha?

 

HS. Seasonal demand of naphtha for gasoline can change the relative feedstock competitiveness. This is the reason why crackers with flexibility to choose the raw material have a competitive differential.

 

 

Is there an opportunity to export either Naphtha, Ethane, Propane or Butane to Brazil and if so why?

 

HS. As Brazil is short in all NGL’s, there are different logistic restrictions for each product. Nowadays, USA already exports propane, butane and natural gasoline to Brazil. There is the possibility to increase exports of C5+ (natural gasoline and condensate) as Brazil will continue to be short in naphtha

 

 

Which region are you mostly looking to import the majority of your naphtha and propane from?

 

HS. Main naphtha supply to the Brazilian market comes from the Mediterranean. USA is becoming more important as a supplier due to shale gas developments.

 

 

Almost all of the major petrochemical and productions companies are involved in largescale global export of feedstock, but what would you say to smaller companies that are considering export opportunities?

 

HS. There are opportunities to all the players in the market. For the smaller producers logistics are even more important. These producers need to find a way to consolidate parcels in order to optimize the logistics. Some end users have projects to consolidate parcels in the USA in order to have the right size to export. To export C5+, producers with parcels smaller than 300 kbbl have a big challenge to be competitive.

 
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