According to Chevron Phillips ME to be affected by the US ethylene capacity in 10 years

Pointing out that Middle Eastern producers are at a stage in their development where pure ethane is difficult to secure and that the industry is moving towards heavier feedstocks, Chevron Phillips Chemical Company has revealed in a news release that the development of new shale gas resources in the United States will have a bearing on the region and that it needs to prepare to capitalise on potential opportunities in its own petrochemical sector. Eli Andjelich, Vice President, Business Development, Middle East, Chevron Phillips, said that announcements have been made over the past year regarding the high probability that four to six new crackers will be constructed in the United States based on feed supply from the growth of shale gas production and that if these are actualised, the country would become a larger exporter of ethylene and ethylene derivatives.

With the development of new shale gas resources, the US petrochemical industry is announcing significant expansions of US petrochemical capacity, and these new resources are a major driver for its new investments in the United States, Chevron Phillips claimed. It added that the company was on track to build a 1.5 million metric tonnes/year of ethane cracker at its Baytown, Texas plant and two polyethylene facilities, capable of producing 500,000 metric tonnes/year each, in Old Ocean, Texas near its Sweeny plant. The entire project called US Gulf Coast Petrochemical Project will cost an estimated $5 billion, Chevron Phillips said.

According to Dr Christian Günther, Partner at McKinsey and Company, the consultancy, this is unlikely to affect Middle East aspirations of growth in a major way – the US is estimated to add around nine to 11 million tonnes of ethylene capacity within the next 10 years, which can be absorbed by the forecasted global demand growth of around 50 million tonnes and still leave space for other players. Moreover, prices will remain set by liquids-based producers, as significant quantities of liquids-based ethylene will be needed to meet global demand.

“Cracking naphtha primarily produces ethylene, propylene and butadiene,” said Dr Günther. “If the US shifts to cracking ethane, the supply of propylene and butadiene may reduce and force prices to increase, making it an opportunity for producers with access to C3 and C4 to invest in.”

The real challenge for the petrochemical industry in the Middle East, says Chevron Phillips, will likely be the availability of advantageously priced ethane. From a country perspective, Dr Günther believes that the right feedstock allocation decisions by regional governments as well as enhanced education and capability building are required. And at the same time, chemical companies will have to accelerate their move towards functional excellence in operations, capex, procurement and marketing and explore opportunities beyond their traditional products to ensure the Middle East remains globally competitive.