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INEOS joins US in building next wave of shale projects

Posted on June 30th, 2017 by in Chemicals Industry News and Analysis

INEOS Dragon Ship

INEOS’s new expansion projects in Europe will rely on feedstock imported from the US, with the company taking further advantage of the influx of feedstock from the opposite side of the Atlantic.

These plants will tap into the significant investment by INEOS in shale gas logistics infrastructure. According to the company, the new PDH project will rely on shale gas with a proportion coming from the US.

In March, INEOS said it had signed a contract with Oiltanking Antwerp Gas Terminal (OTAGT) to construct the largest butane storage tank ever built in Europe.

The tank will allow INEOS to import butane from the US and world markets in very large gas carriers (VLGCs) for its cracker in Cologne, Germany with the possibility of extending supply to its joint-venture cracker at Lavera in southern France. It also gives the company the option to trade butane in Europe.

“These projects represent the first substantial investments in the European chemicals industry for many years,” said INEOS CEO and major shareholder, Jim Ratcliffe, referring to the latest announcements.

“It has only been made possible because of INEOS massive $2bn investment in our Dragon Ships programme which allows us to import ethane and LPG [liquefied petroleum gases] from the US in huge quantities.”

Even though the INEOS projects are in Europe, they will rely on growing supplies of natural-gas liquids (NGLs) in the US, joining the second wave of new plant announcements that are relying on this expanding source of feedstock.

Before the announcement by INEOS, Dow Chemical said it would increase the capacity of its new cracker in Freeport, Texas, to 2m tonnes/year.

ExxonMobil and SABIC picked a site in Corpus Christi, Texas, where it may build a cracker and other downstream units.

NOVA Chemicals is also creating a joint venture with Borealis and Total to build a 1m tonne/year cracker in Port Arthur, Texas.

The wave of new plant announcements illustrates the magnitude of the recovery in NGLs production in the US.

Output fell following the decline in crude prices, which forced US companies to reduce oil production. Oil wells are an important source of NGLs from associated gas.

But oil companies have since cut costs, allowing profitable shale oil exploration and production at a much lower crude price. US crude production has since recovered despite the decline in oil prices.

The result is reflected in the US oil and gas rig count, which recently increased for the 21st straight week.

The increase in drilling activity has caused production of oil, ethane and propane to increase, as shown in the charts below. All of the statistics are from the Energy Information Administration (EIA). The date of the statistics starts in 2014, the year that oil prices had fallen.

Field production of crude

 

Gas plant production

 

Propane and Propylene

 

(The propane and propylene statistics are in thousands of bbl)

Looking ahead, US NGLs production should continue increasing, given the wave of announcement from midstream companies.

Companies are expanding NGLs pipeline capacity and building new gas-processing plants to handle the increase in associated gas production from the Permian oil wells in west Texas.

Another midstream company has announced plans to build a gas-processing plant in west Texas.

Since West Texas is relatively close to the US Gulf and its petrochemical plants, it is an ideal source of new NGLs production.

Already, west Texas is well served by midstream infrastructure. The new pipelines and gas plants will accommodate additional production of NGLs.

Of course, a pipeline will not connect the Permian to the expanded crackers or new PDH plant announced by INEOS.

Instead, these will rely on the terminals along the US Gulf Coast and at Marcus Hook, Pennsylvania, on the east coast that can ship ethane and LPG overseas to Europe.

Already, the US is the world’s largest exporter of LPG, and much of these exports are feeding crackers in Europe.

Last year, US ethane arrived at the INEOS crackers in Grangemouth and Rafnes.

This first wave of US feedstock allowed European producers to change to lighter feedstock or to replace dwindling supplies of ethane from the North Sea.

This second wave will allow INEOS to increase capacity. It also incorporates Europe in the second wave of US-fueled petrochemical projects.

To find out how to read more news and analysis stories from ICIS, go to www.icis.com/about/news/

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All opinions shared in this post are the author’s own.

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