ESAI Energy's five-year "Global Industrial Fuels Outlook" concludes that the natural gas liquids (NGL) boom from shale gas development will spur export-oriented investment in petrochemical facilities. Higher petrochemical exports from the United States will target the Latin American market, deterring petrochemical investment in that region.
As a result of growing access to cheap ethane feedstock, U.S. ethylene is becoming more competitive in global markets given its feedstock price advantage over pricier oil-derived naphtha.
According to ESAI, between 2006 and 2011, U.S. ethane output increased by as much as 233,000 b/d, or 34%. "Supplies grew most rapidly in the Rockies (97,000 b/d) and the U.S. Gulf Coast (89,000 b/d), but also in the Midwest (47,000 b/d). By 2016, ESAI expects U.S. ethane output to rise to 1.2 million b/d, up 350,000 b/d from 2011."
Rising profitability is encouraging investment. Two new ethane crackers are scheduled to come on stream between 2012 and 2016, and several existing plants are undergoing upgrades to absorb more ethane feedstock, ESAI noted.
"The implications are two-fold," said ESAI analyst Vivek Mathur. "A lighter ethylene feedstock slate will displace heavier feedstocks from the petrochemical pool. Rising petrochemical production will also reinforce the U.S. position as a plastics exporter."
And there has been a consequent growth in U.S. ethylene output, which is forecast to rise to 27 million tons by 2016, up from 24 million tons in 2011, according to ESAI.
With domestic demand for ethylene derivatives growing modestly in the U.S., expanding petrochemical capacity will be export-oriented. ESAI expects the annual surplus of ethylene derivatives to expand to over 4 million tons by 2016, a 40% increase from 2011.
The natural target for U.S. petrochemical exports is the Latin American market, which is expected to face a continued shortage of ethylene derivatives. The emergence of the U.S. as a low-cost ethylene producer is therefore likely to deter or further delay petrochemical investment in that region.
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