Total and Sasol still committed to ethane crackers as petrochemical prices begin to fall

Plastic granules
Source: DollarPhotoClub

There are two basic ways to produce ethylene – the primary building block of most plastics. One is to use, or “crack”, ethane derived from natural gas. Another is to use naphtha as a feedstock. Back in the day when oil prices were high, it was a no-brainer since the glut of cheap shale-derived natural gas meant that ethane was much cheaper and more readily available than expensive naphtha, which is derived from oil production.

But now that the prices of naphtha have followed the crude prices to the bottom, with crude oil prices down 9% and naphtha prices down 14% in July, according to a recent Platts analysis, the ethane-cracking projects that aimed at capitalising on the spread between expensive oil and cheap gas are looking far less attractive.

According to Platts Global Petrochemical Index (PGPI), prices in the $3-trillion-plus global petrochemicals market fell for the first time in five months in July, following the decline in the energy complex. Petrochemical prices, expressed as a monthly average, fell $91 per metric ton (/mt) from June to $1,013/mt in July. The last time global petrochemical prices fell on a monthly average was January of this year, when prices fell 14% to $850/mt.

Is this the end of the petrochemical renaissance? It’s too early to say. Some analysts expect many of the planned chemical plants in the U.S. to be shelved, with one expected casualty being the gas-to-liquids plants that made sense when gas was cheap and crude expensive.

However, there still seems to be a lot of appetite for ethane crackers.

In the recent days Total has announced its plans to build a new, $2 billion steam cracker in Port Arthur to produce up to 2.2 million pounds of ethylene a year. Meanwhile the South African chemical giant Sasol is still forging ahead with its $8.9bn investment in a US gas processing facility near its existing site in Southwest Louisiana. The plant will be able ton produce 1.55m tonnes of ethylene.

According to Sasol’s website, approximately 90 percent of the cracker’s ethylene output will be converted into a diverse slate of commodity and high-margin specialty chemicals for markets in which Sasol has a strong position, underpinned by collaborative customer relationships. The complex will also include six chemical manufacturing plants.

Total Petrochemicals & Refining USA has hired the energy infrastructure company CB&I to provide its proprietary ethylene technology and front-end engineering and design (FEED) services for a proposed new ethane cracker located in Port Arthur, Texas. According to the company statement, the proposed cracker will have a capacity of one million metric tons per year of ethylene. CB&I will provide FEED services and the process license for its latest, proven ethylene technology, including seven highly selective SRT® (short residence time) cracking heaters.

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