July 17, 2015 – OPIS
OPIS North America LPG Report (page 7)
IN THE NEWS . . .
Ethane prices could hit 50cts/gal by 2020, bolstered by new demand from growing petrochemical cracking capacity and export capacity, RBN Energy predicted yesterday. Yet, those infrastructure improvements may not generate the returns originally projected.
In a blog, "It's Not Supposed To Be That Way -- NGL Prices and Petchem Margins In a Low Crude Price World," RBN author Sandy Fielden observed that the economic conditions that existed when the petchem and export expansions were planned and announced have changed.
Fielden said the investments were based on three assumptions: "1) that NGL production would continue to grow; 2) NGL prices would remain low; 3) Crude oil and naphtha -- would continue to be expensive."
Many of the projects were developed when crude oil prices were above $75/bbl and were expected to remain there. But, crude prices dropped sharply in late 2014 and in early 2015. A subsequent price rebound has been gradual. Crude prices may have difficulty sustaining higher levels -- especially given the lifting of economic sanctions against Iran.
