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All I Need is the Air That You Cleaned and to Pay You – Will Emissions Costs Choke Petchem Expansions?

Emission regulations require that companies planning new olefin crackers in EPA designated nonattainment areas like Houston must buy emission credits prior to construction. The market for credits in Houston for one criteria pollutant – volatile organic compounds (VOCs) skyrocketed from $4.5K/ton in 2011 to $300K/ton this month. The scarcity of emission credits and their rising price threaten to constrain or delay new petrochemical plant builds and will continue to hamper plant development and expansions in the Gulf Coast region. Today we describe the challenge new projects face.

All I need is the Air That You Cleaned and to Pay You – Emissions and Olefin Cracker Expansions

Cheap feedstocks resulting from dramatic increases in US shale production of natural gas and natural gas liquids (NGLs) have led petrochemical companies to plan at least 7 new processing plants - known as olefin crackers - all but one on the Gulf Coast. These plants are expensive (think $billions) and take years to permit and build. They also produce significant quantities of emissions that are restricted by the Clean Air Act (CAA) – some of which trade in a market that has been skyrocketing for the past few months – threatening to delay or constrain the Gulf Coast cracker building spree before it gets started. Today we describe the regulations.

Let’s Get Cracking - How Petrochemicals set NGL Prices – Part III

Last week the price of ethylene dropped from the low 50s per pound down to the low 40s. In a big flip-flop, propane has been the preferred feedstock for petrochemical plants on the Gulf Coast for a couple of weeks now (it had been ethane for the most part of the last 3+ years).  And the petchem market hit ethane where it hurts, whacking the price down to 29.875 cnts/gal on Friday according to OPIS.  A month ago that price was 50 cnts/gal. In October of last year the price was almost $1.00 (see graph below).  This is good news for petchems, right?  Well, it all depends on the margin that the petchem realizes on the feedstocks that are run.  So to figure that out, let’s get to Part III of our series on the economics of petrochemical feedstocks.