Petrochemical Steam Crackers

Prices headed up!!  That’s something that you haven’t heard much lately.   But big changes are just over the horizon for NGLs as new petrochemical plants and export projects come online.   These projects will encounter a market environment far different than what was expected when they were being planned.  Instead of an oversupplied market driving NGLs lower relative to crude oil and natural gas, the projects will confront a tight market, with NGL prices higher relative to the other hydrocarbons. In today’s blog we explain why what must go up must come down, and vice versa.

Massive infrastructure investments in petrochemical steam crackers and export terminals for propane, butane and ethane are in the works.  But the market has changed since the investment decisions for many of these facilities were made.  Instead of the low ethane prices the petrochemical market is enjoying today (about 19 cents/Gal), prices could ramp up to 50 cents/Gal by 2020 as new steam crackers and ethane export facilities come online.  If ethane prices increase and crude oil prices remain below $65/bbl, the feedstock cost advantage of ethane versus naphtha that the new petrochemical facilities expected likely would not materialize.  Lower crude oil prices would also cap production growth of all NGLs, limiting the volumes to be exported through the new terminals.  Today we review Part 2 of our Drill Down Report on NGL Infrastructure.