Shale gas – will crackers get their fair share?

Feb 12, 2014

It’s a new world of natural gas in the United States. It’s cheap and plentiful and has a plethora of end uses.  The power sector will suck up most of it, displacing coal. Commercial and residential heating take another big chunk. And demand overseas is likely to drive exports higher. That leaves fertilizer producers and other industrial users to compete for the small part of the pie that remains.

Ethane from natural gas has become the feedstock of choice for ethylene in the U.S., displacing C5+ liquids. High margins have inspired six firms, including ExxonMobil and Chevron, to consider building crackers -- with a total 7.7 million tons of capacity. That would constitute a cracker explosion – if such an alarming pun could be excused. If all the new plants go forward, by 2017, they will be eating 12 million tons of ethane per year, more than there will likely be to go around. Limited supply = rising prices = declining profits.

Complicating matters is the surge of propane dehydrogenation (PDH) projects that will be competing for precious wet gas resources.

Which crackers will come online? Where? How will they secure feedstock? Ethylene producers and buyers must think long and hard through a number of possible scenarios.

Since well before the last US ethylene supercycle in the late 1980s, Nexant consultants have been advising olefins plants at all stages, from pre-feasibility to revamps. Our core strengths lie at the intersection of rapidly shifting energy markets, advancements in energy technologies and ongoing innovations in information technology.