The Impact of Shale Gas on Petrochemicals
The most import petrochemical of them all is ethylene. It is a precursor to Polyethylene as well as many other chemicals. Ethylene is usually made in a steam cracker, which converts naphtha, which itself is produced in petrol refineries. Therefore demand for plastics helps drive demand for crude oil. So what happens if an alternative feedstock is used instead of naphtha?
On alternative is ethane, a byproduct of natural gas, the sources of which are growing ever greater, as the world produces and consumes growing volumes of gas. In areas where natural gas production volumes are significant, it provides the bulk of the raw material in place of naphtha. This is happening to a great extent in the USA as shale gas production increases.
A decade ago most ethylene in North America was made using naphtha, an oil derivative: it is this process that has propylene as its by-product. However, in the past few years, dearer oil—thanks in part to China’s energy-hungry growth—and the emergence of new sources of gas, such as American shale-gas deposits, have made it attractive to produce ethylene using a natural-gas derivative called ethane. The trouble is that the ethane route to making ethylene produces virtually no propylene.
It seems set to continue, with investments from Chevron
Chevron Phillips Chemical Company LP (Chevron Phillips Chemical) today announced that it is advancing a feasibility study to construct a world-scale ethane cracker and ethylene derivatives at one of its existing facilities in the U.S. Gulf Coast region. The new facility would utilize the advantaged feed sources expected from development of shale gas reserves.
& Dow Chemical planned in ethane cracking.
The Dow Chemical Company (NYSE: DOW) announced today that it plans to increase ethane cracking capabilities on the U.S. Gulf Coast over the next two to three years, and improve its ethane cracking capabilities by 20 – 30 percent in this timeframe.
Dow explains why ethane is the way forward
“Ethane is an advantaged feedstock in the United States and we anticipate a favorable oil to gas ratio to continue,”
They currently produce 55% of their ethylene from ethane.
as a result of the recent rise in domestic gas output, U.S. ethane production has risen by 25 percent over the last five years.
This is one area of natural gas for oil substitution that we hear little of in the press. Yet petrochemicals account for maybe 4% of global oil consumption. That's about 3 million barrels of oil per day. So you can see the substitution potential.
So while pundits and politicians are discussing the pros and cons of natural gas powered vehicles, chemical companies are already making the shift over to gas, a shift that could have profound impacts on the natural gas sector, the petrochemical sector and the price of oil.