Petrochemical Update, an independent division within FCBI-Energy (www.fcbi-energy.com), recently released a report (“U.S. Polyethylene Export”) on projections for the rapidly growing U.S. ethylene production and investment in new polyethylene (PE) capacity. North American PE production will increase to more than 54 billion pounds by 2020, up from about 44 billion pounds in 2015 as supply grows faster than domestic demand. The report also noted that an additional 2 billion pounds of PE capacity could be added over this time frame pending final investment decisions. The added supply will create opportunities over the next decade for North American companies to export supply to regions like China, Africa and India.
Abundant and cheap supply of ethane, propane, butane, isobutane, and pentane from shale formations are driving these petrochemical investments. Steam crackers on the U.S. Gulf Coast mostly use these NGLs, primarily ethane and propane to produce olefins such as ethylene, whereas the remaining steam crackers in mature markets such as Europe primarily use refinery naphtha. Final products, such as PE are priced off crude oil. In the Petrochemical Update report, it was noted that “The cost differences between North America’s ethane crackers and international reliance on naphtha crackers has created the export potential for U.S. produced ethane, ethylene and polyethylene,” Tim Rhoads of the Professional Logistics Group said.
U.S. ethane production is outpacing expected U.S. demand growth and the ethane production surplus is projected to reach nearly 700,000 barrels/day by 2020, according to Petrochemical Update. “Additional investment in U.S. ethane crackers will add nearly 20 million pounds of additional ethylene capacity and as a result, total ethylene capacity will outpace domestic demand for ethylene derivates,” Rhoads said. In fact, the U.S. Energy Information Administration (EIA) noted in its Short Term Energy Outlook published at the beginning of the year that U.S. production of ethane is expected to increase from an average of 1.25 million bpd in 2016 to 1.7 million bpd in 2018.
The Petrochemical Update report noted that four steam crackers totaling more than 5 million tonne/year of ethylene capacity are slated to start operations this year along the U.S. Gulf Coast. Five more are under construction and expected to begin operations before the end of 2019. Some 10.3 million tonnes of ethylene capacity will enter the U.S. market before the end of 2019. Most of the new plants under construction are steam crackers plus derivatives, and the derivatives usually include a PE unit.
The report noted that Latin America, Northwest Europe, Brazil, South Korea, and China will provide the best export opportunities, based on regional demand-supply imbalances and U.S. total supply cost competitiveness. “As new U.S. polyethylene capacity comes online in 2016 and beyond, the U.S. will become a significant net exporter of polyethylene and put pressure on the international polyethylene supply/ demand balance,” Rhoads said.