Shale Gas and Petchem Feedstock
The last meeting held on the sidelines of IPF was question-and-answer session about shale gas.
The participants in this forum said US shale gas projects and China’s coal are among factors that would cause a revolution in the petrochemical feedstock in the near future.
The main points discussed in this forum are as follows:
Growing differences in the crude oil and natural gas prices in the US and easy access to ethane in North America have boosted investment and paved the ground for the markets to increase ethylene exports to Europe.
Iran’s economy will be ready to rival big economies like China and India in the coming years.
Growing population, per capita income, industrial developments and environmental impacts affect supply and demand.
The US has still to invest heavily in liquefied natural gas (LNG) terrains, while having to lay more pipelines to carry petrochemical products and gas to exports terminals which are both time taking and costly.
Huge investment has been made in the US downstream oil sector, while Persian Gulf littoral states have been slow in this regard.
China is investing in transforming coal to olefin, thereby opening a new chapter in petrochemical production.
Production of propylene from coal in China would raise this country’s petrochemical production by 50 percent and make the country self-sufficient.
A major cause of concern with shale gas recovery is its detrimental impacts on the environment. However, Japan and South Korea have managed to develop methods that would minimize environmental impacts of shale gas recovery.
Shale gas is natural gas that is found trapped within shale formations. Shale gas has become an increasingly important source of natural gas in the United States since the start of this century, and interest has spread to potential gas shale in the rest of the world. In 2000, shale gas provided only 1% of US natural gas production; by 2010 it was over 20% and the US government's Energy Information
Administration (EIA) predicts that by 2035, 46% of the United States' natural gas supply will come from shale gas.
Some analysts expect that shale gas will greatly expand worldwide energy supply. China is estimated to have the world's largest shale gas reserves. A study by the Baker Institute of Public Policy at Rice University concluded that increased shale gas production in the US and Canada could help prevent Russia and Persian Gulf countries from dictating higher prices for the gas they export to European countries.
A 2013 review by the United Kingdom Department of Energy and Climate Change noted that most studies conducted on the subject have estimated that life-cycle greenhouse gas (GHG) emissions from shale gas are similar to those of conventional natural gas, and are much less than those from coal, usually about half the greenhouse gas emissions of coal; the noted exception was a 2011 study by Howarth and others of Cornell University, which concluded that shale GHG emissions were as high as those of coal.
China’s shale gas ramp-up may surprise the skeptics. Beijing wants drillers to increase output from a standing start to a third of current US levels – around 270 bcm annually – by 2020. That’s a stretch. But on plausible assumptions, the People’s Republic could get there within a decade. New discoveries and further joint ventures with the likes of Texas-based FTS International would help.
Shale Gas and Petchem Market
The sixth meeting held on the sidelines of IPF discussed shale gas and its impact on the market.
The main points addressed by participants in this gathering are as follows:
Iran, which has the world’s largest gas reserves, should try to minimize gas sales level and instead, sell products of higher value.
The US has become an energy exporter thanks to shale gas reserves it has recovered. It is expected to become a major player in the world chemical industry.
The issue of shale gas has been the centre of attention since five years ago.
Middle East remains the largest producer of polyethylene and it will be the focal point of world energy supply.
Shale gas revolution in the US has created both opportunities and threats for producers of petrochemicals. Iran can benefit from these opportunities by boosting its aromatics production.
The shale gas revolution mainly affects olefins and polymers and it will not have significant impacts on other products.
The petrochemical industry in North America suffered recession for a certain period of time, but it grew again and the US has become a global rival due to its shale gas recovery.
The US petrochemical industry will also grow due to its shale gas recovery, but it may have to import aromatics. That would be a good chance for the Middle East countries.
Iran has largely contributed to aromatics production in the world. Iran can develop its petrochemical industry by benefitting from its advantages like easy access to natural gas and specialized manpower.
Despite sanctions, Iran has continued exporting petrochemicals and China, which is Iran’s largest trading partner, is a major customer of Iran’s petrochemical products particularly methanol and polyethylene.
Asia and Middle East have always sought to boost production due to low-price feedstock. China is also moving towards self-sufficiency and plans to use coal in petrochemical production. That would be more cost-effective given its huge coal reserves.
The price and demand volatility has inevitably affected the aromatics business over recent years. The weak downstream demand is mainly attributable to economic uncertainty around the world. Asia continued to dominate aromatics consumption driven by new derivative production capacities, while a decline in demand was seen in North America and Western Europe.
The complexity in upstream factors provided a challenging environment for aromatics. Benzene supply from pyrolysis gasoline (pygas) is highly dependent on the economics and feedstock type of ethylene production.
US pygas supply has been reduced as a result of shale gas exploitation. LPG also gained in popularity as cracker feedstock in Western Europe to mitigate the effect of high crude oil prices.
On the reformer side, demand for transportation fuels continues to be effected by high crude oil prices, biofuels, renewables and electric vehicles. Nevertheless, most aromatics players continued to approach their maximum capacities, following high margins for paraxylene, driven by the strong demand from the fiber and packaging sectors.