Hydrocarbon Processing Copying and distributing are prohibited without permission of the publisher
Email a friend
  • Please enter a maximum of 5 recipients. Use ; to separate more than one email address.



Dow Chemical sees high risk in Enterprise project to export US ethane

04.24.2014  | 

“It’s a high risk, because the oil-gas arbitrage that we have baked into our assumptions for our investments is half what it is today,” Dow Chemical CEO Andrew Liveris said an interview. “When you put that arbitrage in place and then put the cost of freight and a receiving facility, that’s a high-risk contract.”

Keywords:

By JACK KASKEY
Bloomberg

Dow Chemical CEO Andrew Liveris said there’s a risk that tighter natural gas markets will hurt the economic assumptions behind Enterprise Products' plan to export US ethane.

Global oil prices will drop and US gas prices will rise during the next five to 10 years, reducing the advantage of producing ethylene and plastics from US ethane, a natural gas liquid, Liveris said in a phone interview. After adding costs for export and import facilities, chemical makers in places such as Europe may have little incentive to buy US ethane, he said.

“It’s a high risk, because the oil-gas arbitrage that we have baked into our assumptions for our investments is half what it is today,” Liveris said in the interview. “When you put that arbitrage in place and then put the cost of freight and a receiving facility, that’s a high-risk contract.”

Increased production from US shale formations has created a glut of ethane, benefiting chemical makers such as Dow who turn it into ethylene and plastics, while hurting ethane producers. Enterprise said it plans to eliminate much of the estimated 300,000 bpd of excess ethane production with an export facility on the Texas coast.

“There is nothing that we see as concerning about that announcement,” Liveris, who is also Dow chairman, said from company headquarters in Midland, Michigan. “The chances this will get built on schedule and impact supply is very low for us.”

Exporting Ethane

Rick Rainey, an Enterprise spokesman, declined to immediately comment when reached by Bloomberg.

If Enterprise can fill its export facility, US ethane markets may balance by 2018 when new ethylene plants start production in 2018, followed by more surplus through at least 2020, Bradley Olsen, a midstream analyst at Tudor, Pickering, Holt & Co. in Houston, said in a report.

Dow is investing $4 billion in Texas and Louisiana to expand production of ethylene and propylene using low-cost natural gas liquids such as ethane and propane. Companies such Chevron Phillips Chemical and ExxonMobil also are expanding ethylene production in the US because of the cost advantage.

Enterprise plans on starting ethane exports in the third quarter of 2016 at a refrigerated facility that will have the capacity to load 240,000 bpd, making it the largest such facility in the world. The Houston-based company said it has executed long-term contracts to support the facility and continues to discuss supplying potential customers.

Oneok, which has been rejecting about 90,000 bpd of ethane at its processing units, stands to benefit from the start of ethane exports, Christopher Sighinolfi, a New York- based analyst at Jefferies, said in a report.

Ineos Group previously announced agreements to import US ethane for European ethylene production.



Have your say
  • All comments are subject to editorial review.
    All fields are compulsory.

BRJ
04.28.2014

If Dow is coming out against it, then probably Enterprise's business plan is fairly solid. If they had a shred of integrity Dow would also lobby furiously against exports of the low-value commodities they produce, like polyethylene, and not only the ones they buy.

Miner49er
04.25.2014

Enterprise is no doubt grateful to have the rent-seeking toads at Dow to assist them in their business planning.

Bill
04.25.2014

I'm shocked ... to hear that Dow would want to keep all that ethane here, keep proces as alow as possible, and not support exporting it!

Related articles

FEATURED EVENT


Sign-up for the Free Daily HP Enewsletter!

Boxscore Database

A searchable database of project activity in the global hydrocarbon processing industry

Poll

Should the US allow exports of crude oil? (At present, US companies can export refined products derived from crude but not the raw crude itself.)


65%

35%




View previous results

Popular Searches

Please read our Term and Conditions and Privacy Policy before using the site. All material subject to strictly enforced copyright laws.
© 2014 Hydrocarbon Processing. © 2014 Gulf Publishing Company.