The New Gold Rush: Benefits and Risks of the US Shale Gas Boom?
Linde and Bechtle formed a partnership last year to exploit the shale gas boom and participate in planned petrochemical projects in the US. Linde’s LNG business has been the main beneficiary up to this point, as the company has been able to leverage its expertise in natural gas production, liquefaction and storage. In company’s interim report for Q1 2012, Dr. Aldo Belloni made special mention of a shale gas contract which will generate $95 million in revenue for the Engineering Division.
That however is only the tip of the iceberg. According to an article which appeared in the German business news magazine Wirtschaftwoche, the American Chemistry Council estimates that the shale gas boom has generated $25 billion of investment in the petrochemical industry.
Shale Gas: It’s Really All About Ethane
These number games are ultimately founded on worldwide ethylene production volumes (around 160 million MT in 2012). Ethylene is absolutely critical to the chemical and plastics industry. Packaging, car seats, cable insulation, water buckets and much more are based on this mass produced chemical. Worldwide demand continues to expand unabated, particularly in the emerging markets. Because feedstock prices make up 80% of production costs, even minor price variations obviously have a large impact. At the GPCA Forum (Gulf Petrochemicals & Chemicals Association) in Dubai last year, Chevron Phillips Chemical CEO Peter L. Cella reported that the price differential between crude oil and ethane is 40 to 1.
The Second Wave of the Shale Revolution Is on Us
According to Fitch rating agency, Chevron Phillips which is a major producer and ten other companies are reaching into their pockets to build ethane crackers, ushering in the 2nd wave predicted by Uhde Senior Executive Thieman. The joint venture between Chevron and Conoco Phillips claims to be the world’s second largest producer of High Density Polyethylene (HDPE) and alpha-olefins and the 9th biggest maker of ethylene. With typical American exhilaration, Cella sketched out a scenario that was probably not very welcome to the oil sheiks at the event. He gave a presentation on trends in ethylene production, and he started out by looking at where the cracker capacity needed by 2020 will be put in place and what feedstock the plants will use. He predicted that ethylene supply in the US will double to 12,000 MBB per day by 2016, up from 600 MBB per day in 2005, and that ethane will be the feedstock rather than straight-run gasoline.
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