Market and product
Ethane imports still wanted despite naphtha fall
"We still see value for ethane imports but at a more reduced levelbecause of [the] naphtha [drop]," he said.
Hydrocarbons like naphtha and ethane are used in a steam cracker toproduce olefins ethylene and propylene.
Naphtha values have recently plummeted to $636.50/mt CIF NWE, a low sinceJuly 27, 2010, tracing crude oil's slump to four year lows. Meanwhile, ethaneprices are currently trading at 23.75 cts/gal or $176.22/mt at one monthhighs. Ethane therefore remains the more attractive feedstock.
Borealis said that having European ethane options, or not a completereliance on US ethane, was preferable.
"We think US ethane is attractive, but prefer our balanced position ofStatoil and US, rather than 100% exposure to the US. We don't want to[entirely] expose ourselves to a market that is many kilometers away," Garrettsaid.
Borealis said in August it had signed a 10-year deal to receive ethanefrom US gas fields, making it the second European company to sign deals to buyUS shale gas for cracking. The gas, bought from US' Antero Resources, will becracked in its flexible steam cracker in Stenungsund, Sweden.
Earlier in the year, Borealis also announced an ethane supply contractwith Norwegian energy company Statoil for its Stenungsund plant.
The announcements highlight the global transition to lighter feeds, withVersalis and Shell last month announcing they would have the potential inEurope to take shale-based North American ethane cargoes by the end of 2015.
Sabic also is set to use US ethane for its Wilton, UK, steam cracker.
Borealis operates two steam crackers in Europe, the other being inPorvoo, Finland. The cost of the investment into the crackers has led to adivergence in strategy for Borealis' two crackers.
Garrett said Stenungsund was in a "very good position" for importingethane.
"We already have a lot of flexibility in Stenungsund, the imports areonly enabling the cracker to go even further and use even more ethane. That iswhat we are basically doing," he said.
But for the Porvoo cracker, with existing feedstock contracts andfeedstock flexibility, the move to ethane imports is not favorable.
Prices of LPG, the second most common feedstock in Europe, have alsocorrected sharply recently. Propane cargoes were assessed $17/mt lower at$513/mt Thursday, the lowest since July 31, 2009, when they were assessed at$510.50/mt.
Despite already having ethane cracking infrastructure, Borealis isspending Eur120 million ($149 million) upgrading its cracker and building atank in Stenungsund.
In Europe, naphtha is the primary feedstock forming about 70-75% of thecracker throughput and there are only four full gas crackers in Europe --Ineos' Grangemouth and Rafnes, Borealis' Stenungsund, and Exxon/Shell's JV inFife, Scotland -- out of 43 crackers.
The rest only have gas flexibility. Hence they require infrastructureinvestment to utilize ethane.
