THE collapse in oil prices does not trouble INEOS, which has just invested $2 billion to transport US shale gas to Europe.
Tom Crotty, INEOS’ Group Communications Director, said outsiders had questioned the viability of importing US gas when oil prices were now so low.
But he said it did not matter because INEOS owned both gas and oil crackers.
“For us, the fact that we’ve now got much lower oil prices hasn’t impacted the viability of bringing that gas in from America at all,” he said. “Instead, it has improved the profitability of our oil-based crackers.”
Tom said there had been some ill-informed commentary.
“Some have said that companies like INEOS must be mad to bring in ethane from the US when oil prices are so low but they are missing the point,” he said. “If you’ve got a gas cracker, you cannot use naphtha. You have to use gas. So the issue is not one of gas versus naphtha. It’s gas versus gas.”
The availability of low-cost ethane, a natural gas derived from shale gas, has revitalised America’s chemical industry and given it an advantage over many competitors around the world which rely on naphtha, a more expensive oil-based feedstock.
But with the collapse in oil prices, that advantage has narrowed.
“The European petrochemical industry has done very, very well as a result of low oil prices, because the price of naphtha has fallen dramatically,” said Tom. “So margins have come back into naphtha crackers big time. If you’ve got both types of crackers, like us, then you have reason to feel very happy.”
INEOS, which relies on ethane gas for its crackers in Norway and Grangemouth, said it was still cheaper to import gas from the US than buy it in Europe.
“The other issue is that we cannot get gas in Europe,” said Tom. “Our Grangemouth cracker has been running at 40% output for the past three years because we haven’t got ethane. Ethane is running out fast in the North Sea. So your choice there is really simple. You need to either run a cracker or you don’t.”
MOTHBALLED UNIT TO REOPEN
A MANUFACTURING unit at INEOS’ Grangemouth site is to reopen eight years after it was mothballed.
The plant has successfully completed rigorous recommissioning trials to prepare for the arrival of US shale gas ethane.
INEOS announced the news shortly after the first shipment of US shale gas arrived at its neighbouring gas cracker in Rafnes, Norway. The first deliveries are expected at Grangemouth in the autumn.
“We are now in great shape to finally run the Grangemouth plant at full rate,” says Gordon Milne, INEOS Grangemouth Operations Director.
INEOS was left with no option but to close the second manufacturing unit at the KG ethylene cracker in 2008 after it could not operate it at full capacity.
The arrival of US ethane changes everything.
“When the gas finally arrives here, this plant will move into the premier league of European petrochemical plants,” said Gordon.
The US liquid gas will be stored in a specially built ethane tank – the biggest in Europe – and make up for dwindling North Sea supplies.