ERJ staff report (PR)
European polymer and petrochemicals producers are the main target for US competitors preparing to leverage low-cost feedstocks derived from shale gas, according to Ineos director Tom Crotty.
Without the development of indigenous shale resources in the UK and other EU countries “we will see a very serious retrenchment of the chemical industry in Europe,” Crotty warned at a 27 March Chemical Industries Association press event in London.
Current investments in the US are targeted at exports, believes Crotty, who commented: “There is no way you need them for domestic [US] consumption, which is growing at probably a maximum of two or three percent.”
Europe will, therefore, be the destination for most of this new US output, particularly as China – the other big potential market – is increasingly meeting its own petrochemical and polymer requirements.
“Only five years ago, the US ethylene cost curve was probably marginally worse than Europe. It is now dramatically less. More worryingly, the other area where the cost curve has moved significantly, if not as dramatically, is China,” said Crotty.
Whereas, for example, ethylene production costs in China were previously higher than Europe, they are now significantly better because of the investment that has gone in to building new world-scale operations there, he explained.
One way forward for European producers is to adapt cracker facilities to process shale-gas feedstock - as with a £300m project being carried out by Ineos to import US shale gas ethane at its Grangemouth site in Scotland.
As only four of the 44 crackers in Europe are gas crackers, owners with access to low-price gas are likely to have a clear advantage over their competitors in the region.
However, Crotty does not expect to see a “wholesale decimation” of naphtha crackers in Europe, not least because of an increased reliance on the aromatics streams from these facilities.
Ineos has a “very high quality” naphtha cracker system in Cologne, where profitability is very reliant on its non C2 and C3 streams, said the company director.
But, concluded the Ineos boss, the industry "will see more closures of uncompetitive crackers” in the EU.