Executive Summary:
Infrastructure: The petrochemical industry is reckoning with low margins and excess capacity, prompting measures by companies and governments in Europe and Asia to weather the storm.
Exports: Vortexa ship-tracking data shows Enterprise’s Neches River terminal exported cargoes for at least two consecutive weeks, reaching 55% utilization of its 100 Mb/d Phase 1 capacity in the week of Aug. 24.
Rigs: The total US rig count decreased during the week of Aug. 17 to 525. Liquids-driven basins decreased by 4 rigs W-o-W from 405 to 401.
Flows: US natural gas volumes averaged 70.6 Bcf/d in pipeline samples for the week ending Aug. 31, down 0.4% W-o-W.
Infrastructure:
Low margins and excess capacity have led to a reckoning in the global petrochemical industry. Companies in Europe and Asia are working with governments to weather the storm, and in some cases close older naphtha crackers. The streamlining reflects the superior economics of NGL-fed plants and could lead to further growth for US NGL exports.
The European Union has adopted a plan to use state aid, tax incentives and government procurement initiatives to keep petrochemical facilities afloat. Several governments in Asia are implementing similar frameworks, while in Japan the industry is cooperating to manage a strategic retreat.
China plans to retrofit nearly half the country’s total petchem capacity to increase yields, while also encouraging a shift towards specialty chemicals further downstream. South Korea plans to reduce the nation’s naphtha-cracking capacity by as much as 25%. Japan’s domestic industry, rather than its government, has taken action to reduce capacity through plant closures.
North America doesn’t have the same model of government and industry cooperation. The US has no federal policies to restrict production, although growth in petrochemicals has slowed relative to the past. In Canada, Dow has suspended construction of its Path2Zero ethylene plant, citing weak demand and uncertain profits.
In contrast, India, Southeast Asia and the Middle East continue to grow their capacities. Nations like Thailand, Indonesia, Malaysia and Vietnam are adding olefin capacity through new crackers or expansions. Saudi Arabia and the UAE are also adding crackers. India is perhaps the fastest-growing nation, and is backing policy frameworks that aim to boost petrochemical capacity.
What does this all mean for US NGL exports? To maintain ethylene and propylene supply, firms will lean harder on existing and new steam crackers fed by NGLs. South Korean firm YNCC is exploring retrofitting old crackers to use ethane and more LPGs. As older crackers are retired, the spread between NGLs and olefins (petrochemical margins) will likely rise and could lead to companies exploring new ethane or LPG-fed units.
Exports:
Total US NGL exports rose 5% W-o-W, driven by a 9.6% increase in LPG exports, partially offset by a 14% decline in ethane exports.
Ethane Exports – Neches River Update
Enterprise’s Neches River terminal has now exported cargoes for at least two consecutive weeks, reaching 55% utilization of its 100 Mb/d Phase 1 capacity in the week of Aug. 24. This suggests commissioning activities are complete and the facility is likely to remain in steady operation
Rigs:
The total US rig count decreased during the week of Aug. 17 to 525. Liquids-driven basins decreased by 4 rigs W-o-W from 405 to 401.
- Permian:
- Delaware (-3): EOG Resources, ConocoPhillips, Civitas Resources
- Midland (+1): Burk Royalty
- Anadarko (-2): Downing-Nelson Oil, DJF Services Inc.
- ArkLaTex (-1): Tanos Exploration IV
- Marcellus + Utica (+1): CNX
Flows:
US natural gas volumes averaged 70.6 Bcf/d in pipeline samples for the week ending Aug. 31, down 0.4% W-o-W.
Major gas basin samples declined 0.8% W-o-W to 43.6 Bcf/d. The Haynesville sample decreased 0.6% to 10.5 Bcf/d, and the Marcellus+Utica sample fell 1.0% to 32.2 Bcf/d.
Samples in liquids-focused basins gained 0.4% W-o-W to 19.2 Bcf/d. The Permian sample rose 1.8%, the DJ increased 1.1% and the Eagle Ford sample was up 1.8%.
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