ChemOrbis 4th Turkey Petrochemical Conference: What is the preferred chemical feedstock?
Mr. Lidback commented that in 2014, when crude was above $100/barrel, investments in crackers using alternative feedstocks such as coal and ethane became increasingly attractive, however in 2015, with crude oil below the $50/barrel threshold, these investments have become relatively less attractive. Mr. Lidback calculated that ethane remains advantaged over naphtha as a feedstock so long as crude oil remains above $30/barrel while natural gas prices stand at $3/million BTU or less. Coal, meanwhile, loses its advantage over naphtha as a chemical feedstock if crude falls below $50/barrel assuming coal at $40/ton.
Mr. Lidback also commented on the shift created in the propylene market by the shift to lighter cracker feedstocks, which producer less propylene as a coproduct during ethylene production. In the years between 2009 and 2014, as the US balanced its propylene market by shipping exporting less propylene and propylene derivatives while China continued to increase its imports of propylene and propylene derivatives, Mr. Lidback stated that global propylene markets tightened and this provided additional incentives for investments in PDH units.
Mr. Lidback stated that PDH units will become an increasingly important source of propylene supply in the coming years and the economics of PDH units will become increasingly important in determining propylene prices. According to Mr. Lidback’s calculations, PDH operators need a spread of around $350-500/ton between propylene and propane prices in order to maintain acceptable margins at their units. These margins were easily obtainable with crude above $100/barrel, but the spread has moved back to around $450-500/ton now that crude is trading below the $50/barrel threshold.
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