The growing supply of ethane in the US has reversed the widely-held assumption of a US petrochemical industry losing market share to other regions of the world, according to the president of ExxonMobil's petrochemicals division.
Stephen Pryor, the president of ExxonMobil Chemical Co. and a senior vice president of the parent company, told the CERAWeek 2011 conference in Houston that "conventional wisdom" several years ago held the US would be a net importer of petrochemicals by 2010.
Instead, fueled by low-priced ethane as a feedstock, US exports of petrochemicals rose 28% in 2010 compared with 2009. Ethane supplies in the US have risen -- and prices have dropped -- as supplies from natural gas liquids produced alongside shale gas deposits have risen significantly.
According to Pryor, global petrochemical feedstock has shifted about 8% over the last three-four years from heavier feedstocks, such as naphtha, to lighter feedstocks such as ethane or refinery gases.
"This is clearly a positive development," he said. "Will it drive investment in ethane cracking? Yes."
But he noted that the growth could be limited by bottlenecks in infrastructure, such as extraction and transportation facilities. These sorts of debottlenecking projects will be the norm, rather than larger projects, which Pryor said entail "significant" financial risk.
Pryor noted the history of petrochemical feedstocks, which began with coal-related products in Germany near the start of the 20th century, moved to the Gulf Coast with petroleum-based inputs, and moved to ethane-based supply in the 1960s.
Middle East petrochemical refiners followed suit with ethane feedstocks after that, taking market share from Western countries, "but now we're seeing ethane re-emerge in North America," he said.
Pryor used the speech to tout his vision of feedstock flexibility, which he said has been a key focus for ExxonMobil's downstream operations. Even now, he said, with ethane prices below $1/gal, the petrochemical division will use feedstock streams that might include jet or gasoil rather than ethane, if the economics work.
"It boils down to what we call 'molecule management,'" Pryor said. If the economics of switching a feedstock makes sense, then adjustments need to be made in "real time ... you look for the highest value combination of fuels."
At the heart of that ExxonMobil vision is an integration of petroleum refining and petrochemical refining, though he added that it doesn't always mean facilities on the same site.
Pryor said there are enough overlapping activities between the two halves of the refining equation -- such as safety and maintenance -- that a company should look to "capture synergies while maintaining assets unique to certain processes."
There are petroleum-only refineries that do well in ExxonMobil's slate despite having no petrochemical operations, Pryor said. He cited the Joliet, Illinois refinery, which has a "great situation with crudes."
Joliet presumably would benefit from cheaper Canadian and Midwest crudes, kept lower than the rest of the market through the glut at the NYMEX delivery point of Cushing, Oklahoma, and a small refinery in Montana.
