The cost differential between using gas rather than oil is having significant implications for both polyethylene and polypropylene production here in Europe.
To compare the relative cost of natural gas and crude oil, it is necessary to use the same units of measure:
Brent Crude Oil: Prices for crude oil are quoted in terms of price per barrel. The energy content of crude oil can be expressed in terms of British thermal units (BTUs) or joules.
- 1 barrel of Brent crude oil contains approximately 5.8 million British thermal units (MMBtu) of energy.
Natural Gas: Prices for natural gas are typically quoted in terms of price per million British thermal units (MMBtu).
Using typical current prices for Natural Gas Futures, Brent Crude Oil Futures and £ : $ exchange rate, the following comparison can be made:
@polymerman
Not only is Brent Crude Oil-derived energy/feedstock over 7 times more expensive than Natural Gas-derived energy/feedstock, but it should also be noted that each tonne of polymer produced requires somewhere in the order of another 0.75 – 1.25 tonnes of energy in the production process.
Q. So why don’t European polymer producers just switch to natural gas feedstock?
A. Some producers, including Ineos, Sabic and Borealis have already done so, where their manufacturing assets are accessible from the sea, and where crackers that convert the feedstock into monomers are engineered to run gas rather than liquid (Naphtha feedstock*).
A. The shipment of natural gas either requires pipelines, or the ability to liquefy the natural gas (LNG) and ship it in specialist vessels. Since the Russian invasion of Ukraine, including the subsequent decommissioning of the Nord Stream gas pipelines, demand for LNG has outstripped supply and so availability is extremely constrained.
*Naphtha is a derivative from the crude oil refining process which is typically priced at a small premium over crude oil.
Evidence of the relative cost differential has come in the form of various European polyolefin plants being shuttered, such as the recently announced ExxonMobil closure of its French petrochemical site in Gravenchon, including PE and PP polymerisation facilities. It is already evident that US origin material, even after accounting for logistics costs and import duties, can compete in the European market based upon the feedstock cost advantage coming from shale gas, and no doubt ExxonMobil will substitute US origin materials to maintain its sales here in Europe.
The less evident consequence of the move from Naphtha to Natural Gas feedstocks is on the price and availability of monomers other than ethylene, because Natural Gas cracking to produce ethylene produces significantly less in terms of coproducts including propylene.
Whilst the economics of polyethylene are impossible to ignore, the consequences for other polymers need to be carefully considered. The next @polymerman will look at on-purpose monomer production.