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April 2016 Exclusive Story

Petrochemical Renaissance

Shale Gas Cues U.S. Chemical Export Boom

HOUSTON–Petrochemical industry expansion, driven by growing U.S. shale gas production, continues to move forward, and a report from IHS forecasts the domestic chemical industry will add more than 100 million metric tons (MMT) of new capacity by 2025. IHS predicts much of that new capacity will be converted to plastics, significantly increasing the U.S. net export position for these materials.

Major U.S. chemical products include ethylene, propylene, methanol, ammonia and their derivatives, such as plastics and fertilizer, IHS says, adding new domestic fertilizer production will replace imports from South America, the Black Sea and the Middle East. The U.S. shale gas impact on liquid bulk chemicals is less pronounced than for solids, but still is significant, notes the report, IHS Chemical U.S. Bulk Chemical Export Expansion Analysis.

Production additions in the United States have resulted in a 10 MMT increase in bulk liquid chemicals in the past year, and IHS predicts that by 2025, those additions will expand by more than 25 MMT. It says the most notable bulk liquid chemical additions will be in methanol.

“Chemical producers clearly are looking to take advantage of continued low natural gas prices in the United States, which are enabling the significant expansion of these methane-based projects,” says Chris Geisler, director of chemical consulting at IHS Chemical and the study’s author. “With so many projects coming on line, this phenomenal growth is changing the global trade landscape.”

The United States now is a major methanol importer, but Geisler says by 2018, it will be a net exporter.

According to the report, the vast majority of new olefin chemical production will be converted to solid plastic resins and exported. Except for the ammonia and fertilizer production chains, it predicts most of the expansion will be centered in Texas and Louisiana. Within Texas, it says firm capacity additions stretch from Beaumont to Corpus Christi, including several within the Houston Ship Channel.

“Solid fertilizer and plastics trade will change substantially in the United States, as will bulk liquids trade for products such as caustic soda, methanol and ethylene glycol,” Geisler says. “This capacity expansion means there will be significant upticks in chemical trade activity and logistics considerations, not only for producers and traders, but also the key ports, terminals and logistics providers, primarily on the Texas and Louisiana Gulf Coast. As these chemical products expand, we expect to see increased marine, rail and truck traffic, primarily in the U.S. Gulf Coast. Possibly later, that activity will expand to several East and West Coast ports and terminals.”

Aromatic Derivatives

Base aromatics, such as benzene, toluene and xylene, have not benefitted from shale gas development, but aromatic derivatives–particularly styrene–have, says Peter Feng, director of aromatics at IHS Chemical. Tight oil and shale gas have impacted the outlook for naptha and octane. Unlike some other petrochemicals, he says there are only a limited number of expansion plans for North American aromatics.

The impact on trade flows has been quite pronounced, Feng assesses.

“North America will be a growing net importer of benzene, and the region has flipped from being a net exporter of toluene, mixed xylene and paraxylene, to a net importer. From a logistics perspective, this will be important, as ships transporting shale-gas-advanced production such as methanol out of region will need products to bring back into North America as well.”

Low U.S. natural gas prices also are pushing electricity prices lower, the report says, which likely will incentivize U.S. operators in the chlor-alkali chain to increase operating rates in the near term and to expand long term. IHS predicts this will result in more caustic soda production as a chlorine co-product.

No longer used in the U.S. gasoline pool, methyl tertiary-butyl ether (MTBE) is expected to see expanded export potential, IHS predicts. Also, ethylene glycol production will increase in the longer term, moving the United States from a net importer to a net exporter. As other methanol, ethylene and propylene liquid derivatives are built, the report says trade in bulk liquid chemicals will increase further.

Through the study period of 2025, IHS Chemical says it expects capacity expansions in alpha olefins, ethoxylates, glycol ethers, MTBE, acetic acid and acrylic acid, among others. IHS Chemical adds it is expanding its reports on bulk liquid chemicals to include plastics and fertilizers. The new expanded study, the IHS Chemical U.S. Chemical Industry Trade and Logistics in the Shale Gas Era Report, will be available in the second quarter.

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