Shale Gas a 'Game Changer' according to Chevron Phillips Chemical Company

Eli Andjelich, Vice President, Business Development, Middle East from Chevron Phillips Chemical Company LLC recently participated in an interview with The World Refining Association ahead of PETCHEM Arabia 2012 to explain the changing global scenario of petrochemical production from the Middle East to the West.

PETCHEM Arabia, running from 30 September to 3 October in Manama, Bahrain will address these challenges and explore future directions for the region's industry.

Mr. Andjelich reported that announcements have been made over the past year regarding the high probability that several (four to six) new crackers will be constructed in the US based on feed supply from the growth of shale gas production. If these announcements are built, the US would become a larger exporter of ethylene and ethylene derivatives. .

With the development of new shale gas resources, the US petrochemical industry is announcing significant expansions of US petrochemical capacity and these new resources are a major driver for Chevron Phillips Chemical's new investments in the US.

The company is on track to build a 1.5 million metric tons/year ethane cracker at its Baytown, Texas plant and two polyethylene facilities, capable of producing 500,000 metric tons/year each, in Old Ocean, Texas near its Sweeny plant. The entire project called US Gulf Coast Petrochemical Project will cost an estimated $5 billion.

According to Dr Christian Günther, Partner at McKinsey and Company, the consultancy, this is unlikely to affect Middle East aspirations of growth in a major way - the US is estimated to add around 9 - 11 million tons of ethylene capacity within the next 10 years, which can be absorbed by the forecasted global demand growth of around 50 million tons and still leave space for other players. Moreover, prices will remain set by liquids-based producers, as significant quantities of liquids-based ethylene will be needed to meet global demand.

"Cracking naphtha primarily produces ethylene, propylene and butadiene," said Dr Günther. "If the US shifts to cracking ethane, the supply of propylene and butadiene may reduce and force prices to increase, making it an opportunity for producers with access to C3 and C4 to invest in."

The real challenge for the petrochemical industry in the Middle East will likely be the availability of advantageously priced ethane. From a country perspective, Dr Günther believes that the right feedstock allocation decisions by regional governments as well as enhanced education and capability building are required. At the same time, chemical companies will have to accelerate their move towards functional excellence in operations, capex, procurement and marketing and explore opportunities beyond their traditional products to ensure the Middle East remains globally competitive.

Mr. Andjelich, Vice President of Business Development, Middle East for Chevron Phillips Chemical Company LLC and Dr Christian Günther, Partner at McKinsey and Company are confirmed to participate at PETCHEM Arabia 2012.

The seventh annual PETCHEM Arabia will be held in Manama Bahrain from 30 September - 3 October 2012, and will feature discussions that will include the global industry outlook, the impact of shale gas advances for the GCC region, integration, cluster development, supply chain management and the wider regional outlook, creating the perfect opportunity for operators in the region to reinforce their position in the market and for key suppliers and service providers to demonstrate their new technologies, innovations and solutions.