(8b) Future Prospects for North American Ethylene

The recent trend of accelerating production of natural gas in North America associated with the development of shale gas production technology has dramatically improved the financial results of U.S. ethylene producers. Increased natural gas production has also boosted availability and lowered the relative price of light feedstock from natural gas liquids. However, in the near term, the shift to lighter cracking slates as well as the boost in incremental capacity by many producers has resulted in demand for ethane keeping up with increased production. Within the last year, the U.S. ethylene industry has announced ethylene additions that have cumulative capacity of over 15 billion pounds per year by 2017, requiring over 200,000 barrels per day of additional light feed supply. Will light feed requirements outpace supply and will ethane prices approach global oil pricing on a BTU equivalent basis? Is the oil-to-gas price ratio, currently over 20 to 1 sufficient to guarantee high polyethylene chain margins?