Change in Middle East Feedstock Cost Advantage

2 Change in Middle East Feedstock Cost Advantage 

Since about 2010, the feedstock cost advantage in the Middle East has begun to erode. The two primary reasons for this change in feedstock cost advantage are (1) the shortage of ethane in Saudi Arabia and (2) the discovery of enormous amounts of natural gas and crude oil in North America, which has been designated as the shale gas revolution.  

A report by John Richardson in 2010 titled Saudi Feedstock Problems Worsen, [ 1 ] discussed the complex issues that have at the very least led to a shortage of ethane availability in Saudi Arabia. This ethane shortage was due to several factors such as (a) lower crude oil production, (b) lower levels of ethane (dry crude) in the crude oil produced, and (c) the relatively high cost of replacing the ethane-based crude oil with ethane-based natural gas production. In addition, as Richardson noted, these ethane production problems in Saudi Arabia also coincide with the shale gas revolution in North America. This ethane shortage in Saudi Arabia has led to an ethylene cost of 150/ton and could rise to 300-350/ton on limited supply of ethane. On the other hand, due to the increase in ethane availability in North America, ethylene costs have been reduced from 700/ton in about 2008 to 400-450/ton in 2012, which eliminates most of the feedstock 

It should be noted that shale-rock deposits exist in most other regions of the world, i.e., Europe and Asia, and the exploration of these deposits to produce other sources of ethane in future decades may offer the potential for polyethylene capacity expansions in these regions although as of 2014, these regions have not been explored to a significant level due to lack of the necessary infrastructure for the drilling to take place. 

2012 Capital Requirements for an Integrated Ethylene/Polyethylene Facility 

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