Global glycol capacity utilization is expected to increase by 5%

(Xinhua) -- Shell and Qatar Petroleum's cancellation of a joint venture between Al Karaana olefins and derivatives will significantly alter the supply and demand outlook for the ethylene glycol (EG) market, according to a new report from IHS Chemical. Prior to the cancellation of the project, analysts predicted that global EG capacity utilization would fall to 80% by 2020, but after the cancellation of the project, global EG capacity utilization is expected to be at a more appropriate level of 84% to 85%.
IHS estimates that at least three new world-class EO-EG (ethylene oxide-ethylene glycol) plants will be in operation in North America by 2019. South Africa's Sasso plans to invest $8.1 billion in new petrochemical projects in Lake Charles, Louisiana, including the construction of a 300,000-ton/year EO-EG plant. Raith Chemical announced a new EG unit in early 2014. The plant will be built near a 1 million-ton/year ethane cracking plant in Louisiana. Thailand's Indolama announced in November 2014 that it was conducting a feasibility study for a new EG plant in the United States and a fracking project it was involved in. MEGlobal announced in December 2014 that it would build a new world-class EG installation along the Gulf Coast of the United States.
china, six coal EG units are nearing completion in the fourth quarter of 2014, and another nine are under construction and are expected to be completed in 2015-2016. IHS estimates that China's coal EG capacity will be close to 3 million tonnes per year by 2019.
previously, IHS estimated that new installations in china and the United States and the Al Karaana project would increase global EG production capacity by about 12 million tons per year by 2020, while demand would increase by only 8 million to 9 million tons per year over the same period. "Out-of-step capacity expansion and demand growth will result in a reduction in global EG capacity utilization to about 80 per cent," said Thyssen Kiel, head of IHS Chemical's global ethylene oxide and its derivatives business. Historically, such low capacity utilization will leave EG producers' earnings in a very weak position, especially for those using tar as a raw material.
Qatar Petroleum has been planning the Al Karaana project in the industrial city of Rafan, Qatar, for more than a decade, initially planning to work with ExxonMobil to build it, but ExxonMobil announced its withdrawal in 2010 and Shell joined the project. The project plan includes the construction of a cracking unit with a design capacity of 1.1 million tons/year of ethylene and 170,000 tons/year of propylene, as well as two EG units with a combined production capacity of 1.5 million tons/year, and other derivatives, including a linear α-olefin unit with a design capacity of 300,000 tons/year and a 250,000-ton/year niobyl alcohol plant.
, Shell briefly explained in a statement the reasons for the cancellation of the project, rising costs and the current slump in the energy sector. Tyson Kiel said the dual impact of a less promising energy market and a tight environment in international capital markets had made the project less viable. Both Qatar Petroleum and Shell are heavily dependent on the oil and gas market, and while international oil prices may have recovered by the time the project doesn't go into production, the debt pressure of investing billions of dollars will reduce the cash flow of both companies.
fall in crude oil prices has led to a sharp drop in profits from petrochemical production in the Middle East, which has a cost advantage. "The sharp drop in oil prices has had a significant negative impact on producers of low-cost ethane-based polymers and other derivatives," said Tyson Keeler. Global
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understands that these producers have long enjoyed the high profits from low-cost raw materials, but the prices of petrochemicals closely linked to oil prices have also fallen sharply as a result of the sharp drop in oil prices, while the price of ethane raw materials has fallen much less than the price of oil, resulting in a significant decline in the profitability of petrochemical producers of ethane-based raw materials. While
Shell's cancellation of the Qatar project is of no value to the global EG market, Tyson Kiel believes Shell, as the world's leading EG producer, may have recognized the current state of overcapacity in the global EG market. The cancellation of the project will ease global EG overcapacity. "Overall, the cancellation of the project provides a more optimistic profit environment for the global EO-EG industry." Tyson Kiel said.