US chem feedstock costs face upward pressure from LNG project

HOUSTON (ICIS)–Costs for ethane, the predominate feedstock for US ethylene plants, could face upward pressure with the startup of the first train of the Golden Pass liquefied natural gas (LNG) project, which has reached a new milestone following setbacks earlier this year.

The project’s owner, Golden Pass LNG Terminal, had reached an agreement with the contractor in regards to the commercial terms for the completion of the full scope of the first train of the project, according to a statement published on Monday by Chiyoda International, a contractor.

Chiyoda and CB&I are partners in the joint venture that is building the terminal.

Another joint venture is the owner of the terminal. That joint venture is made up of QatarEnergy (70%) and ExxonMobil (30%).

Earlier in November, ExxonMobil said the first train of Golden Pass should start up at the end of 2025.

The joint venture and the contractors are in talks to amend the contract to complete the second and third train of the LNG terminal, Chiyoda said.

The second train could start up six months after the first one, ExxonMobil had said earlier in November. The third train could take another six months to start up.

The three trains at Golden Pass will have the capacity to export 15.6 million tonnes/year.

GOLDEN PASS SOURCE OF UPWARD PRESSURE ON CHEM COSTS
LNG terminals such as Golden Pass increase demand for natural gas, which can cause prices for the fuel to rise. That, in turn, can affect costs for ethane, the main feedstock used to make ethylene in the US.

When natural gas prices are high relative to ethane prices, ethane rejection becomes more attractive, said Kojo Orgle, feedstock analyst for ICIS. Orgle monitors the US markets for ethane and other petrochemical feedstock.

Increased ethane rejection, in turn, tightens supply fundamentals and puts upward pressure on ethane prices, Orgle said. Rising natural gas demand for LNG exports could effectively elevate ethane prices.

One LNG project should start up by the end of 2024, when Cheniere begins operations at stage three of its 10 million tonne/year LNG project in Corpus Christi, Texas.

Another source of cost pressure on ethane is growing capacity to export ethane. Midstream companies are expanding ethane terminals.

On the other hand, US supplies of ethane should continue growing because of rising production of oil and natural gas.

LIMITED DEMAND GROWTH FROM US CRACKERS
Domestic demand for ethane should see limited growth because few companies are building new crackers in the US.

The only confirmed US project is a joint-venture cracker that Chevron Phillips Chemical and QatarEnergy should start up in late 2026 in Texas.

Shintech could build a cracker in Louisiana, but the company has yet to announce a final investment decision (FID).

DETAILS OF GOLDEN PASS PROJECT
The Golden Pass terminal is being developed at Sabine Pass, Texas, next to Louisiana.

The project has faced delays following the bankruptcy of its former lead contractor, Zachry Industrial.

Earlier in October, Golden Pass LNG was granted an additional three years to finish construction of the plant, extending the deadline to 30 November 2029.

The Texas project had also requested to the Department of Energy that its deadline for the start of commercial operations be extended to 2027.

Additional reporting by Lars Kjoellesdal

Thumbnail shows natural gas. Image by Shutterstock