With oil and gas prices expected to remain low for a long time until the rich shale formations in the us are exhausted by 2025, relatively cheap oil and gas could become the dominant feedstock in the refining and chemical industry in the future.
Growth in us shale production has loosened the market
In 2018, U.S. crude oil production increased by about 2 million barrels per day, thanks to increased production from shale oil.Production in the Permian basin, the main shale producing area, increased by about 1.094 million b/d.Unconventional oil and gas supplies such as us shale resources have replaced dwindling conventional oil resources outside OPEC+, and global crude supply has shifted from tight to abundant and diversified.In addition to relying on OPEC to make up for lost output due to emergencies, U.S. shale producers can also make up some of the lost oil production.
The disposal of shale gas as a by-product of shale oil production
Most shale drilling produces both crude oil and natural gas, and as shale production increases, so does the amount of shale oil produced.Unlike natural gas drilling, it is a by-product of production.Because Texas's combustion permit allows natural gas to burn directly for six months, any gas older than six months cannot be removed by combustion.In addition to burning and releasing directly into the atmosphere, shale producers typically handle natural gas in one of several ways: by pipeline;Reinsert into the ground;Stop drilling.
Under normal circumstances, shale drilling still produces significant output after 24 months
In late march and early April 2019, the price of Permian Waha gas turned negative due to a major pipeline failure in the Permian basin, and producers paid people with spare pipeline capacity to ship out the gas.As Permian production increased, pipeline capacity temporarily failed to keep up with expansion, and gas became the "waste gas" shale producers had to deal with when pipeline capacity was limited.At the time, WTI was around $60 a barrel, and producers were reluctant to shut down Wells at higher crude prices.For some of the gas produced by shale producers, the cost support could be transportation costs.
The us has plenty of spare capacity before the resource-rich fields in America's shale belt run out in 2025.OPEC's tightening of supply did not raise prices, as it did in the 1970s, before spare capacity evaporated in the United States.
Production of polyolefin from naphtha and natural gas is more profitable than that from coal at lower oil and gas prices
Using ethane, propane and other gases to produce polyolefin has the highest profit.With the shift of raw materials to oil and gas resources, oil and gas raw materials such as crude oil, natural gas and liquefied hydrocarbon gases are transported by special transport vessels. The transportation cost is lower than that of coal and polyolefin products.
The production methods of polyolefin are mainly coal, oil and natural gas (ethane propane).In 2010-11, when the price of crude oil was above $100 / BBL, coal chemical industry started to produce a lot of oil in northeast Asia due to its better profits.When the price of crude oil drops to $60 / BBL, oil to polyolefin is more profitable than coal.In the long run, ethane production of polyolefin has a higher profit.The Middle East and North America are close to the source of ethane propane raw materials. Most of the new production capacity of polyolefin is produced by ethane method.Naphtha and other refined petroleum products in petrochemicals are used to break down and become raw materials for plastics production.In addition to naphtha, the petrochemical industry also consumes large quantities of liquefied hydrocarbon gases.
Naphtha refined from crude oil is the main raw material for polyolefin.From the processing process, the raw materials of polyethylene are crude oil, naphtha and ethylene.
The transportation cost of oil and gas raw materials is lower than that of coal and polyolefin products
The logistics cost of raw materials may be lower than that of chemical products.Compared with coal, oil and gas resources have great advantages in transportation cost and convenience.Crude oil, natural gas and ethane can be transported at low cost, and the loading of liquids and gases can be simply piped to or from a carrier to shore.