Opportune uses TIBCO Spotfire™

BY: PACO RANGEL

Vast shale gas discoveries in recent years have drawn the attention of ethylene producers who seek to capitalize on the cost advantage associated with light feedstocks.  Since 2009, natural gas in the US has been three times cheaper than crude oil.  The crude-to-gas ratio, which compares the price of both crude and natural gas on an energy basis ($/mmbtu), has fallen below 0.2 over the past 24 months compared to historical 0.6 ratios.

Crude Gas Ratio Spotfire2

A low crude-to-gas ratio means light olefin feedstocks, specifically ethane, whose price is tied to natural gas, provides a significant cost advantage over its heavier counterparts such as propane, butane and naphtha, for which prices are more closely correlated to the price of crude oil.  As a result, North American steam cracker operators have begun conversion efforts in order to crack more abundant ethane as well as propane, the cheapest of the oil-based feedstocks.  Companies have also announced over 10 million tons of new capacity between 2012 and 2017 in an effort to take advantage of a surplus of cheap feedstocks.

Most steam crackers however are located in the United States Gulf Coast and some shale-rich areas such as Marcellus are located on the East Coast.  Although infrastructure projects are already under way to blend ethane with dry gas and meet the specifications of gas pipelines and new olefin projects in Pennsylvania and West Virginia will bring demand to the area; NGL buyers and sellers will face the challenge of trying to optimize product disposition of propane and butane, which have alternative uses in heating and gasoline markets.  New ethane crackers intend to maximize the use of ethane as feedstock and will depend on close proximity of feedstock supplies while flexible crackers will have to crack propane, butane and even naphtha and heavier feeds during times of limited feedstock availability.  Therefore, planned feedstock sourcing must be optimized in order to maximize production and trading margins.  Both traders and consumers of NGLs could also benefit from improved business intelligence capabilities in order to better analyze olefin economics, pricing, demand seasonality, and other market trends and dynamics.

 

Olefin Economics Spotfire (3

TIBCO Spotfire™ and Opportune have partnered in an effort to deliver improved analytics and business intelligence capabilities to clients facing these types of challenges.  Join our team of consultants at our hospitality suite during the upcoming AFPM General Meeting and Petrochemical Conference to discuss this and other use cases where Spotfire™ analytics have made a difference in the way companies analyze market and operational data.

Opportune LLP is a consulting firm specializing in assisting energy clients with corporate finance, complex financial reporting, process and technology, strategy and organization, dispute resolution, enterprise risk, tax and outsourcing.

 

 

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