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Did RIL make a mistake by switching to ethane?
Jun 20:
Is RIL's switch to use of methane instead of natural gas a flawed decision, on hindsight?
8Reliance is the first company to globally conceptualize large-scale imports of ethane from North America as feedstock for its cracker portfolio in India.
8But things are looking a little complicated as of now.
8U.S. ethane prices began declining relative to natural gas prices in late 2011 and remained consistently lower than the price of natural gas between 2013 and 2015 when ethane production began to outpace consumption.
8This must have promoted RIL to look at ethane as the feedstock.
8But now the situation is a little different.
8U.S. ethane prices began to increase in 2016 when ethane demand increased, and ethane prices surpassed natural gas prices in the United States on a heat-content equivalent basis in 2016 and 2017. By the time the ethane reaches RIL, through a fleet of large carriers, it is likely to be more expensive than gas. This means that RIL loses a key raw material pricing advantage.
8The projection is that ethane prices are likely to stay up instead of down
8This is because several more petrochemical plants are expected to come online in the United States in 2018 and 2019, further driving increases in ethane demand and prices.
Click on Reports for more
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8Reliance is the first company to globally conceptualize large-scale imports of ethane from North America as feedstock for its cracker portfolio in India.
8But things are looking a little complicated as of now.
8U.S. ethane prices began declining relative to natural gas prices in late 2011 and remained consistently lower than the price of natural gas between 2013 and 2015 when ethane production began to outpace consumption.
8This must have promoted RIL to look at ethane as the feedstock.
8But now the situation is a little different.
8U.S. ethane prices began to increase in 2016 when ethane demand increased, and ethane prices surpassed natural gas prices in the United States on a heat-content equivalent basis in 2016 and 2017. By the time the ethane reaches RIL, through a fleet of large carriers, it is likely to be more expensive than gas. This means that RIL loses a key raw material pricing advantage.
8The projection is that ethane prices are likely to stay up instead of down
8This is because several more petrochemical plants are expected to come online in the United States in 2018 and 2019, further driving increases in ethane demand and prices.
Click on Reports for more
