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RIL and ethane prices-I: What is up?
Jul 02: 8Companies around the world have modified their facilities to accept U.S. ethane. And RIL has built an import terminal an ethane pipeline, and ordered the construction of six very large ethane carriers (VLEC) to transport ethane to India.. Each such vessel is capable of transporting over 800,000 standard barrels of ethane, with on average two of these ships loading at Morgan’s Point in US every month.
8RIL's main intention of using ethane is to produce ethylene, which in turn is the feedstock for petrochemicals, and it does so by replacing natural gas with ethane.
8A close look at US ethane prices relative to gas from 2013 onwards will reveal that RIL's decision to switch to imported ethane was taken at a time when ethane prices had remained consistently lower than gas prices.
8In fact the gap was widest around 2014-15 when RIL took the decision.
8But ethane is now exuding a worrying higher price relative to gas, expect in early 2018 when gas prices shot up temporarily. Ethane prices are currently at an all-time high.
8The website carries here a list of ethane-based petrochemical plants in the US as well as in China which will keep demand high enough for ethane prices to stay above natural gas prices for more time to come
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