Borealis inks 10-year US ethane deal
London (Platts)–7Aug2014/654 am EDT/1054 GMT
Austrian petrochemical company Borealis said Thursday it has signed a long-term contract to receive ethane from US gas fields, making it the second European firm to sign deals to buy US shale gas for cracking.
Borealis said in a statement it had signed a 10-year deal to buy the gas from US firm Antero Resources to crack in its flexible steam cracker in Stenungsund, Sweden.
The gas will be sourced from the Marcellus and Utica shale formations.
Borealis Chief Executive Mark Garrett said in a statement: “We need to take advantage of the significant shift in ethane availability triggered by the US shale gas boom.”
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“In an increasingly challenging environment in Europe this is an exciting opportunity to increase the competitiveness of our integrated polyolefins business,” he added.
Borealis said it has signed a shipping agreement with LNG shipping company Navigator Holdings to transport the gas from Marcus Hook in the US to Sweden.
To fulfill the contract Navigator will build a new 35,000 cubic meter ethane vessel.
The first shipments are expected to arrive in late 2016 after Borealis completes a multi-million pound investment to upgrade its steam cracker and build an ethane storage tank.
Borealis is the second company to sign a long-term deal to buy and ship ethane from the US in a bid to improve profit margins in Europe’s battered petrochemical industry.
Last year, Switzerland-based Ineos said it had signed a contract to buy ethane from US shale gas fields to crack in its Rafnes and Grangemouth petrochemical plants.
European petrochemical margins have come under pressure over the past few years as cheap US ethane fueled by the shale gas boom has reduced the competitiveness of traditional naphtha crackers.
In a bid to improve profitability, several European crackers have sought to upgrade plants to allow them to crack gas, such as ethane, propane and butane for greater flexibility.
Earlier this year Borealis said it had signed an ethane supply contract with Norwegian energy firm Statoil for its Stenungsund plant.
Markku Korvenranta, Borealis executive vice-president, said: “The ethane contract with Antero Resources in combination with the recently renewed North Sea-based ethane contract with Statoil provides us with an ideal portfolio of sources balancing cost competitiveness and supply security.
Saudi Arabia’s Sabic, the world’s largest petrochemical company, is expected to follow Ineos and Borealis by sourcing gas from the US.
In January this year, Sabic applied for planning permission to convert a storage tank from liquid to gas at its Wilton cracker in the UK.
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–Edited by James Leech, firstname.lastname@example.org