Massive tankers create a ‘virtual pipeline’ bringing feedstock to replace dwindling domestic supplies
The first ship carrying ethane from US shale gas has landed in the UK. Chemicals producer Ineos has spent five years and $2 billion (£1.5 billion) building a fleet of eight 27,500m3 tankers and associated infrastructure to form what it calls a form a ‘virtual pipeline’ across the Atlantic ocean.
The firm began shipping US ethane to its cracker in Rafnes, Norway, in March. Now that its Grangemouth, UK, site has been modified to receive the ships and store the ethane, it is ready to accept shipments. The modifications were part of Ineos’s ‘survival plan’ for the site, implemented after a dispute with workers nearly saw the whole operation close down.
Ineos will use US ethane both as fuel and to produce ethylene to feed petrochemical processes. Ethane is in short supply in Europe – Ineos says the Grangemouth cracker has been running at 40% capacity for the last three years. But the high proportion of ethane in US shale gas has pushed down prices there, making it economical to ship it across the ocean.
When Ineos began this project, high oil prices gave US ethane a large advantage over crackers running on naphtha from oil. However, while the oil price crash has boosted margins on naphtha crackers (which Ineos operates on other sites), it hasn’t affected gas prices much. And gas crackers can’t run on naphtha. Ineos says that US ethane is still cheaper than European gas, and increased supply means it can make full use of its facilities at Grangemouth and re-open mothballed manufacturing units.