Ethane, Petrochems, and Margins -- RBN Energy

Link here. 

These are the only two U.S. olefin cracking units that run ethane located north of the Texas border. Both are LyondellBasel.  One is the Clinton, IA plant and the other is the Morris, IL plant.  Both run a lot of ethane and some propane.  Both plants probably get supplies from a variety of sources, but let’s assume a portion of their feedstocks come from Conway or are priced at Conway indices.  If you are not familiar with olefin crackers, they make ethylene and propylene out of hydrocarbon feedstocks, here in the U.S. mostly from NGLs.

A few years ago, the operating margin at these plants was in the single digits or worse.  Today ethylene is about 63 cents/pound and propylene is about 70 cents/pound.  Let’s put our Conway ethane in those terms.  At 7.25 cnts/gal, that is equivalent to 2.4 cents/pound.  (There are about 2.97 pounds per gallon of ethane).  The ethylene yield from ethane is 70% to 80%.  So the Lyondell plants could be making 60-something per pound products from a 3 cent/pound feedstock.  Now that’s some serious margin.  Sure there are lots of other costs besides the feedstock, but the margins are still beyond any historical scale.  Even Gulf Coast crackers with 40 cent/gallon ethane are looking at 50 cent/pound margins according to Bentek’s Daily NGL report.  Petchems are happy campers indeed.

A reader noted the same thing yesterday: see this link and first comment. I'm impressed.