"Ready Availability Of Low-Cost Propane" -- Remember The Days Of Propane Shortages? -- Just A Few Years Ago -- Four Wells Coming Off The Confidential List Today -- October 25, 2019

Active rigs:

$56.08	10/25/2019	10/25/2018	10/25/2017	10/25/2016	10/25/2015
Active Rigs	56	68	54	35	68

Four wells coming off the confidential list today -- Friday, October 25, 2019: 85 for the month; 85 for the quarter:

• 35684, conf, Whiting, Norman 21-30H, 
• 35623, conf, Liberty Resources, Garnes 159-93-14-2-1MBHX, 
• 35397, conf, Hess, RS-Aadnes-157-91-2829H-3, 
• 35054, conf, CLR, Rader 4-24HSL1,  

RBN Energy: more propane-consuming PDH plants are on the way. 

The ready availability of low-cost propane, the expectation of renewed growth in global propylene demand and other factors are spurring development of another round of propane dehydrogenation plants in North America. Three PDH plants — two in Alberta and one in Texas — already are under construction and scheduled to come online in the 2021-23 period. Now, Enterprise Products Partners has committed to building a second PDH plant at its NGL/petchem complex in Mont Belvieu, TX, and PetroLogistics — which completed the U.S.’s first PDH plant in 2010 — has selected the technology it will use for a new facility it now plans to build along the Gulf Coast. Today, we discuss planned PDH capacity additions in the U.S. and Canada and what’s driving their development.

Propylene is a particularly useful chemical building block. About two-thirds of the propylene produced is used to make polypropylene (PP) — one of the best-selling plastics, second only to polyethylene — which is used to make (among other things) automotive parts, reusable shopping bags and plastic storage containers. Most of the rest is used to produce acrylonitrile, propylene oxide, oxo alcohols, cumene and isopropyl alcohol, which are used to make polyurethanes, polycarbonates and other materials that are part and parcel of a myriad of everyday products.

Global demand for propylene has been increasing at an average of about 5.2 million metric tons per annum (MMtpa) — a 3.6% compound annual growth rate (CAGR) — while North American demand is growing at a more modest average of 390,000 metric tons per year (Mtpa), for a CAGR of 2.2%. The problem is that the traditional “co-product” sources of propylene supply (steam crackers and refineries) have not kept up with demand. This is largely due to two Shale Era-related changes. First, refineries have been shifting their crude slates to lighter oils. And second, the steam-cracker sector has been shifting from old-standby feedstocks like propane, normal butane and naphtha, each of which produce 40 pounds or more of propylene for every 100 pounds of ethylene (the primary product of steam crackers), to ethane, which typically produces only 4 pounds of propylene for every 100 pounds of ethylene.

To help fill the gap between propylene supply and demand, a number of PDH plants have been built this decade — not just in the U.S. and Canada, but in Europe and Asia. Earlier this year we discussed the latest PDH project to reach a final investment decision (FID), namely, the plan by a joint venture of Canada’s Pembina Pipeline and Kuwait’s Petrochemical Industries Co. (PIC) to build a large PDH/PP complex in Alberta’s Industrial Heartland northeast of Edmonton. As we said then, the 550-Mtpa Pembina/PIC project, which is scheduled to begin operating in 2023, comes on the heels of a 525-Mtpa PDH/PP project by Inter Pipeline, also in the Industrial Heartland, that reached FID in 2017 and is slated to start up in late 2021. Each of the PDH plants will consume about 23 Mb/d of Western Canadian propane, which has been selling at a significant discount in recent years due largely to takeaway constraints.