US gas prices forecast to rise 41% in 2017; Shell sells Saudi petrochemicals assets

Petrochemicals news you need to know.

EIA predicts higher gas demand in 2017 based on a return to more typical winter temperatures. (Image credit: Yokemon)

US gas prices forecast to rise 41% in 2017

Average U.S. Henry Hub gas prices are expected to hike 41.4% in 2017 to $3.55 per million British thermal units (MMBtu) as inventory levels fall, according to the U.S. Energy Information Administration's latest Short-Term Energy Outlook, published January 23.

Gas prices are forecast to rise to $3.73/MMBtu in 2018 as gas demand and exports exceed supply and imports, drawing down inventories, EIA said.

Source: EIA's Short-Term Energy Outlook

Average Henry Hub prices in 2016 were the lowest since 1999, due to a mild winter that left gas inventories at a record high at the end of March.

The EIA expects higher gas demand in 2017 and 2018, based on a return to more typical winter temperatures. Gas demand from power generators is expected to decline due to higher gas prices, it said.

Dry natural gas production is forecast to rise in 2017 and 2018 due to higher spot gas prices and pipeline infrastructure buildout, particularly in the Marcellus and Utica Shale regions in Ohio and Pennsylvania, EIA said.

Liquefaction start-ups to make US gas exporter

U.S. liquefied natural gas (LNG) exports are set to rise sharply in 2017 and 2018 due to new export capacity which will turn the U.S. into a net exporter of gas, EIA said in its latest Short-Term Energy Outlook.

Source: EIA's Short-Term Energy Outlook

Cheniere's 3.5 Bcf/d Sabine Pass LNG liquefaction plant in Louisiana is forecast to come online in 2017 while Dominion's 0.82 Bcf/d Cove point liquefaction plant in Maryland is due online in December 2017. Sempra Energy's 2.1 Bcf/d Cameron LNG and Freeport LNG's 1.8 Bcf/d Gulf of Mexico plants are scheduled to start up in the second half of 2018.

A "small increase" in pipeline exports to Mexico is also expected in both years, EIA said.

"Imports of natural gas are expected to remain relatively stable over the forecast period at slightly more than 8 Bcf/d. With expected growth in exports and stable import levels, the US is expected to become a net exporter of natural gas on an annual basis in 2018," it said.

Shell sells Saudi petrochemicals stakes in asset disposal push

Royal Dutch Shell has agreed to sell its 50% stake in the SADAF Saudi Arabian petrochemicals facilities to project partner SABIC, the Anglo-Dutch group said in a statement January 22.

The SADAF joint venture encompasses six world-scale petrochemical plants with a total output of more than 4 million metric tons per year.

Shell sold its 50% share for a price of $820 million, according to the Financial Times. The group aims to dispose of $30 billion of assets by 2018 and the company announced a flurry of asset dispositions in January, including sales in upstream production and exploration assets in the North Sea and Thailand.

Shell completed or advanced some $15 billion of asset divestment deals in 2016, CEO Ben van Beurden said in the group's annual financial statement February 2.

"We are gaining momentum on divestments...we are on track to complete our overall $30 billion divestment programme as planned," van Beurden said.

Shell's partnership with SABIC has been in place since 1986 and the company will explore potential future opportunities with the Saudi Arabian group, it said.

"This acquisition will enable SABIC to further optimize operations at SADAF and further invest in the facilities, integrating them with SABICs other affiliates. This step will allow Shell to focus its downstream activities and make selective investments to support the growth of its global chemicals business," Shell said.

In its annual results on February 2, Shell reported 'current cost of supply' earnings fell 44% in 2016 to $1.0 billion, impacted by a $500 million impairment charge mostly related to the weakening of the Australian dollar on a deferred tax position.

Pennsylvania township approves Shell's ethylene project

The township of Potter, Pennsylvania unanimously approved a conditional use permit for Shell's planned 1.6 million tonnes per annum (MTPA) ethylene cracker and polyethylene derivatives complex, Reuters reported January 19. The project still requires a permit from the state of Pennsylvania, it said.

The 'Pennsylvania Chemicals Project' is expected to start producing ethylene by 2022 and the facility will use 100,000 barrels a day (b/d) of ethane.

Shell made the final investment decision (FID) to build the facility in June 2016 based on three key considerations: proximity to low-cost ethane feedstocks, proximity to customers and local fiscal incentives, Ate Visser, Shell's vice president of the Pennsylvania Chemicals Project, said in June 2016.

Speaking at Petrochemical Update’s Northeast U.S. & Canada Petrochemical Construction Conference, Visser said the market will have absorbed the additional supply of polyethylene from the first wave of U.S. Gulf Coast petrochemical projects by the time Shell's ethane and derivatives complex comes on stream.

There are currently eight ethane crackers under construction on the U.S. Gulf Coast. Six of these are slated to come on stream by the end of 2017, representing more than 7 million tons per annum of new ethylene capacity. Ten more ethylene facilities have been proposed for the Gulf Coast and the U.S. Northeast, eight of which are in development.

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