C2 storage.pngIn business, as in war, defence can often be the best form of attack. This seems to be the principle behind Ineos’s announcement that they intend to build a 1 million tonne deep-sea ethylene terminal to feed their 340KT ethylene oxide/glycol business near Antwerp, Belgium.
The glycol business is clearly under threat from the massive volume of new low-cost capacity now coming online in the Middle East. Already Dow have closed their 275KT plant in Wilton, UK.
But Ineos’ move is a potential game-changer for plants situated along the ARG ethylene pipeline. It will be the first terminal owned by a company structurally short of ethylene, and will also provide Ineos with a valuable link between the ARG and its US, UK, Norwegian and N German plants.
Until now, it has been relatively difficult for ethylene to be imported into Europe. Not only is it expensive to transport. But there has also been a shortage of terminal space linked to the ARG pipeline. This latter constraint will now change. Rightly, Ineos describe it as being likely to “significantly change the shape of the ethylene market in Europe“.
Of course, the cost of the terminal will be high – probably around $80M. And Ineos will have to absorb a $200/t or more freight penalty when importing product. But once it opens in 2012, older, inefficient, crackers along the ARG will effectively find themselves in competition with ethane-based Middle Eastern ethylene having a $200/t cash cost of production.
Ineos’ move is therefore likely to open up a major debate about the likely future of Europe’s petrochemical assets.