Global cracker operators are turning to feedstock flexibility to improve margins, as the energy transition and rising petrochemical capacity reshape oil supply and demand.
Persistently high crude prices and poor returns from cracking naphtha in recent years have pushed Asian cracker operators — mainly in China — to crack ethane instead, seeking better margins. More producers are considering adding ethane to naphtha-dominant crackers to benefit from lower ethane costs while retaining the flexibility to use naphtha to produce a broader slate of byproducts, delegates said at the S&P Global Commodity Insights Appec conference.
Vietnam's Long Son is the latest Asian producer to retrofit its cracker to feed ethane for better economics. Singapore-based SP Chemical plans to increase ethane cracking capability at its 600,000 t/yr cracker in Jiangsu, China from 75pc to 90pc. India's state-controlled ONGC has partnered with Japan's Mitsui OSK Lines to build two very large ethane carriers (VLECs) to supply 800,000 t/yr of ethane to its petrochemical arm Opal's 1.1mn t/yr dual-feed naphtha/ethane cracker in Dahej, starting from May 2028.
Many companies have started incorporating ethane into their cracking systems, but high infrastructure and shipping costs — along with long-term supply commitments — remain key barriers to wider adoption.
"Conventionally... you tend to put capex for production. But this capex is not just for production, but for feedstock security or level of flexibility you want to achieve in your infrastructure," said Rajesh Rawat, senior vice-president and cracker business head at India's Reliance.
Since the US is the largest exporter of ethane, there is also an inherent supply risk. The recent US-China trade dispute disrupted ethane flows between late May and early August, when the US Department of Commerce ordered exporters Enterprise Product and Energy Transfer to obtain licences for ethane shipments to China.
Although US ethane exports to China have resumed — hitting an all-time high in August — concerns over future supply disruptions have slowed expansion plans in China. Several planned ethane-fed crackers are being shelved, as Beijing discourages projects that increase reliance on US imports.
Chinese firms had planned to build 17mn t/yr of ethane-fed cracking capacity, but only three projects are likely to proceed, totalling 2.8mn t/yr, according to market participants. The surviving projects will be developed by private firms Satellite, Lanhai New Materials and Shenghong, with capacities of 1.5mn t/yr, 1mn t/yr and 300,000 t/yr respectively, and due on line in 2026–28.
New steam crackers should be feedstock flexible rather than relying solely on ethane, to avoid supply disruptions from the US, Chinese company sources said.
C5 supply at stake
While ethane-fed crackers are generally more cost-competitive, naphtha crackers produce a broader range of byproducts, including propylene, butadiene and isoprene.
Naphtha, once a refinery byproduct, is now increasingly produced to meet petrochemical demand, as gasoline blending weakens. But the naphtha crack spread — the premium of naphtha cfr Japan over Ice Brent crude — must be high enough to support petrochemical-driven production.
Persistently weak margins could prompt Japanese, South Korean and European crackers to rationalise capacity, widening the supply gap for C5 hydrocarbons, Reliance's Rawat said. These regions are key sources of C5s, and reduced output could make it harder to source feedstocks for downstream speciality chemicals.
Is crude-to-chemicals a better option?
Rising demand for petrochemicals, weaker fuel demand and global carbon neutrality pledges are prompting refiners to pursue crude oil-to-chemicals (COTC) initiatives.
COTC yields up to 60–70pc petrochemicals from crude, but requires major investment and a longer payback period. It remains unclear whether producers are willing to commit to such investment now.
South Korean firm S-Oil's Shaheen project in Ulsan is a closely watched COTC investment expected to come online in 2026. The Shaheen complex includes a mixed-feed cracking facility capable of producing up to 1.8mn t/yr of ethylene and 770,000 t/yr of propylene.
S-Oil is majority owned by Saudi oil giant Saudi Aramco.
