Ethane shortages hit Saudi petrochemical producers

Power outages at state-controlled Saudi Aramco last week have led to an ethane supply shortage, in turn affecting ethylene cracker operations at downstream petrochemical producers in Saudi Arabia.

Jubail United (JUPC), an affiliate of Saudi Arabia's state-controlled Sabic, heavily reduced operations at its 1.4mn t/r ethane cracker in Jubail last week because of the ethane supply shortage brought on by the power issues at Aramco. JUPC also shut its 400,000 t/yr linear low-density polyethylene (LLDPE)/high-density PE (HDPE) swing unit. Cracker operations resumed earlier this week, with the producer also gradually increasing operating rates at its PE plants.

There is talk that Saudi producer Sharq is also affected by the ethane shortage and has reduced operating rates at its petrochemical complex in Jubail, according to market participants. But this could not be confirmed. Sharq operates a 1.3mn t/yr ethylene cracker, a 400,000 t/yr HDPE plant and a 1.15mn t/yr LLDPE/HDPE unit.

But Saudi Ethylene and Polyethylene (SEPC), a subsidiary of Saudi petrochemical producer Tasnee, was not significantly affected by the ethane shortage. It shut its cracker operations for around 2-3 days last week owing to technical issues. Operations have since resumed. SEPC operates a 1mn t/yr ethylene cracker, a 400,000 t/yr LDPE plant and a 400,000 t/yr HDPE plant in Jubail.

Saudi petrochemical producers were concerned about ethane supply shortages even before last week's power outages. Ethane production is being curtailed by 10-18pc each week at Aramco because of reduced downstream demand brought on by the Covid-19 pandemic. PE producers have been trying to increase operating rates to improve economies of scale and boost netbacks, but these efforts have been hampered by the tight ethane supply availability.

Saudi Arabia last faced a major ethane shortage in September 2019. Saudi petrochemical producers had their feedstock supplies cut following attacks on oil facilities in the country. The attacks halted production of an estimated 2bn ft³/d (21bn m³/yr) of associated gas, cutting Saudi supplies of ethane and NGLs by 50pc.

Workable levels for LDPE film were at $1,470-1,500/t del Middle East as of yesterday. Workable levels for LLDPE film and HDPE film were at around $1,230-1,250/t and $1,250-1,270/t respectively on the same basis.

By Matthew Rajendra