The shale gas revolution will not render naphtha cracking in Taiwan obsolete in the near future, despite the low cost of making ethylene using new technology, Formosa Plastics Group (FPG, 台塑) chairman William Wong (王文淵) said recently.
Wong said it costs about US$1,300 per tonne to make ethylene with naphtha cracking technology, while deriving the product from shale gas costs just US$255 per tonne in the US.
“Fortunately, it is still expensive to ship the product to Asia from the US,” Wong said on Jan. 15 during the company’s annual year-end banquet for employees, or weiya (尾牙) in Mandarin.
Therefore, Formosa Petrochemical Corp (台塑石化), the nation’s only listed oil refiner with naphtha cracking technology and a major unit of the Formosa group, is unlikely to be severely hit by cheap ethylene, Wong said.
The costs of transporting ethylene gas to Asia are still high because the gas needs to be shipped under low temperature and high pressure, Formosa Plastics Corp (FPC, 台塑) president Jason Lin (林健男) said.
Formosa Plastics, the group’s flagship unit and the nation’s largest producer of polyvinyl chloride (PVC), has a subsidiary in the US — Formosa Plastics Corp USA — that uses shale gas to make ethylene.
The US subsidiary, established in 1978, produces PVC and other basic chemicals at four operation sites: Delaware City, Delaware; Illiopolis, Illinois; Baton Rouge, Louisiana; and Point Comfort, Texas.
However, Lin said the company has no plan to ship products to Asia from its US operations.
Instead, the company is considering setting up downstream companies to process ethylene in the US.
“It will be cheaper to process ethylene in the US and ship the end products to Asia in either liquid or solid form,” Lin said.
Despite a boom in US shale gas production in recent years, total gas output in North America is not expected to increase by 10 million tonnes a year before the end of 2017, Formosa Plastics Corp chairman Lee Chih-tsuen (李志村) said.
“The petrochemical industry in the US has been stagnant for the past 30 years. A lack of sufficient workers may cap that industry’s recent rapid growth,” he said.
According to Formosa group’s estimates, the US has shale gas reserves of about 18.8 trillion cubic meters, the fourth-largest in the world.
China, with the world’s biggest shale gas reserves, has 31.6 trillion cubic meters underground, but, unlike the US, most shale gas drilling sites in China do not have sufficient water nearby to extract the gas, Lee said.
As the US is working to boost the country’s economic fortunes by luring back jobs and factories from Asia, Lee said he hopes the US government can approve the company’s US$2 billion investment plan to expand Formosa Plastics Corp USA’s manufacturing capacity in Texas, enabling it to start hiring people there.