Ethane-only Middle East crackers would continue to be among the world’s most profitable even if feedstock prices were lifted to $4 a million BTU, according to experts.

Saudi Arabian ethane prices are now $0.75 a million BTU, which is equivalent to producing a tonne of ethylene for about $35 a tonne, analysts say.

“If ethane goes up to $4, Saudi companies using ethane would still be very competitive,” said CMAI director Richard Charlesworth at the Middle East Petrochemicals 2012 conference on 20 March. “This might cut profits by $100-200 a tonne, but still leave Saudi ethane-only crackers in the top 25 per cent most profitable in the world.”

Saudi authorities are now seriously considering increasing the price of ethane and naphtha. This is in part prompted by the rise in oil prices since the end of 2011, which has significantly lifted the profitability of Saudi petrochemical companies with ethane-only crackers.

Charlesworth said that likely global petrochemical prices will ensure that mixed feedstock Middle East crackers will also continue to be profitable.

“In 2016, we are forecasting the price of polyethylene will be about $1,800 a tonne,” he said. “This would still allow the new mixed naphtha/ethane cracker coming on stream in Sadara to be competitive.”

Charlesworth said that alternative feedstock-based production and downstream expansion offer the best opportunities for investors in Middle East petrochemicals.

He said that Saudi Arabia’s ethane availability due to upstream expansion projects is expected to rise to about 1 million cubic feet a day compared with about 800,000 cubic feet a day at present. But he said allocations to present and future Saudi petrochemical companies will mean all of it will be absorbed.

Charlesworth said that all significant GCC ethane supplies, including from Qatar, will be fully allocated by 2016. The two biggest alternative sources are Iraq and Iran.

“There is a lot of ethane in Iraq,” Charlesworth said. “In the Basra region alone, there is sufficient ethane burnt today to support a 1.5 million- tonne cracker. Iran also has a surplus. But the pace of investment is likely to be low in both places.”