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ANALYSIS: Narrow propane-propylene margins, low prices weigh down PDH projects

HOUSTON, March 9, 2016 (PCW) -- This week, Enterprise Products Partners stated in an SEC filing it was delaying the start-up of its propane dehydrogenation (PDH) unit from the end of this year to 2Q 2017. PetroChem Wire also learned this week that Ascend Performance Materials’ planned Chocolate Bayou PDH – which would have been the largest in the US – has been indefinitely tabled, removing about 42,000 b/d of propane demand.

This has effectively reduced the amount of planned PDH production capacity from 8.36 billion lb/yr to 6.36 billion lb/yr, a 24% fall.This capacity could also reduce further given REXtac and Sunoco Logistics’ PDH projects have yet to get the official green light.

Additionally, the turmoil around Williams’ pending acquisition by Energy Transfer has led several analysts to question whether its Alberta PDH plans might move forward as well. Should these last three projects fall by the wayside, new PDH production capacity could stand at 4.6 billion lb/yr, a decrease of 45%.

Enterprise attributed its delay to “new estimates” from the contractor, while sources told PCW the Ascend project’s $1.2 billion budget was deemed too large in the face of softer commodity prices. Throughout the energy sector, lower prices have resulted in weaker earnings and revisions – usually reductions – of capital expenditure budgets.

Propylene-propane differentials, while narrower year-on-year since 2014 have been increasing since 2008.--Samantha Hartke

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