Kevin L. Boyle, Consulting Releases Prospectus: Petrochemical Market Impact on US Shale Plays

Houston, TX, October 28, 2010 --(PR.com)-- Advances in drilling and production have created opportunities for natural gas production from shale formations in the US. However, the implementation of these new technologies is relatively expensive, resulting in higher commercial thresholds from these new resources. As the practice of the new technologies advances and even more technologies are refined, commercial thresholds may be expected to decrease. In addition, the products from these shale plays tend to be rich in liquids. The objective of this study will be to anticipate the value of these liquids as feedstocks for the petrochemical industry and their possible impact on commercial thresholds for the shale plays. As the production of petrochemicals serves a complex global market consisting ethylene as the primary intermediate, the concurrent influence of the availability of the shale-based liquids on other coproduct markets will also be addressed.

Natural gas prices became disconnected from oil prices sometime in 2005. Crude oil prices peaked at $60 per barrel in 2005 and natural gas prices spiked to $10.33 per MMBTU. However, natural gas prices subsequently receded and crude prices continued to increase. Since 2005, natural gas prices have remained at a significant discount to crude oil. On a BTU basis, the discount has averaged $6.73 per MMBTU from 2007 through 2009.

This difference is significant from the perspective of global petrochemicals. In simple terms, ethylene can either be produced from crude oil, via naphtha, or natural gas, via ethane or ethane and propane. If crude oil is priced significantly higher than natural gas, then the cost of ethylene derived from naphtha is much higher than ethylene derived from ethane. The price of ethylene will be based on the cost of the marginal producer.

The incremental buyer of petrochemicals is China who currently imports 50-60% of their ethylene equivalents. China also has the highest growth rate for ethylene equivalents. Most of the country’s ethylene is based on naphtha. They are the marginal producer to their quickly growing demand. With the marginal producer then oil based, ethane-based ethylene production that can be exported in equivalent forms, such as polyethylene, will have a cost advantage. Exports of ethane then are possible in the form of ethylene equivalents.

The study will exam two scenarios: First, one in which natural gas prices remain low relative to crude oil prices. The second scenario will have natural gas prices gradually returning to parity with oil. The Shale Plays to be examined include:

Barnett
Marcellus
Fayetteville
Woodford
Hilliard-Baxter-Mancos
Eagle-Ford
Potential Subscribers

A variety of constituents may be interested in the results and details of this study. Potential subscribers may include petrochemical, midstream and upstream industry participants, financial and government professionals.

Upstream natural gas producers
Midstream service companies
Government agencies with interest in natural gas
State governments with shale gas and/or petrochemical resources
Financial professionals
Banks and investors
Trading firms
Exchange research functions

The full prospectus is available for downloading and review at: www.klbconsultingservices.com.

A Word About Kevin L. Boyle, Consulting
Kevin L. Boyle is an independent consultant serving clients in the financial industry, petrochemicals and midstream services since 2003. He has more than thirty years experience in oil/gas, petrochemicals, polymers and plastics. Mr. Boyle provides clients with advice and support in the areas of pricing, forecasting, market research, acquisitions, due diligence, asset valuation and optimization.

Kevin L. Boyle, Consulting provides a variety of quantitative products to clients led by MarketWorks, a weekly newsletter on petrochemical markets; Ethylene Economics, a global margin estimation tool; Operating Cash Flow models for selected chemical producers; Integrated Product Profiles, estimating margins for entire company/product value chains; and industry cost curves.

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