How the US Shale Gas Revolution Curtailed Asian Petrochemicals: Analyzing Market Trends Using ZEMA

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Petrochemical Trouble Brewing in the Middle Kingdom

US Shale Gas Revolution
US Shale Gas Revolution

On April 28, 2014, Reuters and other sources reported that Sinopec Corp, the largest petrochemical producer in China, had put on hold a massive $3.1 billion USD ethylene plant in Qingdao, a refinery hub in China’s Shandong province.[1] The official reason cited was a safety reassessment, following last November’s fatal pipeline explosion which killed 62 individuals. The real reason is likely more complicated.

Ethylene (or ethene) is a 2 carbon chain hydrocarbon known in the petrochemical industry as an olefin, or a hydrocarbon containing at least 1 carbon to carbon double bond. It is often called “King of Petrochemicals” because this intermediate produces an astonishingly wide array of economically valuable goods such as plastics, textiles, engine coolants and lubricants, medical and agricultural chemicals, and consumer products like shampoos, detergents, paints, solvents, textiles, and adhesives (Figure 1). Propylene (or propene) is another economically important 3 carbon chain olefin affected by similar factors. Ethylene and propylene are produced in massive fiery furnaces called steam cracking plants (or crackers). A typical modern steam cracker produces 3 million tons of products and requires $1 billion USD to construct.

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