Petrochemicals giant INEOS is today (Friday) – literally – raising the roof on what will be Europe’s biggest shale gas tank at its Grangemouth plant.
The move coincides with the latest warning from the International Energy Agency that crude oil prices are set to slide again – trading at midday today at around $59-barrel.
US shale energy boom cuts OPEC ability to ramp up crude oil prices – http://goo.gl/qGjqrw
Can UK oil and gas regulator save N. Sea ‘Jurassic Park’ industry from extinction in $60-barrel climate? – http://goo.gl/Zmm1ZR
A roof will be placed on the tank, which will hold more than 30,000 litres of liquefied gas at the Grangemouth plant. The work is being done by INEOS to hold imported shale gas from the US, obtained through the shale-gas fracking process.
In a remarkable feat of engineering, Grangemouth today saw the 330 tonne roof on Europe’s biggest ethane tank floated up almost 150 feet on nothing more than a cushion of air.
The huge tank is 56 metres in diameter and 44 metres high – that gives it a displacement volume of 108,372 cubic metres – large enough for 560 double decker buses to fit inside.
The investment into the ethane project represents part of a £450 million rescue package for Grangemouth. The tank is designed to hold over 60,000 cubic metres of ethane brought from the United States to replace declining North Sea supply.
INEOS has established a groundbreaking $1 billion dollar global project, spanning China, the US and Europe – all to bring ethane to Grangemouth and Norway. This project will transform the Grangemouth petrochemicals business, providing a secure supply of essential ethane for the next 15 years.
John McNally, Chief Executive, INEOS O&P UK, said: “This is an important day for Grangemouth. It takes us one step nearer our goal of importing US ethane to Scotland and putting Grangemouth back into the premier league of petrochemical plants.”
Meanwhile, the IEA said it expected global demand growth to slow next year to 1.2 million barrels per day (bpd) from 1.4 million this year – far less than needed to balance stubbornly growing non-OPEC and OPEC supply.
“The bottom of the market may still be ahead,” the IEA said in its monthly report today.
“The rebalancing that began when oil markets set off on an initial 60% price drop a year ago has yet to run its course. Recent developments suggest that the process will extend well into 2016.
“The oil market was massively oversupplied in the second quarter of 2015, and remains so today. It is equally clear that the market’s ability to absorb that oversupply is unlikely to last. Onshore storage space is limited. So is the tanker fleet … something has to give,” it said.
The global glut arose from a steep spike in U.S. oil supply on the back of the shale revolution and OPEC’s decision not to reduce output but rather to fight for market share with rival producers.
As a result, N. Sea oil producers are caught between a rock and a hard place. In order to maximise economic recovery (MER) – the very reason for the existence of the newly set up Oil and Gas Authority – operators (if possible) have to cut costs while still continuing to pump crude oil at half they price they get now for their oil compared to this time last year.
But the IEA warned: “The expected timing of the rebalancing has shifted a bit, but the story line has not changed. The supply response to lower prices is on the way,” – adding it may take another price drop for a full supply response to unfold.
“Cost-savngs, efficiency gains and producer hedging have let light tight oil producers defy expectations until now, but growth ground to a halt in May and will likely stay there through mid-2016,” it said.
U.S. supply grew by 1.0 million bpd in the first five months of 2015, down from 1.8 million in 2014, according to the IEA.
“Total U.S. supply will keep growing through 2016, but much more slowly than in 2014, and thanks to natural gas liquids and new deepwater plays rather than onshore crude supply,” it said.
Non-OPEC supply as a whole, after expanding by a massive 2.4 million bpd in 2014, looks on track to slow to growth of 1 million bpd in 2015 and stay flat in 2016, the IEA said.
Among other bearish signals, the IEA said world oil demand growth appeared to have peaked in the first quarter of 2015 at 1.8 million bpd and would continue to ease throughout the rest of this year and into next.
That means the need for OPEC’s oil will stand at 30.3 million bpd next year, up 1 million bpd on 2015, but still a whopping 1.4 million bpd below current OPEC production.
“And the group is not slowing down. On the contrary, its core Middle East producers are pumping at record rates and the outlook for Iraqi capacity growth – accounting for most projected OPEC expansions – keeps improving.”