InterviewSome proposed US cracker plans may fall on wayside

21 April 2011 21:29  [Source: ICIS news]

By Al Greenwood

HOUSTON (ICIS)--Some of the proposed ethylene expansion plans in the US could fall by the wayside as producers have second thoughts about pursuing the projects, a consultant said on Thursday.

Dow Chemical became the latest producer to announce plans to build a new cracker in the US.

Dow also plans to build an on-purpose propylene plant.

Companies announcing actual plants instead of studies may likely move forward on their projects, said Bob Bauman, president of Polymer Consulting International, a US consultancy.

"When they say they are going to build, they are going to build," he said. Companies do not announce new plans lightly, since it affects stock prices.

Other companies, however, have announced only plans to study whether they would expand ethylene capacity.

Some of these companies may ultimately abandon the projects, Bauman said.

In fact, companies could make new-plant announcements to discourage other firms from going forward with their own tentative plans, he said.

"For me, announcing is an absolutely prime strategy," he said. "You may stop someone else from going forward."

As such, there could be even more plant announcements in the future, he said.

The projects could still falter, however.

The flood of new projects could overwhelm construction contractors, Bauman said. "Construction might be the biggest setback that would delay plans."

Such a problem arose in the Middle East during its recent petrochemical boom.

In addition, surprises could always arise, making the new plants unviable.

Another economic crisis could destroy chemical demand, Bauman said.

Oil prices could fall, eliminating the price advantage of the ethane-based crackers.

New environmental regulations could limit shale-gas production, cutting the supply of cheap ethane, Bauman said.

For more on ethylene visit ICIS chemical intelligence

By: Al Greenwood
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