Commentary: Indorama joins the US ethylene fray with new cracker study

12 March 2012 00:00  [Source: ICB]

Hat throw, Rex Features
 © Rex Features
Polyester producer throws its hat into US ethylene ring
Thailand-based Indorama Ventures Ltd. (IVL) is jumping into the US ethylene cracker fray, joining a crowded field of players that are either going full steam ahead with new crackers and expansions, or considering projects.

IVL will likely partner on its 1.3m tonne/year cracker rather than go it alone. It has completed a pre-feasibility study with an undisclosed partner, and expects to complete its full feasibility study by 2013, aiming to start work on the project in 2015 (see story on page 28).

"This world-scale cracker will be most competitive in the US with the progress of shale gas," said IVL founder and CEO Aloke Lohia, at its analyst conference at the Stock Exchange of Thailand on February 29. "The scale [of this project] and availability of cheap gas makes it very exciting."

IVL is the first non-ethylene producer to announce its entry into the market - at least on a feasibility study stage. Expect its partner to be an existing cracker operator in the US. "Our partner is also building utilities and other polyolefins plants at the complex," said Lohia.

IVL is in the process of closing its $795m buyout of US-based EO/MEG (ethylene oxide/monoethylene glycol) producer Old World Industries. It will also build EO and MEG capacity as part its US cracker project.

As players look to the US for cheap natural gas feedstock for petrochemicals, they see another advantage.

"For any petrochemical plant, whether you make paraxylene, [ethylene] or derivatives or PVC [polyvinyl chloride], a major cost is energy. When energy is cheap in the United States, the cost of production goes down," said DK Agarwal, CEO of IVL subsidiary Indorama Polymers, at the conference.

Agarwal pointed out that plant energy operating costs in China are about 11 cents/kWh, whereas in the US it is around 5.5 cents/kWh.

Not only is IVL seeking to secure feedstock for its downstream MEG and EO operations, but it also aims to capture full integrated cracker economics. "That is the game plan - to capture the value chain from ethane to ethylene," said Agarwal.

In its "Roadmap to 2020" plan, IVL shows that its US ethylene and EO/MEG plant will be completed in 2018.

We expect US ethylene expansions to add 28% to existing capacity by 2017-2018, with the addition of at least one more world-scale cracker resulting in an increase of 32%.

  • Additional contribution from Anna Jagger in London

By: Joseph Chang
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