23 April 2012 00:00 [Source: ICB]
Favorable feedstock costs and robust downstream demand puts EO on a strong growth path
US ethylene oxide (EO) producers, looking to take advantage of low natural gas and natural gas liquids (NGL) costs, are planning numerous expansions as the market cycles up amid forecasted robust downstream demand.
Thailand-based polyester maker Indorama Ventures Ltd. (IVL), one of the world's largest plastics producers, completed its $795m (€604m) buyout of US-based EO/MEG producer Old World Industries on April 1.
IVL's production is "virtually integrated" in the US through a co-location deal with UK-based energy and chemical major BP's 1.15m tonne/year purified terephthalic acid (PTA) plant in Decatur, Alabama, which supplies PTA to IVL.
IVL operates a 432,000 tonne/year polyethylene terephthalate (PET) plant in Decatur located next to BP's PTA unit. MEG and PTA are the key feedstocks in the production of polyethylene terephthalate (PET).
"We are now integrated into both our major feedstocks and expect to reap the benefit of the high demand for this product [MEG]," said Aloke Lohia, CEO of Indorama Ventures at the time of closing. EO is primarily used in the production of MEG, which is in turn mainly utilized to make PET and polyester, as well as antifreeze. Globally, 63% of EO is converted to MEG, with a further 7% going into other glycols.
Other EO derivatives include ethoxylates and ethanolamines, which are used in surfactants and personal care products.
The Old World EO/MEG production facility is the largest in the US, with a crude EO capacity of 435,000 tonnes/year. The facility also produces 204,000 tonnes/year of purified EO and 358,000 tonnes of MEG.
"To enter an industry that is forecast to enter an upcycle in the near future is good timing for us, and I believe this is a business line we can build over time," Lohia said.
Huntsman, another major player in the US EO sector, plans to increase capacity at its Port Neches, Texas plant by 250m lb/year (113,000 tonne/year). The plant has EO capacity of 460,000 tonnes/year, according to the ICIS plants and projects database.
Huntsman is seeking to take advantage of low natural gas and NGL costs in North America, noted CEO Peter Huntsman. The EO will be used to produce amines and surfactants.
"I think we will be announcing a series of expansions in North America that we otherwise would not have been announcing two or three years ago," he said at the International Petrochemical Conference (IPC) in San Antonio, Texas, hosted by the American Fuel & Petrochemical Manufacturers (AFPM) association. "The US will be in a position of being an exporter in the petrochemical industry, short of massive government intervention."
And Brazil-based EO/MEG producer Oxiteno is making a move into the US surfactants sector with its acquisition of Pasadena Property's specialty chemicals plant in Pasadena, Texas. Oxiteno bought the plant for $15m and plans to spend an additional $15m for retrofitting so it can make Oxiteno's line of specialty surfactants.
The plant has a capacity of 32,000 tonnes/year, and operations should start in 2013. Oxiteno plans to use the infrastructure at the site as a platform for further expansion in the US.
For any petrochemical plant, a major cost is energy. Shale-gas drilling is boosting supplies of US natural gas and prices are near record lows relative to oil. This provides a dual benefit to petrochemical producers in the form of lower feedstock and energy costs.
IVL has said it will likely partner on a 1.3m tonne/year cracker in the US. It has already 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.
"This world-scale cracker will be most competitive in the US with the progress of shale gas," said Lohia, at a conference at the Stock Exchange of Thailand in February. "The scale [of this project] and availability of cheap gas makes it very exciting."
The shale gas revolution is a game changer, analysts say. Outside of the Middle East, the US has the lowest natural gas costs in the world, which gives it a distinct advantage.
IVL is the first non-ethylene producer to announce its entry into the market - at least on a feasibility study stage. Its partner is most likely to be an existing cracker operator in the US.
ICIS expects US ethylene expansions to add about 28% to existing capacity by 2017-2018, with the addition of at least one more world-scale cracker resulting in a stunning 32% increase.
Meanwhile down the EO/MEG chain, companies are continuing acquisitions of PET assets while capacity expansions continue to proliferate worldwide.
Indorama has major plans to increase its presence in PET, and intends to increase its global production capacity for PTA, PET and fibers to at least 10m tonnes/year by 2014 from roughly 5.5m tonnes/year currently. Indorama has several projects going on at once.
Projects already under way include PET and PTA expansions in Rotterdam, the Netherlands; a PET expansion in Wloclawek, Poland; a fibers expansion in Indonesia; and a PET expansion in China.
Also in the US, the company is planning a brownfield PET project, that would be co-located with a BP Chemicals PTA plant, in either Alabama or South Carolina.
Indorama intends to begin work on the US PET project in 2013, with start-up expected in 2015. The capacity would be about 432,000 tonnes/year.
The company's proposed integrated PX/PTA/PET project in the Middle East is expected to come on stream in 2017, and will be a joint venture with a refinery partner. A feasibility study is ongoing, but the location of the project has not been disclosed.
The company is also planning a joint venture PTA, PET and fibers project in India with India-based polyester fibers company Indorama Synthetics, which owns approximately 2% of Indorama Ventures.
At the beginning of March, Indorama bought the PET assets of Indonesian producer Polypet Karyapersada, which owns a 100,800 tonne/year PET facility in Cilegon, Indonesia.
US EO producers include Dow, Huntsman, Old World Industries (Indorama), Shell, LyondellBasell, MEGlobal, Formosa Plastics, BASF and Eastman Chemical.
Additional reporting by Joseph Chang in New York
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