Logistics, high capital costs hinder US EO investments - EO&D

25 April 2012 20:31  [Source: ICIS news]

JERSEY CITY, New Jersey (ICIS)--US producers must face constrained railcar availability, high logistical risks and investment costs of $2bn-3bn (€1.5bn-2.3bn) before they can build new ethylene oxide (EO) and ethylene glycol (EG) plants, an ethylene derivatives producer said on Tuesday.

"You won't see anybody jumping into investing production for EG/EO in the West. It's very expensive," said Doug Richtler, president of US-based EO&D.

Richtler spoke at the 2nd ICIS World Surfactants Conference in Jersey City, New Jersey.

"There is a tremendous investment hurdle before a potential producer can bring up new EO/EG capacity in the US. It will cost an investor $2bn-3bn before they can build an EO/EG facility that has to be integrated in an ethylene cracker and an olefins plant," added Richtler.

EO is also a highly explosive chemical and it will cost producers to invest in railcars, which is the current mode of transportation for EO, he said.

"There are limited numbers of specially-built railcars available for EO transportation. Right now, there are only two producers in the US that can transport EO via pipeline," Richtler added.

The US EO market is currently tight, according to EO&G, as producers opt to produce ethylene glycol instead of ethylene oxide.

"Even though current EO price is high, they would not want to sell it to the market because of high logistical investments," said Richtler.

The 2-day surfactant conference ends on Thursday.

($1 = €0.76)

By: Doris de Guzman
+1 713 525 2653

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