News focus: LyondellBasell to boost North American ethylene capacity by 19% via debottlenecks

15 March 2013 09:13  [Source: ICB]

Standfirst: Debottlenecks will raise its North American ethylene capacity 19% - the equivalent of a new cracker, but faster and cheaper

LyondellBasell plans to raise North American ethylene capacity by 1.85bn lb/year (839,000 tonnes/year), or 19%, by 2016 through a series of debottlenecks.


Capacity at the Channelview cracker will increase by 250m lb/year

Copyright: LyondellBasell

"We aim to finish these projects two to three years earlier than our competition at a cost of around $0.50/annual lb versus $0.80 [for a new build] - faster, cheaper," said CEO Jim Gallogly at the company's investor day event in New York. "We hope these projects will be paid for before our competitors even come on line."

LyondellBasell also plans to raise its overall exposure to cracking natural gas liquids (NGL) from 85% currrently to 90% in the coming years. It will also conduct "a variety of modest US derivative debottlenecks" at a cost of around 10 cents/annual lb or less, he said.

The company will add an additional 800m lb/year (363,000 tonnes/year) of ethylene capacity at its cracker at Corpus Christi, Texas, by late 2015 at a cost of around $420m (€323m).

It was the first announcement of additional capacity for its Corpus Christi expansion. Previously announced projects include an 800m lb/year ethylene expansion at La Porte, Texas, by mid-2014, and a 250m lb/year ethylene expansion at Channelview, Texas, by 2015.

LyondellBasell's planned expansion projects to 2016 in North America, including a potential new polyethylene (PE) plant and a PE plant debottleneck, are expected to add around $600m of annual value, said Tim Roberts, senior vice president of olefins and polyolefins for the Americas.

LyondellBasell is in the early stages of evaluating a possible new 1bn lb/year PE plant in North America, which could come on line by 2016, said Roberts. The project, at an unspecified location, would cost around $200m.

"Today [PE] margins are thinner than they have been historically, but we think there is a bit of an upcycle to come," said CEO Gallogly. "Right now we're long on olefins in the US, which has been a competitive advantage but we have an opportunity to create an export platform with PE at a nice, reasonable margin."

The company is also planning a PE debottleneck at one of its existing facilities that would add 220m lb/year by 2014 at a cost of $20m, noted Roberts.

LyondellBasell is also continuing to evaluate the potential for a condo cracker in North America.

"We will continue to look at the condo cracker option. We are not interested in building a worldscale cracker on our own," said Gallogly at the investor day. "If we do a condo cracker, then we would look at the total integrated value versus just the ethylene piece. And this would probably be a second wave [cracker]," he added.

A condo cracker is a joint venture project with one or more partners. The first wave of new US crackers - six in total - is scheduled to start up in 2016-2017.

"It appears some projects are slipping in terms of timetable. ExxonMobil, Chevron Phillips and Dow will likely be the folks driving sooner to the finish line than the rest," said Gallogly.

US ethane supplies will continue to outpace demand for at least the next five years as shale natural gas production rises 20% over the period, according to LyondellBasell executives.

"The amount of natural gas and NGLs [natural gas liquids] coming out of the ground is astounding. The wells are extremely prolific," said Roberts. "If you have any NGLs coming out of natural gas production, you are incentivised to keep drilling."

Ethane represents only about 10% of the value of a typical wet gas stream, with other NGLs butane, propane and natural gasoline (condensate) providing almost 50% of the value, noted Roberts.

"The NGLs give companies a big incentive to produce, and ethane will ride that coat-tail. Ethane production is expected to continue exceeding demand," he said.

With the assumption that five out of seven planned crackers in the US come on line, ethane "supply should be ample to cover that and more", Roberts said.

In addition, US midstream infrastructure - comprising fractionators and pipelines - has caught up with ethane capacity, enabling efficient delivery, he added.

"We have a bullish view on long ethane for years. The economics are still very positive for natural gas production," said Gallogly. US liquefied natural gas (LNG) exports should actually help US chemical producers, despite concerns from some CEOs that this would hurt the industry, said Gallogly.

"Generally this helps us. We want [natural gas] producers to have better pricing because we're not interested in the methane - but the liquids. We're optimistic," he said.

LNG typically consists mostly of methane, or dry gas, to be used as fuel. The NGLs such as ethane, propane and butane, could be stripped out for use locally, or in the case of propane, exported by ship, too.

Ethane is more difficult to ship overseas, although Switzerland-based INEOS has a deal to ship ethane from the US east coast to its cracker in Norway by 2015.

"We as an industry support exports. We love free enterprise and exports," said Gallogly. "We suspect US LNG exports will be relatively modest."

By: Joseph Chang
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