News focus: Dow Chemical lays out US downstream plans

22 March 2013 09:13  [Source: ICB]

US-based Dow Chemical has partnered up with Japan-based companies Idemitsu Kosan and Mitsui on an ethylene offtake agreement, and outlined its own plans for downstream facilities from its planned new 1.5bn tonne/year cracker in Freeport, Texas, US.

Idemitsu and Mitsui are exploring the creation of a 50:50 joint venture to build a 330,000 tonne/year linear alpha olefins (LAO) unit in the US. The companies also signed an initial agreement to offtake ethylene from Dow's US Gulf Coast facilities for LAO production.

Packaged fruit and veg Rex Features

Rex Features 

Dow's new units will produce performance materials for packaging

Dow said that the joint venture would "contribute significant capital" for rights to supply LAO to its performance plastics business, without giving financial details. LAO are used as comonomers throughout that business. Dow would not disclose whether it would take all the LAO output.

A final investment decision on the LAO unit will be made in 2014, with production starting up in 2016, said Idemitsu and Mitsui.

LAO output of 330,000 tonnes would require about 380,000 tonnes of ethylene. Dow said at its investor day meeting in December 2012 that about 1.1m tonnes/year of ethylene output from its new cracker would be used to make its own derivatives.

"Dow is not looking for additional downstream partner opportunities but will evaluate and explore opportunities if and when they arise," said Nancy Lamb, a Dow spokesperson.

DO-IT-YOURSELF

Dow itself will build a metallocene ethylene propylene diene monomer (EPDM) plant, and facilities to produce high melt index (HMI) elastomers for hot melt adhesives; "enhanced" polyethylene (PE); and specialty low density polyethylene (LDPE).

The units will produce performance materials for the packaging, medical, electrical, consumer, telecom and leisure industries. Dow is currently scouting locations along the Gulf Coast, with the exact spot to be announced at a later date.

"Today's announcement further illustrates Dow's commitment to invest in high-return projects that deliver advantaged feedstocks for our differentiated, downstream derivatives, while simultaneously building strategic partnerships that drive economies of scale and improved capital efficiency," said Dow CEO Andrew Liveris.

"As an investor in Dow's Gulf Coast project, Idemitsu and Mitsui will receive ethylene integration benefits while improving the capital efficiency of the cracker from a Dow perspective," said executive vice president Jim Fitterling. "In addition, Dow secures a reliable, integrated, cost-advantaged source of comonomers for our performance plastics franchise."

The facilities are currently in the front end engineering and design (FEED) phase, which is expected to be completed in 2014.

"These new facilities will include a wide range of technologies that will produce differentiated, high performance materials for the fastest growing segments in Dow's existing markets, while providing access to new markets and applications," said Fitterling. "These investments are also aimed at businesses that have consistently delivered a higher return on capital, which is clearly aligned with our long-term strategy."

Dow said that its plans for a new 1.5m tonne/year ethane cracker at Freeport are progressing, with detailed engineering and the purchase of long lead time equipment having been approved. The cracker is expected to start up in 2017.

Dow is also lifting ethane cracking capability at Plaquemine, Louisiana. It restarted its 380,000 tonne/year cracker in St Charles, Louisiana, in December 2012.

DERIVATIVES CAPACITY

A picture is slowly emerging of how petrochemical producers in North America intend to add value to their already significant local ethylene cost advantage through new derivatives capacities.

Jim Fitterling

"Idemitsu and Mitsui will receive ethylene integration benefits while improving the capital efficiency of the cracker"

Jim Fitterling
Executive vice president, Dow Chemical

Graham van't Hoff, Shell's new executive vice president for chemicals, said at a briefing on 14 March: "It's more than probable that we will re-enter polyethylene."

Shell will not recreate a core PE business - it sold its PE interests, a stake in the Basell polyolefins joint venture, in 2005. But it could add PE capacity to add value to the ethylene it plans to produce from a new world-scale cracker in Monaca, Pennsylvania, US, close to its own exploration interests in the Marcellus shale.

"We look at polyethylene very much as a route to monetise ethylene," van't Hoff said. Shell has also talked of building monoethylene glycol (MEG) capacity associated with the cracker investment. The company has its own OMEGA MEG process technology.

Van't Hoff also said that Shell has a number of projects planned for the US Gulf coast to help it capture more value from advantaged natural gas liquids (NGLs) based feedstocks but he gave no details.

"We are looking to extend positions relative to our US Gulf portfolio," he said. "We are working on a lot of things in the US Gulf." Shell has capacities for olefins and first line derivatives in the area.

  • Tom Brown and Regan Hartnell in London contributed to this article

By: Joseph Chang
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