Brazil: Shale gas to drive new capacity wave

21 March 2014 10:03  [Source: ICB]

The US is about to see a massive increase in petrochemical, polymers and derivatives capacity with a wave of new petrochemical projects in the coming years, all on the back of the shale gas boom. US ethylene capacity stands to rise by as much as 51% by 2020, if all the planned new crackers come to fruition.

The new capacities will have major ­implications for the global petrochemical market, including Latin America, as much of the ­additional US production will be targeted for export.

Kevin Swift

“The US is truly experiencing a new wave of investment in chemicals, with more than half of the investment planned in dollar volume representing foreign direct investment”

Kevin Swift
Chief economist, ACC

But it is notable that the first “new” ethane cracker will not be built in the US, but in Mexico. Braskem Idesa, a 75:25 joint venture between Braskem and Mexico’s Grupo Idesa is building a 1.05m tonne/year cracker in Coatzacoalcos, along with downstream polyethylene (PE) units. The project, called Ethylene XXI, is scheduled to start up in the third quarter of 2015.

There are plans for a total of at least 10 new ethane crackers in the US – eight on the US Gulf Coast, and two in the Northeast US. This represents around 12.2m tonnes/year of ethylene capacity, according to an analysis by ICIS.

Seven projects are beyond the feasibility stage and seven groups have announced capacity figures for eight crackers – Chevron Phillips Chemical, Dow Chemical, Exxon-Mobil Chemical, Sasol, Formosa (two crackers), Occidental Chemical/Mexichem and Axiall/Lotte Chemical. Yet to detail capacities are Shell Chemicals and Odebrecht – both of which plan to build in the Northeast US.

In November 2013, officials from Brazil-based industrial conglomerate Odebrecht and the governor of the state of West Virginia ­announced a proposed cracker and three ­polyethylene (PE) units. Capacities were not disclosed.

The complex, to be called Ascent (Appalachian Shale Cracker Enterprise) would be built in Wood County, West Virginia. Odebrecht would be responsible for investment and financing. Brazil-based Braskem, in which Odebrecht has a 38% stake and majority ­voting rights, would run the facility and ­market the PE.

In addition to the 10 planned greenfield projects, there are also 10 expansions planned at existing crackers amounting to 1.5m tonnes/year of ethylene capacity – equivalent to one large world-scale cracker.

If all 10 crackers are built and the expansions go through as planned, the US is looking at a massive 51% increase in existing ethylene capacity to over 41m tonnes/year, according to an analysis by ICIS.

But it is not just cracker projects in the works. The US shale gas boom is giving rise to a host of other chemical projects, including those in methanol, fertilizer, polymers, chlor-alkali and others further downstream.

 

Total investment in US chemical projects linked to shale gas has reached $100.2bn (€71.9bn), spanning 148 projects from 2011 to ­February 2014, according to the American Chemistry Council (ACC).

These include new projects as well as expansions, some of which have been completed. This could lead to additional chemical output of $81bn/year for the chemical industry by 2023, the trade group noted.

Planned US shale crackers

ACC chief economist Kevin Swift expects total US chemical investment based on shale gas to reach at least $110bn, comprising up to 175 projects.

And it’s not just US companies that are spearheading the advance. Foreign-based companies are actively participating. “The US is truly experiencing a new wave of investment in chemicals, with more than half of the investment planned in dollar volume representing foreign direct investment,” says Swift. “These have mostly been in bulk petrochemicals, fertilizers and resins. But there will be more announced downstream.”

Much of the downstream investment in the US will go into boosting the production of polymers. US plastics exports are expected to jump from 10-12% of total production a decade ago, and around 20-21% today, to about 35% by 2023, according to Swift.


By: Joseph Chang
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