Downstream partnerships can take advantage of US shale

Non-US chemical companies may feel like they’re on the outside, looking into the shale gas party. But there’s an opportunity for these firms to take advantage of cheap shale gas feedstocks – through downstream partnerships.

There are already plans to build 7 new world-scale crackers in the US. That combined with expansions of existing facilities could add 37% to existing US ethylene capacity.

Dow Chemical’s plans came into focus this week with its announcement of an ethylene offtake agreement with Japan-based firms Idemitsu and Mitsui.

The latter companies will build a linear alpha olefins (LAO) plant and take ethylene from Dow’s planned new 1.5m tonne/year cracker in Freeport, Texas. Dow will in turn buy some of the LAO for use in its performance plastics business.

Dow itself will build polyethylene (PE), EPDM and elastomers plants downstream.

But most other companies’ downstream plans are not yet fully defined. Herein lies the opportunity for foreign and domestic players to partner up to build downstream facilities.

Look at all the non-US companies that have announced that they are exploring the construction of world-scale crackers in the US.

They include South Korea’s Hanwha Chemical, Thailand’s Indorama Ventures and PTT Chemical, Saudi Arabia’s SABIC and Brazil’s Braskem.

But there is more than one way to take advantage of low-cost shale gas feedstock. Why not partner downstream for higher value added products instead?

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