Commentary: Companies take a ‘deep breath’ on US cracker projects

In the new crude oil reality, companies planning new crackers in the US are delaying decisions and evaluating feedstock flexibility. There could also be significant spare ethylene capacity

By now, it’s clear that the second wave of US ethane crackers will be delayed. The new oil price reality is sinking in, and tough decisions on massive capital investments will have to be made. Lower oil prices have led to lower petrochemical and polymers prices, compressing margins of US ethane-based producers.

There are six US crackers already under construction but another seven projects under evaluation – the most recent announcement being Total’s planned 1.0m tonne/year cracker on the US Gulf Coast.

The ASCENT (Appalachian Shale Cracker Enterprise) cracker and polyethylene (PE) project being developed by Brazil-based companies Braskem and Odebrecht could see its start-up pushed out to after 2020, the head of its US business said on 15 April.

“We’ve finished most of the engineering for the first phase, but given the new [oil] situation, we are revisiting that. Start-up could be postponed to after 2020,” said Fernando Musa, CEO of Braskem America, at a Societe de Chime Industrielle meeting in New York.

No start-up date for the ASCENT project, which would be built in West Virginia, had been given previously. The proposed project was announced in November 2013. The capacity of ASCENT would likely match the scope of the Ethylene XXI project that Braskem is developing in Mexico with partner Grupo Idesa, Musa confirmed. Ethylene XXI involves a 1.05m tonne/year cracker and matching PE capacity.

US ethane cracker projects with “steel in the ground” will be competitive and progress, but “others will take a deep breath and evaluate design choices”, said Musa.

Companies may look to more feedstock flexibility between ethane and propane, rather than go with mostly or 100% ethane, he said. “If you expect propane to be very long, you may be better off with an ethane/propane cracker. Compared to three years ago, now it is not so obvious that you should be ‘all-in’ ethane,” said Musa.

The six US crackers under construction could also have significant spare ethylene capacity, as downstream plans thus far fall short of absorbing the feedstock, he noted.

“People underappreciate that a lot of the new ethylene capacity is not integrated,” said Musa.

Chevron Phillips Chemical’s cracker under construction will have 1.5m tonnes/year of ethylene capacity but only 1.0m tonnes/year of PE capacity, he pointed out as an example.