SABIC JV cracker would join second US wave

Al Greenwood

25-Jul-2016

(adds details throughout)

HOUSTON (ICIS)–If built, SABIC’s proposed cracker would join the second wave of US crackers scheduled to start operations in 2018 and beyond, according to statements the Saudi Arabia-headquartered company made on Monday.

Earlier, SABIC said it was in talks with an affiliate of ExxonMobil to potentially develop a world-scale cracker and downstream units on the US Gulf Coast.

The company provided few details about the project and did not specify the capacity or the downstream units. The site was similarly left open, with SABIC considering Texas or Louisiana.

SABIC and ExxonMobil plan to conduct studies and evaluations on the possible project before reaching a final investment decision – again, with an unspecified date.

If SABIC does decide to build the project, its cracker would join the second wave of projects being built in the US.

Construction on the first wave is already well underway, with the first five scheduled to start operations in the next 12 months.

The sixth project is actually made up of an idled cracker that Indorama is restarting.

The following table summarises these first six projects.

Company

Capacity

Location

Start-up

Status

Chevron Phillips Chemical

1.5m tonnes

Texas

2017

Under construction

ExxonMobil Chemical

1.5m tonnes

Texas

H2 2017

Under construction

Dow Chemical

1.5m tonnes

Texas

2017

Under construction

Formosa Plastics

1.59m tonnes

Texas

Dec-17

Under construction

Occidental/Mexichem

544,000 tonnes

Texas

Q1 2017

Under construction

Indorama

370,000 tonnes

Louisiana

end 2017

restart

The second wave of projects will begin operations in 2018 and later. While these include some late entrants, this wave also includes companies like Shell, which announced its project several years ago but only recently made a final investment decision.

The following table lists the projects in the second wave.

Company Capacity Location Start-up Status
Shintech 500,000 tonnes Louisiana early 2018 Construction imminent
Sasol 1.5m tonnes Louisiana H2 2018 Under construction
Axiall/Lotte 1.0m tonnes Louisiana early 2019 under construction
Shell 1.5m tonnes Pennsylvania early 2020 made FID
SABIC/ExxonMobil world-scale Louisiana NA feasbility stage
Total  1m Texas end 2019 awarded FEED
PTT Global 1m Ohio 2021 FEED awarded
Formosa Petrochemical 1.2m tonnes Louisiana NA Feasibility stage

Like Shell, SABIC was among the companies that made early announcements – back in 2011.

Back then, the US enjoyed a huge cost advantage. Most of the country’s crackers use ethane and other natural gas liquids (NGLs) as a feedstock.

The advent of shale gas increased US supplies of NGLs, all while oil prices exceeded $100/bbl. This placed oil-based naphtha producers at a disadvantage.

Since then, the decline in oil prices has eroded the US cost advantage. Other factors have since arisen that could further diminish this advantage.

Oil and condensate production are an important source of NGLs in the US – about 45%, according to Enterprise Products, a US-based midstream company. Exploration and production companies have slashed the number of oil rigs operating in the country, which could limit ethane supplies from this source.

At the same time, companies have started exporting ethane from newly completed terminals.

Enterprise recently started up its ethane terminal at Morgan’s Point in the Houston Ship Channel. Its capacity is 200,000 bbl/day.

Earlier this year, Sunoco Logistics began exporting ethane from its east coast terminal at Marcus Hook, Pennsylvania. Alembic Global Advisors, an equities research firm, estimates that the terminal will ship 91,000 bbl/day of ethane, based on three contracts Sunoco has with INEOS and Borealis.

The US will certainly have enough ethane to meet demand from these terminals and these new crackers. However, this new demand could pressure ethane prices.

For example, some material may need to be shipped from the northeast, home to the Marcellus and Utica shale fields. Shipping ethane to the Gulf Coast from such distances will come with fees, subsequently raising prices.

Any squeeze in supplies could be delayed if companies decide to postpone or abandon its projects.

LyondellBasell has put its planned 250,000 tonne/year ethylene expansion at Channelview, Texas, on hold for now, but could bring it on early in the next decade.

Last year, Odebrecht and Braskem said they decided to revaluate their planned petrochemicals project in West Virginia.

Additional reporting by Stefan Baumgarten and Joseph Chang

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