Commentary: The US cracker boom accelerates

17 January 2014 09:38 Source:ICIS Chemical Business

Plans for another three crackers have been announced in the past three months. All 10 planned crackers and expansions represent a 52% increase in existing US ethylene capacity

The plans for new petrochemical capacity in the US to take advantage of shale gas just keep on coming. In the past three months, three new worldscale crackers have been proposed. While not all 10 may ultimately get built, expect at least one more announcement for a planned cracker.


US projects could strain E&C resources

Copyright: Rex Features

The latest comes from Formosa Plastics, whose chairman Lee Chih-tsuen was quoted in Taiwan’s Taipei Times detailing a plan to build a new 1.2m tonne/year cracker in Louisiana. This would be in addition to its planned new cracker in Point Comfort, Texas, where it is in the process of securing permits.

Axiall announced a $3bn cracker project in Louisiana in December 2013 with an unnamed partner for start-up in 2018. A month earlier, Brazilian industrial conglomerate Odebrecht announced a cracker project planned in West Virginia.

At some point, like right about now, chemical companies should consider the toll on engineering and construction (E&C) resources and potential cost overruns. The project slate for just US ethylene projects from 2013-2018 represents craft labour demand of 42,500 (across different years), according to Robert Connors, analyst covering the E&C sector for investment bank Stifel Nicolaus.

To put this into historical context, the 2005-2008 heavy crude upgrade cycle for US refiners required around 28,200 craft labourers, the analyst said.

There are now plans announced for a total of 10 new ethane crackers in the US – eight on the US Gulf Coast, and two in the Northeast US. This represents around 12.5m tonnes/year of ethylene capacity, according to an analysis by ICIS.

In addition to the 10 planned Greenfield projects, there are also 10 expansions planned at existing plants amounting to around 1.5m tonnes of ethylene capacity.

If all 10 crackers are built and the expansions go through as planned, the US is looking at a massive 52% increase in existing ethylene capacity to over 41m tonnes/year, according to an analysis by ICIS.

Just taking into account the six cracker projects on the US Gulf Coast where both capacities have been outlined and the projects have advanced beyond the feasibility stage (Chevron Phillips, ExxonMobil, Dow, Sasol, Formosa Plastics – Louisiana, and Occidental/Mexichem), plus the announced expansions of existing facilities, this amounts to a 33% increase in US ethylene capacity.

By Joseph Chang