Visibility clears on the 2nd wave of US petrochemical projects

The visibility into the second leg of US petrochemical expansions is getting clearer. While many projects were shelved or in doubt amid the crude oil price decline in 2014-2015, the recent relative stability in oil coupled with a renewed sense of optimism on long-term global demand growth is spurring a new round of project announcements and activity.

A robust oil price is beneficial to US producers who use cheap natural gas liquids (NGLs) feedstock to make products whose price largely tracks oil. And, of course, companies must believe there will still be plenty of ethane feedstock to go around to make these billion-dollar bets.

Total is the latest entry in the new US cracker tally, announcing a planned joint venture with Borealis and NOVA Chemicals to build a 1m tonne/year cracker in Port Arthur, Texas, and a new 625,000 tonne/year polyethylene (PE) plant in nearby Bayport, Texas. A final investment decision (FID) is expected by the end of 2017 with start-up at the end of 2020.

Dow Chemical’s 1.5m tonne/year cracker and derivatives project in Freeport, Texas, is mechanically complete, with start-up slated for mid-2017.

Plus, Shell said it will be ready to start construction of its 1.5m tonne/year cracker and PE project in Monaca, Pennsylvania, in late 2017 – moving up the timetable from 2018. The complex is slated to start up in the early 2020s.

ExxonMobil Chemical is working with SABIC to select a site on the US Gulf Coast this year for their planned 1.8m tonne/year cracker and derivatives project. ExxonMobil’s own 1.5m tonne/year cracker project is already under construction and expected to start up by the end of 2017.

While Total/Borealis/NOVA and ExxonMobil/SABIC have yet to make a final investment decision (FID), confidence is high they will proceed. These projects, along with Shell’s, would be the cornerstones of the second wave.

And while LyondellBasell is not building a new cracker, it is about to break ground on a new 500,000 tonne/year high density PE (HDPE) plant in LaPorte, Texas, scheduled to start up in mid-2019.

At LyondellBasell’s investor day in early April, CEO Bob Patel said the company is evaluating expansion plans for ethylene, PE, propylene and polypropylene (PP) in the US, as well as potential acquisitions (see page 9).

PO/TBA, BENZENE AND MDI

And the second wave of US petrochemical projects may not just be ethylene-based. LyondellBasell in Q3 2017 will make an FID on its propylene oxide/tertiary butyl alcohol (PO/TBA) project for start-up in 2021. The $2.0-2.5bn project would include 450,000 tonnes/year of PO and 900,000 tonnes/year of TBA.

Chevron Phillips Chemical, which is also planning to bring on a new 1.5m tonne/year cracker in Cedar Bayou, Texas, by the end of 2017, is mulling an aromatics project in the US – specifically on-purpose benzene from its proprietary Aromax process which uses light liquids prevalent in US shale formations.

Downstream in the benzene chain, China’s Wanhua Chemical just announced plans to build a methyl di-p phenylene isocyanate (MDI) plant in Louisiana.

PE MARGIN PRESSURE

In the meantime, with all the new North American PE capacity starting up in 2017 and 2018, margins could come under pressure.

In addition to the new PE units downstream from the three crackers – Dow, ExxonMobil and Chevron Phillips Chemical – INEOS and Sasol is on track to start up their joint venture 470,000 tonne/year HDPE project in LaPorte, Texas, in Q4 2017.

The total expected tally in additional US PE capacity for 2017 is 3.5m tonnes/year, and there’s more on the way. If other projects move forward as planned, through 2019 we’re looking at a cumulative additional 6.1m tonnes/year versus 2016. Through 2022, the tally could balloon to 10.7m tonnes/year, according to an ICIS analysis.

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