DowDuPont project managers share success behind $6 bn US Gulf Coast Investment
Dow Chemical has delivered a successful U.S. Gulf Coast investment program and will take lessons learned in efficient construction, capital effectiveness, costs and quality as the company looks to invest further, company executives said.
Three Dow Chemical leaders who oversaw the company's $6 billion U.S. Gulf Coast Investment program spoke about the fundamental’s that led to the success of the six-year massive buildout to utilize low-cost and advantaged U.S. shale gas feedstock.
They discussed the challenges and strategies that made the program successful at the Downstream Engineering, Construction and Maintenance conference and exhibition in Galveston, Texas. The Dow Chemical Company is a subsidiary of DowDuPont.
Dow had 15 project teams that were set up across eight geographic sites, working with different EPC firms and construction contractors and using a variety of execution models with overlapping schedules on a multi-year timeline, William Newton, the commissioning and startup leader said.
“The investments involved roughly 4,000 pieces of equipment, 32,000 instruments and analyzers, and more than 3 million feet of pipe that had to be installed, tested, commissioned and started up and that was done successfully with no major issues for the gulf stream program,” Newton said.
Dow started up the crown jewel of the program, the ethylene and plastics complex in Freeport, Texas at the end of 2017, making it the first to debut a major ethylene project along the Texas Gulf Coast.
The cracker will produce some 1.5 million tonnes/year ethylene, and the company has already begun the expansion phase to increase that capacity to 2 million tonnes/year, making it the world's largest ethylene production plant.
The Gulf Coast Investment Program began more than five years ago with a series of comprehensive investments in projects designed to take advantage of low-cost shale gas feedstock.
“We looked at how we could be more effective as a company delivering products to our consumers,” said Ron Huijsmans, U.S. Gulf Coast Program Director said. “One of the areas was clearly the cost avoidance error. For us, this means switching from getting ethylene and propylene at market to getting ethylene and propylene at cost.”
“We use a lot of propylene and as the industry moves to cracking lighter feeds, the propylene pricing and availability became much more volatile so that was our motivation to build this PDH plant,” Huijsmans said.
$6 billion details
The Gulf Coast Investment Program began with Dow restarting and recommissioning its ethylene cracker in St. Charles, Louisiana in 2012. The cracker was previously idled in 2009.
Next, was the PDH project in 2015 to get on-purpose propylene from the propane facility to reduce costs. In 2016, Dow took advantage of the shale gas opportunity by retrofitting an olefins unit in Plaquemine, Louisiana.
“We had been working on our feed slate. We want to be flexible in the feed that we take in to our crackers to get the best pricing at the end of our supply chain,” Huijsmans said.
“One of the things we did there was retrofitting an olefins unit in Plaquemine, Louisiana to be able to crack more ethane and to also increase its capacity,” he added.
At the start of 2017, Dow completed a Gas Phase Poly Retrofit in Seadrift, Texas.
At the end of 2017 and start of 2018, Dow completed its world scale cracker, which included three high performance derivative assets and a gas phase retrofit.
Currently, Dow is on track to complete another Gas Phase Poly Retrofit, this time in Saint Charles, Louisiana and to add additional flexibility, a specialty elastomers unit in Texas. Both projects are expected to be complete by the end of 2018.
A tremendous amount of utilities and infrastructure went along side each project.
Program Director Scot Scherwitz, who oversaw the Freeport project, said setting up an “A Team” of leaders to be involved through all project phases, plus development of a perfect front-end engineering design (FEED) that required no changes played a big role in the project's success.
Engineering firms TechnipFMC and Fluor worked on the Freeport project.
“You need to set the vision and define what success looks like for each one of your project teams, develop those detailed plans and execute against them,” Scherwitz said.
“You have to begin with the end in mind and really start early with defining what your strategy is going to be, where do the teams have flexibility to do what makes sense locally and what are those critical deliverables that have to be part of your program,” he added.
Overall safety performance was successful, Huijsmans said, with a total recordable incident rate (TRIR) of 0.13, beating out the previous Dow average of 0.15.
“We did that over a six-year time frame where we expended about 55 million working hours…And I think we were very efficient in our manhour spending,” Huijsmans said.
Costs were somewhat higher than expected, but not at the level of overrun reported in industry surveys, Huijsmans said.
“Construction costs escalation is a real thing. There is an opportunity to optimize costs, and an opportunity to be more capital effective on the Gulf Coast,” he said.
The new cracker created 500 jobs but having enough craft to complete all the construction tasks proved to be a challenge for many projects on the Gulf Coast. Dow dealt with a U.S. Gulf labor shortage by using modules and global sourcing.
There was a total of 59 modules built in Mexico, and 1/3 of pipe and steel was moved on site. They also sourced an automation team in Thailand.
Schedules were within anticipated windows even with aggressive targets, Huijsmans said.
Dow’s strategy is to be driven by costs and sensitive to the schedules, but overall construction driven on the projects.
“We have to make sure that all projects will be construction driven,” Huijsmans said. “That is really key in high risk areas like the Gulf Coast, but also in other countries like Europe, Canada and even Latin America to some extent.”
Dow plans to focus on efficient construction techniques to be more capital effective on future projects.
“You can go to China and build for 60% of the Gulf Coast cost and export the ethane over there,” Huijsmans said. “Those are options that are really on the edge of being attractive, so we need to be more cost competitive here on the Gulf Coast.”
By Heather Doyle