Total joins with Borealis, Nova to build Gulf Coast ethane cracker; Dow completes Freeport TX-9 unit

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Gulf Coast construction has surged on rising shale gas production and export capacity expansions. (Image credit: Trayaging)

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Total joint venture to build 1 million mt/year cracker in Texas by 2020

France's Total is to form a 50-50 joint venture with Abu Dhabi-controlled Borealis and Canada’s Nova Chemicals to build a new 1 million mt/year ethane steam cracker in Port Arthur, Texas, and a new 625,000 tonne/year polyethylene plant on the Bayport site, Texas, Total announced March 27.

Total originally announced plans to build a 1 million mt/year ethane cracker at Port Arthur back in 2015 and the company recently said it would make a final investment decision this year. The $1.7 billion cracker is scheduled to start up in 2020 and will create around 1,500 jobs during peak engineering and construction activity, the French company said. Total will own a 50% stake and the cracker will be built alongside Total’s Port Arthur refinery and an existing Total/BASF steam cracker.

The project forms part of a second wave of U.S. ethane cracker projects, most of which are planned on the Gulf Coast. The first wave of projects consists of eight Gulf Coast ethane crackers and six of these are expected to come on stream by the end of 2017, representing more than 7 million mt/year of new ethylene capacity.

                                           US ethane cracker projects

Source: US Ethylene Plant Construction Costs report, Q4 2016

Some of the projects in the first wave of construction have seen schedules slip and costs escalate.

In its statement, Total said it would leverage synergies with its existing Texas facilities to deliver “one of the most competitive cracker projects in the U.S."

Sources told Platts this week that the 2020 start-up date for the cracker project was too ambitious.

Total, Borealis and Nova are expected to make a final investment decision on the project later this year pending regulatory approval and this likely pushes the actual start of construction to 2018, Platts reported.

"That likely pushes the actual start of construction to 2018, putting them on a schedule more like that of Royal Dutch Shell's 1.5 million mt/year cracker and chemical complex in Western Pennsylvania. Shell aims to begin construction in 2018, with start-up in 2021 or 2022," Platts said.

Sources told Platts that the plan to build a new 625,000 tonne/year polyethylene on the Bayport site was a surprise.

The U.S. is forecast to have a polyethylene supply surplus of almost 4.64 million mt in 2020, rising to 4.73 million mt in 2021 and 6.54 million mt in 2022, not including the proposed Bayport plant, according to Platts Analytics.

Dow's 1.5 million mt/year Texas cracker on track for mid-2017 start-up

Dow Chemical has completed construction of its 1.5 million mt/year TX-9 ethane cracker at Freeport, Texas within one week of the original plan, the company said in a statement March 28. The facility remains on track for "mid-year" start-up, it said.

The TX-9 ethane cracker unit is the cornerstone of Dow Chemical's $6 billion-Gulf Coast investment plan. The facility will feed derivative facilities set to come online throughout 2017 and 2018.

At peak activity, the TX-9 construction involved more than 3,000 Dow employees and contractors. The project is one of the “least capital-intensive” ethane cracker projects on the Gulf Coast, measuring investment per metric ton of capacity, the company said.

"This unit will further enhance Dow’s industry-leading integration and provide the critical building blocks to bolster our competitive advantage in targeted consumer-led markets, including packaging, transportation, infrastructure and consumer care,” Jim Fitterling, Dow President and Chief Operating Officer said in a statement.

US LNG terminal surge opens gap for Canadian producers

The rapid buildout of U.S. LNG capacity and associated contractual obligations will create an opportunity for some Canadian gas suppliers to fill regional U.S. gas demand in the coming years, the Conference Board of Canada said in a new report published March 20.

Canadian gas production is expected to drop over the next five years as North American demand remains relatively flat and U.S. shale gas production grows, according to the study. U.S. natural gas exports to Canada rose by 10.5% in 2016 to an average 2.1 billion cubic feet per day (Bcf/d), EIA said March 1.

"Unless a large domestic LNG export facility is built, Canadian production levels will continue to fall in the coming years." Carlos A. Murillo, Economist at the Conference Board of Canada, said.

                             US monthly gas trade with Canada


However, rising U.S. LNG export capacity will see U.S. exports outpace production gains and some Canadian producers are signing contracts to export gas as LNG via the U.S., the Board noted.

Cheniere's Sabine Pass facility in Louisiana became the first operating LNG export facility in the Lower 48 states in 2016 and the facility is now taking supplies from as far away as the Montney shale play in Canada’s Alberta and British Columbia provinces, the company said last month.

In addition, TransCanada recently secured long-term commitments from shippers to use its Mainline pipeline and this may mean that Western Canadian gas producers could retain, or “possibly increase" market share in central Canada and northern U.S., the Board said.

Last year warmer than usual weather drove up natural gas inventories and depressed market prices, but prices are expected to rise in 2017.

Canadian gas producers made pre-tax losses of $7.6 billion in 2016 and this is expected to narrow to $2.8 billion this year, the Board said.

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