Ineos gets aromatics, acetyl plants in U.S.; petrochemicals vulnerable to capex cuts; automotive railcars rise

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Storage tank at BP's Cooper River plant in South Carolina. Photo courtesy of BP.

INEOS adds aromatics and acetyl assets in South Carolina, Texas plants after BP purchase

UK-based Ineos, which runs several olefins and polymers sites in North America, will add aromatic and acetyls plants in South Carolina and Texas as part of its $5 billion purchase of BP’s petrochemical global assets.

Jim Ratcliff, chairman at INEOS, said on June 29, 2020 that the transaction, to be fully completed within a year, seeks to expand participation in the acetyls markets and add “a world leading aromatics business.”

The purchase includes BP’s Texas City Chemicals, a plant that produces paraxylene (PX) and metaxylene, as well as a purified terephthalic acid (PTA) plant in Cooper River, South Carolina.

The Texas City chemicals plant feeds much of its PX production to Cooper River to produce PTA, an intermediate for PET plastic bottles and polyester.

Acetic acid is an intermediate for vinyl acetate monomer, PTA, peracetic acid and ethyl acetate.

BP Texas city can produce about 1.7 million tonnes annually after completing an expansion in 2017. Cooper River, which also saw an expansion that year, has 1.5-million-tonnes capacity of PTA.

The transaction transfers a production agreement with Eastman Chemical in Texas City for 600,000-tonnes capacity of acetic acid. The accord, effective until 2031, resulted from BP’s purchase of Sterling Chemicals 10 years ago.

The $5 billion also includes BP’s 37% stake in Atlas Methanol, where Canada’s Methanex is the majority owner. Methanex announced in March the shutting down of some methanol capacity due to weak prices. Other assets included in the sale are located in Asia and Europe.

Ineos production in the U.S. includes ethylene glycol, or vehicle antifreeze, as well as PVC in addition to chemicals for uses like detergents or solvents. INEOS also produces butadiene that goes into tires and athletic shoes.

Ineos Olefins and Polymers USA website lists total annual chemicals production at 9 billion pounds.

As recently as October 2019 BP had considered adding capacity to produce acetic acid through a venture for a new plant in China.

Petrochemical projects are most exposed to Covid-19 capex cuts

Petrochemical projects may be the first to be deferred as upstream and downstream companies seek to preserve capital, said Alan Gelder, vice president for refining, chemicals and oil markets, downstream global SME at global consultancy group Wood Mackenzie.

“Petrochemical is more exposed to cuts in capex primarily because it has a larger proportion of its projects in the engineering and the planning phase,” Gelder said during the Petrochemical Update Downstream 2020 conference in June.

According to information compiled by Wood Mackenzie for “firm and likely” projects as of April and early May, there were in the world projects for ethylene plants in construction, engineering or design stages that would result in 48.9 million tonnes annually of added capacity if completed, he added. 

Just 4.3 million tonnes of that new annual ethylene output were in North America, all already in the construction stage. By far most projects were in China.

As for propylene, out of 41 million tonnes of new global capacity in projects considered “firm and likely,” 21 million tonnes were under construction with the rest in earlier stages. 

China also accounted for most propylene projects. Only 1.9 million tonnes were in North America, with just over half of that already under construction.

Projects in the design or engineering phases were more likely to experience capital spending cuts so that only the current stage may see completion. Only projects already under construction had higher probabilities to be finished, Gelder said.

As the oil demand recovers and executives eventually retake new petrochemical plants initiatives, future new global capacity may see a shift toward additions within domestic market rather than “export oriented,” he said.

Gelder also said it may take until late 2021 for a recovery of crude oil demand.

“In the second quarter 2020 oil demand has fallen by about 12 million barrels per day. April was very severe with over 20 million barrels per day of reduced demand,” he said.

Rail association sees automotive recovering

While U.S. railroads originated 794,256 carloads in June, down 22% from June 2019, there were signs that the automotive industry is picking up, the Association of American Railroads reported on July 1.

“The reopening of automotive plants that began in early June has regrown that business from as little as 2,000 weekly loads to over 13,000 by the end of the month,” said John Gray, the association’s senior vice president.

“This also contributed to stabilization for loadings of products that support auto production such as metals, glass and plastics,” he added.

The automotive industry is a key consumer of over a dozen plastic commodities and specialties. A downturn linked to Covid-19 earlier this year forced chemical plants to cut production rates.

By Petrochemical Update