LyondellBasell’s $2.4bn Texas chemical plant signals sustained export demand

LyondellBasell’s decision to move forward with its $2.4 billion (bn) propylene oxide (PO) and tertiary butyl alcohol (TBA) plant in the Houston area signals a continuation of the petrochemical boom on the U.S. Gulf Coast driven by regional feedstock advantage and access to foreign markets from Texas ports.

LyondellBasell's decision to move forward on a $2.4bn PO/TBA plant in Texas is its largest capital investment to date. Photo: LyondellBasell

The American Chemistry Council (ACC) estimates the Texas Gulf Coast accounts for about $70bn of the $185bn in petrochemical plants completed since 2010 or potential capital investments announced to 2023.

As of now, more than $86bn in new projects have been completed in the U.S. or are under construction.

Source: ACC

U.S. investment program

LyondellBasell said the $2.4bn investment would fall under its $5bn organic investment program in the U.S. Gulf Coast, where other mega projects have also been announced to take advantage of cheap gas-based feedstocks.

LyondellBasell recently completed ethylene expansion projects at the company's La Porte, Channelview and Corpus Christi sites in Texas, finalizing a multi-year plan to increThe ase annual ethylene capacity in the U.S. by 2bn pounds (900,000 tonnes).

Additionally, LyondellBasell began construction of a world-scale polyethylene (PE) plant at its La Porte Complex, which utilizes the company's proprietary Hyperzone PE technology and will more than double that site's PE capacity to 2bn pounds (900,000 tonnes) per year upon completion in 2019.

"This world-scale (PO/TBA) project is a key part of our organic growth strategy which is designed to meet rising global demand for both urethanes and cleaner-burning oxyfuels while creating real, long-term value for our shareholders," LyondellBasell Chief Executive Bob Patel said.

Largest capital investment

"Our investment in this plant combines the best of both worlds: our leading PO/TBA process technology with proximity to low-cost feedstocks, which gives LyondellBasell a competitive advantage in the global marketplace for these products,” he added.

The plant, which is the company’s single-largest capital investment to date, is expected to come on stream in 2021, and will create 160 jobs in the Houston area. Construction will employ around 2,500.

LyondellBasell said the all front-end engineering design (FEED) works had already been completed and all environmental permits received. Construction is expected to start by the second half of 2018.

Site selection

Final site selection is contingent upon final approval of certain economic incentives by the state of Texas, the company said.

The PO/TBA project will have a split facility design to optimize product balances and realize synergies between LyondellBasell sites. The proposed location for the PO/TBA plant is the LyondellBasell Channelview Complex located in Channelview, Texas.

The associated ethers unit, which will convert TBA to oxyfuels, is proposed for the company's Bayport Complex near Pasadena, Texas.

Sustained demand

Production capacities will stand at 470,000 tonnes/year (1 billion pounds) for PO and 1m tonnes/year (2.2 billion pounds) for TBA.

The majority of the plant’s products will be exported via the Houston Ship Channel. The PO and derivative products will be sold to domestic and global customers, and the oxyfuels will primarily be sold into Latin America and Asia, with a portion remaining in the U.S. to be used in tires and lubricants.

Exports of chemicals linked to shale gas are projected to reach $123 billion by 2030, notes ACC, more than double the total in 2014. Source: American Chemistry Council

A large portion of the PO will be used for the derivatives LyondellBasell produces, such as propylene glycol (PG) or P-series glycol ethers.

PO is used in the manufacture of bedding, furniture, carpeting, coatings, building materials and adhesives. The TBA will be converted to two ether-based oxyfuels: methyl tertiary butyl ether (MTBE) and ethyl tertiary butyl ether (ETBE), which are high-octane gasoline components which can reduce emissions from combustion engines.

The U.S. automobile sector is also expected to absorb some of the TBA in the tires, fuel additives and lubricants markets.
Demand for the octane boosting ethers MTBE and ETBE are mostly driven by the gasoline market.

The Environmental Protection Agency’s (EPA) Tier 3 gasoline requirements for lower sulphur content and greater fuel efficiencies require greater use of octane boosting ethers.

Feedstock supply

Feedstock supply is expected to be adequate with many propylene units built during the U.S. first wave of construction projects.

Abundant and cheap supply of U.S. NGLs (natural gas liquids), a group of hydrocarbons that includes ethane, propane, butane, isobutane, and pentane, from shale formations drove the first wave of petrochemical investments and created one of the biggest spending booms in history.

LyondellBasell made it clear in its first quarter earning call that the outlook for NGL supply is positive for future investment decisions.

“U.S. demand for natural gas is growing on the Gulf Coast due to the commissioning of LNG export facilities, stronger industrial demand, and the increases in pipeline exports to Mexico. This 20% increase in gas demand will bring more ethane and other NGLs to market. In addition, the ethane content of the gas is increasing with more production from NGL-rich basins,” Patel said during first quarter earnings calls.

“As a consumer of ethane, we're always cognizant of the logistics and transportation costs associated with this supply. Fortunately, most of the recent activity has been focused in the Permian, Woodford and Eagle Ford Basins, which all have good connectivity to the Gulf Coast ethylene cracker market,” Patel continued.

By Heather Doyle