Positive US earnings spur second wave project decisions

Several U.S. chemical companies grew at a double-digit rate for the last two consecutive quarters, the first time since 2011, and this growth is spurring key decisions on second wave construction plans, analysts told Petrochemical Update.

Positive Earnings and stable demand are pushing a second wave of petrochemical construction projects. Photo: Alexander Morozov

“Second quarter earnings showed solid growth against a benign macroeconomic backdrop with expansion in manufacturing activity in all three key regions – the U.S., Europe and China/Asia. Companies were largely able to grow volumes and show improvement on price year-on-year,” Joseph Chang, Global Editor of ICIS Chemical Business said.

Dow raked in net sales of $13,834 million during second quarter, up roughly 16% year-over-year.

LyondellBasell recorded revenues of $8,403 million, up 14.7% year-over-year.

Chevron Phillips Chemicals second-quarter earnings were $196 million, compared with $181 million in the first quarter of 2017.

“Companies also appear more confident on the long-term outlook, committing to major capital plans in the U.S.,” Chang said.

Capital plans

LyondellBasell decided to greenlight its $2.4 billion propylene oxide/tertiary butyl alcohol (PO/TBA) project likely to be in Bayport, Texas.

The 470,000 tonne/year PO, and 1 million tonne/year TBA plant would be the largest of its kind and yield the most PO of any plant in the world when it starts up in mid-2021, the company said. Construction is slated for the second half of 2018.

LyondellBasell is also evaluating other projects such as a polyethylene (PE) expansion and new polypropylene (PP) plant in the U.S., Chang said.

The company has also been ramping up ethylene production at its recently expanded Corpus Christi, Texas cracker. Capacity is expected to reach more than 360,000 tonnes/year.

Dow Chemical has committed to spending $4 billion spread over the next five years on a series of expansions, mostly in the U.S.

These include a 500,000 tonne/year expansion of its recently completed Texas-9 cracker in Freeport, bringing the facility’s total ethylene capacity to 2 million tonnes and making it the largest ethylene facility in the world when complete.

Dow also said it would begin construction on a new 600,000 tonne/year PE unit on the U.S. Gulf Coast and add 350,000 tonnes/year of incremental PE capacity through various debottlenecks.

Among other investments, Dow announced it will invest in a new, $100 million state-of-the-art innovation center at its global headquarters in Michigan.

ExxonMobil Chemical, in a joint venture with Saudi Arabia’s SABIC is looking at another U.S. cracker, this time in Corpus Christi, Texas. The cracker would be 1.8 million tonnes/year, the company said. However, a final investment decision (FID) has yet to be made.

ExxonMobil is set to start-up its 1.5 million tonne/year cracker in Baytown, Texas, along with two 650,000 tonne/year PE units in Mont Belvieu, by the end of 2017.

Plans laid

Previously, Total announced a joint venture with Borealis and Nova Chemicals to build a 1 million/tonne year cracker in Port Arthur, Texas, and a new 625,000 tonne/year polyethylene plant in Bayport, Texas. An FID is expected by the end of 2017 and start up by the end of 2020.

Shell said it would start construction on its 1.5 million tonne/year cracker and PE project in Monaca, Pennsylvania in late 2017, with start-up expected in the early 2020s.

Its Falcon Pipeline, a 97-mile pipeline connecting ethylene from the Marcellus and Utica reservoirs in Pennsylvania and Ohio into the chemical project in Pennsylvania is on schedule, the company said in its second quarter earnings call. 

“Right-of-way acquisition is progressing well and permanent submittal is scheduled for later this summer and mainline construction is expected to start in spring of 2019,” said Shell Commercial Vice President Kevin Nichols during the second quarter earnings call.

More to come

“Chevron Phillips Chemical is also bringing on its 1.5m tonne/year cracker in Cedar Bayou, Texas with 1 million tonnes/year of PE capacity in nearby Sweeny in 2017,” Chang said. “It should surprise no one if the company announces another world scale U.S. project.”

Chevron Phillips Chemical confirmed in its recent earnings calls that its PE plants in Texas are on schedule to start up by the end of third quarter.

“Our PE units are mechanically complete and close to putting hydrocarbons in,” CEO Greg Garland said in the company’s second-quarter earnings call.

The two 1.1 billion lb/year (500,000 tonne/year) PE derivative units at Old Ocean, Texas, reached mechanical completion in June. When operational, the units will increase Chevron Phillip's global ethylene and polyethylene capacity by one third.

In addition, Chevron Phillip's 1.5 million tonne/year ethane cracker in Cedar Bayou, Texas, is expected to be completed by the end of 2017.

Strong margins continue

A significant number of projects were announced from 2010-2012 when oil spiked to more than $100/barrel; a petrochemical construction boom the industry now refers to as the ‘first wave’.

Of those, four crackers totaling more than 5 million tonne/year of ethylene capacity are slated to start operations this year along the U.S. Gulf Coast. Five more are under construction and expected to begin operations before the end of 2019.

Some 10.3 million tonnes of ethylene capacity will enter the U.S. market before the end of 2019.

Source: Petrochemical Update

While oil prices declined, continued low natural gas prices, recently relatively stable oil prices and optimism for increased global demand is spurring the second wave of investments.

“We will continue to see competitive advantage because we have ability to access tremendous supplies of natural gas,” American Chemistry Council President Cal Dooley said while speaking at a Petrochemical Update conference. “The reserves seem to be growing each time we do an assessment.”

Dooley pointed to a study IHS did four years ago which predicted that the U.S. had a 30-year minimum natural gas supply for under $4/MMBtu, and said that price estimate has probably dropped because hydraulic fracturing has become even more efficient creating more supply.

U.S. natural gas prices are at their lowest price since 2002, according to an August study issued by the U.S. Energy Information Administration (EIA).

By Heather Doyle