US storms may delay project completions
Some petrochemical projects along the U.S. Gulf Coast may be delayed, but most energy and petrochemical players will go ahead with capital expansion plans, despite record damage from Hurricane Harvey driving up costs and slowing work, experts said.
The American Chemistry Council (ACC) estimates there are 310 projects currently under construction or planned and $185 billion in potential capital investment as of mid-year 2017 in North America, up from the 97 projects and $72 billion in March 2013.
Industrial Information Resources (IIR) is tracking more than $30 billion in project activity in hard hit Harris County, Texas, ranging from those projects that are still in the planning phases, to those that are nearing completion.
Of those, 42 capital projects worth $7.4 billion are now in the construction phase, and 19 capital projects worth nearly $2.6 billion are expected to kick off construction in the fourth quarter of 2017.
Harris County, Texas covers much of the Houston area.
Image: Industrial Information Resources
“Almost all of the construction sites are as flooded and muddy as everywhere else that was hit by Harvey,” said Tony Salemme, IIR’s vice president of craft labor. “You can’t go in until all that dries out. So with flooding, poor site conditions and the inability to move equipment, I don’t anticipate anybody’s projects not being delayed. There are going to be delays of a week, days or even a month just on that issue alone.”
Harvey was a Category 4 storm when it made landfall in Corpus Christi, Texas on August 25. It then went on to dump nearly 23 trillion gallons of water over the Gulf Coast region, causing an estimated $190 billion in damage, according to IIR.
Capacity recovery across the energy and chemicals supply chain is advancing with most of the capacity back on line and operating rates continuing to ramp up, with the biggest concern now on transportation and deliveries, according to IHS Markit.
Major refineries and chemical plants were largely spared by the storm, but the surrounding communities were not so lucky and will pull on capital project resources in the coming days.
“Labor shortages pose a long-term issue,” Salemme said. “There are already shortages in mechanical crafts, and now there will be shortages in the soft crafts like painting, insulation and laborers.”
The new ethylene units that were slated to come online over the next six months are expected to be delayed, with Chevron Phillips potentially seeing signiﬁcant delays at Cedar Bayou, Texas, according to IHS Markit.
Chevron Phillips has completed its two 500,000 tonne/year polyethylene units at Old Ocean, Texas and is initiating the start-up process of these units, but the $6 billion project's second phase will be delayed due to flooding at the site caused by Hurricane Harvey, the company said.
Initially planned for startup by year-end, Chevron Phillips said it now expects the 1.5 million tonne/year Baytown ethane cracker to be finished by the end of March 2018 and achieve full production by mid-2018.
North America Ethylene Expansion Calendar
Table: Vertical Research Partners
Oxiteno USA is expected to complete its Ethoxylated Surfactants Unit expansion project in Pasadena, Texas in December. The project includes installation of new equipment and modification of existing equipment to increase production capacity at the plant site.
Targa Resources Corporation is expected to complete a $115 million grassroot condensate splitter in February 2018 in Channelview, Texas. Construction of the 35,000-barrel/day splitter kicked off in June 2016.
Owners with two, three and four-week turnarounds or outages will experience a tougher labor market as craftsman flock to the longer-term projects, Salemme said.
Some facilities have decided to delay fall outages to spring.
Early analysis is that the storm will not stop owners from going ahead with previously announced projects, but more data could be revealed during the third-quarter earnings season depending on how the rest of the year plays out.
“Abundant shale gas resources are fueling an economic revival that extends across the nation and supports economic growth around the globe,” said ChevronPhillips President and CEO Mark Lashier.
Several ‘second wave’ projects announced recently, including LyondellBasell, DowDuPont, ExxonMobil and BASF are not planning to drop plans now, while others will repair damage from Harvey before making final investment decisions on previously announced projects.
LyondellBasell will build a $2.4 billion propylene oxide/tertiary butyl alcohol (PO/TBA) complex 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.
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.
Since 2010, $85 billion worth of petrochemical projects have been completed or started construction, nearly all of them in the U.S. Gulf Coast, according to the ACC.
By Heather Doyle