PETROCHEMICAL UPDATE IN-DEPTH ANALYSIS WHITEPAPER - US ETHYLENE CRACKERS: PROJECT STATUS UPDATES - 2017
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IN-DEPTH ANALYSIS WHITEPAPER
US ETHYLENE CRACKERS:
PROJECT STATUS UPDATES
The information and opinions in this report were prepared by Petrochemical Update (FC Business Intelligence Ltd.) and its
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Michael Devanney, Devchem & Associates Consulting
Louis Vye, Project Manager
Welcome to Petrochemical Update’s 2017 U.S. ethylene cracker construction outlook. In this white
paper we examine the status of cracker projects on the Gulf Coast and the Northeast, including
projects planned and under construction. We also share our latest insights into the oil to gas price
This white paper has been produced for anyone involved in petrochemical project development in the
U.S. With Exxonmobil planning a second gulf coast mega project in partnership with SABIC, and
sustained interest from many other international players in new facilities, the second wave of projects
looks to be shaping up to add even more capacity than the first.
There has been more progress in the North East as Shell became the first company to approve a major
petrochemical complex in the region in June, when it announced it would begin construction of an
ethylene cracker with a polyethylene derivatives unit in Potter Township, Beaver County.
If petrochemical construction is topic of interest for you and your organisation, I hope you will join me
at the Downstream Engineering, Construction & Maintenance Conference June 15-16, in New
Those interested in attending are invited to Register Here
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There are seven U.S. projects included in the first wave of
new cracker investment in the US. The first wave is
defined here as those plants starting operations over
2016-2021. Six of these plants are already under
construction and due to start production on the U.S. Gulf
Coast over 2017-2019. While one of the crackers has not
yet started construction, it is believed it will proceed and
be completed by 2021.
The total also does not include the less than world scale
ethylene cracker for Oxichem/Mexichem, specialty
derivatives such as elastomers, EPDM and oxo-alcohols.
Specialties are excluded as costs as these plants are of
proprietary nature. Finally estimates do not assume new
EDC/VCM/PVC production capacity since the market is
believed to currently have adequate capacity. Taken
together the above mentioned elements could add $3-4
billion to the rolled up company costs.
Cost of the First Wave
The aggregate, estimated total capital cost for the first
wave crackers and their derivatives expansions will be
approximately $22 billion as summarized. That figure
includes estimates of the cost for a new ethylene cracker
complex at an existing site. Also included are the capital
costs for the major downstream derivatives associated
with each cracker investment including polyethylenes
(HD, LD and LLDPE), EO/EG, and alpha-olefins
(hexene/octene). Certain investments were excluded for
EO/EG, EDC and alpha olefins because intended
capacities for these units were unknown. None of the
new crackers complexes is assumed to be bringing on
new PVC capacity.
Estimates take into account increasing labor costs but
these appear to have moderated a little in particular for
managers and supervisors and also for workers with
selected skill sets. A labor shortage for certain skilled
crafts such as welders, crane operators, riggers and iron
workers, whose salaries have increased over 2016, could
cause delays in meeting construction schedules.
The Second Wave
A second wave of investments will follow the first wave
with operations to begin in 2022 through the next five
years. The second wave is defined here as the six
potential new crackers and one Canadian expansion that
are in the planning stage and could start up in 2022 or
Given these qualifications most first wave competitors are
later. A number of companies had announced new
calculated to invest between $2 and $5 billion each in
cracker investments but not finalized approvals or started
their projects. Of the total $21.88 billion capital cost of the construction before the oil price collapse in 2015. In
First wave, 52% reflects new ethylene units and
contrast to first wave cracker projects, which will
expansions. The remaining 48% covers new derivative
continue to move forward, the oil price and lower with
investments which will be primarily polyethylene. The
shrinkage of ethylene margins, has meant that some
estimates given here are defined as actual project cost
second wave projects have been delayed
estimates. As such the estimates do not include more
extensive site preparation and logistics (e.g., rail sidings,
rail cars, etc.). Sasol, for example, is thought to have
allocated approximately $800 million for site development.
and with other derivative investments could spend
more than the $5 billion estimated.
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US Ethane Cracker Projects
Announced Start Up
Project Status Updates
Chevron Phillips: CPChem’s U.S. Gulf Coast Petrochemicals Project will cost an additional
5-10%, $250 million to $500 million, due to construction delays, Greg Garland, Chairman &
CEO of Phillips 66, which owns a 50% share in the joint venture, said in a Q3 earnings call.
Speaking alongside Garland, President Timothy Taylor explained that each contractor has a
diﬀerent workforce, and that while the polyethylene aspect of the project will be completed
on time and budget, the ethane cracker had been more of a struggle. CPChem has since
reorganized the way it works with the contractor, and is now seeing better productivity, he
said. The plant was 85% complete as of the end of October 2016, according to Garland, with
the polyethylene business on track to start by mid-2017, and the ethane cracker to start up in
the second half of the year.
Dow Chemical: Dow’s 1.5 mtpa ethane cracker in Freeport, Texas passed 85% mechanical
completion during the third quarter 2016, James Fitterling, President and Chief Operating
Oﬃcer, said in a Q3 earnings’ call on October 27. His comments came six weeks after Howard
Ungerleider, Chief Financial Oﬃcer, told a conference that the cracker was 75% complete.
Fitterling said the cracker, known as Texas 9, remained on target to come online in mid-2017.
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Formosa: Formosa Plastics Group has $15 billion worth of investment projects under
evaluation by U.S. authorities, Chairman Wang-Wen-yuan said at a banquet with the group’s
labor union oﬃcials, according to a report by Taiwan’s Central News Agency. According to the
report, the chairman listed $10 billion in proposed investments in Louisiana, and $4-5 billion
in proposals for Texas. Formosa has an ethane cracker under construction at Point Comfort in
Texas, and is known to be evaluating a 1.2 mtpa cracker in Louisiana.
OxyChem/MexiChem: Joint-venture partners OxyChem and MexiChem remained on track
to commission the Ingleside ethylene plant by mid-January and to begin producing ethylene
in the ﬁrst quarter of 2017, OxyChem CFO Christopher Stavros said in a Q3 earnings’ call on
November 1. OxyChem will use the ethylene to manufacture vinyl chloride monomer, which will
then be sent to Mexichem’s plants in Mexico and Colombia to produce polyvinyl chloride and
PVC piping systems.
Indorama: Thailand’s Indorama Ventures has signed a long-term agreement with Targa
Resources for all its ethane and propane feedstock supply requirements for its new ethylene
cracker in Lake Charles, Louisiana, the company announced December 12. Under the deal, Targa,
a supplier of natural gas liquids based in Mont Belvieu, Texas, will also provide storage for these
gases locally at Lake Charles. Indorama announced the acquisition of the Lake Charles ethylene
cracker in September 2015. It is currently undergoing refurbishment and is expected to start up
in the fourth quarter of 2017. The cracker will process both ethane and propane feedstock to
produce about 420,000 tons per annum of ethylene and 20,000 tpa of propylene.
PTT/Marubeni: PTT Global Chemical is expected to make a ﬁnal investment decision on
Ohio’s ﬁrst ethane cracker by the end of March 2017. Site preparation for the planned cracker in
Belmont County, Ohio (located on the other side of the Ohio River from Wheeling, West Virginia)
is nearly complete, and all signs of the former R.E. Burger power plant are “nothing more than
a memory”. Thailand’s PTT and minority stakeholder Marubeni of Japan have spent more than
a year evaluating the viability of the project. The project cleared a signiﬁcant hurdle in the ﬁrst
week of January when the Ohio Environmental Protection Agency agreed to let the company
discharge wastewater into the Ohio River. The Ohio EPA is still reviewing the air permit for the
project, according to an agency spokesperson.
ExxonMobil/SABIC: ExxonMobil and SABIC are in the ﬁnal stages of buying land in Texas for
the ethane cracker they are proposing to build in a joint venture, the San Antonio Express News
reported on December 23, and SABIC later conﬁrmed. The land is 1,400 acres of mostly open
ﬁelds between the small cities of Portland and Gregory, and across Nueces Bay from Corpus
Christi. According to the Express News, Portland’s City Council unanimously voted to urge the
joint-venture partners to choose another location. However, they have no power to block the
land being used for an ethane cracker as it falls outside the city limits.
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US Oil to Gas Price Ratio Update
US Oil to Gas Price Ratio
Gas prices in the US are expected to remain below $4/mmbtu for 2016 and into 2017, keeping
ethane projects proﬁtable. The EIA expects the Henry Hub natural gas spot price to average
$3.55 per million British thermal units (MMBtu) in 2017.
The ratio of oil to gas prices in Q4 2016 ranged between 13 and 20. The ratio hit a Q4 high of
20 in November on the back of the OPEC deal to curb production growth. The limit came into
eﬀect in November and is aiming to cap production to a range of 32.5-33.0 million barrels per
day (bpd). OPEC estimates compliance levels have been 80% and are approaching 100%.
The ratio has fallen as oil prices have dropped back down to $52/bbl, as US oil production
continues to increase. U.S. drillers added the most rigs in nearly four years in the third week of
January, extending an eight-month drilling recovery according to data from Baker Hughes.