The U.S. Cracker Leader Board

Back in March 2011, I jotted down on my notebook a ranking of companies most likely to build a U.S. ethylene cracker. It was to be a post for this very blog. But before I got around to posting it, Chevron Phillips announced a cracker project, stealing my thunder. I didn’t end up putting it up.

And thank goodness for that. It was a pretty cruddy list. I can’t find it now, but I am pretty sure that Shintech, SABIC, and LyondellBasell were on top. None of these has formally announced a project.

That said, now that we are approaching the construction phase for the projects that have been announced over the last three (three!) years, it might be worthwhile to compile a ranking of how likely it is that the projects will be built (at something resembling their appointed schedules and without major modifications).

Welcome Plastics News readers! And thanks, Don, for the kind words.

1) Chevron Phillips: The company is building a cracker in Baytown, Texas, and a pair of polyethylene plants in Sweeny (Old Ocean), Texas.

Probability: nearly 100%. Only meteors or aliens could stop this one. I just interviewed Ron Corn, who has been in charge of these projects for the last couple of years. The sites have been prepared. The equipment, and even the structural steel and pipe, have been ordered. The contracts and the air permits are in hand. Construction is set to begin in earnest within months.

2) Dow Chemical: The company is building a cracker in Freeport, the keystone of a program that is also seeing the company build a propane dehydrogenation plant and reopening a cracker in Louisiana. The dehydrogenation plant is already under construction.

Probability: 90%. Like Chevron Phillips, it seems that equipment and contracts are in place. A draft permit from EPA came for the facility this month. That said, Dow has an unrivaled capacity to change its mind on capital expenditure decisions. (Remember the crackers in Oman, Russia, and India? The Michigan battery plant? Ethanol-based polyethylene in Brazil? The Canadian wheat straw composites plant?) However, what Dow is doing on the Gulf Coast is much less risky than any of those things. The company did originally promise a second PDH plant, which I would say is a little less probable than its other builds in the region.

3) ExxonMobil: The company is building a cracker in Baytown and polyethylene capacity in Mont Belvieu.

Probability: 85% There have been challenges to the environmental permitting here. I doubt that would be enough to sideline the project. 

4) Formosa Chemicals and Plastics: A medium-sized ethylene cracker and propane dehydrogenation unit as well as a polyethylene plant at its Point Comfort, Texas, plant.

Probability: 80%. The company hasn’t said a lot about the project since it was announced in February 2012. Having built a cracker in Point Comfort a little more than a decade ago, the company has a proven track record. Plus the project is more modest than some of the other plans companies have for U.S. petrochemical capacity.

5) Occidental Chemical/Mexichem. A smallish cracker in Ingleside, Texas. The cracker will feed an Oxy vinyl chloride monomer plant. Mexichem has an offtake for the VCM, which it will export to integrate its polyvinyl chloride operations. 

Probability: 70%. This one is a little less likely than the others, though it is somewhat out of the gate. Mexichem is already expanding VCM capacity in Mexico. Maybe it needs more, maybe not. Oxy is back integrated into upstream oil and gas and needs an outlet for natural gas liquids. It is building fractionation capacity in Ingleside. However, Oxy already owned a cracker in Corpus Christi. It contributed it to Equistar. Now Lyondell owns it and is presumably a major Oxy ethylene supplier. I would be shocked if the Oxy and Lyondell haven’t discussed an NGL supply agreement with an ethylene offtake for Oxy. I would be surprised if such a low capital approach wasn’t still an option today.

6) Sasol: A cracker and derivatives in Westlake, La.

 

Probability: 65%. This is the aperitif to Sasol’s $16 billion gas to liquids project. Sasol tells me that a final investment decision hasn’t been made. So, at the very least, I would look for a delay beyond the 2017 startup. However, the community has invested a lot in this plant. Sasol has also divested an Iranian joint venture to prevent a regulatory holdup to its plans in Louisiana. Some 80% of property owners surrounding the plant have signed on to Sasol’s land acquisition plan.

7) Axiall/Lotte: An ethylene cracker and downstream derivatives somewhere in Louisiana.

Probability: 50%. On the one hand, I am under the impression that having the heft to pursue a project like this is one of the reasons that PPG’s chlor-alkali unit and Georgia Gulf merged. However, the project is new and not defined yet. 

8) Shell: An ethylene cracker along with polyethylene and other derivatives in Monaco, Pa.

Probability 30%. This project is not on the Gulf Coast, so lack of connectivity with the rest of the chemical world is a big disadvantage. Shell would have to reenter the polyethylene business. Shell did cancel a gas-to-liquids project, making it a little more likely that the company will allocate capital for the chemical plants. But that is like a turkey concluding he’ll never be eaten because he wasn’t the one dragged to the stump on Thanksgiving morning. The best that can be said that is that Shell really loves chemicals now because it compares favorably to refining. 

9) Odebrecht: A cracker in Parkersburg, W.Va, and polyethylene plants. Odebrecht affiliate Braskem would market the output. 

Probability: 29%. Just slightly less likely than the Shell project. It should be noted that Braskem and Idesa are already building an ethylene cracker in Mexico that is well underway. So my only real reservation about this project, other than the same isolation issues for Shell, is that another Braskem project in the NAFTA region will be like another trip to the smorgasbord. (Or leaving the rodizio card greenside up?) However, investing in petrochemicals in South America isn’t a great option for the foreseeable future. Braskem would be wise to invest in North America while there is an opportunity to do so.

 

10) Total Petrochemicals: The company is contemplating a cracker in Port Arthur.

Probability 25%. Lowest on the list only because the project isn’t clearly defined.

 

Author: Alex Tullo

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