The Enterprise Ethane Terminal Is Quite Large (UPDATED)

As you may have heard, Enterprise Products Partners plans to build an ethane export terminal in Texas. It will have a capacity of 240,000 barrels of ethane per day. Let’s convert that number from the oil perspective into the petrochemical one. According to John Stekla, formally the olefins guru at IHS and now with Williams Cos., 1 million metric tons of ethylene production consumes about 63,000 barrels per day of ethane. So that means that the Williams facility, IF it ran at full capacity would export enough ethane to feed 3.8 million metric tons of ethylene production. That is more than two new world scale ethylene plants. You may be wondering why I have CAPITALIZED, italicized, and bolded the word if in the preceding paragraph. Dow CEO Andrew N. Liveris, at least, is criticizing the project and doesn’t seem to think it would run at full capacity. Dow reflexively complains about every development that could mean petrochemical feedstocks leaving the U.S. They have been fighting hard to block Department of Energy approval of LNG export facilities to non Free Trade Agreement countries. Bloomberg reporter Jack Kaskey knows all this and asked Liveris for his take on the ethane export terminal. Upon hearing an utterance that ends in a question mark, Liveris started talking. “It’s high risk, because the oil-gas arbitrage that we have baked into our assumptions for our investments is half of what it is today.” In other words, oil prices will decline relative to gas prices, which would make the export terminal less attractive. “There is nothing that we see as concerning about that announcement,” he added. (Every time “concerning” is said when “disconcerting” is meant, a kitten falls down a well.) Chemical Notebooks take: If the arbitrage is so fleeting, why is Dow building so much ethylene and propylene capacity on the premise of an enduring advantage? Moreover, if Enterprise truly intends to build the terminal then Enterprise believes that the project will earn its cost of capital. For that matter, companies such as Ineos seem to think that importing ethane from the U.S. also earns the cost of capital of building receiving facilities. What we have here is a mere difference of opinion. Either that, or Liveris isn’t being serious in his assessment or Enterprise isn’t really considering building the terminal. I would add that the premise of the investment is a big glut of ethane. The petrochemical industry isn’t building capacity fast enough to soak it all up. The Enterprise project is timed for 2016, a little in advance of the flood of new ethane capacity. It could be that Enterprise needs to export...

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Whoa! That’s A Lot Of Ethane

A new report from BENTEK Energy and Turner, Mason & Co. says that because of shale, we should expect a 40% increase in natural gas liquids production in five years. The increase amounts to 950,000 barrels per day of new natural gas liquids by 2016. That is an extraordinary amount of new feedstocks for the chemical industry. I ran my own estimates of how much ethylene production all these NGLs can support. I assumed 75% ethane content in the NGLs. I came up with 11 million metric tons of ethylene per year. These NGLs would also yield about 3.7 million metric tons of propylene (assuming propane from the NGLs is dehydrogenated) and other stuff. If the report, and the Chemical Notebook’s estimates, are correct, or nearly correct, then all the announcements we’ve been hearing about new ethylene capacity aren’t nearly tapping out shale’s potential for petrochemicals. John Stekla, CMAI’s director of ethylene, gave a recent presentation where he forecast about 6 million metric tons of new ethylene capacity by 2016. (see slide 29). If not feedstocks, there is a factor that would limit the amount of new ethylene capacity that can be built. That is markets. Can the world really swallow more than 11 million metric tons of polyethylene, vinyl chloride monomer, ethylene oxide, and other derivatives from the U.S.? The world ethylene market today, Stekla points out, is around 120 million metric tons. My own thoughts are that we probably will see more capacity announcements in the U.S., though not to the tune of another 5 million metric...

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The Busy Bees of LyondellBasell Expand Their Hives
May05

The Busy Bees of LyondellBasell Expand Their Hives

Out of bankruptcy for about a year, LyondellBasell is starting to find its stride. It is calling itself “the busiest chemical company in the world”. (This reminds me of “the hardest working man in show business”.) And to hammer that theme home, the cover of its annual report is covered in bees. This strikes me as a good idea for a broader corporate branding initiative. Indeed, the company has been busy. This week, executives rang the opening bell at NYSE, shareholders elected a few independent directors to its board (it calls it a “supervisory board”, how very European), and they also approved a dividend. LyondellBasell also had its Q1 earnings conference call, presided over by King Bee Jim Gallogly. The most interesting topic, and the one that got the most questions from analysts, was about how it would take advantage of the shale gas boom. Here are highlights: 1) The company has an 18-month plan to shift to lighter feedstocks at its Channelview, Texas, site. (It has already doubled ethane cracking capacity at Channelview and Corpus Christi.) This project will yield about 500 million lb more ethylene from ethane per year. 2) The company is conducting engineering for debottlenecks at La Porte and Channelview. These projects will yield more than 500 million lb of new ethylene capacity. 3) Gallogly said he was open to investing in a cracker joint venture, specifically to a “condo cracker”. This is an idea that Lyondell has been bouncing around for a very long time, since not long after it formed Equistar. It would involve two or more partners with offtake agreements in a cracker. However, Gallogly said that expansions of existing crackers are a higher priority because such projects get better returns. 4) LyondellBasell’s crackers in Morris, Ill., and Clinton, Iowa, are setting production records. They enjoy a cost advantage over ethane crackers on the USGC because they are tied into a different grid. (I’m curious about what the influence of reduced border flows from Canada might have been on these crackers. But seems like there is plenty of feedstock in the neighborhood.) 5) Small capital projects has increased HDPE production in Victoria, Texas, by 10%. It is also getting a 10% increase in production rates from ethylene oxide, a strong market right now. 6) “Newer projects in the Middle East may not be as competitive as some of the new projects in the U.S., depending on the availability of ethane,” Gallogly said. This speaks volumes. While he was the head of Chevron Phillips, Gallogly built many petrochemical plants in the Middle East as part of the last wave of new capacity...

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Chevron Phillips Studies Cracker, Plus Scary Publishing News

I was completely wrong about who would build a new cracker in the U.S. It wasn’t a “foreign” firm at all. Chevron Phillips–based in the Woodlands, Texas–announced it is studying a new ethane cracker at one of its Gulf Coast facilities. The company already makes ethylene at Sweeny, Port Arthur, and Cedar Bayou, Texas. It also makes styrene in Louisiana and has an aromatics plant in Mississippi. Let me illustrate how surprised I was by this announcement. While sitting in a ballroom at the Hilton last week waiting for the conference to begin, I actually made a list of every ethylene maker in North America and the pro’s and con’s of each building a cracker. (I was preparing a post on this blog, though I do that kind of thing for fun as well) Chevron Phillips was dismissed out of hand (I’m using the passive voice to make this less embarrassing to me.) My reasoning was that they just restarted an idle unit in Sweeny. (I’m really glad I didn’t publish that list.) Also, I seemed to have overlooked CP Chem’s announcement last year that it was building a 200 ktpa hexene plant in Cedar Bayou. I suppose there might be room for another cracker, especially somewhere in the Northeast, that would sip ethane from the Marcellus shale. And of course, there will likely be some incremental expansions and other investments related to ethylene. (Silver lining.) Scary Publishing News: Modern Plastics’ will publish its last print edition in April. I got an e-mail today from its publisher about folding everything into its website: As part of the restructuring, the last print editions of Injection Molding Magazine and Modern Plastics Worldwide will be published in April. Injection Molding and Modern Plastics Worldwide will continue to deliver content via branded e-newsletters and the PlasticsToday.com website. Modern Plastics isn’t just some trade paper. It is an institution in the plastics industry. The magazine has 33,078 audited print subscribers and 10,462 qualified digital subscribers. The current print issue has 40 pages. This is down from a few years ago, which were perfect bound and 60+ pages. There seems to still be a decent amount of paying advertisers. I really do hope that the transition works out well. It looks like the odds are in its...

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Observations About The CMAI And DeWitt Conferences
Mar25

Observations About The CMAI And DeWitt Conferences

I’m in Houston for the DeWitt and CMAI petrochemical conferences. According to modern journalist practice, I should have had a live Twitter feed from the conferences. I don’t do that. I’m not particularly ashamed. Feel free to cut and paste these observations into your own Tweets. 1) DeWitt was held at the Hotel ZaZa in the Museum district, an artsy hotel with giant booking photos of Frank Sinatra on the walls and stuff. There were about 40 attendees, not including speakers and journalists. 2) CMAI had about 950 or so, by my reckoning, if you don’t include the petrochemical workshop they put on the day before the actual conference. Overall figures were more than 1,000, and I think, a record. They held it at the Hilton Americas, a perfectly normal hotel near the convention center. 3) When I started going to these a decade ago, both were held in the Galleria area. In fact, you could shuttle through the mall between talks. Attendance was closer to even at the time. 4) The biggest theme at the conferences was the cheap natural gas in North America and the strong international advantage North American producers have by cracking ethane into ethylene. Some 25% or 30% of U.S. output of some petrochemicals is being exported, CMAI president Gary Adams said. It is being shipped, “not to Columbus, Ohio, or Houston, Texas, but to conversion facilities around the world.” 5) A big topic of conversation on the sidelines was who might invest in a new cracker in the U.S. and where. (Perhaps I was just bringing it up to people I talked to. I have such tendencies, being a reporter and all.) The juiciest thing I heard is that it would be a “foreign” firm. Whether that narrows it down depends on what is meant by foreign. Reliance Industries is foreign, but technically, so is LyondellBasell. Though I think the more foreign sense of foreign was meant. 6) Investments in chemicals other than ethylene is likely for the U.S. Dewey Johnson, who covers syngas chemicals for CMAI, said in his talk that new acetic acid capacity is needed in the U.S. Tison Keel, who leads ethylene oxide and derivative studies at CMAI, said ethylene oxide purification capacity for derivatives (as opposed to ethylene glycol, which is a different animal) might be needed. That’s nothing to sneeze at; EO purification costs tens of millions, if not upwards of a hundred million, dollars to install. 7) The World Makes, China Takes: The other big theme at the conference was that the booming Chinese economy will buy up all the excess tons of chemicals the world...

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