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Shale Gale Still Blows in Petchem Sector as Projects Advance

There might be blood in the shale patch, but downstream there's cheap fuel and feedstock continuing to support a Gulf Coast petrochemical renaissance that is projected to grow production capacities for ethylene and derivatives substantially in the coming years.

Axiall Corp. and Lotte Chemical Corp. have just announced a $3 billion final investment decision (FID) for two new chemical manufacturing plants in Lake Charles, LA.

And in Texas, The Dow Chemical Co.'s new world-scale propane dehydrogenation unit, located at its Oyster Creek site in Freeport, has begun commercial operations. The unit's startup is another milestone in Dow's "...plan to further integrate its U.S. operations with cost-advantaged feedstocks from increasing supplies of U.S. shale gas..." the company said Friday. Construction of a nearby Dow ethylene facility is under way (see Daily GPIJune 25, 2014).

"Dow continues to make significant progress on its world-scale ethylene unit, supporting infrastructure and the derivative investments aligned to Dow's Performance Plastics franchise, located at Dow sites across the U.S. Gulf Coast," the company said Friday.

In Louisiana, Axiall and Lotte, through a joint venture called LACC LLC, plan to make a $1.9 billion capital investment in a new ethane cracker facility beside Axiall's Lake Charles manufacturing plants in Calcasieu Parish. Additionally, Lotte will make a $1.1 billion capital investment in a new monoethylene glycol (MEG) manufacturing plant on the same site.

The plans were announced in December 2013 (see Daily GPIDec. 24, 2013). Later, Axiall identified its investment partner for the project as Lotte; the two companies announced a joint-venture arrangement in June 2015.

Lotte will be the sole owner of the MEG plant, with construction on that site and the ethane cracker expected to begin in 2016. Upon completion of the MEG plant, Lotte plans to export more than 600 kilotons per year to customers abroad. The ethane cracker is expected to open in early 2019, with an annual capacity of 1 million tons. Axiall plans to acquire 50% of that plant's output for making vinyl chloride monomer and other products.

"Calcasieu Parish became the preferred site [for petrochemical plants] for a number of key reasons, including the location of raw materials, pipelines, available steam, electric power, other utilities and deepwater access," said Axiall Vice President Jim Rock. "The project is needed to enhance the long-term sustainability of existing Axiall facilities by ensuring a cost-competitive, reliable source of ethylene feedstock that will enhance Axiall's ethylene integration for its vinyl chain. Manufacturing ethylene at an Axiall-affiliated facility will contribute to the economic sustainability of our existing Louisiana plants in Calcasieu Parish and Iberville Parish."

The MEG plant will be the largest in the United States, said Lotte CEO Soo Young Huh. "The MEG products produced will be sold to customers mainly in the U.S., Europe and Asia. We expect to expand our market basis in the U.S. and Europe, in addition to our strong position in the Asian market."

According to a recent whitepaper from Petrochemical Update, there are 16 companies that are investing in U.S.-based ethane cracker facilities or have announced projects to assess such development. Additionally, there are numerous ethane cracker expansions in Texas and Louisiana.

"Corresponding with the increases in ethane cracker capacity, more than eight million metric tons of new additional polyethylene production capacity is announced to come online, which will increase North American polyethylene production to more than 24.49 million tonnes per annum (mtpa) (54 billion pounds per year) by 2020, up from 19.95 mtpa (44 billion pounds) at the end of 2014," according to the whitepaper.

The paper cautioned that many announced projects still awaiting FID are being re-evaluated in light of the projected market environment.

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