Low-cost ethane supply from the Marcellus Shale is behind plans of Westlake Chemical Corp. to convert its Calvert City, KY, ethylene plant from propane to ethane feedstock and increase ethylene production capacity from 450 million pounds per year to 630 million pounds per year.
This project will enhance Westlake's vinyl chain integration. Westlake also announced an expansion of its existing PVC plant in Calvert City that will add 200 million pounds per year of capacity to the existing 1,100 million pounds per year of capacity. The expansion will allow Westlake to take advantage of the increased ethylene production at the site and provide additional PVC resin to meet growing demand, the company said.
"These announced projects demonstrate our commitment to our overall integration strategy and to leveraging our access to low-cost feedstock," said Westlake CEO Albert Chao. "It further confirms the importance of the Calvert City operations and our commitment to building a strong and successful site."
In August Chao told financial analysts during a second quarter earnings conference call that the dynamics around natural gas liquids, particularly ethane, would be good for Westlake's business for years to come. "We expect the growing production of natural gas liquids from shale gas and oil drilling will cause ethane to become structurally long, as billions of dollars of fractionation and pipeline infrastructure will bring ethane from the wellhead to market faster than the ability of the chemical industry to consume this production," he said (see NGI, Aug. 6).
Numerous ethylene plant projects are planned or in the works in states such as Pennsylvania, Ohio, West Virginia, as well as Louisiana and Texas. Some projects are new plants while others are expansions of existing ethylene production capacity. According to Dow Chemical Co. -- which has two ethylene projects of its own (a plant restart in Louisiana and a new plant in Texas) -- there are nearly two-dozen projects slated to come online over the next several years. Besides Dow and Westlake, other companies involved are INEOS, LyondellBasell, ExxonMobil Corp., Chevron Phillips Chemical, Formosa Plastics, Braskem, Sasol, Royal Dutch Shell plc, Eastman and Occidental Petroleum Corp. This is in addition to numerous ammonia, methanol and propylene projects.
There is some debate in the natural gas liquids industry about the outlook for ethane supply-demand. While some expect the ethane supply-demand balance to improve during the remainder of this year and into next, others see ethane rejection occurring for several years as the industry waits for more demand capacity to materialize (see NGI, Oct. 1).
According to Westlake, construction cost of the Kentucky projects is estimated at $210-240 million. The ethylene expansion and feedstock conversion project is targeted for start-up in the second quarter of 2014, and the PVC expansion is projected to start up in late 2014. A Westlake spokesman said the company has entered into agreements for pipeline supply of ethane feedstock beginning in the first half of 2014.
In late September Westlake said it would perform planned maintenance and an expansion of the Petro 2 ethylene unit at its complex in Lake Charles, LA, during the first quarter of 2013. The expansion will increase ethane-based ethylene capacity by 230-240 million pounds annually in support of the company's ethylene integration strategy, Westlake said. The unit is expected to be down about 50 days for the work to be completed.
The Kentucky Economic Development Finance Authority has preliminarily approved tax incentives up to $10 million, with an additional $7 million pending approval through the Kentucky Reinvestment Act (KRA), for the new projects and other work currently in progress at the site. KRA is designed to assist companies that need to make significant capital investment in Kentucky facilities in order to remain competitive.
"This is an outstanding step forward for Westlake and a tremendous boost for the economy of Calvert City and the surrounding area," said Kentucky Gov. Steve Beshear. "Kentucky has built a partnership with Westlake, and we're thrilled to see this multi-million dollar investment in the Commonwealth."
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