Low natural gas prices and increased supplies are reviving the chemical manufacturing industry within the United States as evidenced by the news Wednesday that Dow Chemical Co. is authorizing final engineering and lead-time equipment spending for a new, world-scale propylene production facility in Texas, which will take advantage of increasing supplies of U.S. shale gas as a feedstock.
The decision to authorize spending comes less than a year after the Midland, MI-based chemical giant launched an ambitious plan to increase ethylene and propylene production, as well as integrate U.S. operations, into feedstock "opportunities" because of robust shale gas supplies (see Shale Daily, April 25, 2011).
"This authorization marks yet another significant milestone in Dow's comprehensive plan to create competitive advantage for our downstream performance materials and advanced materials businesses by further connecting our U.S. operations with cost-advantaged feedstocks," said Jim Fitterling, president of feedstocks and energy and corporate development. "This investment directly supports Dow's transformational strategy to enhance its feedstock flexibility and integration strength, and positions the company for growth in attractive markets and geographies."
Basic engineering work for the new on-purpose propylene production facility at the Dow Texas operations has begun; the project is on track for production start-up in 2015.
In December Dow and UOP LLC, a Honeywell company, signed a technology licensing agreement to enable on-purpose propylene production at the facility. Under the terms of this agreement, Dow would license UOP's proprietary UOP C3 Oleflex process technology for manufacturing on-purpose propylene from propane. Dow also signed catalyst supply and performance guarantee agreements with UOP. On-purpose propylene production from propane would create better economic value for Dow, compared with high-priced purchased propylene.
"The availability of cost-advantaged feedstocks from U.S. shale gas developments represents a value-creating opportunity for our downstream businesses, and Dow is capitalizing on this," said Brian Ames, vice president of Olefins, Aromatics and Alternatives. "Our company was among the first in our industry to declare a comprehensive plan to take advantage of the increasing supplies of U.S. natural gas liquids, and we remain on track to implement that plan, which will create thousands of domestic jobs."
At its construction peak the project is expected to create 1,300 jobs, according to Dow. A total of 40 contractor jobs and 80 direct new jobs are expected to be created to operate and maintain the facilities. Dow estimated that this project, together with all other planned projects announced as part of its comprehensive U.S. investment plan would create up to 35,000 indirect jobs in the United States.
DCP Midstream LLC, the Denver-based infrastructure and natural gas liquids operator, is buoyed by the resurgence of U.S.-based chemical companies, according to DCP President Bill Waldheim (see related story). The privately held firm, which is jointly owned by ConocoPhillips and Spectra Energy, has discussed nearly $4 billion in new infrastructure investments, mostly in the south-central energy center of the United States. Waldheim said in a recent interview that another $2 billion is probably in the cards over the next three to five years.