Cheap ethane provided by liquids-rich natural gas production in the United States has prompted Dow Chemical Co. to boost its ethane cracking capabilities on the Gulf Coast over the next two-three years. The company's cracking capacity will grow by 20-30% during the period, Dow said Thursday.

Dow also said it is reviewing joint venture options for building a natural gas liquids (NGL) fractionator to secure its ethane supply. The company has three existing fractionation joint ventures in the United States, Canada and Argentina, a spokesman told NGI.

Dow claims to be the world's largest ethylene producer, and the company said it plans to use its infrastructure to participate with producers in fractionation, transportation and storage of NGLs. The spokesman said the company "will review its options over time regarding reassigning [ethylene] capacity."

"Ethane is an advantaged feedstock in the United States, and we anticipate a favorable oil-to-gas ratio to continue," said Raja Zeidan, global business vice president for Dow Hydrocarbons. "Bringing additional fractionation capacity online and expanding our ethane cracking capabilities will further improve Dow's feedstock flexibility and competitive positions in the United States.

"Couple that with our feedstock flexibility in Europe and with our advantaged feedstock positions in the Middle East, Western Canada and Argentina, we truly have a competitive advantage -- evidenced by the strong returns delivered by Dow's ethylene derivatives this year."

Dow produces about 55% of its ethylene from ethane, and the competitive U.S. cost position provides an advantage for its higher-margin specialty plastics businesses, such as linear low-density polyethylene, as well as its performance and advanced materials businesses, the company said.

Earlier this week analysts at Wells Fargo Securities noted recent improvement in NGL producer economics (see Daily GPI, Dec. 2) and Enterprise Products Partners LP brought online its fourth fractionator at its complex at Mont Belvieu, TX (see Daily GPI, Dec. 1). Enterprise COO Jim Teague has been bullish on the petrochemical industry's ability to absorb more U.S. ethane production, but others have expressed doubts (see Daily GPI, Oct. 27).

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