The Dow Chemical Co. last week confirmed it would move forward to expand two big petrochemical facilities along the Gulf Coast of Texas and Louisiana integrated by “advantaged shale gas.” A unit of Royal Dutch Shell plc also has launched an open season to solicit more interest in a proposed ethane cracker expected to be sited in Pennsylvania.

Dow’s proposed investments in the Performance Plastics franchises in Freeport, TX, were announced in March (see NGI, March 25). The expanded facilities are to use building block materials from an ethylene production facility set to begin operations in 2017.

At the Freeport, TX, facility, Dow is expanding the High Melt Index Affinity brand franchise and the Elite polymer unit. The Plaquemine, LA, facilities are to be expanded in two units as well, the Nordel franchise and the low-density polyethylene family of high-performance polymers similar to Affinity. Once operational, the expanded facilities are expected to generate about $2.5 billion a year in gross earnings. Construction is scheduled to begin soon.

The state’s Louisiana Economic Development (LED) agreed to provide Dow with a $2.84 million modernization tax credit to be claimed over five years for expanding the facilities. In addition, Dow is expected to use the state’s Quality Jobs and Industrial Tax Exemption programs. LED said Dow is spending $1.06 billion on the Plaquemine expansions

Dow Louisiana Operations in Plaquemine “were the very first investment” by Dow 57 years years ago, said Louisiana Gov. Bobby Jindal. “Between the direct jobs, the contractor jobs and the third-party company jobs supported by Dow here in Plaquemine, and the new jobs that are on the way, Dow will provide 3,750 great jobs for Louisiana families…”

Also last week Shell launched a two-month bidding period to solicit more ethane commitments from Appalachian Basin natural gas operators for its proposed Beaver County, PA cracker (see NGI,March 19, 2012). Shell has secured known commitments from Consol Energy Inc., Hilcorp Energy Co., Noble Energy Inc. and Seneca Resources Corp, but before it presses the “go” button, it wants to see what other types of commitments it can garner.

“Securing additional ethane supply is one of the key components in determining the next steps as part of the ongoing site evaluation process,” Shell spokeswoman Kimberly Windon said.

The two announcements preceded a report by IHS Chemical, which said North America’s copious gas resources have created a “competitive resurgence” driving low-cost ethylene production,” but the growth has challenged the Middle East, where operators are facing the “opposite and unfamiliar challenge of ethane supply limitations.” IHS Chemical 2014 Ethylene World Analysis covers historical developments and future projections for 2008-2023.

“Low regional ethane prices continue to support high ethylene margins for North American producers, while producers in other regions are facing an opposite situation,” said IHS expert and co-author Steve Lewandowski, who directs olefins research. “Once blessed with abundant supplies of cheap ethane, Middle East producers invested heavily in capacity additions, but this market shift, and a lack of readily available ethane supplies, has effectively put a stop to new, low-cost ethane-based ethylene capacity,” with a shift in investments to ethylene based on liquefied petroleum gas and naphtha feedstocks.

Consumption volumes in North America and Europe are forecast to “grow slowly” over the next few years, but after 2016, large-scale investments in almost 14 million metric tons (mmt) of North American ethylene capacity “will require a substantial rise in ethylene derivative investment,” the authors found. “The new derivatives are primarily to feed exports to the rest of the world,” including South America, Asia and Europe.

“The U.S. ethylene industry and the ethylene industry in the Middle East have essentially traded places in terms of supply outlook in the past few years, due to the emergence of low-cost feedstocks,” Lewandowski said. “There is a tremendous amount of U.S. capital investment that is underway, with units starting up beginning in 2017. Middle East players wish to participate in the North America low-cost feedstock boom, and are seeking joint venture partners with North American companies as one entry strategy.”

After contracting considerably in 2008, world ethylene demand now is expected in 2014 to be close to 140 mmt, according to the analysis. Over the next 10 years, IHS analysts see global ethylene demand growing at about 4% a year, reaching about 196 mmt by 2013.