Dow Chemical Co. officials on Monday said a comprehensive plan to connect U.S. operations with “cost-advantaged feedstocks” from abundant supplies of domestic shale gas is moving forward and is on track to deliver long-term competitive advantages for the worldwide operations.

Plans to increase ethylene supply and ethane cracking capabilities at existing Gulf Coast facilities have strengthened the competitiveness of the company’s performance plastics, performance products and advanced materials businesses, which are enabling profitable growth in the Americas, said officials.

“Our U.S. Gulf Coast investments represent a game-changing move to strengthen the competitiveness of our high-margin, high-growth derivatives businesses as we continue to capture growth in the Americas,” said Dow’s Brian Ames, president of olefins, aromatics and alternatives. “Today, 70% of the company’s global ethylene assets are in regions with cost-advantaged feedstocks — and we’ve seen the benefits this advantage provides even while the global industry is at mid-cycle operating rates. In addition, the investment for on-purpose propylene production will improve the downstream propylene envelope integration and provide a platform for margin improvements.”

The Gulf Coast investment plan included four milestones:

According to the company’s 3Q2012 10-Q filing, Dow uses derivatives of crude oil and natural gas as a feedstock in its ethylene facilities. The company’s cost of purchased feedstocks and energy in 3Q2012 decreased $1.2 billion compared with the same quarter last year, a decline of 20%. The cost of purchased feedstocks decreased primarily due to lower feedstocks and energy prices in the United States due to increased supply of shale gas and natural gas liquids as well as lower naphtha and condensate prices in Europe. Year to date, the cost of purchased feedstocks and energy was down $2.1 billion from the same period last year, a decrease of 12%.

Last year Dow launched a four-point plan to integrate domestic operations into “feedstock opportunities” through U.S. shale gas (see Shale Daily, April 25, 2011). At that time Dow, the largest U.S. chemical manufacturer, and a subsidiary of Range Resources Corp. signed a memorandum of understanding for Range to deliver ethane supplied from the Marcellus Shale in Pennsylvania to Dow’s existing chemical operations in Louisiana.

As a result of these investments, the company’s exposure to purchased ethylene and propylene is expected to decline, offset by increased exposure to ethane and propane feedstocks. The first project to come online will be the restart of an ethylene cracker in St. Charles, LA, which is expected to be completed by the end of 2012. The company also announced investments in a new on-purpose propylene production unit (expected start-up in 2015) and a new ethylene production unit (expected start-up in 2017), both located in Freeport, TX (see Shale Daily, April 20). As a result, Dow’s ethylene production capabilities are expected to increase by as much as 20%.