The Geismar olefins plant operated by Williams northwest of New Orleans, which has been shuttered for almost a year, is scheduled to restart in June, with expansion plans back on the table, management said Thursday.
An explosion and subsequent fire last June at the Williams Olefins LLC facility killed one person and injured dozens (see Daily GPI, June 14, 2013). The cracker at the time of the incident had been producing 37,000 b/d of ethane and 3,000 b/d of propane, with annual ethylene output of 1.35 billion pounds. Williams was cited in late 2013 for six process safety management violations, including one classified as willful, by the U.S. Occupational Safety and Health Administration (see Daily GPI, Dec. 12, 2013).
The restart is a few months behind schedule as the original timetable was April; however, it still will be one of the big earnings drivers this year for Williams and operator Williams Partners LP, CEO Alan Armstrong said during a conference call.
“We’re very focused on the June restart at Geismar” by the second half of June, he said. Because the “startup isn’t a simple push of the button…we are starting to return systems, various auxiliary systems to service as we speak. But again, a lot of work left to be able to get hydrocarbons into the facility and cracked.”
Geismar 2 is “out in the market right now trying to assess the market’s interest in participating in an investment there,” said Senior Vice President John Dearborn, who heads natural gas liquids and petrochemical services. “Our concept…there is to build a cost-advantaged large cracker. It would be greenfield. We have expanded Geismar, if I could call it Geismar 1 for the moment, about as big as Geismar 1 could be expanded.
“I think we’re about done with expansion, save for perhaps some incrementals there,” Dearborn said. “So that’s a concept…about what we’re thinking on this, another investment on the river in ethylene.
The current thinking is possibly a joint venture with one or two partners, he said. Partners “that would build derivative capacity alongside it, so creating new demand. And then we would take our volumes and sell them into the market on a fee-for-service basis.”
CFO Don Chappel said the next tranche of cash related to the business interruption insurance for Geismar is expected by the end of June. “I think we’ve disclosed that our business interruption insurance, combined with our property damage insurance, would substantially offset the downtime. We think that’s still the case. Exactly what that is will be dependent on the Geismar…pro forma margins, had Geismar has been up and running, and as well as our negotiations with the insurance companies. But I don’t think anything has really changed.”
Because Williams and its pipeline partnership have natural gas and midstream businesses that cover North America, offshore and on, management has insight into the viability of an ethylene export market.
“It is an interesting idea,” said Dearborn. “From one perspective, you’d really like to see some better price signals out there on ethane so the necessary infrastructure gets built and you get supply reliability to the industry, to the petrochemical industry, which, of course, we’re a participant of. But of course, that could mean ethane prices going up. Moving some ethane offshore I think begins to increase some of the demand, which perhaps begins to create a better balance there,” and provide an incentive to expand infrastructure “that provides the supply reliability, which then assures on the demand side that people continue to invest capital…
“But on a very positive note to projects like this, I think there’s also an opportunity because there are some shortages out there in the world [and] we could export some ethylene from some of these ethane facilities. And I think that bodes well for the ethylene balance in North America, which would be a very positive dynamic for us with our investment at Geismar today. So I see a fair bit of positive there.
“Exactly how big the market is going to be for ethane export, that’s a difficult challenge, a difficult question to answer right now. But I do see positive dynamics on the — potentially on the ethylene side.”
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