LyondellBasell Industries, a worldwide chemical company based in the Netherlands, expects to complete a cracker expansion at the Channelview, TX, facility near Houston by the end of the year, with production ramping up in early 2014.
Senior Vice President Sergey Vasnetsov, who is in charge of strategic planning and transactions, told attendees at the Credit Suisse Chemical & Ag Science Conference in New York City on Tuesday that LyondellBasell “sees olefins and polyolefins [in] America as a primary investment vehicle,” and worth most of discretionary capital expenditures (capex) for fiscal 2013.
“Our near-term project is restart of our national plant at Channelview,” Vasnetsov said. “This project was one of the early plants we put forward, and right now it’s in full phase of construction. It should be completed by the year end and then ramp up in the early part of 2014. We’re quite excited about this project. I think this has very low execution risk. It’s proven technology, it exists in [a] marketplace we know very well; it’s on the front side of the capital flagship site…and should contribute to…profit next year.”
Lyondell plans to add 250 million pounds per year of ethylene capacity to the Texas facility, one of six crackers in the United States, by 2015 (see Shale Daily, March 19). The company has three other Texas crackers in nearby La Porte, Corpus Christi and Victoria, as well as one in Morris, IL, and another in Clinton, IA. Collectively, the six crackers have an annual capacity of 9.8 billion pounds.
Vasnetsov said LyondellBasell plans to invest about $1.5 billion to expand U.S. ethylene capacity and hopes to generate pretax earnings of $800 million to $1.1 billion. By comparison, LyondellBasell’s 2012 annual report indicated the company planned to invest $1.2 billion to expand domestic ethylene capacity by 1.85 billion pounds.
“We take particular pride in being very transparent with you, in terms of [the] projects that we are contemplating, from fairly mid-size level to larger projects, and also our expectations of the financial returns,” Vasnetsov said. “I want to be clear that our expectations of returns are based on 2012 results.”
LyondellBasell also plans to add 800 million pounds/year of ethylene capacity to the Corpus Christi and La Porte facilities. The company wants to join other manufacturers in taking advantage of the abundance of natural gas and natural gas liquids (NGL) produced from shale formations in the United States.
During a brief question and answer session at the conference, Vasnetsov said LyondellBasell shared the industry’s concern that there could be a specialized labor shortage in the Gulf Coast region, as construction work for several cracker projects get underway.
“I agree there are concerns that there would be shortage of qualified labor — not whole labor, but qualified labor [such as] welders, precision welders and some fit-to-the-craft skills,” he said. “There are concerns about escalation costs and also delays.” However, “existing projects still will go forward. How successful that will be, we’ll see. From our side, we are making significant efforts to work very closely…[to bringing these projects] in safely and sometimes on scale.”
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