Aramco studies US ethylene, aromatics projects; Chemicals caught in looming trade war

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Motiva, the subsidiary of Saudi Aramco, is considering entering the U.S. petrochemical market. Motiva owns a 600,000 barrel/day refinery in Port Arthur, Texas, the largest in North America. Image: Motiva

Aramco considers US ethylene, aromatics projects

Motiva Enterprises is evaluating world scale investments in ethylene and aromatics, marking Saudi Aramco’s plans to enter the U.S. petrochemical market.

Motiva Enterprises signed $8 billion-10 billion worth of memoranda of understanding covering process technologies for possible ethylene and aromatics units in the U.S., the subsidiary of Saudi Aramco said.

Motiva could make a final investment decision in 2019, the company said.

One of the memoranda will evaluate using TechnipFMC's mixed-feed ethylene production technologies in the U.S.

Another will evaluate using Honeywell UOP's aromatics extraction and production technologies for benzene and paraxylene (PX), which Motiva may use to develop a possible complex on the U.S. Gulf Coast.

The memoranda mark the first steps of Motiva's expansion into petrochemicals, the company said.

Motiva owns a 600,000 barrel/day oil refinery in Port Arthur, Texas, the country’s largest in capacity.

Motiva is also studying an expansion of its Port Arthur, Texas, refinery to more than double its current 603,000 barrel/day crude oil processing capacity, the company said.

The company is considering boosting the refinery’s capacity to between 1 million and 1.5 million barrels/day.

Chemicals caught in looming trade war

The U.S. chemicals and plastics industry stands to lose $5 billion if the U.S.-China disputes escalate, according to research by the American Chemistry Council (ACC).

The threat of a trade war between the U.S. and China may be escalating. China recently announced plans to impose a 179% tariff on U.S. sorghum, effective April 18. Sorghum is a drought-resistant increasingly used in ethanol production.

Earlier in April, China announced it would increase tariffs on 106 products originated from the U.S. by 25%, including several chemicals, according to a statement from China’s Ministry of Finance on April 4th.

The U.S. products targeted by the tariffs were worth nearly $50 billion in 2017, and include items such as soybeans, cars and chemicals.

At least 44 of the 106 items are chemicals and include items such as propane, ethane, polyethylene, base oils, polyethylene terephthalate, ethylene, polyvinyl chloride, adhesives, rubber, acrylonitrile and more.

This announcement was preceded by mounting tension in March after U.S. President Donald Trump announced global tariffs of 25% on steel and 10% on aluminum.

The ACC has pointed out that China is one of the U.S. chemical industry’s most important trading partners, importing 11%, or $3.2 billion, of all U.S. plastic resins in 2017.

These proposed tariffs could impact up to $5 billion of the chemical industry’s exports to China, Cal Dooley, the president and CEO of the ACC, testified earlier in April before a congressional committee.

“China knows how competitive the U.S. chemicals industry is and has very likely targeted U.S. chemicals exports because it is an area where the U.S. is poised to grow the most,” Dooley explained in his written statement.

The U.S. chemicals industry had a trade surplus of $33 billion in 2017, and that number could more than double to $73 billion by 2020 if the U.S. were to enact smart policies and trade agreements that fully capitalized on industry’s global competitive advantage, the ACC said.

For the first time in decades, the U.S. enjoys a competitive advantage in chemicals and plastic production, made possible by affordable domestic natural gas, the industry’s primary feedstock.

Today, American chemical manufacturers account for 14% of all U.S. exports, or $174 billion in 2016.

“Thanks to America’s shale gas revolution, in a little over a decade the U.S. has gone from being one of the most expensive places to produce chemicals, to one of the world’s lowest cost producers,” Dooley told lawmakers.

Approximately $194 billion in new chemicals and plastics production capacity has been announced in the U.S. in the past eight years, according to the ACC.

“Much of the new capacity is intended for export, reflecting investors’ belief that the U.S. is the most competitive platform from which to serve global markets,” Dooley said.

US imports of Canadian crude oil by rail up

Growth in Canadian crude oil production has outpaced expansions in pipeline takeaway capacity, driving Canadian crude oil prices lower and increasing Canadian crude oil exports by rail to the U.S., according to the U.S. Energy Information Administration (EIA).

However, the outlook for increased volumes of Canadian crude oil by rail to the U.S. is uncertain despite increased U.S. demand for Canadian crude oil, specifically on the U.S. Gulf Coast, the EIA said.


Crude oil production in Canada increased to 3.9 million barrels/day in 2017, up approximately 300,000 barrels/day from 2016. However, crude oil pipeline capacity out of Canada has failed to keep pace with growing production.

Several pipeline projects, some to the U.S. and others across Canada to its Atlantic and Pacific Coasts for export, have either been canceled or significantly delayed. Additionally, the 590,000 barrels/day Keystone pipeline is currently limited to 80% of capacity since a leak in November.

Because of these conditions, volumes of Canadian crude oil exported to the U.S. by rail increased between 2016 and 2017.

In December 2017, U.S. imports of Canadian crude oil by rail set a monthly record of 203,000 barrels/day, nearly matching domestic intra-U.S. crude oil by rail movements of 240,000 barrels/day for the same month.

While U.S. crude oil by rail imports from Canada fell to 129,000 barrels/day in January 2018, volumes remain slightly higher year-over-year.