Multimedia: Mapping North America's petrochemical construction projects

LyondellBasell’s recent announcement that it plans to expand Tri-ethylene Glycol (TEG) production capacity at the company's existing ethylene oxide and ethylene glycol plant in Pasadena, Texas has been the latest addition in a slate of petrochemical construction projects in the US Gulf Coast that are expected to come on stream by the end of the decade.

The additional capacity of about 23,000 metric tons per year (50 million pounds) would more than double the company's current TEG production capacity.

Engineering is already underway on the new unit, which is expected to be operational in late 2016, according to a LyondellBasell press release.

The new facility at the company’s Bayport Underwood plant is expected to be one of the world's largest on-purpose TEG production units.

The hike in capacity is part of LyondellBasell’s strategy to integrate its feedstock to ethylene and ethylene oxide to take advantage of the cheap North American shale gas and meet the long-term demand for TEG in the oil-field, construction and automotive markets in North America, according to Pat Quarles, LyondellBasell’s executive vice president of Intermediates and Derivatives, Supply Chain and Procurement.

The shale gas boom in North America has transformed petrochemical manufacturers in the US, Canada and Mexico from high-cost producers of key petrochemicals and resins to some of the lowest-cost producers globally, second only to the Middle East.

After a decade without any investment in new crackers, North America is seeing a sharp increase in the construction of ethylene cracking and derivatives capacity, methanol, ammonia and urea plants and propane dehydrogenation (PDH) units.

Petrochemical Update has created an interactive map of the major ethane-based projects (under construction or proposed) that are expected to be completed by 2020. The map will be updated and expanded regularly to give readers instant access to the latest industry dynamics.

To get more insights about the construction costs and local labor markets for ethylene plant projects in the US, check out Petrochemical Update's US Ethylene Plant Construction Costs Report 2015.

Major ethane-based petrochemical construction projects in North America. Customize and filter the data here. Source: Petrochemical Update

Even though the 50% fall in crude prices since mid-2014 has reduced the spread between gas and oil prices, the differential is still significant, meaning that US exports are still very competitive in the global market.

The surge in shale gas production has significantly reduced the cost of natural gas, ethane and propane extraction in the US. This shift in competitiveness is boosting export demand for ethane and ethane-based products, and driving significant flows of new capital investment into the US.

For US ethane crackers to be more competitive than naphtha crackers in the export market, the key ratio of the crude oil price ($/bbl) to the natural gas price ($/mmbtu) needs to be greater than 7. The current ratio comes around 20.5.

This advantage is likely to stay in the near term. The strong correlation between olefins and oil market prices suggests that ethane-based ethylene manufacturers will continue to dominate on a cost basis, at least until crude oil and natural gas prices stabilize.

There are six new ethylene crackers currently under construction in North America, totalling around 7.5 million tonnes of additional ethylene capacity, according to Petrochemical Update estimates.

In the meantime, at least eight companies have announced expansions, most of which are already underway. This will add another 4 million tonnes of ethylene by 2018.

All in all, there is about 11.5 million tonnes of ethylene capacity expected to start up by 2018 or 2019, depending on construction delays, regardless of where the crude oil price goes.

A number of other projects have been announced, though not yet approved. This planned capacity could increase domestic ethylene production by about 30% by 2018 from 2013 levels.

Besides the first wave of units expected to come on stream around 2018, there is likely to be a second wave after 2020 from plants that haven’t started construction yet, assuming that oil and gas prices remain competitive.

With traditional big players, new market entrants – such as Braskem and Sasol – and smaller manufacturers (SABIC, Lotte, Appalachian Resins, among others) looking to invest, overall capital expenditures in new crackers and associated derivative units will exceed $40 billion in the next five years, according to Robert Bauman, president of Polymers Consulting International.

In January, Sasol announced it had decided to delay the final investment decision on its large-scale, gas-to-liquids (GTL) plant in Louisiana.

The shale boom is also driving a shift in feedstock demand. Pre-shale boom crackers in the US were 70% ethane- and 30% naphtha-based, according to the American Chemistry Council (ACC). This has shifted to 92.6% NGLs (of which 70.9% ethane) and about 5.6% naphtha-based crackers currently, according to an October 2014 IHS report.

The shift from naphtha to ethane cracking will allow US petrochemical producers to compete in global markets on a cost basis. But the boom in ethane crackers will also mean that many manufacturers will forego opportunities to capitalize on co-product markets such as propylene and benzene. Propylene supply in the US has decreased 50% since 2009, according to Bauman.

In the long term, gross exports of chemical products, including plastics, linked to plentiful and affordable natural gas are projected to double accordingly, from $60 billion in 2014 to $123 billion by 2030, with China, Europe, Mexico and the rest of Latin America remaining the leading net export destinations, according to a report by the American Chemistry Council and Nexant released in January 2015.

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