Project delayed by pandemic retaken in 2021 at higher cost, while others see indefinite delays

Covid-19 challenged the biggest petrochemical projects in North America, as it added costs and extended the timeline to works reconsidered last year for resumption in 2021, as well as created conditions that compromised feasibility to the point of forcing indefinite delays in others.

Image courtesy of John Dortmunder/Pixabay

LyondellBasell will retake construction in 2021 of its propylene oxide (PO)/tertiary butyl alcohol (TBA) plant near Houston. Separately, Pembina Pipeline said in December its joint venture prophane dehydrogenator (PDH)/polypropylene(PP) project with Kuwait’s Petrochemical Industries Co. in Alberta, Canada will remain indefinitely delayed.

Thailand’s PTT Global Chemical said late last year that its integrated ethylene/polyethylene project in Ohio is a priority but it has yet to announce a final investment decision, after several postponements with the most recent attributed to the pandemic.

Shell’s integrated ethane cracker and polyethylene complex near Pittsburgh in Pennsylvania saw slowdowns last year because of Covid-19 but it has continued under safety protocols and is about two-thirds advanced.

LyondellBasell retakes construction of PO/TBA plant

“In March, we announced that we were reducing activity on the PO/TBA project to both prevent virus spread at the construction site and conserve capital as we prepared for an uncertain economic environment,” LyondellBasell’s CFO Michael McMurray said.

“We now expect the project to be completed in the fourth quarter of 2022, approximately one year later than our original schedule,” he added, speaking during the most recent earnings call on Oct. 30, according to a Motley Fool transcript.

Higher costs arising from the delayed project execution, more extensive civil construction and unexpected tariffs on materials will add at least 30% to the original cost estimate of $2.4 billion, he said.

New startup timing will be better

Taking the decision to stop construction in March 2020 “gave us some cushion on cash flow (…) that given the uncertainty at the time we made the decision back in Q2, I still continue to believe it was the right thing to do,” LyondellBasell's CEO Bhavesh Patel said during the same call, according to a transcript by Motley Fool.

“Secondly, when we do start up, it will be timed better when markets are recovering or fully recovered hopefully by then,” he said.

Propylene oxide’s main application is for the production of polyether polyols for use in making polyurethane, raw material for bedding or seats. TBA, a by-product of PO production, has uses including as a solvent or octane booster.

Other executives have also shared expectations that demand for durables such as those that require polyurethanes will increase once immunization advances and a broader recovery of the economy becomes possible.

The plant will produce 470,000 tonnes/year of PO and one million tonnes/year of TBA.

One of Canada’s biggest petrochemical projects indefinitely postponed

Pembina Pipeline and Petrochemical Industries Co. of Kuwait jointly announced in February 2019 a final investment decision for a joint venture to build an integrated propane dehydrogenation (PDH) and polypropylene (PP) plant with 550,000 tonnes/year capacity.

They expected their plant near Edmonton, Calgary to run by mid-2023 after an estimated investment of C$4.5 billion ($3.5 billion).

However, in March 2020 Pembina announced it would defer its C$2.7 billion share of the project to be prudent in the face of volatile markets due to the pandemic. In later months Pembina and its partner held talks to discuss what to do.

On Dec. 14 Pembina announced that the company “and its partner continue to evaluate their joint venture petrochemical facility, however the significant risks arising from the ongoing Covid-19 pandemic, most notably with respect to project costs, require the joint venture to suspend execution of the project indefinitely.”

Projects in the Northeast

There are two big projects in the Northeast of the U.S., both for integrated ethane crackers and polyethylene plants.

One, owned by Shell and under construction in Pennsylvania, is about two-thirds advanced and the other, owned by Thailand’s PTTGC and located down the Ohio River in Ohio, has seen a final investment decision repeatedly postponed with Covid-19 cited as the reason for the last postponement.

Shell is building a 1.6 million-tonnes/year polyethylene capacity plant as well as an ethane cracker that will obtain feedstock from nearby shale formations. The plant will have a strategic advantage not only with nearby feedstock availability but also with the biggest North American plastic markets within 700 miles.

Industry sources estimated before the pandemic that Shell’s construction spending would run at about $6 billion. The company has not provided a specific timeline or budget other than saying completion would occur early in the 2020s decade.

Shell slowed down construction in March as it installed safety protocols and within weeks restarted construction with fewer workers, with plans to scale back up as pandemic control allowed.

According to an Oct. 5 report in Pittsburgh Post-Gazette, construction at the start of the fourth quarter was about 70% completed. The newspaper attributed the information to Hilary Mercer, Shell’s vice president for the Pennsylvania Chemicals project.

Trailing behind is the project by Thailand’s PTT Global Chemical in Belmont County, Ohio. It has secured land for years and obtained several permits but has yet to make a final investment decision.

PTTGC America’s website had as of Jan. 9 a notice in which it states that the plant remains a “top priority.” The company “looks forward to making announcements of the project’s progression in the weeks and months ahead,” it said.

PTTGC reported in September signing a long-term ethane feedstock agreement for 15,000 barrels per day of ethane for its complex that will have 1.6 million tonnes/year of capacity, if built.

In July PTTGC saw the departure from the project of its partner Daelim Chemical, which had for the past years shared the plans to jointly build the plant. PTTGC America President and CEO Toasaporn Boonyapipat said at the time that the company “was in the process of seeking a partner whilst working toward a final investment decision.”

The company had said in February 2020 in anticipated a final investment decision in the first half of the year. But then in mid-May it cited pandemic challenges saying the timeline for a decision was postponed into 2021 amid an uncertain outlook.

By Renzo Pipoli