Long delayed polyethylene units in U.S. Gulf Coast set to start up but timing won't help

South Africa-based Sasol will put online by September a 420,000-tonne long-density polyethylene (LDPE) unit in Lake Charles, Louisiana while Taiwan-based Formosa should be on the final stages of completion of a 400,000-tonne LDPE plant it had intended to start in April in Point Comfort, Texas.

Image shows LyondellBasell La Porte complex which includes the HDPE plant started in late 2019. Photo courtesy of LyondellBasell.

The U.S. Gulf Coast may see in third quarter 2020 the start of polyethylene capacity that is the last part of an investment wave started in the past decade when Sasol Ltd. and Formosa Plastics finally complete projects but long delays made the timing little auspicious.

The U.S. petrochemical investment wave that added plastic production capacity, mainly for ethane-polyethylene, started early in the past decade as shale gas liquids like ethane became plentiful.

The crest of the wave came online between 2017 and 2019. Most projects completed within the projected timeline enjoyed lower feedstock costs compared with other regions or the world that relied on crude oil-derived naphtha.

However, the decline of crude oil prices and weakening economies associated with Covid-19 changed the outlook. Prices weakened, hurting margins, in part because the added capacity started to deteriorate market conditions well before Covid-19.

U.S. producers built plants eyeing exports but trade tariff wars started in 2018 additionally clouded the export outlook.

However, much of the added capacity has been for high-density polyethylene (HDPE).

Sasol to start up LDPE unit in September

The LDPE unit is the last to come online out of several added in the Lake Charles expansion project. Startup will occur in September, Sasol said on June 24.

Sasol had previously said on Dec. 17, 2019 it projected that LDPE unit to begin operations in that month.

Sasol confirmed in December the start of a 1.5 million-tonnes capacity cracker in Lake Charles four months earlier. However, that cracker had run since its start at half capacity due to acetylene removal problems solved by December.

An explosion on Jan. 13 derailed plans to start the LDPE unit. Sasol said on Feb. 24 that an investigation determined a piping support structure failed.

The Lake Charles Chemicals Project capital expenditure, not just for the new cracker and polyethylene capacity but also for alcohol and smaller units, was $12.8 billion at the end of May, Sasol said

The Advocate, a Baton Rouge newspaper, reported on October 2019 that Sasol sacked executives due to cost overruns.

Sasol estimated in 2014 full construction would take four years and cost under $9 billion. Due to the delay, ethylene produced by the cracker and originally destined for the LDPE unit had to be sold externally. This coincided with a period when ethylene prices significantly weakened.

Formosa LDPE start up in Point Comfort delayed

Taiwan-based Formosa’s project in Texas also started a new ethylene plant ahead by several months of the start of the LDPE Plant unit due to delays of the latter.

Formosa said on Jan. 22 that the LDPE plant would start in April. It said it was going to timely inform about progress of that and other projects. As of July 7, it had not provided any new update on its website on project advances. 

Two emails and a telephone call by Petrochemical Update on July 2 and 3 failed to get any reply to follow-up question for a startup date as of July 7. 

It is not Formosa’s first delay of the LDPE unit. On Nov. 25, 2019 it said that the start-up of both the cracker as well as the LDPE plant were on schedule for December 2019. 

Formosa confirmed on Jan. 22, 2020 only the start of its Olefins III plant, a cracker with 1.5 million tonnes-annual capacity. 

Formosa had also said in November it planned a PVC expansion in Lousiana, still on a design phase, and had a polypropylene (PP) project under construction in Texas with a start scheduled before the end of 2021. 

According to the website of Formosa Energy, a Formosa Plastics subsidiary, the company investment planned to add units to Point Comfort as of 2017 was $5 billion. 

The website republished a 2017 news story citing Formosa Plastics vice president Jack Wu saying the new LDPE capacity would diversity the product mix. Formosa announced the construction in 2012. Works started in early 2015.

Formosa reported on Nov.25, 2019 that a separate Polyethylene III plant also in Point Comfort started up in August. That 400,000-tonnes capacity plant can switch between HDPE and linear low-density polyethylene, according to industry reports. 

Formosa said in April several contractors at Point Comfort tested positive for Covid-19 but didn’t announce any delay.

Agreement after lawsuit to improve wastewater system

The settlement of a citizen lawsuit over water pollution at Point Comfort will force Formosa Plastics to work to prevent pollution.

Formosa said on Dec. 3, 2019 that as part of a consent decree related to the settlement of a citizen lawsuit, it would “implement a range of improvements to the wastewater and storm water discharge facilities.”

Works include installation of holding pond systems "designed for zero stormwater discharge" and point source controls to prevent pellet release from all manufacturing and loading operations. 

Formosa needs to improve wastewater systems to remove plastics prior to discharges to the environment. It must expand its wastewater drainage system capacity, and it has to improve its sampling system to continuously monitor for plastic in wastewater discharges.

It also agreed to shell out $50 million over a five-year period in environmental sustainability projects.

The four-year long efforts by area residents to fight estuary plastic pollution are the subject of a “Dirty Money” episode in Netflix 2020 television season.

Other plastic production start-ups

Shintec, a Japan-based Shin-Etsu Chemical subsidiary, started a $1.4-billion ethane cracker in Plaquemine, Lousiana, The Advocate newspaper reported in mid-February.

The plant added 500,000-tonnes ethylene annual capacity. Shintec had targeted the start for the first half of 2018. Construction started in April 2015.

Shintec budgeted another $1.4 billion for new chlor-alkali and vinyl chloride capacity with a start projected for early 2021.

LyondellBasell confirmed on Jan 31 that it completed construction and stated in late 2019 a HDPE plant in Texas with 550,000-tonne capacity.

LyondellBasell also announced in March a new timeline for a Texas project to add polyols and solvents capacity.

Braskem is starting up PP production in Texas by September.

The outlook for projects has deteriorated particularly after Covid-19. Analysts believe that projects still in early stages are likely to see indefinite deferment given the current conditions.

By Renzo Pipoli