US ethane cracker updates in petrochemical Q3 earnings calls

The first in a wave of US Gulf Coast ethane cracker projects is slated to start up in the first quarter of 2017 when Occidental Petroleum Corp. and MexiChem’s new joint-venture 550,000 mt/year project near Corpus Christi, Texas, wraps up commissioning by mid-January. Mexichem Chief Executive Antonio Carrillo said the plant will ramp up throughout 2017, reaching 100% capacity in late 2017.

Here is a roundup of other major cracker project updates provided during third-quarter earnings calls:

Chevron Phillips Chemical’s ethane cracker, a 50/50 JV of Phillips 66 and Chevron Corp., likely will cost another $250 million to $500 million because a months-long delay has pushed its target startup to the second half of 2017. Phillips 66 Chief Executive Greg Garland told analysts last week that the delay will probably raise the cost of the project in Baytown, Texas, by 5%-10% “just due to delays we are seeing in construction,” though two associated polyethylene plants 86 miles away in Sweeny, Texas, are expected to be mechanically complete in the second quarter and start up by mid-2017 as planned. About $5 billion of the combined $6 billion project is related to the cracker. Phillips 66 President Tim Taylor said the main push behind the delay is construction amid a tight craft labor squeeze.

ExxonMobil Corp and Saudi Basic Industries Corp (SABIC) are continuing their evaluation of Texas and Louisiana coastal sites for a new 1.8 million mt/year ethylene plant, in addition to a new 1.5 million mt/year cracker at ExxonMobil's Baytown, Texas, refining and chemical complex slated to start up 2017. ExxonMobil expects global chemical demand to grow 1% above gross domestic product through 2040, which will need about 5 million tons per year of new capacity. “To put that into hardware, that would be three to four world-scale crackers per year,” said Jeff Woodbury, vice president of investor relations and secretary. “That sets up the value proposition.”

Enterprise Products Partners has “gained some traction” on adding ethylene export capability with potential customers seeking access to more markets, namely Asia, Chief Executive Jim Teague told analysts last week. He also hinted that Enterprise is likely to build adjacent to the company’s new ethane terminal on the Houston Ship Channel that started up in September.  “You can imagine, if we do it at Morgan’s Point, we are sticking it right next to our ethane export” facility, he said. “So it kind of ties together.”

Teague also said the wave of new US ethane crackers slated to begin starting up along next year will need supply from the Rocky Mountain and Northeast regions as well as the Gulf Coast, and those volumes will be competitive despite added transportation costs. “It’s still about the gas-to-crude spread. You can have ethane prices go up so that it supports transport out of the Northeast or the Rockies, and then ethylene plants can still be advantaged here relative to the rest of the world.”

Dow Chemical’s new 1.5 million mt/year cracker in Freeport, Texas, is 85% mechanically complete and remains on track to begin start up in mid-2017, Chief Operating Officer Jim Fitterling told analysts last week. A cracker and three polyethylene units have started up at the company’s joint-venture Sadara project in Jubail, Saudi Arabia, with 2017 being the “big start-up year” for another 22 units and reliability tests in 2018, Chief Executive Andrew Liveris said.

He also said the company sees weakness in the global industrial economy, but strength in consumer, safety, hygiene and environmental products. Fitterling said the recent minor energy sector rebound with oil prices surpassing $50/b only to fall back to the high $40s/b range has been too small to make a significant impact on industrial chemicals.

Williams Companies expects to decide by the end of the first quarter 2017 whether to sell its 88.5% share of its 1.95 billion pounds per year olefins complex in Geismar, Louisiana, or forge a long-term, fee-based deal to operate it while a partner buys all the output and assumes all the commodity risk. In September Williams announced plans to exit the merchant petrochemical business with a sale or tolling agreement, though Chief Executive Alan Armstrong said that month a sale was likely most favorable. During a quarterly earnings call this week, he said Williams is open to either option as long as a sale is swift or a tolling deal is struck with a reliable partner with strong credit.

LyondellBasell Industries’ Corpus Christi, Texas ethylene complex is being commissioned after a turnaround and a 363,000 mt/year ethylene expansion that will boost capacity to 1.15 mt/year. Chief Executive Bob Patel told analysts this week he expects the plant to operate at its expanded capacity during November.