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NOVA Chemicals, Energy Transfer Partners team up for proposed ethylene export project

Houston — NOVA Chemicals and Energy Transfer Partners have agreed to potentially form a joint venture to develop an ethylene export terminal on the US Gulf Coast, the third such project under consideration for the region, NOVA said Thursday.

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Alberta-based NOVA said the companies have entered a non-binding memorandum of understanding to possibly link up on an 800,000 mt/year terminal, pending customer commitments, that could start up by mid-2020.

Naushad Jamani, senior vice president of olefins and feedstock for NOVA, said in a statement that a terminal would further increase the company's footprint in the North American ethylene industry, building on its $2.1 billion acquisition of Williams Partners' 88.46% interest in an 884,500 mt/year cracker in Geismar, Louisiana, last year. Sabic owns the minority interest in the Geismar facility.

NOVA also is expanding output at its 816,466 mt/year cracker in Corunna, Ontario, by 350,000 mt/year by 2022, and is planning a 625,000 mt/year polyethylene plant with Borealis and Total in Bayport, Texas along the Houston Ship Channel.



The Louisiana cracker is one of two merchant crackers in the US - Flint Hills Resources operates the other, with capacity of 634,000 mt/year in Port Arthur, Texas. When NOVA bought the cracker, the company indicated consideration of adding derivative plants on 525 acres of undeveloped land adjacent to the plant with riverfront access and use ethylene output as feedstock rather than operate it as a merchant facility as Williams had. Williams sold the cracker to exit what could be a volatile merchant ethylene business and focus on its pipelines.

However, a year ago NOVA, Borealis and Total announced a joint venture that includes the Bayport PE plant that NOVA would operate, Total's adjacent 400,000 mt/year PE plant, and Total's new 1 million mt/year cracker under construction in Port Arthur. In December, NOVA also announced it would move ahead with plans to build a new 450,000 mt/year PE plant in Sarnia, Ontario, to start up in late 2021.

More than 11 million mt/year of new and expanded ethylene capacity slated to start up in Texas and Louisiana between 2016 and 2019, with more to come after that.

The potential NOVA/Energy Transfer project would be the third new ethylene export terminal planned for the US Gulf Coast. Enterprise Products Partners and London-based Navigator Gas have teamed up for a 1 million mt/year facility likely to be built at Enterprise's ethane export terminal at Morgan's Point on the ship channel and start up in the first quarter of 2020. Norwegian chemical shipper Odfjell has proposed a $350 million, 750,000 mt/year facility at its terminal near the mouth of the ship channel.

Enterprise is converting an ethane cavern at its operations in Mont Belvieu, Texas, to hold ethylene, and is planning a 24-mile, bidirectional pipeline to connect that to Morgan's Point and Bayport, where multiple producers operate ethylene pipelines adjacent to Odfjell's terminal, including INEOS, Shell, Chevron, LyondellBasell and Flint Hills Resources. Odfjell is eying connections to those pipelines as well, though its CEO, Kristian Verner Morch, said during the shipper's quarterly earnings call last month that Odfjell is "less likely" to build its project Enterprise moves ahead on its facility.

Neither Enterprise nor Odfjell have announced final investment decisions on their projects, though Enterprise said it has signed contracts with customers, including Flint Hills. Odfjell's Morch said last month that the shipper remains in discussions, but had not secured sufficient customer contracts.

Energy Transfer executives had made a few public comments about possibly building an ethylene export terminal, but NOVA's announcement Thursday was by far the most detailed. Earlier this month Energy Transfer announced it had agreed to form a joint venture with Satellite Petrochemical USA to build an ethane export terminal on the US Gulf Coast and a pipeline connecting its Mont Belvieu, Texas, operations to the facility.

NOVA did not disclose a specific location for the project. The company said it would connect Energy Transfer's Lone Star Mont Belvieu storage facility, where NOVA operates a US ethylene trading hub, and the Louisiana ethylene market to an export facility via existing pipelines that can transport ethylene.

NOVA said the proposed project is subject to sufficient market interest, including completion of definitive agreements and approval from NOVA directors.

--Kristen Hays, kristen.hays@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com