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AFPM 2017: Total, Nova, Borealis JV cracker timeline too aggressive: sources

San Antonio — The 2020 startup date for the proposed Total Petrochemicals & Refining USA, Nova Chemicals and Borealis steam cracker and polyethylene plant in Texas is too ambitious, sources said this week.

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"That's pretty fast," a plastics logistics executive said on the sidelines of the American Fuel & Petrochemical Manufacturers' International Petrochemical Conference. "I doubt they can make that."

Related post on The Barrel blog: Many US cracker projects moving along as expected, earnings calls show

Borealis said Monday the companies had signed a preliminary agreement to build a 1 million mt/year light feed cracker in Port Arthur, Texas, and a 625,000 mt/year polyethylene plant in Bayport.

Total spokeswoman Tricia Fuller said the companies have awarded the engineering, procurement and construction contract to CB&I, and with work starting now, they expect startup in the fourth quarter of 2020.

Total's announcement of the $1.7 billion cracker was expected, as CEO Patrick Pouyanne told analysts last month that the French company would make a final investment decision this year on a new 1 million mt/year cracker in Port Arthur.

Total first announced plans in 2015 for a new $2 billion cracker next to its Port Arthur refinery and a joint-venture cracker with BASF, but held off on a final investment decision last year as oil prices fell further from mid-2014 highs. That downturn left suppliers and contractors hungry for work, and Total aims to move ahead on nearly a dozen projects -- the cracker being the only downstream project in the bunch.

But the Nova/Borealis PE plant, to be built next to Total's existing 400,000 mt/year PE plant near the mouth of the Houston Ship Channel, was mostly a surprise, sources said.

US PE supply already surpasses demand -- of a 4.2 million mt surplus in 2016, 3.8 million mt was exported, or more than 90%. Another 6.6 million mt in capacity is expected to come online through 2017 along the US Gulf Coast, adding to that oversupply -- and pushing US PE capacity to more than 30 million mt.

Platts Analytics' polyethylene supply demand forecast projects the US will have a surplus of almost 4.64 million mt in 2020, 4.73 million mt in 2021 and 6.54 million mt in 2022, with the forecast not yet taking the new Bayport plant into account.

When combined with Canada and Mexico, North America will have a surplus of almost 7.1 million mt in 2020, 7.12 million mt in 2021 and almost 8.9 million mt in 2022, according to Platts Analytics.

While Total, Nova and Borealis aim to start up the new cracker and PE plant in 2020, the companies aim to make their final investment decisions later this year, pending regulatory approvals and execution of their formal joint-venture agreements. That likely pushes the actual start of construction to 2018, putting them on a schedule more like that of Royal Dutch Shell's 1.5 million mt/year cracker and chemical complex in Western Pennsylvania. Shell aims to begin construction in 2018, with startup in 2021 or 2022.

The timeline of the Total/Nova/Borealis project puts it in the second wave of major ethylene and PE infrastructure to emerge from the US natural gas shale boom. The first wave includes 10 crackers and nine PE plants slated to start up this year through 2019.

--Kristen Hays,

--Nida Qureshi,

--Edited by Annie Siebert,