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US' Enterprise mulling second new PDH plant: CEO

Houston — Enterprise Products Partners may build a second new propane dehydrogenation plant, given short supply and growing demand, CEO Jim Teague said on Wednesday.

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"We see opportunities for another PDH, and in fact we're working that hard," he said during the company's quarterly earnings call. "When we look at how short the market is on propylene, and given the demand growth, we think there's a strong possibility we'll build another PDH."

Production issues and stronger oil prices fueled higher spot propylene prices in the first half of this year amid tight supply. Spot polymer-grade propylene closed H1 2018 just above the 55 cent/lb mark, averaging 51.13 cents/lb ($1,127.21/mt), the highest for the period since 2014 (68.16 cents/lb) and up more than 15% from the same period in 2017, according to S&P Global Platts data.

Spot refinery-grade propylene, which can be processed into higher-purity grades such as chemical grade and PGP, jumped to three-and-a-half-year highs in late June on what market participants described as tight availability stemming from fluid catalytic cracker shutdowns at major refineries in the Houston area.

Those surges illustrate how plant hiccups and refinery outages can sharply boost propylene prices when supply is tight, which stems in part from lower propylene output from crackers. The US chemical industry embraced cheap ethane from the shale gas boom to feed a slew of new crackers in Texas, Louisiana and Pennsylvania to maximize ethylene production, the building block for the most-used plastics in the world.

Enterprise ramped up its new 750,000 mt/year PDH unit at its operations in Mont Belvieu, Texas, during the second quarter this year, reaching full capacity after repeated startup delays. The unit was initially slated to start up at the end of 2016, but repeated production issues and Hurricane Harvey's assault nearly a year ago threw up repeated hurdles.

DowDupont also faced hiccups bringing its 750,000 mt/year PDH plant up to capacity at its Freeport, Texas, complex. The unit was mechanically complete several months late at the end of 2015, and underwent stops and starts repeatedly through 2016 after finishing commissioning in early March that year.

Those two new PDH plants were among as many as a dozen proposed in 2011 and 2012 as shale gas and oil production was booming. However, the oil downturn that began in late 2014 cooled marginal PDH plans, and Enterprise and Dow were the only companies that moved ahead with their PDH projects.

Dow's PDH allows the company to buy less propylene with output that will enable growth in North America and South America, the company has said. Enterprise aimed to fill the gap of propylene output lost to ethane cracking and export excess supply with its propylene export terminal that started up in 2016.

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

--Catherine Wood, catherine.wood@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com