In early April, I wrote that cheap shale gas in the United States was leading to a renaissance in the U.S. petrochemicals industry. A sector that had been on its knees a few short years ago had completely turned around, from bust to boom.
Since then, conditions have gotten even better. Demand from Asia and Latin America for petrochemical products (i.e., plastics, etc.) continues to march ever higher, thanks to their emerging middle class.
It’s to the point now that even Saudi Arabia has become interested in investing in U.S. petrochemicals.
Saudi Basic Industries Corporation, better known as SABIC, is the world’s largest petrochemicals company when measured by market capitalization.
Last autumn, the company said, “Our strategy is to expand production by utilizing the most feasible feedstock we have at the moment, and that is U.S. gas.”
Quite a statement coming from the “king” of Middle Eastern energy and petrochemicals! The Saudis were the first to use ethane from natural gas to create petrochemicals. That put them ahead of the pack in petrochemicals exports, and they have stayed there since.
Petrochemicals Investment Boom
Based on their statement alone, it’s not surprising that investment into the sector is on the upswing in a big way.
In total, the U.S. petrochemicals industry has announced nearly $72 billion in new chemical-related investments.
Although not all of these plans will be implemented, the industry has come a long way, considering that no ethane cracker plant was built in the United States in more than a decade. (An ethane cracker plant takes natural gas and creates ethylene, a compound used in the manufacture of all sorts of plastics.)
The list of major companies with plans to build a new ethane cracker plant in the United States is like a “Who’s Who” list of the industry. The list includes: Dow Chemical (DOW), Sasol (SSL), Royal Dutch Shell PLC (RDS-A), and Chevron Phillips Chemical. The joint venture of Chevron (CVX) and Phillips 66 (PSX) broke ground on two polyethylene units capable of producing 500,000 tons a year of plastic resin.
ExxonMobil Chemical Investment
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Perhaps the most impressive of investments being made is the one by the chemicals subsidiary of ExxonMobil (XOM), ExxonMobil Chemicals. Exxon announced in June that it had begun construction of an ethane cracker and two polyethylene plants in Baytown, Texas.
The company plans to build a massive cracker, which will have the capacity to provide 1.5 million tons of ethylene annually as feedstock for its two new polyethylene processing units. Each unit will be capable of producing 650,000 tons a year of product. Mind you, Exxon produces a premium polyethylene that can make lighter and stronger plastics than its competitors.
Exxon expects the entire project to be completed in late 2017, ahead of some of its competitors’ plans. The construction was delayed by about a year, though… thanks to Exxon’s long navigation through the Environmental Protection Agency’s regulatory morass before finally winning approval.
With Exxon having an inherent advantage – it’s the largest producer of natural gas in the United States – the multi-billion-dollar project is sure to be a big plus for the company as it battles its competitors in the petrochemicals space.
And “the chase” continues,