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Shale’s Bounty Ignites US Petrochemical Export Boom

Collin Eaton, Fuel Fix

Cheap, abundant U.S. shale gas soon will find its way to a new market: The flood of people moving from the countryside to the dense cities of developing countries.

Aerial view shows the petrochemical refinery complex in Deer Park. (AP Photo/David J. Phillip)

In a few years, the gas will arrive in China, India and Latin America as resin pellets that will become plastic products like food packaging, a key component for urbanizing populations as consumers trade farming markets for preserved foods.

It’s a huge, hungry market.

Shortly after U.S. gas prices collapsed a few years ago, a half-dozen energy companies raced to build plants along the Gulf Coast that can break natural gas molecules into parts that can be molded into the building blocks of plastic.

Among them was Exxon Mobil Chemical Co., which will announce Thursday it began constructing a massive ethane cracker and two polyethylene plants at its existing facilities near Houston last month, soon after regulators gave it the OK. Exxon Mobil did not disclose the project’s cost.

“A big breakthrough in the petrochemical industry was when the Saudis decided to harness the ethane from natural gas to create petrochemicals,” said Steve Pryor, president of Exxon Mobil Chemical, in an interview with FuelFix on Wednesday. “They really have been the low-cost producers, the fastest-growing exporters, the major export force in the petrochemical world since then. Now, because of shale energy, the U.S. is joining the Middle East.”

Largest US investment

Exxon’s planned ethane cracker in Baytown, 25 miles east of Houston, will have an annual capacity to make up to 1.5 million tons of ethylene feedstock from ethane. Its two polyethylene processing units, now under construction at its Mont Belvieu plastics plant, 30 miles east of Houston, will be able to produce 650,000 tons a year of the plastics components. It’s the chemical company’s largest U.S. investment.

It’s expected to create 10,000 temporary construction jobs and 350 jobs in Baytown. And the company claims the project will generate $870 million in economic activity in the region and add $90 million to local tax revenues.

The multibillion-dollar cracker and the polyethylene plants join nearly a dozen similar projects in the works by Dow Chemical, Chevron Phillips Chemical, and LyondellBasell, most of which are expected to start up between 2015 and 2017, along the Gulf Coast. Royal Dutch Shell is considering a plant near the Marcellus Shale in Pennsylvania.

It’s been more than a decade since a company has built an ethane cracker, and industry observers say it’s unlikely all will be built. But in total, the U.S. petrochemical industry has announced about $71.7 billion in new chemical-related investments since the advent of cheap shale gas, according to the American Chemistry Council.

Chevron Phillips Chemical Co. said late Tuesday it broke ground in Old Ocean, Texas on two polyethylene units capable of making 500,000 tons of plastic resin a year. The multibillion-dollar units are expected to start up production in three years.

A new market

Demand for natural gas in the North American market is expected to remain basically flat, but Asia and Latin America have emerged as primary targets for products made from natural gas liquids like ethane, propane and butane, said Phillips 66 President Tim Taylor in a recent interview.

Inexpensive shale gas allows petrochemical companies to “really push that advantage into a new market,” Taylor said.

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