Chevron Phillips Chemical breaks ground on ethane cracker

 

BAYTOWN, Texas — Chevron Phillips Chemical Co. broke ground on the first component of a $6 billion expansion Wednesday that executives say could be transformative for the company.

 

Crews are preparing a site at the company’s Baytown facility for a massive new ethane cracker, which company officials say will be the first new major facility of its type built in the U.S. in a decade.

 

The investment, which officials say will contribute to the creation of about 400 jobs, represents a huge step for the company that’s jointly owned by Chevron and Phillips 66.

 

“This is a big deal for us — $6 billion is a big project for a company with $10 billion in assets,” said CEO Peter Cella.

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The endeavor is the first half of a two-pronged project the company, based in The Woodlands, spent years considering before giving it final approval in October.

The ethane cracker itself is a massive piece of equipment used to transform ethane, a component of natural gas, into ethylene, a component used to make plastics.

 

Cella described the sheer size of the cracker: a footprint the size of nearly 50 football fields, with 350 miles of piping; 1,600 miles of cable and 140,000 tons of concrete.

 

The other component of the endeavor, in nearby Old Ocean, consists of two polyethylene units, which convert ethylene into polyethylene pellets that can be sold, melted and formed into a variety of industrial and household plastics. The entire project is slated to come online in 2017.

 

The work in Baytown and Old Ocean is part of a nationwide trend, said Warren Robinson, a spokesman for the American Chemistry Council. The chemical industry has announced more than $105 billion worth of projects in the U.S. related to abundant natural gas, according to the trade group’s analysis.

 

That chemical infrastructure boom is happening because U.S. chemical makers largely use natural gas liquids as part of their manufacturing process. Overseas, chemical companies use and oil-based ingredient. With growing supplies of natural gas liquids available in the U.S., the ingredients used to make petrochemicals here are available relatively cheaply, giving U.S. firms a big advantage.Indeed, Chevron Phillips is one of at least 21 companies, by the chemistry council’s tally, that has announced new, expanded or restarted ethane crackers, most of which will be located in Louisiana and Texas.

 

Among those are Exxon Mobil Corp., which is pursuing a new cracker in Baytown, and Dow Chemical, which has plans for expansions in Freeport. Officials at both of those companies have said  their projects will be ready by 2017 as well, but Cella suggested his will be the first out of the gate. The company says the cracker will start to be built in the second half of the year.

 

The advent of ethane chemical infrastructure construction has caused some speculation that it will be difficult for all the chemical firms to get the construction done as quickly as they say it will, in part because there simply aren’t enough skilled laborers to do the work. But Cella was optimistic about the prospects for the new project. “We’re pretty excited about our first mover advantage,” he said. “It’s a trail blazer project.”

 

An Exxon spokeswoman said the company’s project is still awaiting final approval and permits, and a Dow spokesperson could not be reached for comment.

 

Cella said Chevron Phillips is still “a few years away” from developing contracts with customers for the ethylene it will produce, and polyethylene contracts tend to be developed on a year-to-year basis. He expected most of the ethylene produced by the cracker to be used domestically, including by the company itself.

 

The two polyethylene units will develop two different products: a biomodal resin he described as durable but soft, and a metallocene resin that is clear and can receive printing and is commonly used for packaging in retail stores.