By Ben DuBose
HOUSTON -- Petrochemical major LyondellBasell will wait for longer-term trends in US natural gas pricing before deciding on whether to build a new US facility, CEO Jim Gallogly said on Wednesday.
Instead, the company is seeking to capitalize on current low natural gas prices through the more immediate method of expanding current facilities, Mr. Gallogly said at the IHS World Petrochemical Conference.
Our expansion in La Porte is equivalent to half of a world-scale cracker, he said. We also have the possibility of expanding at Channelview.
Our first priority is to get assets on the ground today that will capture margins early. We know there will be excess ethane in the near-term.
That strategy is somewhat different from industry rivals such as Dow Chemical and Shell. Those companies have plans in the works to build new US olefins facilities in coming years.
LyondellBasell, however, said in late 2011 that it will boost ethylene capacity by 386,000 tpy via an expansion at its established plant in La Porte, Texas.
In addition, the company is expected to increase its processing capacity for ethane feedstocks by 228,000 tpy in Channelview, Texas.
LyondellBasell is also considering another project in Channelview, whereby it would build a new metathesis unit to raise propylene production by 500 million lb/year of equivalent ethylene.
If you look at the supply-demand economics, it looks very good for the next five-plus years, Mr. Gallogly said. We want to capture that margin early.
He noted that brownfield development projects in petrochemicals will have better economics than greenfield developments.
We have very large facilities in the US, Mr. Gallogly said. It doesnt mean we wont add later if extra ethane continues to grow.
Were going to watch how gas prices, ethane prices and fractionation plans develop, and then make decisions in a reasonable way.
Currently, natural gas is trading in the US at just above $2/MMBtu, with prices depressed largely due to perceived abundant shale resources.
Some have speculated that US prices will rebound to traditionally higher levels in coming years, though, especially if government regulations against fracking act as a deterrent to production. That, in turn, would push feedstock prices higher for petrochemical firms such as LyondellBasell, thereby squeezing margins.
The 2012 World Petrochemical Conference lasts through Thursday at the Hilton Americas in downtown Houston. Stay tuned to Hydrocarbon Processing for further coverage.