By JACOB GRONHOLT-PEDERSEN
SINGAPORE -- Royal Dutch Shell on Tuesday announced plans to expand its petrochemical plant in Singapore to meet rising Asian demand for specialized chemicals used in detergents and personal care products.
The investment comes at a time when the traditionally strong Asian petrochemical industry is seeing margins squeezed by a resurgence in investment in US petrochemical plants based on cheaper shale.
Shell said the expansion will increase the plant's production capacity of alcohol ethoxylate -- mainly used in detergents and personal care items like shampoo and body wash -- to 180,000 metric tpy from 40,000 tons.
It didn't provide any financial details, but said all recently announced projects to upgrade its Singapore plant will be completed in 2014.
The investment will also allow it to more than triple the production of high-purity ethylene oxide, which is mainly processed into ethoxylates, and build a pipeline grid to ship the chemicals to next-door customers.
"The key driver for this is the move by consumers from laundry powder and soap bars to liquid detergent and liquid soaps, especially in major markets like China, India and Southeast Asia," Graham van't Hoff, executive vice president at Shell Chemicals, told reporters.
The company expects demand for alcohol ethoxylates in Asia to grow by 6-7% annually over the next five years.
Shell recently announced plans to boost Singapore production capacity of olefins and aromatics -- used to make plastic products and paint -- as well as polyols, used to make high-quality foams for the furniture and automotive industries.
In Asia, the petrochemical industry mainly uses oil-based feedstock, so companies are now looking anxiously at peers in the US, where the surge of cheap shale gas has revived the chemical business.
Asian producers are also being pressured by large investments in refining and petrochemical plants in the Middle East.
As a result, Mr. van't Hoff said, petrochemicals produced from oil "will tend to be less competitive than those made of Middle Eastern or North American gas. But as you get further down the [value] chain, some of the economics start to shift."
Last year Shell said it plans to build a $2 billion petrochemical plant in Pennsylvania to draw from the region's massive deposits of natural gas found in shale rock, but hasn't yet made a final investment decision.
"We are seeking a balance between investing where the feedstock is and where the consumers are. And given what we've already got on the ground here [in Singapore], continuing to invest in the downstream makes good sense for us."
The feedstock will come from Shell's own petrochemical plant in Singapore, which has a production capacity of 800,000 tpy of ethylene and is integrated with the company's largest fully-owned oil refinery with a capacity of 500,000 bpd.
Dow Jones Newswires