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Cheap natural gas spurs more chemical investment

Cheap natural gas spurs more chemical investment thumbnail

Buoyed by a continued flood of cheap natural gas, the U.S. chemical industry continues chugging forward with billions worth of new plants and expansions along the Texas Gulf Coast even as the rest of the energy sector struggles under a global crude collapse.

This week, chemical giant LyondellBasell announced the completion of a $200 million expansion at its Channelview plant, while 75 miles away in Freeport, another plant operated by BASF, a leading global chemical company, kicked off construction of a $600 million ammonia plant expansion on its existing site.

The projects are the latest in a string of investments returning to the United States thanks to a wave of low-cost natural gas and natural gas liquids that chemical companies use to make their products.

“There’s no doubt the chemical sector continues to be bullish in terms of profitability and the fact that investments will continue,” said Mark Eramo, vice president of global business development at IHS Chemical.

More than one-third of the 242 chemical industry projects announced have been completed or are under construction, according to the American Chemistry Council. In total, the sector is investing $149 billion in the U.S., according to the trade group.

LyondellBasell

LyondellBasell’s recently completed Channelview expansion is slated to boost the company’s ethylene production by 250 million pounds per year, but the company has its sights set on even bigger numbers.

Bob Patel, CEO of the international chemical giant operated out of Houston, said LyondellBasell intends to continue building other projects that will strengthen its U.S. portfolio, including additional ethylene expansions at its plants in Channelview and Corpus Christi. Ethylene is a key building block used to make plastics.

The commitment came as LyondellBasell reported a 13 percent surge in its second-quarter profit, an uptick the company attributed to ongoing access to abundant supplies of low-cost gas and natural gas liquids and its ability to continue operating while competitors shut down for unscheduled maintenance.

Its plants ran at near capacity as a bevy of unplanned outages struck competing plants in Europe. The shutdowns caused shortages of olefins and polyolefins, the raw materials used to make food packaging, automotive parts, bottles, paints and coating, among other items, and helped boost income for LyondellBasell.

The company on Tuesday reported earnings of $1.33 billion, or $2.82 per share, during the three-month period ending June 30. During the same period last year, the company posted earnings of $1.18 billion, or $2.23 per share. Its stock rose $2.61 to close at $92.46 Tuesday on the New York Stock Exchange.

While low-cost energy has obvious direct benefits for LyondellBasell, cheap natural gas has also lured investments from chemical companies with loose ties to the fuel.

BASF

The Yara Freeport plant won’t use natural gas as a feedstock to manufacture ammonia, but BASF and its partner Yara, a Norwegian fertilizer company, would not have made the $600 million investment absent the U.S. shale boom, said Wayne Smith, chairman and CEO of BASF.

That’s because the ammonia plant will operate using two industrial gases with prices linked to natural gas – nitrogen and hydrogen – underscoring the fuel’s effects.

“This project reflects our global view that the marketplace is robust and will remain for many years an opportunity for growth for the chemical industry,” Smith said Monday at a groundbreaking.

The project gives Yara its first manufacturing footprint in the U.S. and marks the latest investment by BASF in domestic chemical projects.

Aside from the Freeport plant, BASF is building a $42.6 million polyurethanes blending facility in Geismar, La., and two years ago, revamped a naphtha steam cracker project in Port Arthur, a joint venture with a subsidiary of French company Total, to process ethane.

BASF is also eyeing building another major project in Freeport that would use natural gas as feedstock to make propylene, also used to make plastics. The company, which has not yet disclosed a price tag for the project, expects to make a decision next year, Smith said.

“If we go ahead with that investment, it will be the largest investment BASF’s made in a single plant anywhere in the world,” he said.

Houston Chron



24 Comments on "Cheap natural gas spurs more chemical investment"

  1. davey thompsony on Wed, 29th Jul 2015 9:04 am 

    George Carlin said it best; “And if it’s true that plastic is not degradable, well, the planet will simply incorporate plastic into a new paradigm: the earth plus plastic. The earth doesn’t share our prejudice toward plastic. Plastic came out of the earth. The earth probably sees plastic as just another one of its children. Could be the only reason the earth allowed us to be spawned from it in the first place. It wanted plastic for itself. Didn’t know how to make it. Needed us. Could be the answer to our age-old egocentric philosophical question’, “Why are we here?”

    Plastic… asshole.”

  2. Plantagenet on Wed, 29th Jul 2015 11:17 am 

    @sony

    Your ignorance of chemistry is evidently even greater then your ignorance on most other subjects.

    Actually plastic doesn’t “come from the earth” as you suggest. Plastic is an artificial (that means “man-created”) product that does’t exist naturally on the earth.

    CHEERS!

  3. apneaman on Wed, 29th Jul 2015 12:18 pm 

    Plant, Fuck off you little cock sucker.

  4. Davy on Wed, 29th Jul 2015 12:25 pm 

    Planter get out of here. We all know where plastic comes from. Quit being a dupe-ster.

  5. apneaman on Wed, 29th Jul 2015 12:27 pm 

    More chemicals for the cancerous carbon monkeys. More autistic babies. Hooray for better living through chemistry.

    The Toxins That Threaten Our Brains

    Leading scientists recently identified a dozen chemicals as being responsible for widespread behavioral and cognitive problems. But the scope of the chemical dangers in our environment is likely even greater. Why children and the poor are most susceptible to neurotoxic exposure that may be costing the U.S. billions of dollars and immeasurable peace of mind.

    http://www.theatlantic.com/features/archive/2014/03/the-toxins-that-threaten-our-brains/284466/

  6. rockman on Wed, 29th Jul 2015 12:48 pm 

    “Actually plastic doesn’t “come from the earth” as you suggest”. So following that logic neither does gasoline, diesel, heating oil, concrete, steel, car windshields, etc. “come from the earth”. Oh…more important: Orio cookies don’t come from the earth either. LOL.

  7. davey thompsony on Wed, 29th Jul 2015 1:23 pm 

    Thanks pantie, you are the best my friend.

  8. Plantagenet on Wed, 29th Jul 2015 2:10 pm 

    1. apie’s potty mouth is backed up again.

    Call the Rooter Rooter man! Ream out those passageways!

    2. Rockman—please tell me where in the earth you can mine plastic? Do you have a claim on such a mine? Does your plastic mine produce high grade Bakelite Ore?

    Hahahahahahahahah!

  9. Northwest Resident on Wed, 29th Jul 2015 2:16 pm 

    I personally much prefer apneaman’s potty mouth to Plant’s potty brain. One is colorful. The other is foul, ugly, gross and reeks of dishonest intent.

  10. davey thompsony on Wed, 29th Jul 2015 2:35 pm 

    Planty I am so glad you are able to come here and tell us all like it is. Have you ever considered running for public office?

  11. Plantagenet on Wed, 29th Jul 2015 2:47 pm 

    @nrodent

    You’ve pretty much given up on discussing the topics haven’t you? You’ve become essentially a full-time troll now, I see?

    CHEERS!

  12. Charles on Wed, 29th Jul 2015 2:50 pm 

    Temps across the country have been topping 90 and 100 degrees.. By the time the first snow storm hits the Glut in NGas will be history….

  13. BobInget on Wed, 29th Jul 2015 2:52 pm 

    Say whatever you wish about petroleum contents of plastics. Natural gas, not low oil prices lifted this nation out of the worst depression since 1930’s.
    Once Big Chemical and fertilizer and glass and cement and construction materials and insecticides and fuel cells and electrical generation, aluminum and steel, micro chips, yes plastics, caught on, lower gas prices were here to stay, at least for decades enough to build out plants.

    We simply need to change our habits around recycling plastics to keep it out of our oceans and waste streams. When, Not If oil becomes so expensive serious recycling for tires and plastics
    will get attention.

    Speaking of tires, it was natural gas that produced tires last, not 15 thousand miles but 80,000. Think of all the old tires (and fuel) this one technology did for saving fuels, land fills,
    mosquito breeding etc.

    All progress isn’t harmful.

  14. apneaman on Wed, 29th Jul 2015 3:07 pm 

    Bob you fail to see the big picture.

  15. apneaman on Wed, 29th Jul 2015 3:12 pm 

    “We’re supposed to smarter than lobsters”

    “But, really, my purpose in exposing these optimistic stories is to demonstrate (once again, sigh) that humans are prone to hopeful fantasies when faced with threatening realities (my “bad news” rule in the original Flatland essay). This is clearly true of the BAU people too (the vast majority). It is a generalized human characteristic.

    The realist’s lament is that he/she is actually trying to show humans the door they must walk through to fix their self-created problems. That’s what I’ve tried to do on this blog over and over again. The first step is to take an unblinking look at the problems humanity is facing.”

    http://www.declineoftheempire.com/2015/07/were-supposed-to-smarter-than-lobsters.html

  16. apneaman on Wed, 29th Jul 2015 3:19 pm 

    Let’s all get a hard on for NatGas and the chemical industry. It should last for a minute or two and then the Texas Gulf Coast along with the rest will be underwater – another toxic legacy to our few surviving mutant grandkids. There’s some progress for ya.

    Blue Water Rising: It Could be Worse

    “The bad news is that even now, the pundits cannot stop using the weasel words, false equivalencies and unsourced generalizations that give the politicians and other willfully ignorant people enough room to act as if nothing important is happening. That Florida property is not “at risk,” it’s doomed. It’s not that the flood risk “could be worse than we thought,” it’s going to be worse than we ever imagined. What James Hansen (and, by the way, 16 other world-renowned experts) outlined was not “an alarming scenario for our planet,” but a sentence of death and destruction for a large proportion of our people.”

    http://www.dailyimpact.net/2015/07/29/blue-water-rising-it-could-be-worse/#more-3002

  17. BobInget on Wed, 29th Jul 2015 7:37 pm 

    Au Contrare M Apneaman,
    Inget sees the ‘big picture’ all too clearly.
    Respectfully, I’m trying to bring a bit of hope into lives and you sir are peddling only despair.

    I won’t quibble with your dire predictions.
    Since sea-level rise, drought, fires, record heat and cold, already a reality, only fools argue climate changes aren’t real..

    I too believe in the inevitability of permafrost melt, record sea level rise and all the other nightmarish scenarios
    (my Google searches for methane feedback loop goes back a decade or longer. At first, my concern for Arctic gas and oil pipelines being undermined by melting foundations built on impermanent ice. I made concerns known that anthropogenic warming was a game changer for oil investors.

    I’ll never forget days, weeks, of constant smearing of my screen name “BerryBob”. So much guilt inspired hate thrown my way in those energy chat rooms I simply went away.
    Years later I returned using my actual name.

    I notice Huffington requires commentators use real names. Good for them. I don’t begrudge people like Plant making a tiny living playing agent provocateur. Unlike Apneaman he doesn’t need to present fact or scientific research. Plant uses FOX news approach to news, “be afraid”.

    The facts are fairly clear, baring some kind of geo-engineering most of the Northern hemisphere maybe Southern as well are screwed.

    Because of greenhouse gasses already in the pipeline, results are well understood.
    If we had started to ‘do something’ twenty years ago we might have had a chance.

    At first corporate and right wing interests denied
    everything. “Caught in bed with another woman?
    Say she was having a terrible chill and you needed to save her life” (Woody Allen)
    Deny Deny. Until a year ago. Today, warming is as natural as seasons or sunspots or just blame God, for permitting gay marriage, we don’t care.
    Just stop blaming us innocent investors and XOM.

    There’s no time to argue whys, we need to prepare so a few more generations have time to possibly reverse what is now inevitable.

    I’ll keep posting news of wars. Pressing the point why political leaders are willing to sacrifice
    their neighbors sons for precious oil.

    You Apneaman should lend your oversized intellect to ‘managing’ climate changes instead of simply causing people to change underwear
    several times a day.

  18. Davy on Wed, 29th Jul 2015 7:56 pm 

    Bob said “Respectfully, I’m trying to bring a bit of hope into lives and you sir are peddling only despair.” Bob false hope is worse than no hope or reduced hope. Your corns are spreading fantasy as reality and that is deception and distortions. People are not going to make good decisions with false hope.

  19. Davy on Wed, 29th Jul 2015 8:22 pm 

    Bob try this reality on for size:

    http://www.zerohedge.com/news/2015-07-29/presenting-jeremy-granthams-10-topics-ruin-your-summer

  20. apneaman on Wed, 29th Jul 2015 9:41 pm 

    Fair enough Bob.

  21. apneaman on Wed, 29th Jul 2015 9:59 pm 

    Davy, simply reading the comment section at zerohedge, or thousands of other sites, should be enough to understand why civilization and maybe the entire species is going bye bye. Everything is a conspiracy or someone else’s fault. It’s not that much different on liberal blogs either….just longer comments with better spelling and grammar. Check out this one by Money Boo Boo, who I’m betting is a Canadian lol

    http://www.zerohedge.com/news/2015-07-29/presenting-jeremy-granthams-10-topics-ruin-your-summer#comment-6369407

    Carlin Doesn’t vote

    https://www.youtube.com/watch?v=xIraCchPDhk

  22. Davy on Thu, 30th Jul 2015 5:53 am 

    That was a fun start to the morning Ape.

  23. Nony on Thu, 30th Jul 2015 6:01 am 

    It’s not just methane. For instance propane is in a huge glut.

    http://www.wsj.com/articles/propane-prices-feel-heat-of-supply-glut-1435186536

    Prices are much cheaper here than Asia and that gives competitive advantage to businesses that use it as a feedstock.

  24. BobInget on Thu, 30th Jul 2015 8:19 am 

    Speaking of natural gas..

    The importance of Turkey entering the Islamic
    war should not be underestimated.

    Markets seem to shrug off bombing of Kirkuk- Ceyhan & bombing of Kurds by Turkey.

    But it’s not so much the pipeline that is the issue as longer term development. Genl, GKP & Dno .

    Perhaps, worth remembering that up until one year ago IEA touted Iraq & particularly Kurdistan region as savior of world supply expecting to contribute 50% of increased future supply.

    IMO it will be actual loss of production, not feared losses, that get world’s attention.

    http://finance.yahoo.com/news/ongoing-security-concerns-kurdistan-oil-211257863.html

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