Formosa investing $1.7 billion to expand Point Comfort plant

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LIVINGSTON, N.J. (Updated March 1, 11:20 a.m. ET) — Formosa Plastics Corp. USA is citing new natural gas supplies as a reason for a massive $1.7 billion expansion of its plastics and petrochemicals site in Point Comfort, Texas.

Officials with Livingston, N.J.-based Formosa said that the expansion would include a new low density polyethylene plant with annual capacity of about 660 million pounds. The expansion also would include a 1.8 billion-pound capacity olefins cracker and a 1.3 billion pound capacity propane dehydrogenation unit.

Formosa joins a growing list of firms that have announced North American petrochemical expansions because of increased availability of natural gas. Chevron Phillips Chemical Co. LP will add PE capacity in Texas, while Nova Chemicals Corp. will do the same at an undisclosed location in Canada.

Chevron Phillips, Dow Chemical Co. and Shell Oil Co. plan to build new ethylene crackers in the region. Westlake Chemical Corp. and Nova also are increasing ethylene capacity at existing locations. Market watchers have speculated that the Dow, Westlake and Shell projects will eventually include new PE capacity as well. These announcements are a sharp turnaround from predictions made in recent years that feedstock limitations eventually would make North America a net importer of PE.

“We’re just like everyone else in the way that natural gas is affecting us,” Formosa spokesman Steve Rice said in a March 1 phone interview. “We’re now comfortable not only with supply [of natural gas] but of its endurance, and we’re anticipating prices that will be economical.”

Rice added that the LDPE unit will be Formosa’s first in Point Comfort, where it already produces high and linear low density PE. The firm also already operates two ethylene crackers and a PVC production unit at the site, which employs 1,800.

The expansion “is a tremendous vote of confidence in the U.S. economy, the state of Texas and the Gulf Coast region’s work force,” said Randy Smith, site vice president and general manager, in a news release.

One PE market watcher said that Formosa’s addition of LDPE to the site might work out, but that the firm should not expect high growth rates for the material.

“LDPE is really good for certain applications, but there aren’t really a lot of new applications that are using it,” he said. “And demand hasn’t gone up.”

U.S./Canadian LDPE sales totaled about 6.7 billion pounds in 2011, according to the American Chemistry Council in Washington. That number is roughly flat with the previous year, but is about 16 percent less than the 8 billion pound sales total that was reported in 2007.

The Point Comfort project will create 1,800 construction jobs and 225 long-term positions. The new capacity is expected to start up in 2016. A start date for the project and its anticipated cost are not being released.

“This will be our third major expansion at the Pont Comfort site,” executive vice president C.L. Tseng said. “It sends a clear signal of our dedication to substantial investment and job creation in the U.S.