Thanks to low-priced shale gas, another 1 billion pounds of polyethylene capacity is headed for North America.
Sasol Ltd. and Ineos Group on July 24 announced plans to form a joint venture that would build a plant in southwest Louisiana with annual capacity of just over 1 billion pounds of bimodal high density PE. The final investment decision will be made in the first half of 2014, with physical start-up of the plant expected by the end of 2015.
“Together, we will develop a world-scale HDPE plant which will allow us to monetize ethylene and supply a high-quality product,” said Andre de Ruyter, Sasol senior group executive, in the release.
The plant will use Innovene S process technology licensed from Ineos. Officials said plans are for the plant to make a limited number of grades, for high efficiency.
The JV “demonstrates Ineos’ continued commitment to the HDPE market, and to growing end-use applications that benefit from bimodal technology, Ineos Olefins & Polymers USA CEO Dennis Seith said in the release.
No specific site is named in the release, but Sasol late last year confirmed plans to build an ethane cracker producing PE feedstock ethylene in Lake Charles, La.
Ineos — based in Lyndhurst, England — already operates almost 1.3 billion pounds of PE capacity in La Porte, Texas. The cracker and plant will be the first North American petrochemicals investment for Sasol, which is based in Johannesburg, South Africa.
The Sasol/Ineos JV is one of at least eight producers with plans to add PE capacity in North America in the near future. Those projects could add at least 11 billion pounds of capacity to a market that currently has just under 45 billion pounds of annual capacity — meaning North American PE capacity could grow 25 percent or more.
These expansions are being made possible by new supplies of shale-based natural gas that are being developed throughout North America. A combination of hydraulic fracturing (“fracking”) and horizontal drilling is allowing energy firms to access natural gas more easily.
These new supplies of natural gas then can be converted into ethane, a precursor for ethylene. Increased supplies have kept prices low, making North America an advantaged region vs. most others around the world. Natural gas prices were near $3.70 per million British thermal units on July 24 after being above $10 just a few years earlier.
Natural gas is cost-advantaged vs. crude oil as a petrochemical feedstock when the oil/gas price ratio is more than 6:1. With light crude prices at $105 per barrel on July 24, that ratio was more than 28:1.