By: Catherine Kavanaugh
December 20, 2013
Formed just a year ago by the merger of two well-known, long-time petrochemicals companies, Axiall Corp. is looking in Louisiana for a place to build a $2 billion ethane cracker as well as a partner to go in halves on the project.
Also, if the same partner or a different one is interested in building an ethylene derivatives plant adjacent to the ethane cracker, officials of the Atlanta-based company said the value of the joint-venture investment could go up another $1 billion.
Louisiana Gov. Bobby Jindal welcomed the news Dec. 19 that his state is in line for a $3 billion industrial development that could create 250 new permanent full-time jobs if both facilities are built.
Another 2,000 to 3,000 construction workers also would be employed for 4-5 years and the surrounding area could see 2,200 indirect jobs, according to Louisiana Economic Development (LED).
“We’re evaluating a lot of sites,” Alan Chapple, Axiall’s corporate communications director, said in a telephone interview. “With all the shale gas that’s in Louisiana, it’s a very attractive state. We’ve got roots here, too, and their workforce understands our industry. There are a lot of ifs, potentials and possibles but the one thing we have determined is if this does go forward and we get approval to do it, it will be in Louisiana.”
Ethane is a natural gas liquid used as a feedstock for many applications. One way to extract it is from shale gas. When ethane is cracked, or broken down into simpler molecules, ethylene and other derivatives are formed. Ethylene is used to produce raw chemicals.
Axiall, which was created by the union of Georgia Gulf Corp. and the chemicals businesses of PPG, needs about 2 billion pounds of ethylene every year for its manufacturing operations, which encompass both chemicals and building products.
Axiall makes vinyl windows, doors, siding and decking that are marketed by Royal Building Products. The company says it is North America’s third-largest siding manufacturer in addition to being the third-largest producer of chloro-alkali and the second-largest producer of vinyl chloride monomer.
Ethylene is used to make vinyl chloride monomer, which then is turned into polyvinyl chloride, which can be turned into any number of vinyl products downstream.
The proposed ethane cracker would allow Axiall to make half of the ethylene it consumes at a lower cost than paying a middleman’s markup.
“We’re not at a point yet where we’re talking about size or capacity of the ethane cracker but it would be considered large by any standard. World-scale is the best way to describe it,” Chapple said.
He described the derivatives plant as an optional facet of the project.
“It could be built as an adjacent manufacturing facility. We would not own or operate it. The plant would just be co-located to take advantage of our ethylene. As far as the derivatives, there are a number that can be produced from ethylene and it would be dependent on what the partner wants.”
Axiall has a number of potential partners in mind for both the ethane cracker and derivatives plant, CEO Paul Carrico said in a statement. He also said he plans to announce one partner in the near future.
If only the ethane cracker is built, 150-175 full-time, permanent jobs would be created. If a partner builds the derivatives plant, the jobs number goes up to 225-250.
The state of Louisiana has offered Axiall a performance-based incentive package to build there but Chapple said he isn’t in a position to disclose the terms. A phone call to the LED wasn’t immediately returned.
In Louisiana, Axiall has two manufacturing complexes in Lake Charles and one in Plaquemine. The company expects to award an engineering and design contract for the ethane cracker in early 2014 if Axiall’s board of directors gives its approval. The facility could be in operation by 2018.
The low cost of shale gas has been a game changer for the chemicals industry during the last five years. Businesses can get it for $3-$4 per thousand cubic feet compared to $10-$12 per thousand cubic feet for natural gas. The so-called “shale gale” has made the United States one of the cheapest places to make plastic.
“Because of the high cost of natural gas, a lot of U.S. companies were going offshore to compete,” Chapple said. “Now with shale gas we actually have a competitive advantage over a lot of foreign producers.”