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Major milestone for plastics in the shale gas era

This week in Material Insights, we're highlighting a major milestone for plastics in the shale gas era.

Published: December 23, 2013 1:00 pm ET
Updated: December 25, 2013 8:26 am ET

This week in Material Insights, we're highlighting a major milestone for plastics in the shale gas era.

Nova Chemicals Corp. recently became the first plastics company to use ethane from the Marcellus Shale Basin to convert to ethylene.

Nova senior vice president Chris Bezaire gave the story exclusively to Plastics News correspondent Mike Lauzon, saying that the company was – this is how he put it – "introducing our first molecules from Marcellus" to Nova's Corunna, Ontario, cracker.

Nova has been accepting delivery of ethane from Marcellus deposits in Pennsylvania and storing it in former underground salt caverns under Sarnia, Ontario. Now the company is completing a conversion at Corruna to use exclusively the low-cost ethane in the first quarter of 2014.

That's a big step. As you know, the North American chemical industry is preparing for a new era of plentiful, low-cost feedstocks, much of it from the Midwestern United States. Hydraulic fracturing is helping to open up exploration of production of shale gas there.

Dow Chemical Company recently estimated that an economic boom as a result of shale gas production will create 485,000 petrochemicals-related construction jobs, 55,000 resin production jobs and 10,000 new plastics manufacturing jobs.

But until Nova's announcement, last week, this was all off in the future.

There will be more to come. New supplies of shale gas have prompted petrochemicals firms to announce ethylene expansions totaling almost 20 billion pounds per year, and propylene projects of almost 9 billion pounds.

Nova is among the companies looking to capitalize. Already, the company is increasing the amount of ethane it uses in its ethylene plant. Corruna will also be expanded by 2018 by about 20 percent, from its current nameplate capacity of about 1.8 billion pounds per year.

Nova also is debottlenecking capacity at its Moore, Ontario, low density polyethylene plant, and retrofitting a high density polyethylene line there. And Nova is building a new linear low density PE plant in Joffre, Alberta, plus it is still planning a technology facility that it expects to have running by 2020.

In other materials news, Belgium-based Solvay announced two long-awaited deals last week – the sale of its majority stake in a South American PVC joint venture, and the sale of its Benvic PVC compounding business in Europe.

The buyer of the South American business was Brazil's Braskem. Braskem is paying about $25 million for the business, plus assuming debt of about 178 million euros.

The business has 936 employees and plants in Argentina and Brazil, with combined annual capacity of more than 1 billion pounds. As we've previously reported, Mexichem also had been interested in buying that business, which has been known as Solvay Indupa.

The second deal is with a U.S.-based private equity form, OpenGate Capital.

Los Angeles-based OpenGate expects to close on the purchase of Solvay's Benvic business in the first half of next year. OpenGate has a growing position in Europe's PVC market. At the beginning of this year, the company bought a PVC profile extruder from Tessenderlo Group.

Combining that profile business with Benvic will give OpenGate PVC-related product sales in Europe of nearly $330 million.

Benvic's manufacturing plants are in France, Italy and Spain. The business employs around 200 people and has annual sales of $220 million.

Solvay is selling the businesses so it can reduce its exposure to the economic cycle and to energy-intensive businesses. The company believes it can grow faster by investing in businesses with lower capital intensity.

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