Nova Chemicals Corp. has unveiled ambitious plans to add more than 1 billion pounds of polyethylene in capacity in North America by the end of 2011.
``North America and the world will need that polyethylene,'' Nova Chief Executive Officer Jeff Lipton said May 9 at a conference hosted by Banc of America in New York. ``The billion pounds of new capacity we are considering would be absorbed by continued demand growth in North America.''
Most of Nova's new capacity will be in a 700 million-pound-capacity plant being planned for Joffre, Alberta, where Nova already operates a pair of PE plants. The Pittsburgh-based firm added 100 million pounds of capacity last year at the existing Joffre plants via a debottlenecking.
An additional 100 million pounds will be added at Joffre this year through that same method, while another 150 million pounds will follow suit there in 2008, Lipton said.
``A new 700 million-pound-per-year plant would only increase North American [PE] capacity by 1.5 percent and would allow operating rates to stay above 95 percent as we project moving forward,'' he explained.
Nova officials said that the firm will continue to use the ``Alberta advantage'' in growing its PE business. That's the term given to the historic 6 cent difference between ethylene produced using lower-priced natural gas from the Canadian province of Alberta, instead of feedstock from the U.S. Gulf Coast.
To this end, Nova in March signed an agreement with Aux Sable Canada Ltd. to jointly develop an ethane extraction plant in Fort Saskatchewan, Alberta. The plant would produce 40,000 barrels of ethane per day from Alberta natural gas and would be on-stream by mid-2010. Nova is not investing capital in the project, but would sign a long-term supply contract with the plant.
At the conference, Lipton also disputed the somewhat negative outlook some consultants have regarding the North American PE market.
``Associated with the idea that North American producers will not be able to compete globally, is the idea that North America will become a net importer of polyethylene,'' he said. ``We strongly disagree that that is a likely probability. In fact, we think that the probability for that happening is faint.
``It's worthwhile remembering - for those of you who weren't looking at this industry back in the mid-1990s - that the global industry could not sustain 90 percent utilization for a year-and-a-half period when we have had very, very strong market places,'' Lipton added.
``We're projecting numbers a lot better than that, and if you believe this industry is going to roll over when we are at 92-93 percent operating rates, I just feel we are going to be telling a very different story.''