North America's polyethylene resin wave will keep rolling with a joint venture that will add more than 4 billion pounds of capacity.
On Nov. 16, Chevron Phillips Chemical Co. and QatarEnergy announced the formation of Golden Triangle Polymers Co. LLC, a JV that will spend $8.5 billion to build a petrochemicals complex in Orange, Texas.
"Our products help make life better for billions of people every day, and they are part of a lower carbon future," CP Chem President and CEO Bruce Chinn said in a news release. "This facility will help meet the growing demand for our products and improve the quality of life for the world's growing global population."
Construction will begin immediately on the project, with operations expected to begin in 2026. The complex will have two high density PE lines, each with annual capacity of 2.2 billion pounds, and an ethane cracker with annual capacity more than 4.5 billion pounds. The project will create 500 full-time jobs and about 4,500 jobs during construction.
Officials said the complex has a target of around 25 percent lower greenhouse gas emissions than similar facilities in the U.S. and Europe. CP Chem will manage engineering, procurement and construction for the project and operate the facility after start-up.
CP Chem will have a 51 percent stake in the JV, which was first discussed publicly in 2019. CP Chem and state-owned QatarEnergy have collaborated for over 20 years on assets they operate together in Qatar. QatarEnergy — formerly Qatar Petroleum — ranks as the world's fifth-largest natural gas supplier. The firm had sales of $21 billion in 2020.
"We have a great relationship and a proven track record of operating these facilities safely and reliably," Chinn added. QatarEnergy President and CEO Saad Sherida Al-Kaabi — who also serves as Qatar's state minister for energy affairs — added that his firm "is excited to announce taking the [final investment decision] on our largest petrochemical investment ever."
Once operational, the plant will produce Marlex-brand HDPE resins for durable goods like pipe for natural gas and water delivery, recreational products such as kayaks and coolers and packaging applications to protect and preserve food.
Access to low-priced natural gas has allowed North American PE makers to add billions of pounds of capacity in the last decade. Most recently, Shell Chemical began production at a 3.5 billion pound capacity unit near Pittsburgh. Large amounts of this new capacity is being exported, since the amount being added far exceeds what's needed to meet North American PE demand growth.
CP Chem, which is based in The Woodlands, Texas, is a leading producer of PE resin as well as related feedstocks, styrenics, pipe and other specialty chemicals. The firm employs 5,000 worldwide.
Market veteran Howard Rappaport, a senior adviser with StoneX Financial, said that although large amounts of PE continue to be added in North America, it's "quite likely" that the economic climate in the U.S. will have improved sufficiently by the time the CP Chem JV capacity comes on to sustain a level of PE consumption more in line with historical norms.
"As we've seen with a number of incremental world scale projects over the years, a lot can happen between the time it gets announced, financed, engineered and built," Rappaport added.
Esteban Sagel, principal at Chemical & Polymer Consultants in Houston, said the industry "needs to look at this announcement from a counter-cyclical point of view."
"We are likely at the beginning of a polyolefin downcycle, which may last anywhere from one to two years, depending on how the economy evolves from this point forward," he explained. "By 2026, it's likely that we'll be in the upswing side of the cycle, which is exactly when you want to start a new plant.
"So, even though the current market conditions are not expected to be great, it may be the right time to make this kind of decision."