Shintech Has New Louisiana-Based Steam Cracker in the Works

It’s been nine years since Formosa Petrochemical filed its first permit applications for a proposed $9.4 billion petrochemical complex in Louisiana and, while the greenfield project has faced legal setbacks, it recently posted an important win and may — emphasis on may — eventually make it across the finish line. The Sunshine Project would be massive and consequential, with two steam crackers each capable of consuming 75 Mb/d of ethane, a big propane dehydrogenation (PDH) unit and a number of other petchem production facilities that together would employ more than 1,200. In today’s RBN blog, we’ll look at the project and its long and winding road toward potential construction and startup. 

The ethane market isn’t for the faint at heart — it’s got lots of ups and downs, and it’s impacted by an unusually wide range of variables. A year ago this month, a combination of fractionation constraints in Mont Belvieu and rising demand from new ethane-only steam crackers sent ethane prices north of 60 cents/gallon. For most of the time since then, though, ethane prices were in something close to freefall, bottoming out at only 10 cents in late July before rebounding in recent weeks to 20 cents or so. During the big, months-long price decline, ethane traders and cracker operators did what anyone does when they can buy something they’ll need in the future for next to nothing — they stocked up. Today, we examine recent trends in ethane supply, demand, prices and storage levels, and take a look ahead.

The margin for producing ethylene by steam-cracking ethane has been less than a dime per pound since mid-March 2018, and less than a nickel for nearly nine of the past 15-and-a-half months. In fact, for two weeks last September, the ethylene-from-ethane margin fell below zero. And yet, a joint venture of two of the world’s savviest companies — energy giant ExxonMobil and petchem behemoth Saudi Basic Industries Corp., or SABIC — recently committed to building what will be the world’s largest ethane steam cracker: a 4-billion-pounds/year facility to be constructed near Corpus Christi by 2022. Is this a case of blind optimism? No, not when you factor in the cracker’s location, the JV’s concurrent plan to construct two polyethylene plants and a monoethylene glycol plant right next door, and the co-developers’ global market reach. Today, we discuss the thinking behind ExxonMobil and SABIC’s big investment in Texas’s San Patricio County.