(Updates with project cost in headline and first paragraph.)
Dec. 14 (Bloomberg) -- Chevron Phillips Chemical Co., a joint venture equally owned by Chevron Corp. and ConocoPhillips, will spend about $5 billion to build one of the first new ethylene production facilities in the U.S. since 2001.
The company selected its site in Baytown, Texas, for new factories to convert ethane into ethylene starting in 2017, The Woodlands, Texas-based Chevron Phillips said today in a statement. The cost includes an ethylene plant, known as a cracker, capable of producing 1.5 million metric tons of the gaseous chemical a year, and two plants for making polyethylene plastic, said Melanie Samuelson, a company spokeswoman in an interview.
The industry is investing in U.S. production of ethylene, the most widely used petrochemical, as natural gas costs have dropped. Ethane is derived from gas, which has dropped in price as new technologies have boosted production from shale formations. The U.S. has a cost advantage relative to producers in Asia and Europe where ethylene is made from oil-derived naphtha.
“We are pleased that the development of shale-gas resources in the U.S. has set the stage for major petrochemical investment and job creation in our backyard,” Peter L. Cella, chief executive officer of Chevron Phillips, said in the statement. The chemical company announced in March plans to consider the project.
Chevron Phillips plans to convert ethylene from its new cracker into 1 billion metric tons a year of polyethylene at plants to be built at either the company’s Cedar Bayou site in Baytown or at the nearby Sweeny site in Old Ocean. A final selection will be made by March, the company said. Polyethylene is a plastic used in grocery bags and food packaging.
Shaw Energy & Chemicals Ltd. is designing the ethane cracker. Federal and state permit applications for air emissions will be filed this week, with approvals anticipated in 2013, according to the statement.
Chevron Phillips said it chose to build adjacent to an existing cracker in Baytown, located about 30 miles (48 kilometers) east of downtown Houston, because the site has access to ethane and ethylene pipelines and storage caverns, as well as to the Mont Belvieu gas-processing hub.
The plants will employ 400 people and the construction project will create 10,000 jobs, the company said.
Dow Chemical Co., the world’s largest ethylene producer, plans to spend $4 billion in the U.S. to build a Gulf Coast cracker by 2017, two propylene plants and to reopen an idled Louisiana cracker. Sasol Ltd. may spend as much as $4.5 billion to build a cracker and related plants in Louisiana.
LyondellBasell Industries NV is among companies expanding existing U.S. facilities to benefit from low-cost ethane.
--Editors: Jasmina Kelemen, Charles Siler
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