Bloomberg News

Dow to Build Ethylene Plant in Texas on Cheap Gas Prices

April 19, 2012

Dow Chemical Co. (DOW:US) will build an ethylene plant in Texas that will employ as many as 2,000 workers, part of the company’s $4 billion investment in expanded chemical production as the price of natural gas drops to a 10- year low.

The plant, scheduled to open in 2017, will be built at a Dow site in Freeport, Texas, the company said in a statement today. The facility will use ethane and other natural-gas liquids to make ethylene, a key plastics ingredient. It will cost $1.7 billion and create 150 jobs, Texas Governor Rick Perry said in a separate statement.

Dow, the largest U.S. chemical maker, announced plans for the project a year ago without naming a location. The Midland, Michigan-based company is among those planning to build the first new U.S. ethylene plants since 2001 to take advantage of gas prices that have dropped to the lowest level since 2002.

“For the first time in over a decade, U.S. natural gas prices are affordable and relatively stable, attracting new industry investments and growth and putting us on the threshold of an American manufacturing resurgence,” Dow Chairman and Chief Executive Officer Andrew Liveris said in the statement. The new plant will give Dow “a long-term advantage,” he said.

Cheap gas is doubly advantageous to chemical makers because it’s used as a raw material and to power factories. U.S. gas is at a record low relative to oil, which is used to make petrochemicals in Europe and Asia.

New Plants

Falling U.S. gas prices boosted profit for ethane-based ethylene production to a record 34 cents a pound, and a similar margin probably will continue through the first half of the year, Don Carson, a New York-based analyst at Susquehanna Financial Group, said in an April 17 report.

Chevron Phillips Chemical Co., Sasol Ltd., Formosa Plastics (1301) Corp. and Royal Dutch Shell Plc also plan to build new U.S. ethylene plants during the next four years. The industry may eventually spend $30 billion on such projects because increased gas output from shale deposits has made U.S. production the cheapest outside of the Middle East, Mark Lashier, an executive vice president at Chevron Phillips, said last month.

Dow has six U.S. ethylene facilities, known as crackers, at three sites in Texas and Louisiana, the newest of which opened in 1995. The company also plans to build a propylene facility at Freeport, with an estimated start date of 2015. Freeport is Dow’s largest manufacturing site, accounting for 20 percent of global production.

Herbicide Plan

Dow will reopen a cracker this year at its St. Charles facility near Hahnville, Louisiana. The two ethylene projects and the propylene plant will cost about $4 billion and employ as many as 4,800 workers during peak construction, Dow said.

The new and re-started plants will boost ethylene production capacity by 2.3 million metric tons a year, a 20 percent increase in Dow’s Gulf Coast capacity, the company said last year.

Dow also will build a plant in Freeport to make the herbicide 2,4-D. Dow anticipates higher demand for the product because of the genetically modified crops the company is developing to tolerate the herbicide’s application.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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Companies Mentioned

  • DOW
    (Dow Chemical Co/The)
    • $53.55 USD
    • -0.09
    • -0.17%
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