LyondellBasell Plans New $2B Chemicals and Plastics Project A

LyondellBasell said it's planning to build a multibillion-dollar chemicals and plastics plant along the Gulf Coast, and very possibly in the Houston area, although a final decision may still be a year away.

LyondellBasell CEO Bob Patel said the project would cost more than $2 billion and use propane to make chemicals and the plastic polypropylene to serve North and South American markets.

"It'll take us a good part of about 12 months before we get to the point where we make a final decision," Patel said. "But, yes, PDH (propane dehydrogenation) and polypropylene is the next project. It'll likely be somewhere along the Gulf Coast."

Patel said he hopes to move forward with the plans by the end of 2018.

Houston's LyondellBasell already is in the midst of a massive expansion along the Houston Ship Channel, currently building a plastics plant in La Porte and beginning construction on a $2.4 billion chemicals complex spanning two locations in Channelview and Pasadena.

Most of the growth is driven by the U.S. shale boom that's producing cheap and ample natural gas to use as feedstock for chemical plants. But most of the projects rely on consuming ethane, another natural gas liquid like propane. However, ethane is much cheaper than propane because, although they both come from natural gas, ethane is bountiful and largely useless outside of the petrochemical sector, while propane is in demand for heating and other purposes.

The propane is less cost advantaged, but Patel said there's a growing domestic demand for polypropylene as a plastic and fabric in the years ahead. Unlike the world's most common plastic, polyethylene, polypropylene also can be used as a fabric.

Globally, the growth is more about producing plastic packaging and serving the surging middle classes in Asia. It's different in North America.

"Here in the U.S., it's more about substitution into automobiles," Patel said. "Cars are getting lighter, so the polypropylene goes into bumpers and internal trim inside the car, as well some under the hood applications."

LyondellBasell is growing as a major U.S. buyer of propane because the recently announced $2.4 billion project also will consume it.

The new LyondellBasell plant will make propylene oxide, which is used to make bedding, carpeting, coatings, building materials and adhesives, and the by-product tertiary butyl alcohol, which is refined into an additive that makes fuels burn cleaner. The plant will have the biggest production capacity in the world for these chemicals, capable of manufacturing 1 billion pounds of propylene oxide and 2.2 billion pounds of tertiary butyl alcohol a year.

As part of the project, the company will build a plant to refine tertiary butyl alcohol into fuel additives at its nearby Bayport facility in Pasadena. Construction on the project is slated to begin next year, with completion scheduled for 2021.

The projects represents a continuation of the petrochemical boom along the Gulf Coast fueled by cheap and ample natural gas liquids and supported by access to foreign markets through the growing export terminals at the Port of Houston and other Texas ports. The American Chemistry Council, a trade group, estimated the Texas Gulf Coast accounts for about $70 billion of the $185 billion in petrochemical plants completed since 2010 or planned through 2023.

In the last few years, LyondellBasell also has completed ethylene expansions at its Channelview, La Porte and Corpus Christi sites, as well as a plastics expansion in Matagorda.