Dow Chemical Co. 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 Thursday. 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 Gov. Rick Perry said in a separate statement.
Dow, the largest U.S. chemical maker, announced plans for the project a year ago. At the time the company said the plant would be built on the Gulf Coast but didn't specify an exact location.
On Thursday a Dow spokesman said the company selected its Texas operations "based on a variety of factors, including proximity to a large number of other downstream plants and the potential to obtain significant synergies through facility integration with the existing crackers and the previously announced new PDH unit." Dow previously announced plans to build a propane dehydrogenation, or PDH, unit in Texas.
The spokesman said, "In addition, Dow Texas Operations will give us the most access to the extensive asset base in our mining, storage and pipeline facilities. Further, the Freeport site's existing capabilities and infrastructure are important factors that will make this project successful."
Dow, which is headquartered in Midland, Mich., 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.
Dow Chairman and Chief Executive Officer Andrew Liveris said in a prepared statement, "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." He said the new cracker will give Dow "a long-term advantage."
Cheap natural gas is doubly advantageous to chemical makers because it's used as a raw material and to power factories. U.S. natural gas is at a record low relative to oil, which is used to make petrochemicals in Europe and Asia.
Falling U.S. natural 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 Corp. and Royal Dutch Shell also plan to build U.S. ethylene plants during the next four years.
Shell recently said it wants to build a cracker near Pittsburgh, Pa., and another company, Brazil-based Braskem, reportedly has been looking to put a cracker in the Appalachian region.
The industry may eventually spend $30 billion on such projects because increased natural 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. 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.
Dow will reopen a cracker this year at its St. Charles facility near Hahnville, La. The two ethylene projects and the propylene plant will cost about $4 billion and employ as many as 4,800 workers during peak construction, the company said.
Daily Mail business editor George Hohmann contributed to this report.
(Originally published April 20, 2012, in the Charleston Daily News.)
Copyright 2012 Charleston Newspapers.