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Odebrecht exploring cracker, derivatives in Marcellus region

3:07 PM MST | November 25, 2013 | —Clay Boswell

Musa: Eager to serve the polyethylene market.

A ninth North American cracker project has been announced. Odebrecht, a Brazilian engineering and construction firm that is the largest shareholder in Braskem, is exploring the possibility of building a petrochemical complex in West Virginia, the company said on 14 November. The project, located in the Marcellus Shale region of the northeastern United States, would include an ethane cracker, three polyethylene (PE) plants, and associated infrastructure for water treatment and energy cogeneration.

Odebrecht would operate the water and electric utilities associated with the complex, which the company calls the Appalachian Shale Cracker Enterprise, or Ascent. Braskem would run the petrochemical operations and market its products.

Odebrecht is the second company to reveal its interest in setting up an world-scale ethylene plant close to Marcellus Shale deposits, which have become a rich source of inexpensive ethane. The first, Shell Chemical, announced its plans in 2011. Shell has since chosen a site in Monaca, PA, and begun taking bids for ethane supply (p. 23).

Odebrecht has already secured a purchase option on a site in Washington, WV, where Sabic Innovative Plastics currently manufactures acrylonitrile butadiene styrene (ABS). Sabic intends to close the plant and consolidate ABS production elsewhere by 2015 (below).

“As the United States’ leader in polypropylene production and with a significant footprint already in the region, we are excited about today’s announcement,” says Fernando Musa, CEO of Braskem America. “Should Ascent materialize, we look forward to serving our clients in the PE market.”

West Virginia Governor Earl Ray Tomblin notes that the project is only in its early phases. “Although we realize much work remains to be done, this announcement of a potential project is tremendous news for our state and our region,” he says.

Steve Lewandowski, director/olefins research at IHS Chemical, says concerns that ethane supplies from the Marcellus Shale might not be sufficient to support two local crackers as well as exports to Canada are unfounded. “Ethane supply will not be an issue,” he says. “Molecules exist in Marcellus. If not exported to Canada or Europe via [the] Marcus Hook terminal, it will be shipped south as ethane or as natural gas liquids.” However, Lewandowski adds, “gaining PE market share from a zero base [in the United States] could be complicated.”

Cal Dooley, president and CEO of ACC, says Ascent is “further evidence that abundant and affordable supplies of natural gas have made the United States the most attractive place in the world to invest in chemical manufacturing.”

News of the Ascent project came within days of a report by a Brazilian newspaper, Valor EconÔmico, that Braskem’s Comperj project has stalled amid concern that it would no longer be competitive given the cost advantage granted North American producers by the shale gas revolution. According to the report, Petrobras and Braskem have been unable to agree on ethane feedstock pricing.

Braskem has issued a statement reaffirming its commitment to Comperj. “Odebrecht’s leadership role will allow Ascent, once its feasibility is confirmed, to be executed by Odebrecht itself,” the company says. “This will allow Braskem to continue prioritizing its current projects, the most important of which is the Comperj project in Rio de Janeiro, Brazil. The [Ascent] project will also enable Braskem to benefit from the opportunities provided by competitive shale gas feedstock in the United States.”

The Comperj project has a “low probability” of being realized, says Javier Ortiz, principal analyst/polyolefins, Americas at IHS Chemical. “At this point, Petrobras seems confident that it will be able to source cheap ethane, presumably by increasing natural gas output from its offshore presalt reserves, but there are plenty of reported operational obstacles in exploiting these fields, which makes it hard to quantify how low the natural gas price could really go,” Ortiz notes. “All in all, we believe that the US ethylene/PE chain will be significantly more cost-advantaged than Brazil, and, more importantly, further ahead in the development of new capacity, which would make it difficult to justify building PE assets in Brazil that would theoretically not come online until the end of this decade.”

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