Chevron Phillips Chemical eyes another expansion in Baytown

Fuel Fix ^ | November 6, 2014 | Rhiannon Meyers

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Chevron Phillips Chemical is considering adding yet another expansion to its Baytown plant, joining a wave of other petrochemical companies scrambling to take advantage of cheap raw materials unleashed by the U.S. shale boom.

The company, which is already building a $6 billion expansion at the same Cedar Bayou plant, this week said it’s studying how to increase the plant’s capacity to produce polyalphaolefins, synthetic lubricants used in high-performance motor oils.

“There’s a pretty strong demand for that and fairly limited supply worldwide,” Mark Lashier, executive vice president of olefins and polyolefins, said in an interview with Fuel Fix. “It’s a specialty product and the feedstocks to produce it are in short supply now.

Polyalphaolefins are made from ethylene, a chemical derived from the ethane in natural gas, which became cheap and prolific thanks to advances in hydraulic fracturing and horizontal drilling. The chemical industry has announced billions in new projects in the coming years to capitalize on the flood of low-cost feedstock, sparking a building spree that’s altering the face of the industrial Gulf Coast.

“From 2000 to 2010, a majority of those opportunities were in the Middle East,” he said. “And now a majority of those opportunities are right here in North America.”

Construction started in April at the ethane cracker at the Baytown plant, which Chevron Phillips Chemical has said would be the first new major facility of its type built in the U.S. in a decade.

Related: Chevron Phillips Chemical breaks ground on ethane cracker

The company, which is jointly owned by Chevron and Phillips 66, also recently started work to expand the unit that produces normal alpha olefins, a feedstock for polyalphaolefins.

Rather than build a new unit, the company is studying the possibility of boosting polyalphaolefins capacity by one-fifth to 58,000 metric tons per year by adding improvements to make the existing plant more efficient, Lashier said. The company did not disclose how much the expansion could cost. A decision is expected late next year.

As Chevron Phillips Chemical weighs whether to invest in the project, the company must consider whether the expansion is worthy of its limited capital at a time when such opportunities abound, Lashier said.

“We’re pretty comfortable with the market demand piece but we really have to understand what the capital cost will be to make this investment in the expansion,” Lashier said. “We don’t want to make an investment that’s not going to provide a favorable return for our shareholders.”

The company must also consider how long the project would take to complete and how much of a disruption construction would entail, Lashier said.