The upheaval in world energy markets over the past year has not really hurt petrochemical projects in the U.S. and Canada, according to petchem owners, engineers and contractors. If anything, they say, owner decisions to delay or stretch out the construction of a few petchem projects have eased concerns about skilled-worker shortages and project cost inflation and prompted talk that the petchem construction boom will last longer than previously thought.
"The bell curve [of likely petchem construction activity] has gotten longer and a little flatter," says Kent Free, director of business development, estimating and pre-construction services at the Houston office of PCL Industrial Construction Co.
"It's gone from ridiculously crazy to just crazy," he says of the petchem construction market, adding that PCL Industrial has been successfully pursuing new work in the booming region between Freeport, Texas, and Baton Rouge.
The firm is among the contractors helping to expand the Petro 1 ethylene unit at Westlake Chemical's Lake Charles petchem complex in Sulphur, La.
Westlake Chemical undertook the Petro 1 project—and an expansion of its Lake Charles Petro 2 facility that was completed two years ago—to take advantage of fast-expanding U.S. production of ethane, a natural-gas liquid and major petchem feedstock. PCL Industrial also is bidding on several other ethane- and refinery-related projects in Texas and Louisiana, Free says.
Martha Moore, senior director of policy analysis and economics at the American Chemistry Council, says a wide variety of petchem projects are under construction or in advanced stages of pre-construction development in the U.S., most of them along the Gulf Coast but also in major shale-gas and NGL production areas such as the Marcellus-Utica region in the Upper Ohio River Valley.
Moore says these projects include new or expanded ethane crackers, polyethylene and alpha olefin projects, methanol and chlorine plants, and fertilizer production facilities. ACC has been tracking the shale-driven petchem boom for several years; the value of 229 announced petchem projects in the U.S. totals about $140 billion, she says, noting that while a few of those projects already have been completed, most are either underway or soon will be.
"Certainly, we've heard about some delays" in project schedules over the past few months as petchem owners paused to assess the effects of the energy-market upheaval, says Moore, and the pace of new-project announcements so far in 2015 is off slightly from last year. Overall, though, the level of petchem-related construction activity remains high, and prospects for the boom to continue are good.
Moore's optimism is based mostly on the significant economic advantage that the U.S.—with its abundance of natural gas and NGLs such as ethane, propane and butane—continues to offer petchem producers. She says that, for some time, the ACC has monitored the ratio of Brent oil prices to U.S. natural-gas prices, which serves as a proxy for the competitiveness of U.S. in the petchem sector.
"When that ratio is below 7-to-1, as it was around the turn of the century," the U.S. is generally less competitive, Moore says; but when the ratio is above 7-to-1, the U.S. has the competitive edge. "In early May, the ratio was 27-to-1," she says. "And while that is down a bit from the ratios of the past couple of years, it is still far above where it needs to be" to support continued petchem development—and it is expected to stay there for the foreseeable future.