New Chevron Phillips plant boosts Texas as chemical hub
09:34 p.m., Wednesday, June 13, 2012
The 1-hexene plant under construction at Chevron Phillips Chemical's Cedar Bayou complex will be the world's largest, and further illustrates Texas' growth as a major international hub for a petrochemical industry benefiting from a surplus of cheap natural gas.
Company executives and others gathered for a ceremonial groundbreaking Wednesday at the plant in Baytown, the first new facility for Chevron Phillips Chemical in the Gulf Coast area since 2003.
The plant will use ethylene to create 1-hexene, an essential ingredient for a range of plastic products. Ethylene is a product of ethane, one of the largest components of natural gas.
"The facility that we are groundbreaking is an outcome of this new natural gas resource base," said Pete Cella, CEO of Chevron Phillips Chemical. "Five years ago, the expectation was that the U.S. would become a net importer of ethylene. Now we are expecting that we will not only meet U.S. demand domestically, but will become a major exporter."
The company plans to hire 1,000 workers to build the plant, which is expected to be online in early 2014.
Chevron Phillips Chemical, headquartered in The Woodlands, is a 50-50 joint venture of San Ramon, Calif.-based oil giant Chevron Corp. and Phillips 66, which recently spun off from Houston's Conoco- Phillips.
Chevron Phillips Chemical also plans other expansions of its Gulf foothold - a new ethane cracker at Cedar Bayou; two new polyethylene units near its Sweeny plant in Old Ocean; and an expansion of its fractionator that separates the individual components out of natural gas liquids at the Sweeny facility
New technology for producing natural gas from shale and other tight formations in the U.S. has increased its supply and lowered its price, a boon for chemical plants that use natural gas both for fuel and feedstock.
U.S. ethylene producers, including Chevron Phillips Chemical, NOVA and Westlake Chemical, are especially well-positioned to benefit from the natural gas bounty, because natural gas costs more in Europe and Asia, according to a recent Moody's report.
"This marks the first time downstream has been a source of economic growth in Houston for three decades," said Barton Smith, professor emeritus of economics at the University of Houston. "For a lot of our petrochemical products, natural gas is a crucial input, and all of a sudden, you have natural gas prices at fire sale prices. It really is a rebirth for manufacturing."
Plenty more jobs?
But Smith cautioned that while the growth will benefit companies and the Port of Houston, it will not significantly boost long-term employment within the petrochemical industry itself.
"As we export petrochemicals, it will have an impact on the port of Houston and jobs there," said Smith. "The petrochemical industry is high-tech, high-capital area. You can have a huge boom, and it will generate job growth, but it won't be enormous job growth because you don't need thousands of workers to run a petrochemicals plant."
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