Chevron Phillips Chemical may delay startup of its new 1.5 million mt/year cracker near Baytown, Texas, after Harvey swamped the company's Cedar Bayou complex with five to eight feet of water in different areas, Phillips 66 CEO Greg Garland told investors on Wednesday.
He said during a presentation at the Barclays CEO Energy-Power Conference that the new cracker did not get as much water as other areas and had limited damage, but contractors had been off for two weeks and the company needed them back to resume construction.
He said CP Chem, a joint venture of Phillips 66 and Chevron Corp, still hoped to finish construction by the end of the year, but Harvey's aftermath could push that milestone into the first quarter of 2018, when the company had aimed to ramp up production.
"We're just now getting back into the facility to evaluate the recovery efforts there, and I don't have a forecast yet on Cedar Bayou for you," Garland said. The company shut its existing 835,000 mt/year cracker at the Cedar Bayou complex on August 26, hours after Harvey came ashore at the middle of the Texas coast late August 25 as a Category 4 hurricane.
The storm then moved to the Houston area and parked, dumping more than 51 inches of rain in places, before moving farther east to swamp far southeast Texas. At its peak, more than half of US ethylene capacity and roughly a third of US polyethylene capacity was offline because of Harvey.
Producers increasingly took steps toward restarting facilities as water receded and logistics to receive raw materials and move products to markets resumed operation.
Harvey was not the first storm to drench CP Chem's new cracker project. Last year a major rainstorm in April flooded low-lying areas, including the CP Chem construction site, and the company pushed its target to finish construction and begin startup to late 2017 from the middle of this year.
The cracker is the centerpiece of CP Chem's $6 billion project, which includes two polyethylene plants 86 miles southwest in Sweeny, Texas, with combined capacity of 1 million mt/year.
Garland said in October 2016 that delays stemming from the April 2016 storm would increase the cracker's cost 5% to 10%.
Garland said on Wednesday that CP Chem was "very close" to feeding hydrocarbons in the new PE plants when Harvey arrived, but "by the middle of this month they should be up with the rest of the Sweeny complex."
PRODUCTION
* Occidental Chemical was preparing to restart its 550,000 mt/year joint-venture cracker near Corpus Christi, Texas, nearly two weeks after shutting it ahead of Hurricane Harvey's landfall, Occidental Petroleum Corp CEO Vicki Hollub told analysts on Wednesday. "The cracker was not damaged," she said during a presentation at the Barclays CEO Energy-Power Conference. "Now we're in the process of doing the things we need to do to bring that plant back up."
OxyChem shut its complex in Ingleside, Texas, before Harvey came ashore late August 25 as a Category 4 hurricane about 15 miles away in Rockport. The company also shut its four OxyVinyls plants along the Houston Ship Channel. Hollub said the cracker was not damaged, but an associated vinyl chloride monomer plant received some wind damage. The four Houston-area plants were flooded, but water was receding and all four were operating at reduced rates on Wednesday as the company works to ensure access to raw materials and logistics to move output.
OxyChem's Houston-area plants and the products they make are: Battleground, EDC; Deer Park, PVC, VCM; La Porte, VCM; and Pasadena, PVC.
* Ineos was restarting one of two steam crackers in Brazoria County, Texas, that were shut as Harvey pounded the Houston area more than a week ago, the company said in a regulatory filing.
The filing with the Texas Commission on Environmental Quality said the UK-based producer was restarting its 875,000 mt/year Olefins No. 1 unit and expected flaring from early Tuesday to early Wednesday. Ineos shut that unit and a second one with the same capacity on August 27. A company spokesman was not available for comment.
* Formosa Plastics on Thursday expected to restart the remaining shuttered steam cracker -- Olefins Unit No. 1 -- at its Point Comfort, Texas, complex, a source with knowledge of the company's operations said on Wednesday.
The first of the two steam crackers at the site -- Olefins Unit No. 2 -- started up on Tuesday, the company said, after both were shut as Hurricane Harvey approached the state. Olefins Unit No. 1 has an ethylene production capacity of 681,000 mt/year and Olefins Unit No. 2 a production capacity of 818,000 mt/year. Four of six polypropylene lines were operational following Harvey. Three out of six polyethylene lines have also been restarted, a source said.
Formosa last week issued force majeure declarations on polyethylene, polypropylene, PVC and chlor-alkali supplies from Point Comfort, citing the shutdown plus logistics issues as force majeure declarations by several raw material suppliers prevented the delivery of propylene, ethane and propane, 1-butene and 1-hexene.
PRICING
* Spot polymer-grade propylene remained at a 4 1/2-month high at 43.50 cents/lb ($959/mt) FD USG for September deliveries, while October deliveries shed 0.625 cent to 42.875 cents/lb FD USG.
Spot refinery-grade propylene also remained at a 4 1/2-month high at 31.25-31.75 cents/lb FD USG.
US spot ethylene was talked in the 29-30 cents/lb ($639.33-$661.38/mt) delivered basis range, remaining near four-month highs.
In polymers, spot polyethylene export assessments were mostly stable week on week amid limited activity.
High-density blowmolding was at $1,212/mt (55 cents/lb), up $11/mt week on week and $121/mt since August 23, as PE pricing was the highest since late Q1-early Q2 2017.
Spot polypropylene for export was stable at $1,234/mt (56 cents/lb) FAS Houston, stable day on day and week on week at near five-month highs.
In aromatics, US spot methanol fell 2.5 cents/gal for prompt pricing to 96 cents/gal ($319.68/mt) FOB USG. US toluene and mixed xylene rose 5 cents/gal to 250 cents/gal ($760/mt) FOB USG and 252 cents/gal ($763.56/mt) FOB USG for prompt-month pricing because of firm blending values and higher bids. Both have retreated from 25-month highs since Friday.
LOGISTICS
* Ports in Beaumont, Port Arthur and Orange opened late Tuesday to vessel traffic for the first time since closing August 28 to all inbound and outbound traffic because of Harvey. However, the ports had a draft limit of 34 feet, effectively holding traffic to barges and tug boats, according to Sabine Pilots.
* The Houston Ship Channel maintained its 40-foot draft limit for ships, but could increase it to 42 feet from the mouth of the channel to Baytown -- just three feet less than normal -- as Army Corps of Engineers investigations of obstructions continue, according to the US Coast Guard. Draft limits for ports in Galveston and Texas City had been lifted, while the Port of Freeport remained open with a 38-foot draft limit.
* Union Pacific and BNSF have largely restored rail service in the Houston area, and both remain focused on doing the same in far southeast Texas, including Beaumont, Port Arthur and Orange, which also sustained catastrophic flooding from Harvey.
* Companies that package plastic pellets for transport to ports for export or to domestic customers are operating, but have concerns about volumes as producers slowly restart plants that shut for Harvey. Katoen Natie and Plantgistix, companies among many in the Houston area that package polyethylene and polypropylene pellets, said their operations were not damaged and they were receiving volumes as railroads made needed repairs and restored service.
