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Future Spending Targets Cheap U.S. Gas, R&D

by Alexander H. Tullo
December 24, 2012 | A version of this story appeared in Volume 90, Issue 52

Credit: Dow Chemical
Dow CEO Andrew N. Liveris, with University of Michigan President Mary Sue Coleman, announces Dow’s Sustainability Fellows Program at the Detroit Economic Club in March.
Photo shows Dow CEO Andrew N. Liveris with University of Michigan president Sue Ellen Coleman announcing Dow’s Sustainability Fellowship Program at the Detroit Economic Club in March.
Credit: Dow Chemical
Dow CEO Andrew N. Liveris, with University of Michigan President Mary Sue Coleman, announces Dow’s Sustainability Fellows Program at the Detroit Economic Club in March.

Even with the economic uncertainty, chemical companies expected to increase both capital and R&D spending in 2012. The 17 firms surveyed by C&EN for capital spending plans reported they would increase outlays by 14.1% this year to a combined $13.0 billion. The eight firms surveyed for R&D spending said they would increase research budgets by 3.0% to $4.4 billion.

As in 2011, investment in the U.S. petrochemical sector to take advantage of new hydrocarbon resources from shale was a big theme for 2012. T. Kevin Swift, chief economist at the industry group American Chemistry Council, estimated that shale has led to $30 billion worth of planned chemical expansions over the past two years.

The potential for stricter regulation of shale gas extraction didn’t seem to daunt chemical executives. At the association’s annual meeting in June, President Calvin M. Dooley raised a glass and said, “I’d like to propose a toast, to shale gas.”

In March, Formosa Plastics joined a group that includes Chevron Phillips, Dow Chemical, Shell Chemicals, and Sasol and unveiled its own plans for a new ethylene cracker complex in the U.S. The facility, to be added to Formosa’s Point Comfort, Texas, site, will also boast propane dehydrogenation and polyethylene plants when it is completed in 2016.

In June, ExxonMobil Chemical filed plans with the Environmental Protection Agency for a new ethylene cracker at its Baytown, Texas, complex. According to the regulatory filing, the company also plans a pair of polyethylene plants, all three set for completion in 2016.

In August, Mexican chemical maker Mexichem signed an agreement with Occidental Chemical to build an ethylene cracker at Oxy’s Ingleside, Texas, complex. Oxy will convert the ethylene into vinyl chloride, which will be sold to Mexichem to make polyvinyl chloride.

Several companies firmed up existing plans for new capacity. Sasol moved into the engineering phase for gas-to-liquids and ethylene plants at its Lake Charles, La., complex. The plants, plus downstream chemical conversion units, could cost as much as $21 billion to build.

Putting an end to nearly a year of speculation, Shell Chemicals announced that Monaca, Pa., would be the site of its new ethylene cracker. In April, Dow selected Freeport, Texas, as the site for a cracker it wants to build by 2015.

Fertilizer makers also looked to capitalize on cheap natural gas. Last month, CF Industries said it would spend $3.8 billion on new nitrogen fertilizer capacity in Donaldsonville, La., and Port Neal, Iowa. Egyptian fertilizer maker Orascom Construction Industries said in September that it was planning a $1.4 billion nitrogen fertilizer plant in Wever, Iowa, by 2015.

But the U.S. by no means had a monopoly on big chemical projects in 2012. Saudi Aramco and Sumitomo Chemical advanced their plans to build a $7 billion petrochemical complex in Saudi Arabia by 2016. The Iraqi Ministry of Industry & Minerals signed a letter of intent with Chevron Phillips Chemical in June to study a new petrochemical complex in that country.

In R&D spending, the year will be remembered as one when companies became more creative about the ways they spent their dollars. Several opted for academic partnerships. In March, Dow Chemical awarded $10 million to the University of Michigan to support 300 Dow Sustainability Fellows—from fields as far-flung as chemistry, economics, and architecture. The idea is to foster a multidisciplinary approach to solving sustainability problems.

Similarly, Eastman Chemical pledged in September to spend $10 million at North Carolina State University over six years to support chemistry, biomolecular engineering, and materials science research. Eastman said the collaboration is meant to bring new ideas to the market more quickly than with traditional approaches.

British oil giant BP pledged to invest $100 million over 10 years to establish the BP International Centre for Advanced Materials at four universities—three British and one American. The organization will research functional materials, catalysis, structural materials, and energy storage.


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