Dow picks Freeport, Texas, as site of new propylene plant

Houston (Platts)--28 Apr 2011 227 pm EDT/1827 GMT

Dow Chemical's proposed on-purpose propylene plant will be located at its sprawling complex in Freeport, Texas, chief executive officer Andrew Liveris said Thursday.

The disclosure of the plant's location came during Dow's conference call related to its first-quarter earnings report.

Dow first announced plans to construct as many as two on-purpose propylene plants on April 21, saying at least one would be located in Texas.

The updated plans call for the construction of a world-scale on-purpose production facility in Freeport by 2015 and the exploration of options to commercialize technology to produce propylene from propane, with the startup of a second unit by 2018.

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Together, the plants would expand the company's propylene capacity by 900,000 mt, according to company estimates.

"These investments will reduce our net purchases of propylene to less than 10% of our total use in the United States," Liveris said.

The news comes as propylene spot and contract prices have reached record levels amid healthy demand, and ongoing tight supply resulting from production issues.

Polymer-grade contracts for April were at 87.50 cents/lb, while chemical-grade product was at 86 cents/lb, both record highs. Spot RGP was last assessed Wednesday on either side of 90.75 cents/lb, also a record high.

As part of its ambitious olefins expansion, Dow also aims to increase ethylene production by as much 2.3 million tons/year.

It plans to achieve this by restarting an idled cracker at its St. Charles complex in Hahnville, Louisiana, by the end of 2012, improving or increasing feedstock flexibility for crackers at its Plaquemine (Louisiana) and Freeport operations by no later than 2014, and by constructing a world-scale ethylene production plant in the US Gulf Coast by 2017.

"Taken together, these actions will allow us to increase our ethylene capabilities by as much as 20% in the United States over the next two to three years," Liveris said, "and allow us to deliver as much as 90% of our North American ethylene from ethane."

Spot ethylene was last assessed Wednesday on either side of 64.75 cents/lb.

--Bernardo Fallas;

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