Dow Chemical picks Freeport, Texas, for new ethylene cracker

FREEPORT, TEXAS (April 19, 1:35 p.m. ET) -- Dow Chemical Co. has chosen Freeport, Texas, as the site of a new plant making ethylene, a key plastics feedstock.

The cracker will be part of an overall investment of $4 billion in Dow’s ethylene and propylene production in the U.S. Gulf Coast, officials with Midland, Mich.-based Dow said in an April 19 news release. The unit is expected to open in 2017 and will employ 2,000 at the peak of construction.

The new cracker will have annual ethylene capacity of 3.3 billion pounds and will employ 150 when fully operational, a Dow spokeswoman said. The project could create as many as 1,200 jobs in the area, according to industry projections, she added. No increased polyethylene production has been announced as part of the Dow expansion.

Low prices for natural gas in the region played a role in Dow’s decision, since natural gas can be used to make ethane, which is then converted into ethylene.

“For the first time in over a decade, U.S. natural gas prices are affordable and relatively stable, attracting new industry investments and growth, and putting us on the threshold of an American manufacturing resurgence,” Dow Chairman and CEO Andrew Liveris said in the release.

“Constructing this new ethylene cracker at Dow Texas Operations will create a long-term advantage for our downstream businesses and for our company as a whole,” he added. “And the benefits will accrue not only to Dow, but to the state and national economy.”

The Freeport complex already ranks as Dow’s largest integrated manufacturing site worldwide and the largest single-company chemical complex in North America, officials said. The site currently employs 4,200 Dow workers, plus 3,000 contractors, and it accounts for 44 percent of Dow’s U.S. production and 20 percent of its global production across all product types.

Jim Fitterling, Dow executive vice president, said the outlook for advantaged U.S. natural gas “was a significant factor” in Dow’s investment. “Today, 70 percent of the company’s global ethylene assets are in regions with cost-advantaged feedstocks,” he added. “We’ve seen the benefits this advantage provides, given oil-based naphtha margin pressure in Europe and Asia.”

Liveris made the site selection announcement in Freeport on April 19, at a ceremony attended by Texas Gov. Rick Perry and other state and local officials.

Dow is one of the world’s largest plastics and chemicals makers. The firm posted sales of almost $60 billion in 2011, up almost 12 percent vs. 2010.

News of the site selection comes less than three weeks after Dow announced it was cutting 900 jobs worldwide and closing at least four plants making expanded polystyrene foam and polyurethane feedstocks. Officials said the job cuts and closings are the result of continued weakness in the European economy.

Dow is one of several petrochemical makers that have announced North American expansion plans because of newfound supplies of natural gas. In February, Formosa Plastics Corp. USA announced it would spend almost $2 billion to expand its plastics and petrochemicals site in Point Comfort, Texas.

Shell Oil Co. also will build a new cracker in western Pennsylvania – near the Marcellus Shale gas deposits – while Chevron Phillips Chemical Co. will build one in the U.S. Gulf Coast. Westlake Chemical Corp. and Nova Chemicals Corp. also will expand ethylene capacity at existing locations in the Gulf Coast and in western Canada. The Nova, Chevron Phillips and Formosa projects also include new PE capacity.