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Chevron Phillips Sees Advantage in Leading Industry’s Expansion

Chevron Phillips Chemical Co. said it’s on schedule to build one of the first new U.S. ethylene plants in more than a decade, taking advantage of cheap natural gas and gaining an edge in avoiding a potential labor shortage.

Chevron Phillips will need about 10,000 engineers and construction workers to build a new ethylene plant and two polyethylene factories outside Houston, and another 400 workers to operate them when they open in 2017, Chief Executive Officer Peter Cella said today in an interview at the company’s Cedar Bayou facility in Baytown, Texas.

Chevron Phillips is racing competitors such as Dow Chemical Co. (DOW) and Exxon Mobil Corp. to complete the factories in southeast Texas as gas production from shale rock makes raw materials from the U.S. among the cheapest globally. With so much production capacity planned, Cella anticipates a dearth of skilled labor in the region.

“We are first out of the gate,” Cella said. “I think that will serve us well if the set of circumstances comes about that there is a tight labor market.”

Cella broke ground today on another Cedar Bayou facility, which will make 1-hexene, an ethylene-derived ingredient in polyethylene plastic. It will be the world’s largest, capable of producing as much as 250,000 metric tons (551 million pounds) a year, the company said. Construction started in April and is scheduled to be complete in the first quarter of 2014.

Rising Demand

Rising U.S. demand for plastics and other ethylene derivatives may support three or four new projects over the next decade, Cella said. Any additional capacity would be used to boost exports to South America and Asia, from about 15 percent to 20 percent of U.S. ethylene production now, he said.

“Thanks to the development of this new resource base previously locked up in shale rock, there is a new optimism that has spread across the entire chemical industry,’” Cella said at the ceremony. “I do see a resurgence in our industry.”

Chevron Phillips is spending about $5 billion on the ethylene and polyethylene plants and Cella wouldn’t disclose the price of the hexene project.

The company also plans to increase production capacity by 20 percent in February at its gas fractionation plant in Sweeny, Texas. The plant separates natural gas liquids such as ethane and propane for use by chemical makers and other customers.

LyondellBasell Industries NV (LYB) opened the last U.S. ethylene plant in 2001 in Channelview, Texas.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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