Japanese oil refiner Idemitsu Kosan Co. and trading company Mitsui & Co. will consider building a petrochemical plant in the U.S. to take advantage of cheap natural gas.
Idemitsu Kosan and Mitsui will carry out studies on a project to produce 330,000 metric tons a year of alpha olefins, which are used as additives in polyethylene and other synthetic resins, the two companies said in a statement today. The plant would buy ethylene from Dow Chemical Co. and sell part of its alpha olefins output back to the biggest U.S. chemical maker, according to the statement.
Companies including Dow and Exxon Mobil Corp. are planning to construct petrochemical plants in the U.S. to capitalize on lower costs. Hydraulic fracturing, or fracking, has increased shale gas output in the country and boosted margins from making ethylene from natural gas liquids such as ethane and propane.
The petrochemicals industry may eventually spend $30 billion on such projects because increased gas output has made U.S. production the cheapest outside of the Middle East, Mark Lashier, an executive vice president at Chevron Phillips Chemical Co., said in March last year.
Idemitsu and Mitsui haven’t decided on a location for their proposed plant or how much they will spend on the project. A final investment decision is expected in 2014. The proposed project is scheduled to start production in 2016, according to the statement.
The Japanese venture’s investment in the project may reach about 100 billion yen ($1 billion), the Nikkei newspaper reported earlier today, without saying how it obtained the information. It will be built next to Dow’s planned ethylene plant in Texas, the newspaper said.
Dow operates ethylene facilities, known as crackers, in Texas and Louisiana. It also plans to build a propylene facility at Freeport, Texas, with an estimated start date of 2015.
The company said today that it plans to build several plants for its performance-plastics unit on the Gulf Coast. The move will add as many as 3,000 workers at the peak of construction, Midland, Michigan-based Dow said in a statement.