Pipeline giants Enterprise Products and Energy Transfer consider chemicals business
June 30, 2022
Two of the nation’s largest pipeline companies are planning projects that would expand their businesses into petrochemical manufacturing.
Houston-based Enterprise Products has applied for tax abatements on an ethylene manufacturing facility in East Texas that, if built, would cost more than $5 billion. Energy Transfer of Dallas also plans to build an ethylene manufacturing facility along the Gulf Coast.
The potential projects would help meet soaring global demand for ethylene. Chemical-makers buy ethylene to make compounds such as polyethylene, a basic plastic used in packaging, and polyvinyl chloride, or PVC, polymers used in everything from construction to consumer electronics.For pipeline companies, ethylene production is “a natural next step,” analysts said. Enterprise and Energy Transfer already take in natural gas, separating out its ethane — the precursor to ethylene — so it can be sold to chemical-makers, who then sell the resulting ethylene back to pipeline companies for transport and storage.
More ethylene manufacturing facilities need to come online in order to keep pace with growing demand for plastics, said Chris Mudd, managing director for Chiron Financial, a Houston-based energy investment banking firm. He said it would take at least one new ethylene manufacturing facility starting up each year.
“The way people live now,” he said, “there’s more demand for flexible packaging, which all comes from ethylene.”The U.S. Gulf Coast is also a natural place to build one, he said, because natural gas is more affordable here.
Enterprise is considering a $5.25 billion ethylene plant that would have the capacity to produce 2,000 kilotons per year of ethylene.
Energy Transfer, too, is looking to build a “world-class” petrochemical facility along the Gulf Coast, part of its plan to provide a coastal ethylene system to “connect the dots between Louisiana and Houston,” executives said during first-quarter earnings call in May.
The company is looking to strike deals with potential ethylene buyers for that project before it reaches a final investment decision, executives said.