U.S. Ethylene Producers See Costly Outages in Second-Quarter 2014

Researched by Industrial Info Resources (Sugar Land, Texas)--Second-quarter ethylene unit outages--planned and otherwise--have cost U.S. producers hundreds of millions of dollars, according to earnings results. Refiner and chemicals producer LyondellBasell Industries (NYSE:LYB) (Rotterdam, Netherlands) was the latest to report costs associated with an ethylene unit outage.

Industrial Info is tracking 60 LyondellBasell projects in various phases of capital and maintenance, worth $2 billion. The largest of these is the ethylene unit expansion in Corpus Christi, Texas, expected to begin construction this fall with a total investment value (TIV) of $600 million.

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LyondellBasell reported its second quarter net income grew nearly 27% to almost $1.2 billion when compared with the second quarter of 2013. But Chief Executive Officer Jim Gallogly said during the company's second-quarter earnings conference call that the quarter "could have been even better, had we not experienced various internal operating issues and third-party disruptions."

Gallogly said that a longer-than-expected planned turnaround at the company's ethylene cracker in La Porte, Texas, combined with mechanical problems to extend the outage from 80 days to 115 days, resulted in 600 million pounds (300,000 tons) of lost ethylene production. Gallogly said he had hoped for a restart in mid-June, but the plant briefly resumed operations in early July, only to go down again as a result of a compressor leak. The delay cost LyondellBasell $50 million, as the company purchased ethylene from other producers to fill the gap. Executives said that the company had already spent $150 million starting in the first quarter to build up its ethylene inventory ahead of the planned outage.

The ethylene unit was restarted July 19-20, Gallogly said, but the effects of the delay will spill into third-quarter earnings.

Lyondell isn't the only ethylene producer to have reported costly second-quarter outages.

The Dow Chemical Company (NYSE:DOW) (Midland, Michigan) said it saw a $100 million impact from unplanned outages at its ethylene units in Plaquemine, Louisiana. The facility incurred 61 days of unplanned downtime during the second quarter, according to Industrial Info's data.

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For related information, see July 24, 2014, article - Dow Chemical Grows Revenues in Second-Quarter 2014, Despite Higher Costs; Expects Up to $6 Billion in Asset Sales.

A 58-day planned maintenance shutdown at DuPont's (NYSE:DD) (Wilmington, Delaware) ethylene unit in Orange, Texas, also affected the company's second-quarter results. Operating earnings for DuPont's Performance Materials segment fell 9% to $303 million, largely as the result of the maintenance shutdown. The outage offset performance polymers sales to global automotive markets.

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For related information, see July 23, 2014, article - Long Ethylene Outage Hits DuPont's Earnings, but Performance Materials Spin-Off On Track.

"It has been a very hectic summer for ethylene producers," said Trey Hamblet, Industrial Info's Vice President of Chemicals Industry Research. "Generally speaking, the summer months are interrupted by tropical storms and hurricanes. This summer they have been plagued by numerous mechanical errors--and then, of course, the fire at CP Chem."

The July 7 fire at Chevron Phillips Chemical LP's (CP Chemical) (The Woodlands, Texas) facility at Port Arthur, Texas injured two workers.

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