Chemical giant LyondellBasell (LYB) said that it is planning to construct a world scale plant on the U.S. Gulf Coast for producing propylene oxide (PO) and tertiary butyl alcohol (TBA), leveraging the shale gas boom in the region. The exact location of the facility has not been finalized yet.
The PO/TBA plant will have annual capacity of 900 million pounds of PO and 2 billion pounds of TBA and its derivatives. The project is expected to offer as much as 1,200 construction job opportunities at its peak. LyondellBasell expects the plant to go on stream in 2019.
LyondellBasell’s shares rose 1.3% yesterday to touch a new 52-week high of $113.65. The stock is up roughly 44% so far this year, outperforming the S&P 500’s corresponding return of 9.5%.
The proposed plant is expected to market PO globally to address growing demand for polyurethanes that are mainly used to make bedding, furniture, carpets and car seats. Moreover, TBA and its derivatives will be sold to meet the requirements for high octane gasoline blending components and for making synthetic rubber and lubricant additives.
LyondellBasell continues to gain from favorable North American natural gas environment and is executing its expansion projects to leverage the U.S. natural gas liquids (NGLs) advantage. The U.S. Gulf Coast is an advantaged feedstock region due to the abundance of shale-derived NGLs. The new project integrates LyondellBasell’s proprietary PO/TBA technology with cheap feedstock advantage.
LyondellBasell also remains on track with its ethylene expansion projects. The company’s multi-plant ethylene expansion program, which started last year, represents a total investment of roughly $1.3 billion across its Channelview, La Porte and Corpus Christi facilities in Texas which benefit from shale gas production. The expansion program, when in full swing, is expected to expand annual ethylene capacity by an estimated 1.85 billion pounds for an aggregate projected capacity of 11.8 billion pounds in North America.
LyondellBasell is a Zacks Rank #2 (Buy) stock.
Other companies in the chemicals space worth a look include Green Plains Inc. (GPRE), Johnson Matthey plc (JMPLY) and Valhi, Inc. (VHI). While Green Plains carries a Zacks Rank #1 (Strong Buy), Johnson Matthey and Valhi retain a Zacks Rank #2 (Buy).
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