P.1 

OAR Box 1872 

Prepped by Keeia Richards 

Document Number: 

31)11-1-80 

Docket Number: 

A-90-19 

Printed 11/26/2008 8:51:50 AM Sheet 31 of 204 
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f '«* 

F EB 27 '91 09:55 RADIAN CORP. HIP, NC 

(litmUmUPi^tHcUS^mWfUU 

JANUARY 1990 

Pttnioiut«port— September 1988 

Ha 

A-90-19 

ill 80 

ETHYLENE 

FOCUS....Ethylene ie the bssie petrochemical building block for polymers including plsstics, fibers and 

elastomers. Principal derivatives include polyethylene, ethylene oxide/glycol, ethylene dichloride, 

ethylbenzene/etyrene, and linear alcohols. US ethylene output was just under 38 billion pounds in 1989, a 

new record. Imports from Cenada were minimal. Exports, as ethylene itself, are negligible. Although US 

demand was strong in the world petrochemical boom of 1988 and into 1989, most derivatives are mature. US 

exports of ethylene derivatives continue to contribute to high US ethylene demand. US ethylene equivalent 

exports (net of equivalent imports) were 2.1 end 3.4' billion pounds in 1988 and 1989, respectively. 

OUTLOOK....US ethylene consumption grew at less than 15 annually between 1980 and 1984, during the protracted US petrochemical industry slump. Between 1985 and 1988, annual growth was over 7S, but fell to 25 

for 1989. Future domestic demand growth will probably average 25 per year. As oversees competition intensifies, exports of US ethylene derivatives will decline. Low cost producers of derivatives in the Middle 

East end elsewhere will penetrate world markets for polyethylene, ethylene glycol, vinyl chloride and 

styrene, among others. Competition in US markets from imports of derivatives from these offshore, low cost 

producers elso will intensify. Uiile the US ethylene supply/demand balance ie currently enug, expansions 

are expected to keep capacity well ahead of demand for the foraeeable future. 

PRICING....The actual price or value of ethylene depends on a combination of feedstock values end derivative demand. The highly captive nature of demand places the profit burden on derivative pricing end raw 

material costs rather than the market value for ethylene. After several yeara of depressed pricing in the 

early 1980'a, ethylene prices eacelated to about 32 cents in 1988 as shortages developed and feedstock 

values increased. Prices retreated into the 24-27 cents per pound range in 1989 as demand began to ease 

and feedstock values decreased. In today's market, feedstock availability is key. The need to maximize 

ethylene yielda explains why producers pay a premium for pure ethane. In the future, lower coat, readily 

available butane may become a feedstock of choice as high octane butane is removed from gasoline to lower 

volatility. Ethylene prices ere expected to continue falling in the years ahead as new capacity becomes 

operational. Some trade analysts anticipate that prices could drop from today's 24 cents to es low as 18 

cents a pound and remain depressed for another five yeara. 

tftf P- .Silty AVERAGE PRICE RANGE - ETHYLENE 

Cents Per Pound 

Trade List 

Avg. Sales 

•••* ««•••••«•«••• HISTORICAL 

1960 1965 1970 1975 1980 

~ T " 5775" 3727 TI775 1575" 

5 4.0 3.1 8.8 22.0 

1985 

1575 

16 

1986 

15.05 

14 

1987 

TB7T7 

14 

1988 

~TT 

25 

*•* PROJECTED *••• 

1989 1990 1992 

* M.ZH-K- ~re~ 

* 28 

Capacity 

Production 

Imports 

Demand 

1960 

cSTTTJ 

5.50 

5.50 

1965 

11.40 

9.60 

9.60 

1970 

2uV80 

18.10 

18.10 

1975 1980 

2S70O 50720 

20.50 28.67 

.27 

20.50 28.94 

1985 

35.20 

29.85 

.23 

30.08 

1986 

35.00 

32.86 

.29 

33.15 

1987 

36700 

34.95 

.02 

34.97 

1988 

T7754 

37.20 

.10 

37.30 

1989 

* 39.2 

• 37.8 

• .2 

• 38.0 

Trade list prices are generally year end low contract prices. 

SUPPLY M O DEMAND....Billions of Pounds....Estimated....Domestic US 

PROJECTED •••• 

1990 1992 

4"070 

38.7 41.1 

AVAILABILITY....As ethylene shortages became widespread in 1988, several US producers made plans to add 

capacity.' Expansions underway include debottleneckings as well as construction of the first world class 

grass roots plants planned during the 1980's. Phillips is building a 1.5 billion pound unit at Sweeny, TX 

that will use natural ges liquid (NGL) feed end be on stream in 1991, snd Quantum Chemical 16 building a 

1.5 billion pound facility at Deer Park, TX by 1991 that will also use NGL feed. Formosa Plestica plans a 

1.5 billion pound plant at Port Lsvece, TX for 1991 startup, but this project will be delayed et least one 

year. Uestlake Polymers Corp. plans a 1.0 billion pound plant for 1991 startup to supply raw materials to 

a polyethylene plant at Lake Charles, LA. Dow may add 1.5 billion pounds at Freeport, TX by 1992. Occidental Petrochemical (Cain) may also build a 1.0 billion pound plant on the Gulf Coast by 1992/1993. 

Some major planned expansions may be delayed or abandoned if market conditions and profit projectione 

deteriorate. In addition to major expansions, it is often possible to incrementally expend existing units 

by 100 to 200 million pounds per year with only moderate capital riak. Incremental expansions are installed quite rapidly and therefore cen reduce a producers exposure to demand growth fluctuations. 

Because of economics, petroleum refiners ere recovering more hydrocarbons, including ethylene end 

propylene, from refinery off-gas streams. About 1 billion pounds of ethylene per year is now made from 

off-gss. Javelina, a partnership among subsidiaries of Coastal Corp., Kerr-HcCee Corp., and Valero Energy 

Corp. will be on stream in mid-1990 with s major off-gas processing plant at Corpus Christi, TX. Ethylene, 

propylene, and other hydrocarbons from nearby refineries will be recovered. 

In Caned8, Polysar, Ltd., now pert of Nova Corp., ia increasing, olefins capacity at its Corunne plent 

near Sarnia, Ontario to over 1.2 billion pounds in early 1990. Polysar currently makes about 900 million 

pounds a year of ethylene et ite Corunna site. Once the expansion/debottlenecking is complete, Nova 

Corp.'s total ethylene capacity wilL,exceed 4 billion pounds. Nova currently produces ethylene from two 

1.5 billion pound crackers at Joffre, Alberta. At Fort Saskatchewan, Alberta, Dow ie expected to build a 

1.0-1.5 billion pound plant by 1992. Dow Canada currently purchases about 1.8 billion pounds or ethylene 

from Nova. At Taylor, BC, Westcosat, in partnership with Taiwanese companies, hes plans for 750 million 

pounds by 1992. but industry observers give thia project little chance for success. 

8/87 
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FEB 27 '91 09=56 RADIAN CORP. RTP, NC 

PRODUCERS AND CAPACITIES - ETHYLENE - MILLIONS QF POUNDS PER YEAR 

P.7 

. PRODUCER 

Amoco 

Chevron 

Chevron 

Dow Chemical 

Dow Chemical 

DuPont 

Exxon 

Exxon 

Goodrich 

Lyondell Petrochemical Co. 

Mobil Chemical 

MoUil Chemical 

Occidentel Petrochemical (Cain) 

Occidental Petrochemical (Cain) 

Occidental Petrochemical (Cain) 

Olin 

Phillips 

Rexene (formerly El Paso) 

Shell 

Shell 

Sun 

Texaco 

Texaco 

Texas Eastman 

Union Carbide 

Union Carbide 

Union Carbide 

Union Texas, BASF, Borg-Warner 

USI (Quantum) 

U5I (Quantum) 

USI (Quantum) 

Vista 

LOCATION 

Alvin, TX 

Cedar Bayou, TX 

Port Arthur, TX 

Freeport, TX 

Plaquemine, LA 

Orenge, TX 

Baton Rouge, LA 

Bay town, TX 

Calvert City, KY 

Channelview, TX 

Beaumont, TX 

Houston, TX 

Chocolate Bayou, TX 

Corpus Christi, TX 

Lake Charles, LA 

Brandenburg, KY 

Sweeny, TX 

Odessa, TX 

Deer Park, TX 

Norco, LA 

Claymont, DE 

Port Arthur, TX 

Port Neches, TX 

Longview, TX 

Seadrift, TX 

Teft, LA 

Texas City, TX 

Geismar, LA 

Clinton, IA 

East Morris, IL 

Tuscola, IL 

Lake Charles, LA 

TOTAL 

1989 CAPACITY 

2153 

1200 

1000 

1950 

2300 

1000 

1700 

1700 

350 

3400 

1100 

500 

1100 

1600 

700 

100 

2500 

570 

1790 

2240 

250 

1150 

375 

1400 

820 

1190 

1250 

790 

800 

975 

400 

700 

39,180 

Olin restarted the Brandenburg, KY unit, idled in 1986. In 1987, Sun Refining and Marketing bought 

Olin Corporation's 505 share of the Sun Olin Delaware joint venture. In early 1988, Mobil Chemical 

purchased Aristech Chemical's 500 million pound plant et Houston. In early 1989 Carbide restarted 450 

million pounds of Taft, LA capacity that was shut down in 1979, increasing Teft to 1,190 million pounds. 

Phillips debottlenecked by 200 million pounds in 1989. Lyondell, now a public corporation with less 

than 505 ownership by Arco Petroleum, expanded Channelview by 600 million lbs. in 1989. After numerous 

debottlenecking steps, Lyondell's total capacity ie now believed to be 3.4 billion pounds. Vista will 

expand by 300 million lbs. to one billion pounds in 1990. Occidental (formerly Cain Chemical) expanded 

at Lake Charles, LA to 700 million pounds. Cein at Chocolate Bayou was previously DuPont snd the1 Cot pu 6 

Christi plant was owned by Corpus Christi Petrochemical Co. Union Texas (with a 425 interest) Operates 

the facility owned jointly with BASF and GE Plastics - which will be expanded to 1.1 billion lbs by 

1991. Koch Industries has 25 million lbs. of ethylene capacity at Corpus Chri6ti from refinery off-ges. 

END USES..,.Ethylene, ethene, is an unsaturated hydrocarbon which forms a variety of polymers. Major 

derivatives include low- and high-density polyethylene, ethylene oxide, ethylene dichloride, ethylbenzene, 

linear alcohols, vinyl acetate, and ethyl alcohol. Other uses include ethylene-propylene elastomers, ethyl 

chloride, and ethylene dibromide. Minor applications include speed ripening and coloring of fruits. 

DERIVATIVE PERCENT 

Polyethylene - LDALTTT7 

Polyethylene - HD 25 

Ethylene Oxide 14 

END USE PATTERN - 1989 ESTIMATE 

DERIVATIVE PERCENT DERIVATIVE PERCENT 

Ethylene Dichloride I T Vinyl Acetate 2 

Ethylbenzene 7 Miscellaneous 6 

Linear Alcohols 6 

MANUFACTURING....Ethylene, and olefinic and aromatic coproducte, are mainly produced by steam pyrolysis of 

gaseous snd liquid hydrocerbons, ranging from ethane to vacuum ga6 oils. Small quantities of ethylene are 

also recovered from refinery streams. In pyrolysis furneces, feedstock, combined with steam, is subjected 

to high temperature cracking to make olefinic rich gas. Resultant products ere quenched in exchangers that 

generate steam. After quenching, liquids are removed by fractionation. Cooled gases are compressed, dried, 

and sent to the demethanizer. Bottoms go to the deethsnizer. Acetylene is removed. The ethylene-ethene 

stream is fractionated, and ethane from the bottom of the ethylene fractionator is recycled to pyrolysis. 

Yields depend on severity of cracking and type of feedstock. Naphtha, propane and butane have e smeller 

yield of ethylene thsn ethane and produce larger yields of propylene, butadiene and benzene. Pure ethene 

can produce 97 lb/bbl of ethylene vs. 78 lb/bbl naphtha, 73 lb/bbl propane and 67 lb/bbl gas oil. Ethane 

may yield 84.0 wtS ethylene and 1.45 propylene. Full-range naphtha may yield 34.45 ethylene end 14.45 

propylene. Improved processes extend the range of feedstocks that can be used. 

ENVIRONMENTAL ASPECTS... .Ethylene, a coforless gas.at atmospheric pressure, is an anesthetic. In high 

concentrations, it is a simple asphyxiant without other significant physiologic effects. Ethylene, a 

flammable gas, presents an explosion hazard which should be considered when setting exposure limits. 

To the best of our knowledge, the information contained herein is accurate. However, we 

do not assume any liability whatsoever for the completeness or accuracy of this report.