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 PCW Harvey Aftermath Final Report--September 20, 2017

With this summary PetroChem Wire concludes its updates on the impact of Hurricane Harvey on the chemical and refining industries.

Introduction

The state of Texas has endured many hurricanes, but Hurricane Harvey's duration as it moved so slowly through the region was an unusual aspect of this storm. The aftermath of Harvey continues 20 days after its first landfall.

At this writing, most plants that shut for the storm have restarted, but recovery to the supply chain has been slow.

Below are summaries by market segment of the effects of this historic weather event to the major chemical sites and refineries in Texas. We hope you have found PeroChem Wire's coverage useful.

Sites Shut August 24-25

Starting on Aug 24, several sites in South Texas reduced their operations significantly or completely shut before the storm made landfall.  

  • ARKEMA CROSBY

  • CITGO CORPUS CHRISTI

  • DOW SEADRIFT

  • EQUISTAR CORPUS CHRISTI, MATAGORDA AND VICTORIA

  • FLINT HILLS RESOURCES CORPUS CHRISTI

  • FORMOSA POINT COMFORT

  • GULF COAST FRACTIONATORS Mt BELVIEU

  • MARKWEST JAVELINA

  • OXY/MEXICHEM INGLESIDE

  • VALERO CORPUS CHRISTI

Sites Shut August 26-27

Other sites in the area reduced operations, such as Freeport. Harvey made landfall as a Category 4 Hurricane during the evening of Friday, Aug 25 at Rockport, Texas, near Corpus Christi. By the time the storm made landfall, about 25% of Texas ethylene capacity had been shut (equiv. 14% US capacity). Sites shut Aug 26-27 included:

  • CHEVRON PHILLIPS CEDAR BAYOU AND PASADENA

  • DOW TX-8 OLEFINS UNIT (lightning) 

  • ENTERPRISE MT BELVIEU - 3 SPLITTERS  

  • ENTERPRISE MT BELVIEU - SOUTH PLANT 

  • EQUISTAR LA PORTE (flooding) 

  • EXXONMOBIL BAYTOWN

  • INEOS CHOCOLATE BAYOU AND LA PORTE

  • SHELL DEER PARK (flooding) 

Sites Shut August 28-30

By Monday Aug 28, the storm was moving back into the Gulf and was predicted to make a second landfall near the Texas/Louisiana border. Sites shut included:

  • CHEVRON PHILLIPS PORT ARTHUR, SWEENY AND ORANGE

  • DUPONT ORANGE

  • EQUISTAR CHANNELVIEW OLEFINS 1 (flooding)

  • EQUISTAR CHOCOLATE BAYOU

  • EQUISTAR MATAGORDA

  • EQUISTAR VICTORIA

  • EXXONMOBIL BEAUMONT AND MT BELVIEU

  • FLINT HILLS RESOURCES PORT ARTHUR

  • HUNTSMAN PORT NECHES

  • ONEOK MT BELVIEU (reduced)

  • TARGA CEDAR BAYOU (flooding)

  • TOTAL BAYPORT

As Harvey made a second landfall as a Tropical Storm during the morning of Wednesday, Aug 30 near Cameron, Louisiana, (30 miles southeast of Port Arthur), more than 80% of Texas' ethylene production had been shut in, most of it voluntarily. At the same time, some sites in South Texas began restarting.

August 31-September 19

On Aug 31, Arkema's liquid organic peroxides facility at Crosby experienced two explosions due to flooding that overwhelmed the site's primary power and two sources of emergency backup power. The company had anticipated the possibility of this incident and the community was evacuated the previous Friday.

Between Aug 23 and Aug 30, refineries totaling about 4.3 million b/d of refining capacity were shut down, representing 24% of the total US capacity of 17.8 million b/d. While refineries restarted at different rates, assuming they were each down about two weeks would equal 60.2 million bbl of crude input, resulting in about 30 million bbl of gasoline lost. The US consumes about 9.5 million b/d of gasoline. Gulf Coast refiners supply retail gasoline to the Midwest, Oklahoma and throughout the US East Coast.

By Sep 5-6, about 20% of Texas' ethylene capacity was restored. By Sep 11-12, about 50% of Texas' ethylene production had returned. By Sep 18, this figure was 35%.

By Sep 11-12, about 50% of Texas' ethylene production had returned. During this time, Lyondell was able to restart the FCC at its Houston refinery, Motiva began restarting its Port Arthur refinery, ExxonMobil began restarting its Baytown refinery and Petrobras restarted the catalytic reformer at its Pasadena refinery. Shell began restarting the crude section at its Deer Park refinery.

By Sep 18, about 65-70% of Texas' ethylene capacity was restored. Valero's Port Arthur refinery fully restarted. ExxonMobil restarted sections of its Beaumont refinery but multiple units remained offline, including the 240,000 b/d crude section and 120,000 b/d FCC.

For the week that ended Aug 18, the EIA showed domestic gasoline inventories of 229.9 million barrels; by Sep 15, those levels had dropped to 216.2 million, 9 million under last year.

Rail transportation became a focal point for estimating when the supply chain would unclog and downstream products, especially plastic resins, could begin leaving production sites. As the rail companies worked to fix damaged tracks and replace sections of their systems that washed away, inventories began to build at many sites that were once again operating. Rail shipments out of the Houston area were still delayed as of mid-Sep, but were steadily getting back to normal. Union Pacific on Sep 19 said it had fully restored Gulf Coast rail operations. The railroad said it had completed repairs to bridges over the San Jacinto and San Bernard rivers, and reopened a line between Beaumont and Houston.

A less dire situation was endured at Texas ports, which closed during the storm's passage but quickly reopened and began working through the backlog of cargo ships in the Houston Ship Channel.

The current state as of September 20

Olefins units at Baytown, Channelview, Chocolate Bayou, Corpus Christi, Freeport, Ingleside, Javelina, Orange and Point Comfort have reached normal operating rates or were close to normal rates. Other sites continue to increasw rates, such as Port Arthur and Sweeny.

Olefins production at Cedar Bayou, La Porte, Beaumont and Deer Park was still shut. Olefins units at Cedar Bayou and La Porte were understood to have experienced flood damage. Beaumont was close to beginning restart activities as of Sep 15. Shell restarted its Deer Park refinery by Sep 18 but has kept its olefins production shut. Huntsman restarted its Port Neches olefins unit but was keeping it at reduced rates until a maintenance turnaround at the site's EO/EG plant concludes in late Oct.

 A total of 100-105 million lbs/day of ethylene capacity was affected by Harvey. About 20-25 million lbs/day of capacity ran throughout the storm. By Sep 18, about 85 million lbs/day of capacity was restored. Downstream, Hurricane Harvey affected at most 53 million lbs/day of PE capacity, or about 42% of North American capacity. About 20 million lbs/day of PVC production was affected (42% of US capacity), as was about 25 million lbs/day of VCM production (46% of US capacity). The storm affected at most 30 million lbs/day of PP capacity, about 61% of North American capacity.

By Sep 15, all but about 10 million lbs/day of PE production that had shut was restarted, and part of that remaining capacity was expected to restart within a week. Five suppliers either declared force majeure on PE or placed customers on sales allocations. Allocations were mostly reported between 50 and 100%, although a few select products from a few suppliers saw steeper cutbacks. Suppliers were giving priority to domestic customers, meaning that export volumes were sharply reduced. Resin import arrivals were expected to pick up in Oct as suppliers and resellers brought in material to offset the domestic supply losses, but the window of opportunity for importing resin was said to be very narrow, given the long lead time required from Mideast and Asian manufacturers in particular.

The most heavily impacted PE production facility appeared to be Chevron Phillips’ Cedar Bayou plant, which was expected to remain shut at least through October due to flood damage at the site. Cedar Bayou is an important source of commodity HDPE BM grades (from the Chevron Phillips/Ineos joint venture reactor on site) as well as more specialized resins for coating and rotomolding. It also supplies normal alpha-olefins (NAOs), which are used as co-monomers with ethylene in the manufacture of LLDPE and HDPE copolymer grades. It was unclear how much the loss of that key piece of co-monomer supply would affect the PE industry, as PE producers may be able to find alternative supplies.

In general, the most heavily impacted PE grades were said to be LLDPE hexene, HDPE BM and HDPE IM, all of which require a small percentage of hexene co-monomer in their manufacture.

PVC production was returning at reduced rates at Point Comfort. Restart of the Point Comfort VCM unit that had been down for repairs prior to the storm was expected to be delayed by about two weeks. OxyVinyls reported that it was producing PVC at full rates at Deer Park and is running at Pasadena as of Sep 20. Its VCM unit at Deer Park was in the process of coming back online. Its La Porte VCM unit was running at reduced rates but was expected to achieve full rates by the end of this week. Its PVC plants in Niagara Falls and Pedrickton were running at reduced rates on shipments of VCM from Houston. Formosa had declared force majeure on all of its PVC products and all dry blend rigid PVC compounds on Aug 29. On Aug 31, OxyVinyls announced force majeure on PVC. Olin declared force majeure on VCM shipments from its Freeport plant on Aug 31.

No PP units remained shut by mid-Sep. Several suppliers either declared force majeure on PP or placed customers on sales allocations. Allocation levels were reported at 70% from two suppliers, and one supplier, Total, lifted its force majeure on Sep 18.

Upstream, the height of NGLs demand loss from Harvey for ethane was 90% of total Texas demand, while propane was 83%, normal butane was 47% and natural gasoline was 55%. Production from some of the most NGL-rich basins in North America (the Permian, Eagle Ford) were shuttered as processing plants shut. According to IIR Energy, more than 30 gas processing units were offline in Texas immediately after Harvey’s landfall on Aug 25, totaling about 245,000 b/d of fractionation capacity in South Texas, roughly 42% of the region’s fractionation capacity. As of Sep 8, IIR saw 37 gas processing units in Texas still offline with 21 of these being NGL fractionators and 16 NGL recovery units. EnVantage estimated an additional 300,000 b/d of ethane was rejected back into the natural gas stream, bringing US rejection levels to around 800,000 b/d, a 60% uptick.

Effects to spot market pricing as of Sep 20 were gradual for ethylene or propylene. Sep steadily traded from 26 cpp on Aug 24 to 29.5 cpp by Sep 1, 31 cpp by Sep 11 and 32.25 cpp by Sep 18, a cumulative gain of 23%. PGP, which was perceived to have been fairly snug before Harvey, rose from 44 cpp at the end of Aug to 45.5 cpp by Sep 18, a gain of just 5%.

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