Shintech will spend $1.4 billion to add an ethylene plant at its Iberville Parish facility, boosting Louisiana’s industrial expansion at a time when low oil prices put some projects at risk.
The plant will create 100 new jobs, with an average annual salary of $68,500, plus benefits. The project will support an estimated 2,100 construction jobs at its peak. The Louisiana economic development department estimates the project will result in 658 new indirect jobs.
The new project will lift Shintech’s total capital investment to date in Louisiana to $4.7 billion.
“This is the third major expansion announced by Shintech in Louisiana since 2008, and our partnership with this global chemical leader continues to strengthen,” said Gov. Bobby Jindal, who pitched Shintech executives on the project during a visit in Japan.
Adam Knapp, president and CEO of the Baton Rouge Area Chamber, said Wednesday’s announcement came at a good time. It has been about 18 months since a petrochemical construction project of Shintech’s scale had been announced.
In recent months, the $14 billion natural gas-to-liquids plant at Sasol’s Westlake complex was delayed and Royal Dutch Shell’s $20 billion natural gas to diesel plant in Ascension Parish was canceled because of the collapse in oil prices. There are also questions about EuroChem’s $1.5 billion ammonia and urea production facility in Iberville Parish; last month, Bloomberg.com reported the plant has been delayed due to changes on the financial markets, but LED said the project is still going forward and blamed the confusion on a translation mixup.
“This shows that petrochemical is a continued sector of strength for us,” Knapp said. “There’s a sense of continued confidence in natural gas prices, and these low natural gas prices are continuing to underscore competitive advantages.”
“We’re still on the precipice of a tremendous renaissance in the Louisiana chemical industry,” Dan Borné, president and CEO of the Louisiana Chemical Association, said in a speech Wednesday before the Rotary Club that was unrelated to the Shintech announcement.
He noted that oil prices are 23 times the price of natual gas and the industry can continue to flourish in the state at a 7-to-1 ratio.
With about 5,700 acres on the Mississippi River southwest of Baton Rouge, Shintech operates plants in Plaquemine and Addis that chiefly produce polyvinyl chloride, or PVC, and vinyl chloride monomer, or VCM — the key ingredient from which PVC plastics are made.
The world’s largest PVC plastics manufacturer, Shintech will be the first Japanese chemical company to build an ethylene plant in the U.S. Shintech is a North American subsidiary of Shin-Etsu Chemical Co. Ltd. in Japan.
The $1.4 billion expansion will include installation of an ethane cracker at the Plaquemine complex and capital upgrades to connect the ethylene output to VCM and PVC production there. Shintech is near completion of an incremental expansion of its VCM, PVC and caustic soda capacity in Iberville Parish, while an affiliated company, SE Tylose, is building a new plant at the Plaquemine site to produce hydroxyethyl cellulose, or HEC — a key component of latex paints.
Shintech expects to break ground on the project in the second quarter, with completion slated for the first half of 2018.
Shintech has been very aggressive with long-term planning for its local operations. While the company hasn’t tipped its hands about future expansions, Knapp said local economic development officials “think they’re positioned for additional growth over here, but it depends on other conditions as well.”
To secure the ethylene expansion, the state offered Shintech an incentive package that includes a $5 million performance-based grant to offset the cost of infrastructure improvements at the Plaquemine site, along with a $5 million Modernization Tax Credit, to be claimed in equal installments over a five-year period. In addition, Shintech will use LED’s FastStart workforce training program and is expected to use the state’s Quality Jobs and Industrial Tax Exemption incentive programs.