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BUSINESS
A fire at a Shell Chemical ethylene cracker in Deer Park, Texas, is expected to have minimal impact on petrochemical markets, which are too oversupplied for the event to make much of a difference. The fire broke out in the furnace block at Shell's 1.9 billion-lb-per-year OP3 (olefins plant 3) unit just before 11 AM on May 13 and was extinguished three hours later. No injuries were reported. Shell is investigating the cause of the fire and the extent of the damage, which appears to affect four of the 17 furnaces at the unit. A Shell plant spokesman says the cracker continues to run at reduced rates. He adds that Shell is considering declaring force majeure, although it may instead buy ethylene and propylene on the open market to meet contractual obligations. Earl H. Armstrong, a petrochemical consultant with DeWitt & Co., says Shell's outage represents, at worst, 1 to 2% of U.S. ethylene production. "It's hard to get excited about it," he says. "There is a lot of spare capacity." He notes, however, that there may be some impact on propylene, which is in shorter supply. Armstrong explains that U.S. ethylene plant operating rates started 2002 at about 80% and have since inched above 85%. However, Eastman Chemical, Huntsman Corp., Dow Chemical, Chevron Phillips Chemical, and Equistar already have idle ethylene capacity. All of this offline capacity is causing the market to tighten. The OP3 unit was the site of an explosion and fire on June 22, 1997. The blast caused several injuries but no deaths, and it shut down the cracker for eight months. Last June, Shell announced plans to spend $400 million to expand the OP2 unit at Deer Park, which was closed in 1981. The refurbished OP2 is expected to come onstream with 1.1 billion lb of ethylene capacity late next year. |
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