Katrina spins U.S. petrochemicals into disarray

While the full impact of Hurricane Katrina on the Gulf Coast''s shipping, refining, and petrochemical industries is still being assessed, reductions in the availability of feedstocks, impacted transportation infrastructure, and higher energy prices have already resulted in promised price increases at the next available interval from a variety of polymer producers.

Prior to the hurricane''s arrival, many large refiners and petrochemical producers began controlled shutdowns on Friday, August 26, with full shutdowns coming for many on the next day.

In the wake of the hurricane, some plants had resumed production, but this was minimal due to nonfunctioning oil and gas pipelines limiting feedstocks and energy. By Sept. 3, the Colonial and Plantation crude oil pipelines had some limited throughput.

According to IndustrialInfo, 10 petroleum refiners and two major ethylene producers in all were offline due to the hurricane, and half of those are expected to remain down for several weeks. Three refiners have returned to service, and another is expected to start up again soon.

Dow Chemical Co. (Midland, MI) had already planned for back-to-back maintenance turnarounds of its two ethylene production units in Taft, LA beginning in September, and now the company is deciding whether to keep them offline for maintenance or start them up and reschedule that servicing for another time.

Entergy Corp. (New Orleans, LA), which provides power to 2.7 million customers in Arkansas, Mississippi, Louisiana, and Texas, is working around the clock to restore power to half of its customers, which include 11 petroleum refineries. Three of those never lost power, according to IndustrialInfo, and the company has brought power back to five others. The remaining three refineries are down river from New Orleans, and Entergy is working to restore service within 10 days. As of Wednesday, Sept. 7, Entergy still had 444,242 Louisiana and Mississippi customers without power, but it had restored energy services to 647,119.

Huntsman Corp. (The Woodlands, TX), which operates its primary North American polyurethane production facility in Geismar, LA, says none of its manufacturing facilities was damaged, but that increases in the cost of energy and feedstocks as well as logistics and transportation limitations would force price increases. The company sent a letter to customers informing them that Huntsman will raise prices on products as soon as contracts allow, and that it would add fuel or transportation surcharges to material costs.

In addition to its ethylene production, Hurricane Katrina has caused disruption to the production and transport of Dow''s polypropylene production at its St. Charles Operations in Hahnville, LS. Declaring force majeure, the company says it is unable to supply certain PP grades produced at St. Charles.

Approximately 30 products are involved or 37% of Dow''s total 1.35 billion lb nameplate capacity in North America. The company says PP production was initially idled ahead of the onslaught of the storm as a safety precaution. Plant equipment suffered no major damage, but the logistics infrastructure across the region was so heavily disrupted that Dow is unable to dispatch finished PP grades.

"We are still assessing the full impact of Hurricane Katrina on St. Charles operation''s production, raw material supply, and transportation capabilities," says Todd Prey, North American product director for polypropylene. "At this time, we are unable to ship PP from St. Charles and cannot speculate how long this situation will last."

PET producer, DAK Americas LLC (Charlotte, NC) has also declared force majeure, due to disruptions in the company''s supply chain and the fact that several suppliers have closed their plants and declared force majeure themselves. In a letter, DAK Americas'' fiber and resin directors explained, "We will be forced to allocate our diminished supply of products and to pass on the price increases we are experiencing," as of Sept. 1.

Such an impact is not surprising given the region''s role as a vital cog in the U.S.''s oil, gas, and petrochemical industries. According to the Louisiana Department of Economic Development, Louisiana has just under 10% of the known U.S. oil reserves and is the country''s third largest petroleum producer. Louisiana''s natural gas reserves are even larger, and it produces roughly 25% of all U.S. supplies.

Louisiana petroleum refineries produce 15 billion gallons of gasoline annually, making the state the third leading refiner. In all, the state has 16 refineries. In terms of petrochemicals, Louisiana ranks second in the nation in the primary production of petrochemicals, with more than 100 major chemical plants located there.-Robert Colvin; bcolvin@modplas.com and Tony Deligio; tdeligio@modplas.com

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