Axiall, Lotte finalize JV for US Gulf ethane cracker

Axiall and Korea-based Lotte Chemical have finalized their joint-venture arrangements to construct an ethane cracker, the companies announced on Thursday. The final investment decision remains subject to approval by both companies’ boards of directors.

The companies have formed LACC LLC to design, build and operate an ethane cracker in Louisiana that would produce approximately 1 MMtpy of ethylene once it commenced operation.

Since announcing their intent to partner on the project in February 2014, Axiall and Lotte have also completed a joint FEED study for the plant. The two are now evaluating final project details, including site selection, which is anticipated in Lake Charles, Louisiana. 

A final investment decision is anticipated in the second half of 2015. If approved, the plant’s anticipated start-up would be the end of 2018.

If approved by Lotte’s board, Lotte Chemical also plans to build a monoethylene glycol (MEG) plant adjacent to the proposed cracker. Axiall would not have any investment in or ownership of that MEG plant. 

Lotte Chemical currently operates three crackers in Asia that produce more than 2.8 MMtpy of ethylene annually.

“We are pleased to affirm our partnership with Axiall to develop a world-scale ethane cracker fed by US shale gas,” said Soo Young Huh, Lotte Chemical CEO. “This investment will build on Lotte Chemical’s global ethylene construction and operating capabilities and increase our manufacturing presence in the North American market.”

Financial terms of the joint venture call for Lotte to lead the project with Axiall having a maximum capital contribution obligation of $225 million towards the cracker during the engineering, procurement and construction phases of the project. The amount of Axiall’s capital contribution relative to the total, actual cost of constructing the cracker would determine the amount of ownership Axiall holds in the cracker.

Axiall will retain an option to increase its ownership level to up to 50% of the completed plant.

“Investing for the long-term benefit of both of our companies, today’s announcement continues Axiall’s integration strategy. If approved, the project meets our strategic objective of providing 50% of our future ethylene needs at advantaged cost,” said Paul Carrico, Axiall CEO.