The cost estimate for the planned expansion of the REXtac petrochemical plant in south Odessa swelled by about $180 million after a pre-engineering study, President Nick Fowler said.
Fowler cited a better understanding of the project’s scope as the main reason for the revised estimate, which now is about $860 million for the project. The planned expansion would allow REXtac to use local natural gas liquids (NGLs) for its polypropylene manufacturing operation.
And a large portion of the revised estimate reflects a new understanding about how much NGLs the upgraded plant will require, Fowler said.
REXtac in its October announcement of the project anticipated the plant would need 42,000 barrels of NGLs per day. Now, Fowler said REXtac expects it will need about 50,000 barrels per day.
Fowler declined to discuss the specifics of the study, known as a pre-FEED (or Front-End Engineering and Design) study. It was performed for REXtac by the Fluor Corp., the Irving-based engineering and construction company.
“When you start really sitting down, you think: Well how much will the piping cost? How are things going to go together? What are we missing? What do we have?” Fowler said Wednesday. “We did that with Fluor, and we have a more refined estimate.”
Many local oil and gas producers have described the project as a welcome outlet for NGLs, which must be shipped at greater cost to Houston or burned away in flares.
The upgraded facility — part of a complex that once included Flint Hills Resources — is expected to open in about three years after the company finishes raising money, Fowler said. Fowler said REXtac has not chosen a contractor for design, engineering or construction yet.
Independent analysts said the higher cost estimate makes sense because of separate downstream projects, primarily on the Gulf Coast, such as liquefied natural gas export terminals, methanol plants, steam and ethane crackers and propane dehydrogenation (PDH) technology, which is also a part of the REXtac project.
“There is a lot of capital investment in the state and all require labor and engineering work, so it’s not surprising to see the cost estimate increase,” said Maria Mejia, a natural gas liquids analyst with Bentek Energy. “Because it’s all taking place at the same time in the same region, which is mainly Texas and Louisiana.”
REXtac makes amorphous polypropylene, a sticky polymer used to make adhesives. The primary ingredient is an odorless gas called propylene.
REXtac has been shipping in the propylene by rail, but the expansion, which includes PDH technology and a fractionator, will allow the company to take local NGLs, extract propane and make its own propylene.
REXtac’s plans for expansion still include a production capacity of 300 kilotons of propylene per year and two polypropylene lines with a total annual capacity of more than 270 kilotons of polypropylene. One of the lines will be new and another will be an upgrade of one of its four existing lines.
Only about 28 percent of the return on the NGLs a fractionator produces is propane. That leaves 72 percent of ethane, butanes and heavier gases that the company does not need. Fowler has said REXtac will sell them but has declined to say where.
Michael DeShazo, who heads the Rexene Employees Association (REA) of former plant workers at the shuttered Flint Hills Resources plant that is next door to REXtac, questioned whether the project would eventually include assets from the Flint Hills Plant.
DeShazo said Flint Hills has assets REXtac could use, including a fractionator and wells that REXtac could use to store the NGLs and byproducts that the company will import and make in order to produce its polypropylene.
Fowler declined to discuss Flint Hills.
REA has tried to buy the Flint Hills plant, which closed in 2009.
A Flint Hills Resources official confirmed in November the company decided not to reopen the plant after examining whether to do so earlier in 2013. But Flint Hills officials would not say what they planned to do with the plant, which produced plastics from natural-gas byproducts.
Production of NGLs is increasing in the Permian Basin. In 2008, the Basin’s average NGL production was 338,000 barrels per day, according to Bentek Energy. In 2013, the daily average was 362,000 barrels.
And by 2018, the firm projects NGL production will grow by 13 percent to an average 420,000 barrels per day.
Fowler still intends to hire 155 employees, working along the on-site operation of 40 people at the current plant. That does not include construction jobs.
“The project is still a good project,” Fowler said. “It still has a good return.”
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