Dow Chemical Gets Behind U.S. Shale Gas

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Midland-based Dow Chemical Co. (NYSE: DOW) Thursday announced comprehensive plans to increase its ethylene and propylene production — and to integrate its United States operations into feedstock opportunities available from increasing supplies of U.S. shale gas in the Marcellus and Eagle Ford shale regions.

“The improved outlook for U.S. natural gas supply from shale brings the prospect of competitively priced ethane and propane feedstocks to Dow — and the promise of new manufacturing jobs to America,” said Jim Fitterling, Dow executive vice president and president of corporate development and hydrocarbons. “Our plan is to further integrate Dow’s businesses with the advantaged feedstocks, based on shale gas deposits and long-term ethane and propane supply agreements. These actions will strengthen the competitiveness of our performance plastics, performance products and advanced materials businesses, for example the elastomers product family and the full acrylates chain, as we continue to capture growth in the Americas.”

Dow is currently finalizing plans to increase the Company’s ethylene supply and increase its ethane cracking capabilities at existing U.S. Gulf Coast facilities by:

* Re-starting an ethylene cracker at the Company’s St. Charles Operations site near Hahnville, La. by the end of 2012;
* Improving ethane feedstock flexibility for an ethylene cracker at the Company’s Louisiana Operations site in Plaquemine, La. in 2014;
* Increasing ethane feedstock flexibility for an ethylene cracker at the Dow Texas Operations site in 2016;
* Constructing a new, world-scale ethylene production plant in the U.S. Gulf Coast, for start-up in 2017.

Dow is currently finalizing plans to increase the Company’s propylene supply by:

* Constructing a new, world-scale, on-purpose propylene production facility at Dow Texas Operations, for start-up in 2015;
* Exploring an option to commercialize its own technology to produce propylene from propane, with the potential start-up of a new production unit in 2018.

Dow plans to supply the required ethane and propane for these projects through a variety of supply arrangements, including: a possible joint venture fractionator in Texas, supply from existing fractionators, supply from future new fractionators to be built within the industry, and potential supply deals from various shale gas opportunities such as the Eagle Ford and Marcellus shale regions. Dow has signed ethane and propane supply contracts based on the Eagle Ford shale gas and is pursuing several more agreements from this area.

In addition, Dow has signed a Memorandum of Understanding (MOU) with a wholly-owned subsidiary of Range Resources Corp. (NYSE: RRC), stating plans to enter into a long-term supply agreement for the delivery of ethane from the Marcellus Region in southwest Pennsylvania to Dow’s existing operations in Louisiana.

“As the largest consumer of propylene in North America, Dow has a unique opportunity to invest aggressively for on-purpose propylene production from propane. Additionally, Dow is the largest producer of ethylene in North America, which provides capabilities to increase our use of ethane in existing ethylene production units – and to grow,” Fitterling said. “All of these investments, combined with Dow’s planned agreement with Range Resources, will dramatically increase our capability to consume ethane, while maintaining our industry-leading feedstock flexibility.”

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