BP Idles Pasadena LAO Plant


In a move expected to tighten supply of feedstock for polyalphaolefins, BP recently idled its linear alphaolefin plant in Pasadena, Texas.

BP said it was halting production at the facility, which has the capacity to produce 500,000 metric tons of LAOs per year, because of dramatic increases in production costs – that is, natural gas and oil used for raw materials and fuel.

Market observers said that move, along with scheduled maintenance turnarounds at LAO plants owned by Chevron Phillips Chemical and Shell Chemicals, will help alleviate chronic oversupply. The market has been awash in LAOs since all three companies – the leading LAO producers – opened new plants within the past few years. Sources said suppliers had already trimmed production even before BP’s announcement because of poor margins.

Given this extremely difficult business environment, which is facing the whole LAO industry, we felt we had to take steps to improve the performance of our business, said BP’s general manager forLAOs,Ralph Lerner. In addition to idling the plant, we are taking other steps to control costs and improve cash flow.

Shell Chemicals Business Development Manager Sean Clarry offered a similar assessment of the LAO market, stating, The ongoing market conditions have made it difficult for producers to recoup dramatically higher feedstock costs.Current economic conditions discourage increasing production rates beyond meeting contract obligations.

One of the main varieties of LAOs, decene, is the principal ingredient in PAOs, which claim approximately 20 percent of LAO output. Sources predicted that the idling of the Pasadena plant, combined with the turnarounds by Chevron Phillips and Shell, will ensure that PAO suppliers dont have to back down from price hikes. Suppliers raised prices approximately 7 cents per gallon, after several rounds of cuts last year.

BP officials said they have not decided when the Pasadena plant will reopen. Ironically, petroleum prices dropped sharply after the plant shut down. Still, sources noted that LAO margins were suffering even before the run-up in oil prices and maintained that market conditions may have to improve further before suppliers increase production.

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