W. Australia eyeing petrochemical complex

A government bid to gauge interest in building a petrochemical complex in Western Australia is garnering some early support.

Dow Chemical Australia, a unit of Dow Chemical Co., has become the first company to respond to the state government's call for interest in developing a $1.5 billion (Australian) petrochemical complex in the state's northwestern Pilbara region.

The government's move was sparked by a study by Woodside Petroleum Ltd., Perth, which showed that sufficient natural gas feedstock will be available on the North West Shelf to supply a world-scale petrochemical plant after 2000.

Hurdles

Dow plans to files a formal plan with the government in the near future, as part of its focus to expand in the Asia-Pacific region.

However, the company cautioned that a number of hurdles must be overcome if the project is to become viable.

Among the hurdles is that a petrochemical plant is likely to incur capital costs closer to $2-3 billion (Australian) if participants proceed downstream to such finished products as caustic soda and plastics feedstocks, which raises concerns over an acceptable level of return.

ICI Australia Ltd., Melbourne, is another chemical company believed to be interested in participating in the Pilbara project. ICI is interested in producing caustic soda for the aluminum industry, a commodity currently imported into Australia. In addition, ICI is interested in producing vinyl chloride monomer, which could be a feedstock for Australia's 200,000 metric ton/year polyvinyl chloride industry.

Early failures

Earlier attempts to establish petrochemical plants in South Australia, supplied by gas from the Cooper basin, failed due to widespread polyethylene overcapacity in the Asia-Pacific region, as well as government moves to relax tariffs on imported feedstocks and finished products. Economic assessments showed that a new plant could not compete with Asian rivals.

However, the Woodside study suggests that strong growth in the Asian region during the next decade is likely to absorb some excess petrochemical capacity. That leaves the ball in the federal government's court over tariff decisions.

Currently, Australia's domestic chemical industry is at a crossroads, with existing plants at Melbourne and Sydney at least 30 years old and well below world-scale size.

Registrations to show interest in a petrochemicals plant are due to the Western Australian government by Sept. 26.