18-03-2013

Dow enhances US gulf coast integration with new Idemitsu/Mitsui JV

The Dow Chemical Company announced today an initial  agreement for a long-term ethylene off-take agreement with a new joint venture to be formed between Idemitsu Kosan Co., Ltd., and Mitsui & Co., Ltd., of Tokyo, Japan. Idemitsu and Mitsui will form the joint venture to construct and operate a world-scale, Linear Alpha Olefins unit on the  U.S. Gulf Coast. This agreement marks the next milestone in Dow’s strategy to integrate cost-advantaged feedstocks to support the profitable growth of the Company’s high value Performance Plastics franchise. The joint venture will utilize an integrated supply of ethylene from Dow’s production grid on the U.S. Gulf Coast to produce Linear Alpha Olefins used as comonomers throughout Dow’s high value Performance Plastics franchise, and will contribute significant capital for these rights.

“Today’s announcement further illustrates Dow’s commitment to invest in  high-return projects that deliver advantaged feedstocks for our  differentiated, downstream derivatives, while simultaneously building  strategic partnerships that drive economies of scale and improved  capital efficiency,” said Andrew N. Liveris, Dow’s chairman and chief  executive officer. “Taken on the whole, positive disruptive trends in U.S. shale gas have led us to make different decisions about where and  how we invest for global growth. Our comprehensive U.S. Gulf Coast  investments will enable our enterprise to deliver higher and more sustainable value from our existing premier U.S. base to supply domestic and global growth.”
 
Dow is a large consumer of Linear Alpha Olefins and utilizes them within  the Company’s Performance Plastics franchise for the production of high  performance materials such as DOWLEX™, ELITE™, NORDEL™, AFFINITY™ and  ENGAGE™. Dow expects the agreement with the JV will enable a long-term  supply and purchase relationship for Linear Alpha Olefins, which will  enhance Dow’s high value Performance Plastics franchise, better enabling  it to serve several of the Company’s fastest growing market segments,  including Packaging; Hygiene and Medical; Electrical and  Telecommunications; Transportation, Sports and Leisure and Consumer  Durables.

“This agreement highlights Dow’s commitment to further strengthen the  competiveness of our high-value, performance-oriented Plastics  businesses, as well as our aim to grow with our customers in North and  South America,” said Jim Fitterling, Dow executive vice  president. “The agreement with the joint venture is beneficial to the  project economics and is a good example of the type of strategic  projects that Dow is currently evaluating: As an investor in Dow’s Gulf  Coast project, Idemitsu and Mitsui will receive ethylene integration  benefits while improving the capital efficiency of the cracker from a  Dow perspective. In addition, Dow secures a reliable, integrated,  cost-advantaged source of comonomers for our Performance Plastics  franchise.”
 
Location options for the Linear Alpha Olefins unit are currently being  explored with final investment locations to be determined at a later  date. Construction and start-up of the new unit is targeted for 2016.
 
The JV is in the Front End Engineering and Design (FEED) phase and will  complete this work in 2014. Financial details are not being disclosed.