Petrochemicals, Front And Center
Mar28

Petrochemicals, Front And Center

I took my usual seat at IHS’s World Petrochemical Conference at the Hilton Americas in downtown Houston today, front and center, as I have for 12 previous annual conferences run by CMAI. “The world is right when you’re sitting in the front row,” Mark Eramo, vice president of chemical industry research and analysis, said as he passed. He has given the big ethylene talk each year that I have attended the conference. IHS purchased CMAI since the last conference. I was worried that IHS might mess with a good thing. The conferences have been a bigger and bigger draw year after year. IHS made some changes, but they were for the better. Instead of a keynote by an august petrochemical executive, there was a panel featuring five of them. That forum gave me the impression that petrochemical executives may be exuberant about the prospects of feedstocks from shale, but they are also realistic. Since the last conference, five companies—ChevronPhillips Chemical, Dow Chemical, Shell Chemicals, Sasol, and Formosa have announced new U.S. ethylene crackers. “Not all crackers that have been announced may be built, certainly not in the announced timeframe,” noted Ben van Beurden of Shell Chemicals. Jim Gallogly, CEO of LyondellBasell, made a similar point. “It’s likely you won’t see all the crackers advanced,” he said. Lyondell, for its part, is focused on expansions of existing U.S. facilities, to the tune of half a new cracker’s worth of output. Also, Gallogly mentioned that his company would be interested in a “condo” cracker, perhaps at an existing facility. As I understand the concept, this would be a cracker that would have two or more partners, each with a defined offtake. I remember Dan Smith, a Gallogly predecessor, talking about this concept about a decade ago, just when the Middle East and Asia started getting all the petrochemical investment. If I had to guess how this might play out today, I would think it would be an project involving Lyondell, a partner with access to feedstocks, and maybe a partner trying to back-integrate an ethylene derivative such as ethylene oxide, alpha olefins, or vinyl chloride monomer. Curiously, in the Q&A, van Beurden kept on getting asked why Shell announced a cracker and Gallogly kept on getting asked why LyondellBasell hasn’t announced a cracker. In fact, one attendee brought up the exact same two problems I noted with Shell project—that Shell no longer makes polyethylene and that Monaca, Pa., is relatively isolated from the rest of the petrochemical world. Van Beurden said there is as a big advantage being close to the converters—customers would enjoy quicker delivery and less working capital tied...

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LyondellBasell Selling French Refinery
May31

LyondellBasell Selling French Refinery

Lyondell has hired an investment banker to help it sell its refinery in Berre, France. Lyondell bought the refinery in 2008 from Shell for $700 million. The 105,000 bpd refinery “has not fulfilled economic projections made at the time of the acquisition,” the company says. It isn’t like they gave it a lot of time to work. OK, who am I kidding? Lyondell’s refining segment, which also includes its 292,000 BPD refinery in Houston, lost $2.4 billion in 2008, and $360 million in 2009. It managed to pull in a $242 million profit in 2010 on $15 billion in sales. All of Lyondell’s business have greater operating profit margins than refining. Lyondell is keeping the ethylene cracker, polyethylene, and polypropylene plants on the site. It so happens that I visited Berre in the late 1990s. A plant manager or someone—I’m not totally sure because he spoke only French—gave me a personal tour. We stood on a high promontory, he struck Napoleonic poses with his hand on his tummy and kept on saying “voilà.” Anyhow, Elenac—the BASF/Shell polyethylene joint venture that is now a part of Lyondell--was constructing a plant at the site when I was there. I think there was something happening to a Montell polypropylene plant while I was there as well. My point is that the polyolefins plants are probably in good shape because they are relatively new. I do wonder what Lyondell will do with the Houston refinery. It has been a part of Lyondell since the company was spun off of Atlantic Richfield in 1985. For most of those years, it was a joint venture with Venezuelan state oil company PDVSA and made gasoline for Citgo stations. Lyondell bought out PDVSA’s share of the JV in 2006. The refinery gets crude under contact from PDVSA. Obviously, that isn’t a great position to be in. It got less than half of its supply from PDVSA in 2010. I recall it received much more of its feedstock from PDVSA a decade ago. Interestingly, that contract is up in July. I’m curious to see what...

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The Busy Bees of LyondellBasell Expand Their Hives
May05

The Busy Bees of LyondellBasell Expand Their Hives

Out of bankruptcy for about a year, LyondellBasell is starting to find its stride. It is calling itself “the busiest chemical company in the world”. (This reminds me of “the hardest working man in show business”.) And to hammer that theme home, the cover of its annual report is covered in bees. This strikes me as a good idea for a broader corporate branding initiative. Indeed, the company has been busy. This week, executives rang the opening bell at NYSE, shareholders elected a few independent directors to its board (it calls it a “supervisory board”, how very European), and they also approved a dividend. LyondellBasell also had its Q1 earnings conference call, presided over by King Bee Jim Gallogly. The most interesting topic, and the one that got the most questions from analysts, was about how it would take advantage of the shale gas boom. Here are highlights: 1) The company has an 18-month plan to shift to lighter feedstocks at its Channelview, Texas, site. (It has already doubled ethane cracking capacity at Channelview and Corpus Christi.) This project will yield about 500 million lb more ethylene from ethane per year. 2) The company is conducting engineering for debottlenecks at La Porte and Channelview. These projects will yield more than 500 million lb of new ethylene capacity. 3) Gallogly said he was open to investing in a cracker joint venture, specifically to a “condo cracker”. This is an idea that Lyondell has been bouncing around for a very long time, since not long after it formed Equistar. It would involve two or more partners with offtake agreements in a cracker. However, Gallogly said that expansions of existing crackers are a higher priority because such projects get better returns. 4) LyondellBasell’s crackers in Morris, Ill., and Clinton, Iowa, are setting production records. They enjoy a cost advantage over ethane crackers on the USGC because they are tied into a different grid. (I’m curious about what the influence of reduced border flows from Canada might have been on these crackers. But seems like there is plenty of feedstock in the neighborhood.) 5) Small capital projects has increased HDPE production in Victoria, Texas, by 10%. It is also getting a 10% increase in production rates from ethylene oxide, a strong market right now. 6) “Newer projects in the Middle East may not be as competitive as some of the new projects in the U.S., depending on the availability of ethane,” Gallogly said. This speaks volumes. While he was the head of Chevron Phillips, Gallogly built many petrochemical plants in the Middle East as part of the last wave of new capacity...

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