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 there.
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