INSIGHT: Setting the pace at ExxonMobil

09 October 2007 16:57  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Driving production efficiency and flexibility underpins better business at ExxonMobil Chemical. But so does the push towards petrochemicals product lines that yield higher added value.

Even as the chemicals company advances plans for its latest integrated investment in Singapore it talks about adding downstream performance products capability. Increasingly, commodity petrochemicals and specialties come hand in hand.

The oil giant is well known for getting the basics right in chemicals. Its superior performance, however, is also becoming more firmly rooted in a drive towards specialties.

The ExxonMobil Chemical numbers speak for themselves: a return on capital employed of 32% last year is above the other high performers in the sector; and a better than average performance since the last industry trough in 2002.

All of this has to do with the way ExxonMobil runs its chemicals and other businesses.

Upstream integration pays great dividends; feedstock flexibility is vitally important.

The company strongly levers its technology advantage – its own tube design across 81 steam cracking furnaces, for instance. Ethylene production capacity has been raised by 70% over nameplate against an industry average of 40%.

The focus is on engineering excellence, on energy management and production plant efficiency.

Above and beyond that, however, in recent years has been a stronger drive into specialties.

ExxonMobil Chemical said on Monday that it had formed a new specialty compounds and composites business to focus on engineered polyolefins.

That business portfolio includes a new line of polyolefin products ranging from soft and flexible compounds to reinforced composites for the automotive industry.

Typically for ExxonMobil Chemical the business will be global and draw on an extensive product slate of polypropylene, polyethylene, and elastomer base polymers; raw materials that can be made worldwide and tailored for specialty compounds.

The new business builds on the recently started speciality compounding venture in Baton Rouge, Louisiana complemented a European facility in Lillebonne, France. In March, the ExxonMobil Chemical opened a Polymers Automotive Application Center in Kawasaki, Japan.

ExxonMobil Chemical has performed particularly strongly during the current upturn, its production efficiencies complemented by strong joint venture earnings from plants in Saudi Arabia and its fast growing specialities portfolio.

It should be remembered though that returns were closer to 6% in 2002. When times get hard again the company will need all the feedstock flexibility and energy efficiency it can muster to capture a decent margin.

Its specialties portfolio, including some of the more advanced polymers, should then even more than now be able to prove its worth.

For ExxonMobil Chemical these ‘premium products’ add more than icing on the cake; they provide a steady earnings stream.

“The fundamentals look good right now globally and in Europe,” ExxonMobil Chemical Senior Vice President, Sherman Glass told ICIS news in an interview on the sidelines of the 41st European petrochemical Association (EPCA) meeting. He added the fundamentals going into next year look good too.

ExxonMobil Chemical’s strategy over time is to make all its manufacturing facilities “globally competitive”.

But in petrochemicals, as Glass says you can see capacity coming so the big question is when things start to loosen again.

Great engineering, integration and feedstock flexibility give you real advantage in the petrochemicals business but a stronger specialties portfolio is much to be desired.

ExxonMobil Chemical’s output of these products, including elastomers, oxo products and metallocene polyethylene (PE) rose by 30% in the four years to 2006.

Glass says that premium products output will continue to grow.

By: Nigel Davis
+44 20 8652 3214

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