20 May 2008 18:30 [Source: ICIS news]
TORONTO (ICIS news)--LyondellBasell is working to shift more of its US ethylene production away from naphtha feedstock to natural gas liquids (NGL) as rising crude oil prices keep driving up the cost of naphtha, company executives said on Tuesday.
The raw materials mix was being reduced to below 50% of naphtha - down from typically over 60% - chief financial officer Alan Bigman and investor relations manager Doug Pike said during the company’s first-quarter results analysts’ call.
“We are looking at how we can gradually move that shift [from naphtha] further,” Bigman said.
“We are really examining the business model from beginning to end … the investment in working capital that makes sense at $30-60/bbl of oil might not make sense at a $125/bbl,” he said in response to analysts' questions.
Options could include toll processing which would help reduced working capital, he added
In the meantime, major acquisitions were not on LyondellBasell's agenda
Rather, efforts were focused on integrating the company – formed last year from the $19.4bn merger between Lyondell and Basell - and reducing debt, he said.
But apart from the pressure on ethylene due to naphtha costs, Lyondell’s other chemicals business in polyolefins, propylene oxide (PO), acetyls and other products continued to perform reasonably well and cost increases could be passed on to customers, the executive said.
Also, the company’s refining business could expect to see continued benefit from favourable spreads between heavy and lighter crude oil, they said.
LyondellBasell’s refinery in ?xml:namespace>
“Some of what we are losing on the
And even in case of supply disruptions from
As for demand prospects on the chemical side, LyondellBasell expected some softening in European demand towards the end of this year, coming after a record year for the company’s polyolefins in 2007.
Asked about their assessment of upcoming petrochemicals projects in the
The Middle East capacities would likely only have a marginal impact on LyondellBasell’s business in
However, US petrochemicals exports to Asia – traditionally a pressure valve for North American producers - would be hurt by the Middle East capacities, they added.
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