Think tank: LyondellBasell focuses on feedstocks and costs

05 March 2012 00:00  [Source: ICB]

Petrochemical companies make the most of whatever the markets throw at them by doing what they do best. And a relentless focus on assets and feedstock availability separates the better from the less well performing in a process industry driven by operating and logistics efficiencies. Ultimately, this attention to the basics pays off.


 LyondellBasell is expanding its ethane cracking capability

Copyright: LyondellBasell

Netherlands-based LyondellBasell says it has been applying that approach and last year achieved production volume records at more than 30 of its sites. It also lifted capital spending to $1bn (€746m) with attention paid to small projects which, it says, will generate high returns. This year, spending is planned to rise to $1.4bn.

The company saw profits drop off at the end of the year, but for 2011, it lifted earnings across most of its portfolio, particularly for olefins in North America and at its Houston refinery - both of which benefited from advantaged feedstock. Full-year 2011 earnings before interest, tax, depreciation and amortisation (EBITDA) was $5.28bn - up from the $3.99bn in 2010.

The shale gas phenomenon lies behind the 25% profit increase in 2011 in olefins and polyolefins in North America, where US ethane feedstock cracking capabilities were raised by 5%.

The company has a number of projects that will raise ethane cracking capacity, but it also is focusing on feedstock flexibility in certain locations that gives it the opportunity to crack naphtha, propane and cost-advantaged condensates.

Sergey Vasnetsov, senior vice president of Investor Relations, says the firm's North American crackers are in the first or second quartile in cost performance in the region. Globally they are in the first quartile of performance.

The company believes that it can generate between $250m and $500m of additional EBITDA from $500m of investment in the business. It is adding 500m lb/year (225,000 tonnes/year) of ethane cracking capability to be ready this year, which could generate up to $100m/year of the total amount.

Expanding the cracker at La Porte, Texas, will give it an additional 850m lb of ethylene capacity by 2014 and up to $250m of additional profit.

Other projects will add 500m lb of propylene capacity from its flexi-crackers and 100m lb of ethylene and polyethylene capacity from debottlenecking plants in the US midwest.

In Europe, LyondellBasell has rationalized four polymer plants and sees itself in a strong competitive position. However, it continues to appraise the portfolio, Vasnetsov says.

By: Nigel Davis
+44 20 8652 3214

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