Commentary: LyondellBasell aims to be number one in the Americas Cup

15 March 2013 09:14  [Source: ICB]

LyondellBasell aims for dominance in North American petrochemicals with a strategy of debottlenecking existing plants rather than building a worldscale cracker

 

 CEO Gallogly compares business to the America's Cup

Copyright: RexFeatures

In the North American ethylene game, LyondellBasell aims to beat its competitors to the punch with a different strategy - relying on less capital intensive debottlenecks to bring on capacity faster and cheaper than its rivals.

The company is undertaking a series of expansions at existing facilities to add around 1.85bn lb/year (839,000 tonnes/year) of ethylene capacity, raising its North American tally by 19% by late 2015.

This includes expansions at La Porte, Channelview and Corpus Christi, all in Texas, US. Downstream in polyethylene (PE), it will debottleneck one facility by 2014 and possibly build a new plant by 2016.

"We aim to finish these projects two to three years earlier than our competition at a cost of around $0.50/annual lb versus $0.80 [for a new build] - faster, cheaper," said Jim Gallogly, CEO of LyondellBasell at an investor day in New York. "We hope these projects will be paid for before our competitors even come on line."

You could feel the competitive juices flowing at the event. Lyondell clearly wants to be number one in North America in terms of key profit metrics such as operating EBITDA (earnings before interest, tax, depreciation and amortisation) and net operating assets.

Based on 2012 performance, it was number two among its peers. That number one company "is standing in our spot", said Gallogly.

LyondellBasell's strategy is clearly differentiated versus its competitors in North America. Most are seeking to build new worldscale crackers to take advantage of cheap NGLs from shale gas.

Seven new US crackers have been announced. Six are scheduled come on line in the first wave in 2016-2017 while Shell's planned cracker in Pennsylvania could start up in 2019-2020, according to ICIS.

But LyondellBasell's expansions will come on much earlier. It is open to a condo cracker, sharing the capital costs of a new cracker with one or more partners, but that project would be likely to come in a "second wave" in terms of timing, said Gallogly.

Gallogly compared the race for dominance in the North American petrochemical game to the America's Cup sailing yacht race. To paraphrase the CEO, the players have similar equipment and trained crews, and face similar conditions. "But there can only be one winner," said Gallogly.

LyondellBasell may find itself on top, but there could be plenty of winners along the way - at least before the big wave of capacity hits.


By: Joseph Chang
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