INSIGHT: LyondellBasell aims to win 'Americas Cup' in petrochemicals

15 March 2013 17:11  [Source: ICIS news]

By Joseph Chang

Sailing in Americas Cup, New Zealand 2003NEW YORK (ICIS)--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 of 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.

That’s about the equivalent of a new cracker, though a bit short of world-scale which we define as 1m -1.5m tonnes/year.

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

Total investment in its Americas olefins and polyolefins expansion projects could total $1.41bn (€878m) through 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 – faster, cheaper,” said Jim Gallogly, CEO of LyondellBasell at the company’s investor day event in New York.

“We hope these projects will be paid for before our competitors even come online,” he added.

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)/net operating assets.

Based on 2012 performance, it was number two among its peers. That number 1 company “is standing in our spot,” said Gallogly.

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

Seven new US crackers have been announced: by ExxonMobil, Dow Chemical, Chevron Phillips Chemical, Formosa Plastics, Sasol, Occidental Chemical/Mexichem and Shell.

Six are scheduled come on in the first wave in 2016-2017 while Shell’s planned cracker in Pennsylvania could start up in 2019-2020, according to ICIS.

“It appears some projects are slipping in terms of timetable. ExxonMobil, Chevron Phillips and Dow will likely be the folks driving sooner to the finish line than the rest,” said Gallogly.

But LyondellBasell’s ethylene expansions will come on much earlier – in 2014 and 2015 – giving it a window to take advantage of expected strong pricing and margins before the first wave of new crackers comes on in 2016-2017.

The company is open to a condo cracker, sharing the capital costs of a new cracker with one or more partners, but that project would likely come in a “second wave” in terms of timing, said Gallogly.

Companies that have indicated interest in building a cracker in the US but that have not announced plans include US-based Axiall, South Korea’s Hanwha Chemical, Thailand’s Indorama Ventures and PTT Chemical, Saudi Arabia’s SABIC and Brazil’s Braskem.

Back to the competitive theme of the meeting, Gallogly compared the race for dominance in the North American petrochemical game to the America’s Cup sailing yacht race.

The actual America’s Cup trophy, first awarded in 1851 by the Royal Yacht Squadron to the boat named America after a race around the Isle of Wight in England, is the oldest in global sporting tournaments.

To paraphrase the LyondellBasell CEO, the players in the America’s Cup have similar equipment and trained crews, and face similar conditions during the race.

“But there can only be one winner,” said Gallogly.

LyondellBasell may indeed find itself on top with its “cheaper, faster” strategy, but there could be plenty of winners along the way – at least before the big wave of capacity hits.

Meanwhile, LyondellBasell’s stock price rose to another record high of almost $65 on 14 March, the day after its investor meeting. It was up 89% in 2012.

LyondellBasell Olefins & Polyolefins – Americas, expansions



Capacity add



La Porte expansion





PE debottleneck





Channelview expansion





Corpus Christi expansion




Late 2015

Olefin NGL recovery





Possible new PE line





Source: LyondellBasell

($1 = €0.77)

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By: Joseph Chang
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