WPC ’16: ExxonMobil sees integration boosting new US chemical projects

By Ben DuBose
Digital Editor

HOUSTON -- The 70% decline in Brent crude oil prices since mid-2014 has eroded much of the "ethylene advantage" for North America's gas-based petrochemical producers, but the president of ExxonMobil Chemical remains bullish on the prospects for his company's US expansion based on underlying fundamentals, including strong integration across the full value chain.

Neil Chapman, president of ExxonMobil, delivered his remarks at the 31st annual World Petrochemical Conference in Houston, presented by IHS Chemical. ExxonMobil is in the midst of a major expansion of its Baytown petrochemical complex in Texas, including a third steam cracker with up to 1.5 MMtpy of ethylene capacity and numerous new downstream derivative units. Startup is planned for 2017.

"The petrochemicals industry is subject to cycles that all commodity businesses go through," Chapman said. "We assess the full range of economic scenarios that our investments must withstand. This allows us to mitigate bottom-of-the-cycle conditions.

"We cannot bank on North American ethane, or any other single feedstock, remaining cost-advantaged forever," he added. "That's not the way the world works. Even as we expand in Baytown, we are also expanding our ability to run liquid feeds from our refineries and even the abiliy to crack crude oil directly."

When asked if some ethylene producers in North America might rethink their investment plans based on the recent decline in oil prices, Chapman was adamant that it would not be the case for his company.

"If a company was banking on the 2013 or 2013 advantage lasting for the long-term, maybe they will [rethink investment]," Chapman said. "But for ExxonMobil, nothing has changed. We designed our Baytown expansion to be resilient over a wide range of market scenarios."

Chapman pointed out that ExxonMobil believes in the value of a diversified and integrated business, adding that all of ExxonMobil Chemical's global facilities are either highly integrated with refineries or have direct access to attractive upstream feedstocks.

"Our refining and chemical facilities share an unwavering focus on increased efficiency," Chapman said. "We pursue efficiencies driven by interconnected facilities and sophisticated models.

"In Baytown, where we have the largest refining and petrochemicals complex in the US, we're already efficient," he added. "Now we believe it will get even more so."

Chapman said ExxonMobil's investment in a third Baytown steam cracker was based on long-term projections for robust growth in US petrochemical demand and an abundant base of feedstock resources in North America, driven by unconventional oil and gas.

Moreover, Chapman said his company remains bullish on the future prospects for petrochemical growth, both in the US and around the world.

"We continue to see a world in which global living standards improve, and demand for chemicals and chemical products continues to grow," Chapman said.

Chapman said the trend toward rising incomes remains crucial for the petrochemical business, and he cited forecasts of the global "middle class" population rising from about 2 billion people today to roughly 5 billion people by 2030.

"That growing middle class will drive high demand for products made from petrochemicals," Chapman said.

Because of those factors, Chapman expects chemical demand to grow by 4%/year over the decade, which would be significantly faster pace than global gross domestic product (GDP) growth and faster than the growth in overall energy demand.

While much of the growth will come in emerging nations like China and India, ExxonMobil also expects rising demand from developed countries like the US -- particularly with a trend toward sustainability solutions like insulation and light-weight packaging that require products made from chemicals.

Even so, the economics for the US chemical industry are not as rosy as they were two years ago, when gas-derived ethane projects held a considerable price advantage relative to oil-based naphtha users elsewhere in the world. But with an emphasis on integration across the wide spectrum of ExxonMobil's energy business, Chapman believes his projects have the long-term vision to succeed.

"The only way to ensure these major investments will remain financially robust is to ensure the projects are advantaged across the entire value chain," Chapman said.

"In our industry, though opportunities abound, we must deal with volatility as the norm -- not the exception," he said.

The 31st annual World Petrochemical Conference, hosted by IHS Chemical, continues through Friday at the Hilton Americas in downtown Houston.

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