7/25/2019 Pginas DesdeHydrocarbon Processing 12 2014-9
1/1Hydrocarbon Processing | DECEMBER 201431
Petrochemicals BEN DUBOSE, ONLINE
[email protected]
Polyolefin producers may reap benefitsfrom lower oil prices
Upstream producers are feeling the painfrom this years plunging
oil prices, and un-easiness is trickling into parts of the
down-stream as well. After all, many of the newNorth American
petrochemical projects
were developed under the logic of shale-gas-derived ethane
feedstocks being eco-
nomically superior to facilities elsewherein the world using
expensive oil feedstocks.
But follow the chain a bit further, andtheres a potential winner
to be found. Withlower energy costs boosting discretionaryincome,
those petrochemical producersfocusing on plastics such as
polyethylene(PE) and polypropylene (PP) could soonfind a holiday
bonus in the form of in-creased demand for their products.
Its worth noting that over the longhaul, WTI and Brent crude
prices be-tween $80/bbl and $85/bbl would be
bad for everyones business in the indus-try. If sustained,
prices like those seen inthe second half of 2014 would undoubt-edly
discourage upstream development,leading to a trickle-down effect
that
would reduce the supply of feedstocksfor the downstream and
crimp marginsacross the board.
Short-term effects. Assuming thatcheaper range is only a
short-term trend, asmany analysts expect, it may actually serve
as a stimulant for many in the downstreampolymers industry. With
polyolefin pro-ducers directly exposed to consumer de-mand, many
leading chemical companiesare making the case that more
disposableincome could lead to more consumptionand demand for the
end-products.
A low oil price means more demandin the GDP, said Dow Chemical
CEO
Andrew Liveris, speaking on a conferencecall to recap
third-quarter earnings. Simi-larly, Dow CFO Howard Ungerleider
saidlower oil prices should help increase gross
domestic product in the US, the UK, Ja-pan and China.
Likewise, LyondellBasell Industries,the worlds biggest maker of
PP plastic,said tight markets for its products couldstall the
narrower margins that could ulti-mately result from lower oil
prices.
Speaking on that companys earningscall, CEO Jim Gallogly said
the fundamen-
tals of the US chemical industry have re-mained favorable
heading into the finalmonths of 2014.
Under those conditions, prices dontfall very quickly, Gallogly
said. Thesupply chain is tight at this point, and ofcourse the US
economy is doing well.
Gallogly noted that customers werenot cancelling orders or
cutting invento-ries in anticipation of lower prices.
Recent crude oil price declines areexpected to ultimately impact
domesticmargins, but todays tight market condi-tions may delay the
timing of potentialdeclines, Gallogly said.
Product-focused producers benefitmost.Executives with chemical
produc-er Huntsman might be even more bull-ish than both Dow and
LyondellBasell.Speaking after his companys third-quar-ter earnings,
CEO Peter Huntsman saidcheaper oil will eventually reduce pricesfor
raw materials like ethylene, propyleneand methanol. Huntsman is a
net pur-
chaser of those chemicals, which it thenconverts into
products.Falling oil prices would be a benefit
to our company, he said. We ought tobe able to maintain our
current margins,if not expand them in certain areas.
Huntsman, in particular, expects tobenefit from its recent
acquisition of the ti-tanium dioxide (TiO2) unit of
RockwoodHoldings, which Huntsman purchased onOct. 1 for about $1
B.
Its not a rosy picture for everyone inpetrochemicals, of course.
With crude
oil declining more than 20% since June,Goldman Sachs recently
cut its profit
estimates for ethylene producers, sayingthat margins from using
natural gas feed-stocks may narrow.
Plastics makers are insulated. Forcompanies well integrated
throughout thepetrochemical value chain, any decline
in ethylene margins could be recoupedin plastics. David
Begleiter, a New York-
based analyst at Deutsche Bank, wrote ina note that US plastics
companies should
be relatively insulated from the drop incrude because ethylene
supplies are tight.
In the big picture, few in the industryare expecting the trend
of lower prices to
be sustained. LyondellBasells Galloglysaid that hes not too
worried that theoil drop will limit drilling in shale forma-tions,
noting that drillers are already pro-ducing more ethane than the
chemicalindustry can use.
As a result, the numerous new US eth-ylene projects and
expansions planned forthe latter half of this decade do not
appearto be in jeopardy.
In the short term, the big swing in oilprices creates both
winners and losers.The losers have been well-documented,
but if cheaper oil spurs the economicgains like Dow and others
predict, poly-olefins producers could soon find an un-expected
holiday bonus.
FIG. 1.LyondellBasell produces PP at its
Bayport plant in Pasadena, Texas. It is usedby customers to
produce consumer products.
