LyondellBasell Retains Spending Plans as Ethylene, Polyethylene Demand Rises

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Researched by Industrial Info Resources (Sugar Land, Texas)--LyondellBasell Industries NV (NYSE:LYB) (Houston, Texas) reported "resilient demand" for the majority of its products in second-quarter 2019, particularly ethylene and polyethylene. The plastics, chemicals and refining giant is maintaining its capital-spending outlook, putting it on a firmer footing than Dow Incorporated (NYSE:DOW) (Midland, Michigan) and other peers that have pared spending plans amid slowing global economic factors. Industrial Info is tracking nearly $8 billion in active projects from LyondellBasell, almost half of which is attributed to capital projects under construction.

Click on the image at right for a map of LyondellBasell's projects along the Texas Gulf Coast.

The abundant, affordable supply of natural gas and natural gas liquids (NGL) from U.S. shale plays is helping LyondellBasell meet the steadily growing global demand for products such as ethylene and polyethylene. The company is considering several high-profile proposals, including a propane dehydrogenation (PDH) plant and a polypropylene plant, which would produce 1.6 billion pounds per year of PDH and 1.1 billion pounds per year of polypropylene; and a polyethylene unit expansion at its complex in LaPorte, Texas, which would add 600 million pounds per year

Each of these projects are in their early planning phases, where various factors could alter, delay or cancel any projected spending. For more information, see Industrial Info's reports on the PDH, polypropylene and polyethylene projects.

"Increased seasonal demand and reduced feedstock costs improved ethylene chain margins for both of our olefins and polyolefins segments," said Bob Patel, the chief executive officer of LyondellBasell, in a quarterly press release. "In North America, the majority of the ethylene crackers and polyethylene plants planned to start between 2016 and 2019 have been commissioned, and more than 70% of the polyethylene capacity is now operational. We expect low-cost natural gas liquid feedstocks will continue to drive strong chain margins in our olefins and polyolefins Americas segment."

Another project on the Texas Gulf Coast is set to wrap up in the fourth quarter: a debottlenecking at its polypropylene plant in Bayport, where a series of equipment additions and upgrades on two units aim to increase production 30% to 40% from the current 1.65 billion pounds per year. For more information, see Industrial Info's project report.

At LyondellBasell's nearby refinery in Houston, the company is proposing a pair of major unit enhancements for the coming years: the replacement of four coke drums on a 57,000-BBL/d delayed coker that have reached the end of their useful lives, and a reactor replacement and other modifications to a 49,000-BBL/d heavy gas-oil hydrotreater. Both proposals remain in their early planning phases, and will not see construction begin until 2022 at the earliest. For more information, see Industrial Info's reports on the delayed coker and hydrotreater projects.

Still, pricing has provided some headwinds to LyondellBasell's refining segment. "Despite our Houston refinery operating at 97% of nameplate capacity, low discounts for heavy sour crude oil in the U.S. Gulf Coast market continued to pressure the profitability of our Refining segment," Patel said.

Outside Texas, the company is making progress on two projects under construction: the $30 million addition of a wastewater treatment unit at its ethylene plant in Clinton, Iowa, which produces 960 million pounds per year of ethylene, and $5 million in infrastructure improvements at an offsite ethylene de-oxidation plant in Edison, New Jersey. LyondellBasell also is proposing a gas turbine addition at its polymers plant in Belpre, Ohio. For more information, see Industrial Info's reports on the Iowa, New Jersey and Ohio projects.

LyondellBasell's second-quarter net income stood at about $1 billion, a 39% decline from the same period last year; revenues were reported to be $9.05 billion, a, 11% decrease. The declines were attributed mainly to pricing factors. Nonetheless, the company is maintaining its full-year capital expenditure budget of roughly $2.8 billion. "This investment in growth has increased slightly during the second quarter, and we expect a similar trend over the remainder of the year," said Thomas Aebischer, the chief financial officer of LyondellBasell, in an earnings-related conference call.

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