The recent IHS Chemical 31st World Petrochemical Conference held in Houston provided an opportunity to weigh the opinions of executives from the petrochemical industry as well as their technology suppliers. Presentations and post-presentation Q&A sessions from several of the keynote executives and IHS Chemical Week Editor-in-Chief Rob Westervelt seemed to indicate that the “lower-for-longer” oil price scenario is finally catching up with the petrochemical industry, as evident from narrower but still profitable ethylene margins. When asked about how their companies plan to operate in an uncertain energy and economic environment, executives from North America, Europe, Asia and elsewhere were quick to point out the positives. For example, European-based liquid steam crackers becoming competitive again by using refinery naphtha feedstock that is directly connected to low oil prices.

The delay of projects, the end of the double-digit economic growth in China and reduced global demand were factors mentioned by many executives. However, based on a global scale, the 5% or 6% growth in today’s market is much more significant than the double-digit growth, such as what was seen in China 10 to 15 years ago. Other important factors that executives commented on pertained to whether the faster-than-expected growth in the European petrochemical industry is just a short-term phenomena or are there long-term structural changes driving this growth?

Against this backdrop, Neil Chapman, president of ExxonMobil Chemical Co., said, “We are not selling commodity products, we are selling performance products.” He noted that ExxonMobil Chemical takes a long-term approach and considers a range of industry scenarios revolving around feedstocks, energy costs and demand, such as the polyethylene (PE) demand. In terms of the viability of previously announced projects, some of the less visible projects are proving to be the most effective in delivering performance products in an uncertain economy. Chapman also mentioned advances to ExxonMobil’s “Enterprise IT” system became necessary due to higher trade volumes between regions. “In building our commercial and technical organization, we put a lot of effort into building feed product supply chain and access,” Chapman said during the IHS conference.

When asked by IHS’ Westervelt to comment on market stability, Michael Graff, chairman and CEO of Air Liquide Holdings Inc., said, “We see long-term growth in industrial gas business in 8 to 10 years where 20% to 25% of the entire world’s industrial gas growth is evolving in the U.S.” In terms of technological developments to support this growth, Graff said, “Long-term hydrogen is a real opportunity. We are working with Toyota on a hydrogen-powered fueled vehicle where the only emission from that fuel cell is water. At least half of that hydrogen will come from renewable resources.”

Jim Fitterling, president and COO of Dow Chemical Co., noted that Dow has recently completed several large capital projects on the U.S. Gulf Coast, including the St. Charles, La., cracker revamp that began in 2012 and the propane dehydrogenation (PDH) unit that started up in late 2015, noting that the PDH unit “has had a very good run in the first quarter of 2016.” Fitterling also stated that Dow is now focusing on the development of “four really differentiated plastics facilities.” When asked about dealing with current economic challenges, Fitterling replied, “Whenever you hit a cyclical investment cycle, about half of what is announced doesn’t get built and about half of that doesn’t come online in the originally planned time frame.” More specifically, Fitterling said, “About 9 million metric tons of [ethylene] projects, especially those originating from the smaller and less integrated companies will have to pull back. In reality, about 5 million metric tons planned for the 2017 to 2018 time period could now move out into the 2019 to 2020 time frame.

As mentioned by other industry executives, construction costs have affected these delays. Fitterling concluded that “Dow is trying to expand into the automotive chain, driven by Dow’s plastics business, glass bonding, high-end crash durable adhesives, elastomeric products and structural components for safety.”

While significant reductions in the price of naphtha have provided new margin opportunities for existing liquid crackers, such as those in Europe and the Middle East, large volumes of LNG have also benefitted from new crackers. Bob Patel, LyondellBasell’s CEO, noted that while margins are still profitable, although not as high as in 2013 to 2014, revamps are preferred over greenfield projects.

“LyondellBasell is debottlenecking existing assets rather than greenfield expansions,” Patel said, referring to the La Porte, Texas cracker, which was designed for a second process train and was never built.

“We are doing these debottlenecks for half the cost of a greenfield cracker at about half the time. We expect continued growth in polypropylene and PE even during economic slumps. We see great prospects for demand growth,” Patel said.

Rene Gonzalez can be reached at rgonzalez@hartenergy.com.