LyondellBasell Industries NV (LYB), the chemical maker that emerged from bankruptcy last year, may spend $1.5 billion on new plants and expansions to add as much as $1 billion a year to pretax earnings by 2016.
Projects in the U.S. olefins unit may add as much as $500 million to earnings before interest, tax, depreciation and amortization, Rotterdam-based LyondellBasell said today in a New York investor presentation that was webcast. The work includes boosting annual ethylene production by 50 percent at LaPorte, Texas, raising propylene output by 500 million pounds in Channelview, Texas, and cracking more ethane to make ethylene.
Chief Executive Officer Jim Gallogly is expanding U.S. production of ethylene, a key plastics ingredient, using ethane, a component of natural gas, because shale-gas production has reduced prices. That’s given U.S. producers a cost advantage relative to producers in Asia and Europe who use oil-derived naphtha.
“This company has a lot of upside in its existing assets, and we are pretty proud of these growth opportunities,” Gallogly said in the webcast.
Projects in the intermediates unit may add $330 million to ebitda, including the restart of an idled plant in Houston by late 2013 that will supply methanol for making acetic acid, an ingredient in polyester and coatings, LyondellBasell said. It also may build a propylene oxide plant in Ningbo, China, with China Petroleum & Chemical Corp. (600028), known as Sinopec.
Ethane prices don’t fully reflect the cost of gas, because of a lack of processing plants and pipelines, the company said. New pipelines and gas fractionation capacity will boost ethane output more than demand starting in 2013, the company said. Ethane supply is poised to climb 50 percent by 2020, LyondellBasell said.
Gallogly said the company won’t join Dow Chemical Co. (DOW) and other chemicals producers, in announcing plans to build new U.S. crackers, as ethylene plants are called. He said LyondellBasell remains in talks on possibly investing in a joint project, or what he calls a “condo cracker.”
Shutting its refinery in Berre, France, at year-end and restructuring the European olefins unit will help boost profit an additional $700 million to $900 million by 2013, the company said.
LyondellBasell fell 1 percent to $32.62 at the close in New York.
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