Chevron Phillips Looks at New Middle East Chemical Plant

Chevron Phillips Chemical Co., the petrochemical venture of U.S. oil producer Chevron Corp. and refiner Phillips 66, is exploring ways to expand in the Middle East, including building a new plant.

The U.S. partnership would consider setting up a site on its own or in a joint venture, and the “entire” region is under consideration, Benny Mermans, head of Europe and Africa at Chevron Phillips Chemical’s international operations, said in an interview at a petrochemical conference in Frankfurt.

The chemical company’s owners are “very supportive” of growth plans, Mermans said. Woodlands, Texas-based Chevron Phillips, also known as CPChem, is already spending about $5 billion on a new ethylene plant, or cracker, and two factories making polyethylene in Baytown, Texas, to take advantage of cheap natural gas, which is used as a raw material as well as an energy source.

“Look at our ownership structure,” Mermans said. “We represent a fair share of their net income. By having that support, by creating margins, that provides us with a lot of legroom” for gaining resources for growth.

Chevron Phillips has three joint ventures in the Saudi Arabian industrial city of Jubail as well as partnerships in Qatar in Messaieed and Ras Laffan, Melanie Samuelson, a spokeswoman at the U.S. company, said in an e-mail.

Funding Sources

Expansion would be financed by the chemical business itself, and Chevron Phillips would tap capital markets for further cash should the need arise, Mermans said.

Availability of cheaper shale gas in the U.S., extracted by the hydraulic fracturing process known as fracking, means that Europe is being “squeezed on all sides,” Mermans said. The company will focus on more specialty chemicals in the region and is expanding a plant in Tessenderlo, Belgium, to add sulfur-based organic products.

In the U.S., Chevron Phillips is the first company in more than a decade to build an ethylene plant, Mermans said. The cracker, which will produce 1.5 million metric tons of the gaseous chemical a year, is on schedule to start operations in 2017, with the company’s board expected to give final approval in the third quarter, he said.

Dow Chemical Co., the largest U.S. chemical maker by sales, and Exxon Mobil Corp., the biggest U.S. oil company, have said they plan similar-sized ethylene plants in Texas.

“It’s a race,” Mermans said. “CPChem is well placed to be first.”

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