Chevron Could Become 3rd Largest Poyethylene Producer in North America
07.01.2019 - NEWS

July 01, 2019 [Tank News International] – Chevron Phillips (CPCHEM), a JV between Chevron and Phillips 66, has made a $15 billion bid to acquire Nova Chemicals, owned by UAE-based Mubadala.

 
Commenting on the bid, Ashish Chitalia, Wood Mackenzie Chemicals Principal Analyst, said: “With this acquisition, Chevron Phillips would become third largest polyethylene producer in North America, just after ExxonMobil Chemical Company and Dow Chemical Company. This deal will also mean that Chevron Phillips will become the largest producer of HDPE in North America, followed by LyondellBasell.
 
“There are synergies between both companies in the polyethylene and polystyrene sector. CPCHEM is a predominant producer of high-density polyethylene (HDPE), while Nova Chemicals’ portfolio leans towards linear low polyethylene (LLDPE). In terms of styrenics, CPCHEM is a major North American producer of polystyrene through its American Styrenics JV. American styrenic accounts for around 28 percent of North American polystyrene capacity. Nova Chemicals, on the other hand, is a major producer of Expandable Polystyrene with a capacity share of 22 percent in the region.
 
“Both companies have a great geographic market reach within North America. Chevron Phillips participates in the Middle East and Asian markets through JVs in Qatar, Saudi Arabia and Singapore. Both companies also provide a distinct edge in the technology sector. CPCHEM is a pioneer and a licensor of HDPE slurry loop technology, while Novachem is a major licensor of solution LLDPE technology. Finally, CPCHEM’s on-purpose and full range alpha olefins capacities would complement well with Nova’s significant exposure to comonomer alpha olefins for the regional LLDPE production.

“Together, both companies would have total polyethylene capacity of 8.5 mmtpa. HDPE would account for 5.8 mmtpa, while LLDPE would be little short of 2.5 mmtpa. In North America, the two companies would account for 20 percent of the capacity share for total polyethylene. The combined capacity share would increase to around 25 percent for HDPE.

“The Nova acquisition would increase ethylene merchant exposure for CPCHEM. After the recent ethylene capacity increase at Cedar Bayou, TX, CPCHEM was exposed to 500 thousand tonnes of ethylene to the merchant market, while Nova, post its acquisition of Williams Geismar (an LA cracker) is exposed to approximately 1 million tonnes of ethylene. Together, the companies would have ethylene volumes equivalent of a world-scale cracker size of 1.5 million tonnes.

“The petrochemical market is consolidating, with the main players – ExxonMobil, Saudi Aramco, LyondellBasell, Dow – expanding organically or through M&A. Since 2018, many petrochemical companies are under pressure owing to the slow economic growth outlook, the credit crunch in India/China, U.S.-China trade war and the plastic backlash. The deal with Nova Chemicals would allow Chevron and Phillips 66 to diversify further into this market while increasing competitiveness and market reach. North American ethane feedstock advantage makes the region an ideal location for acquisitions/expansions in the ethylene-polyethylene sector.

Such a deal would confirm the trend of Big Oil diversifying further into downstream, viewing the petrochemical sector as a growth engine and a means for margin security. But CPCHEM and Nova Chemicals also complement in terms of products (polyethylene, polystyrene), geographic footprint and technology. With up to 1.5 millions of merchant ethylene available to CPCHEM post-Nova Chemicals acquisition, the company would be in a strong position to leverage the second expansion wave on the Gulf coast.

 
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