LyondellBasell Update & Shortage Discussion
LyondellBasell CEO Bob Patel talks the greening of a chemical company
Bob Patel has played a pivotal part of LyondellBasell through two key chapters since joining the company in 2010: restructuring and growth. The third chapter, sustainability, is about to begin.
After 20 years at Chevron Phillips Chemical Co. Patel joined LyondellBasell in March 2010, formed with the merger of Houston’s Lyondell Chemical and Basell of the Netherlands in a leveraged buyout in 2007, as the Houston oil refiner and chemical company was about to emerge from bankruptcy on April, 30, 2010.
Thus began Chapter One of Patel’s career at LyondellBasell, restructuring.
As senior vice president of olefins and polyolefins Americas and later as executive vice president of that same segment for Europe, Asia and International, Patel helped consolidate and reorganize operations in the United States and Europe as the company worked to boost the capacity of its plants along the Gulf Coast.
Chapter Two included an ambitious investment plan crafted by Patel after becoming CEO in January 2015. The company purchased Ohio plastics maker A. Schulman in August 2018 for $2.2 billion, its first major acquisition since emerging from bankruptcy. That same month, the company began construction on a $3.4 billion plant in Channelview. Construction of the propylene oxide/tertiary butyl alcohol plant, slowed due to COVID-19, is expected to be completed in the fourth quarter of 2022.
In December 2020, amid the pandemic, LyondellBasell acquired 50 percent of South African company Sasol’s base chemicals business at Lake Charles for $2 billion.
Now, Chapter Three, sustainability, is about to begin. That includes part of a $25 million investment, in partnership with Michigan’s Dow Chemical hand Calgary-based Nova Chemicals, in the Closed Loop Circular Plastics Fund in May to update and modernize facilities and equipment that would source, process and return currently hard-to-recycle plastics to supply chains in the U.S. and Canada.
Q: In addition to the Closed Loop Circular Plastics Fund, what else is ahead for the company as it enters this next chapter?
A: We will continue to try and grow the company, but we now need to think about being a greener chemical company.
We have three prongs to our work around recycling. The first is mechanical recycling. We have a mechanical recycling plant in Europe. The small plant to further prove out the technology is through our joint venture with Suez, a waste-handling company in Europe, called Quality Circular Polymers. They bring waste to our facility, and then we sort the waste, wash it and create new recycled plastic from it that goes into things like the Magnum ECO Samsonite suitcase.
The second pillar in our recycling effort is called advanced recycling, or molecular recycling. What we’re aiming to do is take plastic waste and convert it back to a feedstock.
The third pillar is bio based feedstocks. We buy used cooking oil, for example, process it and make plastics.
Q: How big a part of the business do you see this being?
A: It is too early to say exactly what percentage of our business will come from this technology.
Without plastics, we can’t carry on everyday life. We’ve got to address the waste, and our company is leading the way in mechanical recycling and molecular recycling. My hope is that we’re building molecular recycling plants in Europe and Houston by the middle of the decade and, by the second half of the decade, we’ll build dozens of those around the world.
We’ll license it as well. We want to share that technology so the world can benefit from the ability to recycle waste. I hope that we’re the ones who develop that.
Q: The company saw no layoffs or furloughs during the pandemic, even with the near shutdown of the global economy. How did you manage that?
A: After going through all of the layoffs during bankruptcy, which I led, one of the things that I wrote down, when I was appointed to be CEO, was there will be no layoffs during my time as CEO.
We did a number of things on the cost front. For example, reducing non-safety related discretionary spending such as travel. We also slowed construction on our propylene oxide/tertiary butyl alcohol plant in Channelview.
COVID-19, as a test for the company, proved that we’ve built something that’s really strong and resilient. We didn’t borrow a single dollar to pay a dividend, or to pay payroll. We funded everything from operating cash flow, and we did a $2 billion acquisition of Sasol in the middle of the pandemic.
My philosophy at the time was, I want to keep everything as normal as possible. Everything was business as usual. It expressed confidence to our employees. Part of my job as a leader during this whole period was to be honest and not sugarcoat things, but if I’m not confident, how do I expect our employees to be confident?
Q: Revenue last year was down 20 percent from 2019. Things have turned around this year, with first quarter revenue 21 percent higher than the first quarter of 2020.
A: As the recovery took hold in the U.S. last year, especially in the second half, we could see demand recovering. Through the pandemic, plastics demand increased because of all the (demand for) carryout food containers and packaging.
Where we got hit hard was on the fuel side with gasoline and jet fuel. Our refinery really struggled and is still struggling. But the rest of the business was actually pretty good through the pandemic.
Now, a reopening of the economy is happening and demand is going up even more.
Q: What new challenges came out of February’s historic winter storm?
A: We had the February freeze, which knocked out almost the whole chemical industry and refining industry for about 30 to 45 days. We’ve never had that kind of outage as an industry, ever. Even during hurricanes, we’re down for a week and then we’re back up again.
The power outages, because they were so sudden, damaged a lot of equipment. We need about two days to safely shut down a big chemical plant. We can’t shut down in three hours. So supply was curtailed for 45 days and there is hardly any inventory.
Q: When will the shortages in supply end?
A: Probably the middle of next year. It’s going to take some time because of the (high) reopening-related demand that’s still in front of us.
If you think about how many different products are short today – with automobiles, there’s not enough supply because of the chip shortages, people are deferring purchases of furniture because it’s not available, seat cushions are made out of propylene oxide, as in the new plant that we’re building in Channelview, appliances – it’s everything.
Q: Where do you see the company heading as the world comes out of the pandemic?
A: At some point, the inventory is going to have to be rebuilt. That will cause a one-time boost in demand to get the inventory back to where it should be. This points to a very strong global business environment well into next year before we get to a balance of supply and demand.
If there are plant shutdowns because of a hurricane, that’s just going to make things even tighter again.« Previous Post Next Post »