International
Essochem Europe strengthens plastics position Moves by Exxon unit to keep strong competitive edge in 1980's include acquisition of Distillers' LDPE operations, expansion of olefins capacity
Dermot A. O'Sullivan C&EN, London
''We're not pessimistic about growth," remarks Robert D. Anding, president of Essochem Europe, a regional arm of Exxon Chemical, at its headquarters just outside Brussels. To substantiate his claim, he points to a number of developments aimed at ensuring that the Exxon unit maintains its strong competitive edge in the 1980's. One is the purchase last year of National Distillers & Chemicals' low-density polyethylene operations at nearby Antwerp. Another is expansion of Essochem's olefins capacity in Europe. Moreover, many of the items Essochem sells are specialties for which growth prospects look bright and profit margins are attractive. With the acquisition of the 560 million lb-per-year LDPE operations from National Distillers' subsidiary, USI Europe, Essochem essentially doubled its production capability for the polymer in a single stroke. The company's own 528 million lb-peryear unit at Meerhout, some 40 miles from Antwerp, started up in 1977. "At the time we decided on the USI acquisition, most of the European companies [in the business] weren't pleased with the performance of polyethylene," Anding recalls. "In spite of that, we went ahead with the decision to buy. We now feel that our confidence at the time was justified. The timing was good. There since has been a dramatic change in the performance of the business." Karl-Ludwig Bohmer, Essochem Europe's vice president for plastics, concurs. "It was a very successful move," he says. "We acquired good hardware and technology, and a lot of very good people." All told, some 550 USI workers shifted over to Essochem, including the LDPE marketing 14
C&EN April 21, 1980
staff, raising Essochem's total West European work force to about 6000. The acquisition put Essochem firmly among the largest West European LDPE producers, with an annual capacity approaching 1.1 billion lb. More significantly, perhaps, the move has expanded considerably the variety of polymer grades it can offer customers. In terms of product specifications, Essochem can supply some 90% of the overall grade requirements of the market, up from 70% before the USI purchase. This capability will be extended further when Exxon Chemical and Esso Chemical Canada complete two new LDPE units. These units will use Union Carbide's Unipol low-pressure route to the polymer. The larger of these, at Mont Belvieu, Tex., will have an annual capacity of 600 million lb when completed in mid-1982.
The Canadian plant, at Sarnia, Ont., slated to be ready in 1983, will have a capacity of 300 million lb per year. A number of claims have been made for the Unipol process, which polymerizes gaseous ethylene continuously in a fluidized-bed reactor using a proprietary catalyst (C&EN, Dec. 5, 1977, page 21). Among them are significant savings in energy use and capital costs, greatly enhanced safety, considerable reduction in plant space, and more desirable environmental features. The product, too, differs in form and physical characteristics from "conventional" LDPE. If Essochem Europe's management follows its customary practice, LDPE produced by the Unipol process will be imported initially for trial marketing in Western Europe. A plant for local production likely will follow,
Essochem has major plants at 11 locations in Europe Location
Products (capacities in lb per year)
Belgium
Antwerp
France
Notre Dame de Gravenchon
Naphtha/gas oil cracker (670 million lb ethylene, 490 million lb propylene, 180 million lb butadiene), aliphatic and aromatic solvents, detergent intermediates, butyl rubber, resins, oil additives
West Germany
Cologne
Naphtha cracker (990 million lb ethylene, 540 million lb propylene, 55 million lb butadiene) Aliphatic and aromatic solvents
Greece
Thessalonica
Naphtha cracker (33 million lb ethylene), vinyl chloride (110 million lb, an expansion to 154 million lb under study), ammonia and nitrogen fertilizers, aliphatic and aromatic solvents, caustic soda, chlorine, hydrochloric acid, sodium hypochlorite
Italy
Trecate Vado Ligure
Aliphatic and aromatic solvents Oil additives
The Netherlands
Rotterdam
Benzene, toluene, xylenes, aromatic solvents, ammonia, nitric acid, nitrogen fertilizers, phthalate plasticizers
Sweden
Stenungsund
Naphtha cracker (750 million lb ethylene, 375 million lb propylene), carbon black, resins
U.K.
Fawley
Naphtha/gas oil cracker (230 million lb ethylene, 220 million lb propylene, 175 million lb butadiene), aliphatic solvents (220 million lb), butyl and chlorobutyl rubber (95 million lb), methyl ethyl ketone (130 million lb), oil additives Ethane cracker planned (1.1 billion lb ethylene)
Meerhout
Hamburg
Mossmorran
Low-density polyethylene (560 million lb), specialty aliphatic and aromatic solvents Low-density polyethylene (528 million lb)
probably sometime around mid-1985, depending on the product's success. The LDPE plant Exxon is consid ering for Saudi Arabia also might use the Unipol process. A 528 million lb-per-year unit is slated for Al-Jubail in partnership with Saudi Basic In dustries Corp. The plant is scheduled for a 1984 startup. Exxon will take most of the product and channel it into world markets. Presumably, some of it will go to Europe. The strength of the polyethylene business in Western Europe took most people by surprise, Bohmer admits. Demand last year rose 11% from 1978, but some believe inventory building accounted for about half this growth. However, Bohmer says that stocks held by converters aren't ex ceptionally high. "People are saying that this kind of growth can't continue," he remarks. "On the other hand, sales in the opening months of this year have been high." Bohmer says a 4%-peryear growth rate for LDPE is "fairly healthy." Meanwhile, Essochem isn't limit ing its sights to LDPE. It is also looking at high-density polyethylene and polypropylene, neither of which it makes in Europe. "A growth rate of 5 or 6% is expected for HDPE in the 1980's," Bohmer says. "For polypro pylene, it might be about 11% per year." Access to diverse supplies of hy drocarbon feedstocks is a trump card held by Essochem Europe that should go far to ensure the success of ex pansion plans. Four major crack ers—at Notre Dame de Gravenchon, near Le Havre, France; at Cologne, West Germany; Stenungsund, in southern Sweden; and Fawley, Southampton, in the U.K.—have a combined annual ethylene capacity of nearly 2.7 billion lb. (Output from-a small 33 million lb-per-year cracker at Thessalonica, Greece, is used lo cally.) And the company currently is laying plans for an ethane cracker at Mossmorran, just north of Edin burgh, Scotland. When completed in 1984, this unit will have an ethylene capacity of 1.1 billion lb annually (C&EN, Aug. 20,1979, page 4). Shell Chemical U.K. will finance half the $700 million cost of this unit, and Esso will use half its capacity to pro cess Shell's feedstock. Esso Chemical, the U.K. subsidiary of Exxon that will own and operate the cracker, initially will ship ethylene to its sister companies in Western Europe. But the consensus is that as olefin becomes available, other com panies may consider putting in downstream operations at the site. Indeed, Esso Chemical itself is eval-
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CIRCLE 34 ON READER SERVICE CARD April 2 1 , 1980 C&EN
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uating the option of building LDPE and HDPE units there. Engineers are designing flexibility into the cracker so that it will be able to use propane as a supplemental feedstock. Ethane and propane will be separated from natural gas liquids piped from the Brent oil and gas field in the North Sea. "Flexibility of cracking operations is going to be awfully important in the future," comments Gene Foley, Essochem Europe's feedstocks manager. "People these days are seeking to in crease their [cracker] feedstock op tions." He foresees "a big thrust in lique fied petroleum gas (LPG) during the coming five years in Western Eu rope." He notes that the growth of LPG supplies in Western Europe and the Middle East, coupled with the temporary halt in shipments of Ira nian crude last year, has focused growing attention on the possibility of using LPG as an alternate to naphtha or gas oil. But much depends on pricing. "Whether LPG proves to be an attractive alternative in the running of chemical plants must de pend on its cost," he says. "Everyone is considering LPG, but nobody wants to cut off his option to crack naphtha in the event LPG becomes overpriced."
Essochem currently processes some 7 million metric tons of hydrocarbons annually for its European chemical operations. About 2 million metric tons of raffinate by-products and off-gases are returned, so that net hydrocarbon requirement is closer to 5 million metric tons per year. The siting of most of its major petro chemical plants adjacent to Exxon's European refineries facilitates this two-way flow of products. Essochem's feedstock costs ran slightly more than $1 billion last year. Naphtha pur chases accounted for about half this total. "To be a factor in this business, you must have access to adequate supplies of feedstocks at competitive prices," Foley says. "If not, you are out of the business." He admits that, as far as supply source is concerned, "all Essochem's eggs are in one basket." But, he adds, "it's a very large and diverse basket. Exxon is a worldwide organization with refineries in many locations." "We have the advantage of having a very reliable and dependable sup plier," Anding points out. He insists, however, that "when it comes to the prices we pay, we have no cost ad vantages whatever over our compet itors. We pay the going market value for all our feedstock. We believe this
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C&EN April 2 1 , 1980
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is appropriate for us to be judged on performance as a chemical com pany." Essochem Europe's principal pro duction facilities are located in Bel gium, France, West Germany, Greece, Italy, the Netherlands, Sweden, and the U.K. A fully integrated petro chemical concern, it produces a vari ety of products. These are distributed among nine divisions—olefins, aromatics, plastics, elastomers, inter mediates (including plasticizers), specialties (such as petroleum resins for adhesives), petroleum additives, solvents, and fertilizers. Each of the nine divisions, or affil iates, is managed as a discrete busi ness center. Close lines of communi cation are maintained with corre sponding affiliates elsewhere in the world. "The main source of strength arising from this management struc ture is direct people-to-people con tact," Anding says. "Each affiliate has immediate access to the technical and commercial strength of the worldwide organization, together with a global supply capability where needed." Essochem Europe's sales last year amounted to about $3 billion, more than double the $1.25 billion figure in 1974. The largest portion of revenue, 38%, came from merchant sales of such primary petrochemicals as aromatics and olefins. Next in impor tance were solvents and specialty chemicals, 33%, and then plastics and elastomers, 23%. Fertilizer sales ac counted for the 6% balance. Exxon doesn't disclose profits for its regional chemical companies. However, Anding notes that Esso chem Europe's profitability last year improved in line with increases chalked up by other West European chemical companies. In general terms, both sales and investments for Essochem Europe account for about one third of Exxon Chemical's worldwide total. Over the past five years, global investments amounted to some $2 billion. Last year alone, the figure was nearly $400 million. "I share the concern voiced by others about business in 1980 and 1981," he says. "In general, the chemical industry in Western Europe had a pretty good year in 1979.1 be lieve that a big part of the 1979 im provement was due to the fact that managers were more determined to make their business profitable. Profitability was put higher on the priority list than in the past. "This year, management of indi vidual companies will be faced with much the same set of circumstances. The decisions taken will result in 1980's either being more like 1979, or the less favorable 1978." D
