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OXYCHEM JOINING EQUISTAR VENTURE Three producers seek economies of scale on eve of industry downturn
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ccidental Petroleum will contribute the petrochemical assets of its Occidental Chemical subsidiary to Equistar Chemicals, the 16-month-old joint venture between Millennium Chemicals and Lyondell Petrochemical. The combination will create one of the world's largest petrochemical producers, one better situated to ride out the anticipated industry downturn (C&EN, March 23, page 17). Equistar will become the world's second largest ethylene producer (after Dow Chemical), with more than 11.4 billion lb of annual capacity, and third largest propylene producer (after Shell and Exxon), with almost 5 billion lb. It is already North America's largest olefins and polyethylene producer and, with the addition of OxyChem's operations, will further diversify and integrate its ethylene production into downstream businesses. OxyChem's remaining core businesses will be chloro-vinyl and specialty chemicals. To mitigate the effects of industry cycles, OxyChem continues to expand its specialties side aggressively, with plans to increase it from about 25% of its business today to about 30% by 2000. Equistar will meet the ethylene feedstock needs of OxyChem's remaining business under a long-term supply agreement. "Joining this alliance substantially improves our investment in the petrochemicals business," says J. Roger Hirl, OxyChem's president and chief executive officer. "All of the companies are focused very heavily on cost efficiency and reengineering our processes, and I know we will fit very well. I think this is a classic win-win-win situation for all three companies." OxyChem's contribution to Equistar includes more than 5 billion lb of olefins capacity; more than 2 billion lb of capacity for ethylene glycol and ethylene oxide and derivatives, including a 50% interest in its PD Glycol joint venture with DuPont; and 950 miles of ethylene/propylene pipelines along the Gulf Coast. 4 MARCH 30, 1998 C&EN
In return, Occidental Petroleum will get $425 million in cash. To finance this payment, and another $75 million to Millennium, the venture will borrow $500 million. The loan and the assumption of $200 million in debt associated with the OxyChem businesses will increase Equistar's total long-term debt from about $1.74 billion to about $2.44 billion. The new partnership, still subject to Federal Trade Commission approval, is expected to become final by midyear. Lyondell's ownership will shift from 57% to 41% and Millennium's, from 43% to 29.5%. OxyChem also will own 29.5%. Lyondell's president and CEO, Dan F. Smith, will continue to serve as Equistar's CEO. Brian Gittings, OxyChem's vice president for chlorinated isocyanurates, will become Equistar's vice president for oxygenated chemicals. Ronald J. Schuh, who had headed OxyChem's petrochemicals business, is now its executive vice president for specialties. This job was held by Leslie J. Story, now executive vice president for R&D and commercialization. "We believe Equistar sets the industry standard for the most efficient and cost-
Hirl: classic win-win-win situation
Oxy remains sizable business even after transfer to Equistar Occidental Chemical Sales: About $3.1 billion Major products: Chlorine, caustic soda, polyvinyl chloride, and several specialty chemical businesses Plant locations: 18 in North America and eight overseas (including joint ventures) Employees: About 6,500
Equistar Chemicals Ownership: Lyondell, 41%; Millennium, 29.5%; OxyChem, 29.5% Sales: About $6 billion Major products: Ethylene, propylene, aromatics, polyethylene, ethylene glycol, ethylene oxide and derivatives Plant locations: Total of 20 in California, Illinois, Iowa, Louisiana, New Jersey, Ohio, and Texas Employees: About 5,300 effective method of operating these commodity chemical businesses," says Smith. "The addition of Oxy's assets will enable us to increase annual profit improvement for these combined businesses to more than $275 million annually by year-end 2000 from the synergy benefits." Although cost cutting is expected, about 900 OxyChem employees, primarily in manufacturing, are expected to move to Equistar. Regarding professional staff, "we found a rather fortuitous situation with Equistar," Hirl tells C&EN, since Equistar was already looking to fill about 150 openings. "Because of the cultural similarity between our businesses, a very high percentage of people will be offered positions in Equistar," he believes. Synergies, shared vision, and cultural fit, say the executives, are the drivers behind this deal, as they were with Equistar's creation (C&EN, Aug. 4, 1997, page 9). The three producers hope to better leverage costs over a larger asset base. Vital to cost control efforts are OxyChem's flexible crackers that can use a variety of feedstocks and will allow Equistar to take advantage of fluctuations in oil and gas markets and reduce ethylene production costs.
OxyChem's higher margin ethylene oxide and derivatives business "diversi fies the product portfolio with an ethyl ene derivative that does not necessarily follow the same cycle dynamics as the polyethylene business," says Smith. "This translates into additional earnings avail able [to all the partners] during all parts of the petrochemical business cycle." Ann Thayer
Microencapsulation makes catalyst reusable Imagine a tea bag that gives a fullflavored brew even though it's dipped over and over again in many different pots of water. None exists. But catalytic systems that work that way may be at hand. Using a microencapsulation tech nique, Japanese chemists have prepared immobilized Lewis acid catalysts that are recoverable and reusable, just like the imaginary tea bag. In addition, the re searchers—chemistry professor Shu Kobayashi and graduate student Satoshi Nagayama at the Science University of Tokyo—find that the activity of the cat alyst they prepare in this way may be even higher than that of its stand-alone counterpart [/. Am. Chem. Soc, 120, 2985(1998)]. The work "is extremely exciting," com
ments Paul J. Reider, vice president for process research at Merck & Co., Rahway, N.J. Because "even when chemists come up with wonderful, efficient catalysts, we have to continually make them because they don't last," he explains. Scandium trifluoromethanesulfonate (scandium triflate), a Lewis acid devel oped in 1993 by Kobayashi's group, was used to demonstrate the technique. Most Lewis acids are destroyed by water, but scandium triflate is stable in water and thus is very versatile. By trapping it in lit tle beads that can be added to a reaction, filtered off when the reaction is over, and then taken to the next reaction, "you can have an incredibly efficient, neverending catalytic system that is reusable, versatile, and easy to use," says Reider. Kobayashi and Nagayama prepare the microencapsulated catalyst by simply stirring powdered scandium triflate in a solution of polystyrene in cyclohexane at 40 °C for one hour. After the micro capsules have cooled and hardened, they are washed with acetonitrile and dried at 50 °C. Using both batch and flow systems, the researchers demonstrate use of the microencapsulated catalyst in several im portant Lewis acid-catalyzed reactions. In one reaction that Reider says is notorious for destroying Lewis acid catalysts—the so-called imino aldol reaction—the pre pared catalyst works very well, showing better activity than the unencapsulated
Microencapsulated Lewis acid catalyzes many reactions Imino aldol reaction
OSi(CH3)3 MC Sc(OTf) 3 3 hours
Michael reaction OSi(CH3)3 MC Sc(OTf) 3
OCHo
OCHo
6 hours
Friedel-Crafts acylation
