BEIJING, Nov. 14 -- Exxon Mobil Corp plans to focus its chemical investments in the Middle East and Asia, where production costs are lower and developing economies are expanding more than three times faster than the United States.
The company is spending "multi-billions" to expand capacity in the Middle East, where plants can process cheaper natural gas into chemicals, and in Asia, home to the fastest-growing markets, Sherman Glass, senior vice president at ExxonMobil Chemical Co, said in Singapore, according to Bloomberg News.
Increased chemical use in developing economies is spurring construction of plants from Iran to Thailand to turn gas and refined oil products into ethylene, the basic building block for plastics. Exxon is building its largest facility in Singapore, an island state on the main route used by oil and gas tankers from the Middle East to Asia. About half the output will be exported to China.
"The bulk of our chemical investments over the next decade will clearly be in those two parts of the world. No doubt about that," Glass said on Nov. 6. North America and Europe are mature markets that "will continue to provide a strong base of earnings to help us grow in the emerging markets of the world."
Asia's developing economies, excluding Japan, are expected to grow 9.8 percent this year, the International Monetary Fund said last month. That compares with 5.9 percent for the Middle East, 2.5 percent for the Euro area and 1.9 percent for the U.S.
Exxon will more than double its ethylene capacity in Singapore to almost two million tons a year when its second chemical complex is completed in 2011.
Unlike rivals in Asia that make ethylene largely from naphtha imported from the Middle East, Exxon's new plant can process a wider range of refined oil products, including gasoil and fuel oil, Glass said in Singapore. More than 90 percent of Exxon's chemical plants are integrated with refineries or natural gas processing plants.
"It's important to note the scale of the plants," said Andrew Ho, director of polyolefins at industry consultant Chemical Market Associates Inc. "The project will benefit from the economy of scale," Ho said. "Exxon will have lower overall costs for each ton of polyethylene produced."
The company is leading a trend toward building "mega plants" that will earn the highest potential return on investment, he said. The polyethylene plants are almost double, and in some cases more than double, the industry standard.
Raw materials and energy account for as much as 70 percent of the cost of running a cracker, or plant that turns gas or naphtha into ethylene, Glass said.
Ethane, a gas produced in association with oil, is used to make as much as 70 percent of the ethylene made in Saudi Arabia, said Koichi Ishihara, a senior analyst at Mizuho Securities Co.
The ethane price in Saudi Arabia has been capped at 75 cents a million British thermal units since 1998, said Samuel Liew, Singapore-based associate consultant at Chemical Market Associates. That translates into a production cost of between 150 and 200 U.S. dollars for each ton of ethylene.
Plants that use naphtha as feedstock in Asia, Western Europe and North America had production costs of between 580 and 650 U.S. dollars for each ton of ethylene in 2006, Liew said yesterday.
The company is spending "multi-billions" to expand capacity in the Middle East, where plants can process cheaper natural gas into chemicals, and in Asia, home to the fastest-growing markets, Sherman Glass, senior vice president at ExxonMobil Chemical Co, said in Singapore, according to Bloomberg News.
Increased chemical use in developing economies is spurring construction of plants from Iran to Thailand to turn gas and refined oil products into ethylene, the basic building block for plastics. Exxon is building its largest facility in Singapore, an island state on the main route used by oil and gas tankers from the Middle East to Asia. About half the output will be exported to China.
"The bulk of our chemical investments over the next decade will clearly be in those two parts of the world. No doubt about that," Glass said on Nov. 6. North America and Europe are mature markets that "will continue to provide a strong base of earnings to help us grow in the emerging markets of the world."
Asia's developing economies, excluding Japan, are expected to grow 9.8 percent this year, the International Monetary Fund said last month. That compares with 5.9 percent for the Middle East, 2.5 percent for the Euro area and 1.9 percent for the U.S.
Exxon will more than double its ethylene capacity in Singapore to almost two million tons a year when its second chemical complex is completed in 2011.
Unlike rivals in Asia that make ethylene largely from naphtha imported from the Middle East, Exxon's new plant can process a wider range of refined oil products, including gasoil and fuel oil, Glass said in Singapore. More than 90 percent of Exxon's chemical plants are integrated with refineries or natural gas processing plants.
"It's important to note the scale of the plants," said Andrew Ho, director of polyolefins at industry consultant Chemical Market Associates Inc. "The project will benefit from the economy of scale," Ho said. "Exxon will have lower overall costs for each ton of polyethylene produced."
The company is leading a trend toward building "mega plants" that will earn the highest potential return on investment, he said. The polyethylene plants are almost double, and in some cases more than double, the industry standard.
Raw materials and energy account for as much as 70 percent of the cost of running a cracker, or plant that turns gas or naphtha into ethylene, Glass said.
Ethane, a gas produced in association with oil, is used to make as much as 70 percent of the ethylene made in Saudi Arabia, said Koichi Ishihara, a senior analyst at Mizuho Securities Co.
The ethane price in Saudi Arabia has been capped at 75 cents a million British thermal units since 1998, said Samuel Liew, Singapore-based associate consultant at Chemical Market Associates. That translates into a production cost of between 150 and 200 U.S. dollars for each ton of ethylene.
Plants that use naphtha as feedstock in Asia, Western Europe and North America had production costs of between 580 and 650 U.S. dollars for each ton of ethylene in 2006, Liew said yesterday.
