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Mergers & Acquisitions

Chevron Phillips amps up chemical investment

Chemical maker plans Qatari project while reportedly bidding for Nova Chemicals

by Michael McCoy
June 24, 2019

 

20190624lnp2-cpchem.jpg
Credit: Fluor
Part of the ethylene cracker Chevron Phillips opened in Baytown, Texas last year

Chevron Phillips Chemical is forming a petrochemical joint venture with one Middle Eastern company and, according to a published report, negotiating with another Middle Eastern firm to acquire the Canadian chemical maker Nova Chemicals.

Chevron Phillips says it has joined with Qatar Petroleum to develop an ethylene complex in Qatar. The facility would be 70%-owned by the state-owned oil company and 30% by Chevron Phillips, and would include a 1,900-metric-ton-per-year ethane-based ethylene cracker and two, downstream, high-density polyethylene plants. Engineering is set to begin shortly, leading to a planned start-up in late 2025, the companies say.

The agreement follows an invitation that Qatar Petroleum put out in May 2018 looking for an international partner with which to build a new cracker. Chevron Phillips—a joint venture between the oil companies Chevron and Phillips 66—earlier partnered with Qatar Petroleum to create Qatar Chemical, a Qatari maker of ethylene, polyethylene, 1-hexene, and α-olefins.

The announcement of the new Qatari project comes just days after a Reuters article reported that Chevron Phillips had offered to acquire Nova for more than $15 billion, including debt. Nova is owned by Mubadala Investment, Abu Dhabi’s sovereign wealth fund, which acquired the Canadian firm in 2009 for $2.3 billion, including debt.

Chevron Phillips declined to comment on the Reuters story. In a statement, the company noted that it recently completed an ethylene-based complex on the US Gulf Coast and that it is exploring other projects. Notably, Chevron Phillips earlier confirmed, it is considering a second US Gulf Coast cracker. “Due to these ongoing exploration activities, it is inevitable that rumors and speculation will surface from time to time,” it said.

Chevron Phillips had sales last year of $11.3 billion, compared to $4.5 billion for Nova. Most of Chevron Phillips’s operations are on the US Gulf Coast. In contrast, Nova’s critical mass is in Canada, at sites in Alberta and Ontario, though it does have a growing Gulf Coast presence through an ethylene cracker it acquired from Williams last year and participation in a planned petrochemical complex in Port Arthur, Texas, with Borealis and Total.

Ashish Chitalia, chemicals principal analyst at the consulting firm Wood Mackenzie, said in a research note that acquiring Nova would make Chevron Phillips the third-largest polyethylene producer in North America after ExxonMobil Chemical and Dow. The deal would also combine two important licensors of polyethylene production technology.

Oil companies like Qatar Petroleum, Chevron, and Phillips increasingly see petrochemicals as a faster-growing market than their traditional mainstay, fuels. “Such a deal would confirm the trend of Big Oil diversifying further into downstream,” Chitalia wrote, “viewing the petrochemical sector as a growth engine.”

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