Sunday Thematic & Weekly Recap

Crude Oil to Chemicals and Upstream Integration – A Game of Musical Chairs
April 28, 2024
Commodities Mentioned:
Crude Oil, Natural Gas, Plastic, Ethylene, Coal, LNG, Power, PVC, Hydrogen, Ammonia, Polypropylene, Polyethylene, PET, Biomass
Companies Mentioned:
Aramco, Shell, BP, ADNOC, Hengli, ExxonMobil, Enterprise Products, Chevron, Dow, BASF, LyondellBasell, Reliance, Alpek, SABIC, Lotte Chemicals, LG Chemicals, Huntsman, Bunge, Tesla, Westport Fuels

C-MAC Sunday Thematic and Weekly Recap

Crude Oil to Chemicals and Upstream Integration – A Game of Musical Chairs

  • Companies pushing oil and gas portfolios downstream for guaranteed oil & gas demand are not likely to change global chemical demand growth, and all it will do is move feedstock supply from some companies to others.
  • There is perhaps an inevitability to this, and we may already be able to flag the winners and losers as getting into chemicals meaningfully – it means a large purchase or lots of new capital if you are not there already.
  • Spending to stop a business from deteriorating (buy buying demand, for example) is ultimately dilutive to return on capital and not a strategy for growth – companies taking this path are trying to slow a possible path to zero.
  • The path for growth in energy transition is to invest in what is needed in energy, power, hydrogen, storage, etc. We explain why we should give fixing power grids to the oil majors – they know project management.
  • Otherwise, we look at the wave of earnings results, the regional mood biases driven by cost differences, and why some European sentiments may be too optimistic. We also look at hydrogen transport and plastic waste.

Exhibit 1: This chart sits in the new ethylene prospectus we will issue on Monday. There is an element of scare tactics in the chart, and we are marketing a study after all, but the potential is there for a lot more capacity.

Source: Corporate Reports, C-MACC Analysis, April 2024

See PDF below for all charts, tables and diagrams

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