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ExxonMobil leverages feedstock advantages

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Oilfield Technology,

ExxonMobil Chemical continues to ensure its competitiveness in a low oil-price environment, according to a new report from IHS Inc. However, ExxonMobil Chemical’s product focus, similar to the chemical businesses of other oil and gas majors, is comparatively narrow, with relatively limited diversification. This, along with a decline in parent company Exxon Mobil Corp.’s upstream earnings, may affect the company’s growth and competitive positioning, according to the new report, entitled the IHS Chemical: ExxonMobil Chemical Competitive Company Analysis.

Exxon Mobil Corp.’s product portfolio ranges from oil and gas exploration, development and production to refining, fuels marketing, lubricants and specialties, and chemicals, IHS stated. It is the third-largest publicly traded, global oil and gas major with revenues of $259 billion in 2015.

“ExxonMobil Chemical has significant opportunities and competitive advantages in terms of its proprietary technology, global scale, and an integrated system that allows unique operational efficiencies,” said Dave Witte, Senior Vice President of IHS and general manager of IHS Chemical. “ExxonMobil Chemical’s feedstock diversity and flexibility, for ethylene, in particular, are the key elements driving margins. However, the company does have limited product diversification in its propylene and benzene chains.”

“ExxonMobil Chemical continues to capitalize on U.S. feedstock and energy costs, which are among the lowest in the world,” Witte said. “The company is expanding its Baytown (ethylene), Texas, and Mont Belvieu (PE), Texas, complexes, which are scheduled for completion in 2017. In addition, the company started its second Singapore petrochemical complex in 2013 to target the high-growth Asian market and is strategically investing in new elastomer capacity in both Singapore and the Middle East.”

One of the most significant investments for ExxonMobil Chemical, Witte said, is the expansion of its export-based position at Mont Belvieu, Texas, US.

“Currently, ExxonMobil Chemical can supply the Asian market through its facilities in Singapore and China, but this U.S. expansion will provide additional cost-effective options for exports to Asia and elsewhere,” Witte said. ”ExxonMobil Chemical’s dominance in proprietary technologies, combined with its scale and market channels, make it a very attractive candidate for partnerships, particularly in Asia and the Middle East,” he continued.

However, Witte also stated: “If petrochemical prices decrease further, that will offset Exxon Mobil’s US and Middle East feedstock advantages, which is significant. Additionally, if the company experiences constrained access to feedstock supplies in countries outside of the U.S., where the government or national oil companies control supplies, this could be a challenge. However, I think Exxon Mobil Chemical’s biggest threat to growth may hinge on China’s economic slowdown, the potential implementation of protectionist measures, and the risks associated with geopolitical uncertainty in the Middle East. These macro-risks are not only applicable to ExxonMobil, but ExxonMobil’s large, but fairly narrow portfolio, could be more substantively impacted as a result.”

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