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Qatar, Chevron Phillips Partner on US Petchem Project

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Qatar Petroleum is taking a significant stake in an $8 billion petrochemical project on the US Gulf Coast with Chevron Phillips (CP) Chemical, just months after the Chevron-Phillips 66 joint venture won a 30% stake in a planned petchem complex in Qatar. The deal comes as international oil companies are courting Qatar for a position in a major expansion of the country's LNG production capacity, which will use additional gas resources from the country's giant North Field. Qatar Energy Minister Saad al-Kaabi, who is also QP's CEO, and CP Chemical CEO Mark Lashier signed the agreement in a high-profile ceremony at the White House after a meeting between US President Donald Trump and Qatar Emir Sheikh Tamim bin Hamad al-Thani. The project -- the US Gulf Coast II Petrochemical Project -- is slated to include a 2,000 kiloton per year ethylene cracker and two 1,000 kiloton/yr high-density polyethylene units (IOD Jun.25'19). CP Chemical will own 51% of the project, with QP taking the remaining 49%. A final investment decision is expected by 2021, with start-up planned for 2024. The US is a "core growth area" for QP, al-Kaabi said at the signing. The more that QP invests in Gulf Coast petchem and LNG facilities, the more important an upstream US asset could become as a physical hedge in their portfolio. Chevron, too, has growth plans in the US. The company is aiming to grow production by 900,000 barrels of oil equivalent per day by 2023, and its Permian Basin position is advantaged because much of the acreage has low or no royalties. The US major has taken steps toward better integration between the Permian upstream and downstream, expanding existing petchem facilities and purchasing the Pasadena, Texas, refinery from Petrobras because it is configured to run the kind of light, sweet crude produced in the Permian. But Chevron has not built out its downstream to the same extent that Exxon Mobil has, with its multiple investments in additional light, sweet refining capacity and chemicals capacity, despite the two companies having very similar production goals. Exxon and Chevron control their gas molecules from the field to market, making their upstream assets appealing for a player like QP. Chevron and Exxon are each very keen to participate in the Qatar LNG expansion, and the Permian has been seen as one bargaining chip that they could offer. Nearly a year ago, Exxon confirmed talks with QP over US onshore asset. But QP to date has only partnered on other assets (IOD Feb.6'19). Politically, the meeting between Trump and Emir Tamim is a diplomatic win for the Qatari government, which has been in a protracted dispute with Saudi Arabia -- a favored ally of the Trump administration. Qatar came to the meeting bearing gifts. Aside from the QP-CP Chemical deal, Qatar Airways agreed to purchase planes from Boeing and Gulfstream and engines from GE, and the country's Ministry of Defense agreed to buy missile defense systems from Raytheon. The US ran a $2.9 billion trade surplus -- a key priority for Trump -- last year, according to the office of the US Trade Representative. The Qatari Emir played that fact up in a dinner Monday night with Trump and senior officials from both countries. "You should all be happy -- especially you, Mr. President -- to hear that there is a trade deficit between our countries that favors the United States of America," he said. Emily Meredith and Michael Sultan, Washington, and Noah Brenner, Houston

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