By BEN LEFEBVRE
Phillips 66 will focus on growing its chemical and midstream
segments at the expense of its fuel production business because
of the weak outlook for fuel demand, the company's incoming CEO
Phillips 66, the refining arm of oil major
ConocoPhillips that will become a stand-alone company after
April 30, will shift its long-term capital spending to its
Chevron Phillips Chemical production and DCP Midstream
Chevron Phillips is a 50-50 joint venture with Chevron. DCP
is a partnership with ConocoPhillips and Spectra Energy.
Phillips 66 will roughly double its 2012 capital expenditure
budget for its chemical business to $500 million, while its
spending on its refining business will grow from
just under $1 billion, Greg Garland, a ConocoPhillips executive
vice president who will head Phillips 66, said.
Capex for its midstream segment will more than double to $1
billion, Garland said during a conference call with
In the long term, Phillips 66 will split 50% of its capital
expenditure budget evenly on the chemical and midstream
businesses, up from 11% and 5%, respectively in 2011, Garland
Spending on its traditional fuel segment will shrink from
84% of total capital budget in 2011 to 50%, he said.
The shift comes as the long-term outlook for gasoline sales
in the US lags because of increased vehicle fuel efficiency and
greater use of alternative fuels. High oil prices are also
eroding fuel refiners' profit margins.
The outlook is better for chemical segment, where raw
material prices are falling because of increased natural
gas liquids production, Garland said.
Increased oil and gas
production in the US will also boost pipeline business, he
Returns on the chemical business "are still significantly
better than what we're seeing in the refining and marketing space,"
Dow Jones Newswires
Cover photo courtesy of John Lloyd via Flickr