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How Is ExxonMobil’s Downstream Segment Positioned?

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ExxonMobil’s Downstream performance

ExxonMobil’s (XOM) Downstream segment has been a savior for the company in the low oil price scenario. The company is focused on expanding this segment to strengthen its integrated model. 

Before we review ExxonMobil’s ongoing Downstream projects, let’s look at the company’s refined product sales in the third quarter.

In the third quarter, ExxonMobil’s refined product sales rose 1% YoY (year-over-year) to 5.6 MMbpd (million barrels per day) because of a 0.1% YoY rise in heating oil, kerosene, and diesel sales, a 13.2% rise in aviation fuels, and a 10.5% rise in heavy fuels. However, this was partly offset by a 0.5% YoY fall in gasoline sales.

Usually, with all else being equal, lighter refined products such as gasoline yield more revenue than heavier ones. Thus, the higher the sales of gasoline, the better it is for the company. In the third quarter, XOM sold 2.3 MMbpd of gasoline and naphtha—40% of its total refined products.

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ExxonMobil’s Downstream projects

ExxonMobil has six major ongoing Downstream projects. Of these, the Antwerp coker and the Beaumont hydrofiner have recently come online. The Antwerp coker is expected to increase the production of high-value distillates and marine gas oil right ahead of IMO (International Maritime Organization) 2020, which will cap the sulfur content in marine fuels.

The Beaumont hydrofiner will also use the company’s proprietary catalyst to produce high-value, ultra-low-sulfur fuels. Further, the Rotterdam advanced hydrocracker project is expected to come online by the year’s end. The Rotterdam advanced hydrocracker is a proprietary technology–enabled project and is expected to double the company’s margin.

Other projects include a Singapore resin upgrade, a Beaumont light crude expansion, and the Fawley hydrofiner. These projects are aimed at increasing feedstock flexibility and producing higher-value, lighter refined products.

Overall, ExxonMobil’s technological advantage and focus on higher-value refined products are expected to create a strong Downstream portfolio capable of creating more than a 20% return.

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