Why the Oil Industry Benefits from Bottled Water Sales

Avatar http://www.alternet.org Posted by admin 109 days ago



Most people know of Royal Dutch Shell, Exxon, ConocoPhillips and British Petroleum as some of the world's biggest oil companies. These corporations are synonymous with gasoline, motor oil and environmental degradation.

Regardless of their ubiquity in our everyday lives, many people are not conscious of how these names are intimately linked to the bottled water industry through the production of PET (Polyethylene terephthalate) plastic bottles.

Given that 80 percent of the PET produced in the United States ends up in a Coca-Cola, Pepsi or Nestlé beverage container, people should know the connection that these bottled water producers have with the largest oil, chemical and plastic corporations on the planet. Let's see who is profiting from supplying oil-based plastic to the bottled water industry and how the players in this supply chain are some of the worst environmental polluters of our time.

The process of producing PET plastic bottles involves a number of different stages using multiple producers in the supply chain. Some of the corporations are widely recognizable, while others are more obscure. The important point in this analysis, however, is that the bottled water manufacturers are the end point of a supply chain that contains some of the biggest polluters on the planet.

Step one: the production of PET's main raw materials

The supply chain for PET plastic bottles begins with two streams which produce PET's primary raw materials, terephthalic acid (PTA) and monoethylene glycol (MEG). These two streams come together when PET is actually produced in a factory through the chemical reaction between PTA and MEG.

These raw materials account for approximately 75 to 80 percent of the total manufacturing cost of PET.

PTA. Terephthalic acid, one of PET's two primary raw materials, is produced using paraxylene. Paraxylene, which is very similar to gasoline, is derived from crude oil through a refining process at oil and petrochemical refineries.

A number of oil companies in the US produce paraxylene including British Petroleum, Chalmette Refining (50/50 joint venture between ExxonMobil and Petróleos de Venezuela S.A.), Chevron Phillips Chemical (50/50 joint venture between Chevron and ConocoPhillips), ExxonMobil, Flint Hills (owned by private conglomerate Koch Enterprises), and Lyondell. These facilities are all located in the gulf region of the United States.

At this point, the PET plastic bottle supply chain divides into two categories of PTA producers:

1. Companies that make both paraxylene and PTA -- In the United States this category is occupied by British Petroleum's Chemical division, BP Chemicals, and the private conglomerate Koch Industries. In BP's case its refineries in Decatur, Alabama and Texas City, Texas produce paraxylene which is then turned into PTA at the company's operations in Decatur, Alabama and Cooper River, South Carolina.

In the case of Koch Industries, its refining division, Flint Hills Resources, manufactures paraxylene at its operations in Corpus Christi Texas while its fiber and polymer company Invista turns paraxylene into PTA. While BP sells its PTA to PET manufacturers, Invista (Koch Industries) uses the PTA it manufactures for its own PET production.

2. Companies that purchase paraxylene and then produce PTA for their own PET production -- In this category chemical companies purchase paraxylene directly from the refinery, transport it to their production facility where they will produce PTA either for sale on the market or for their own PET production. This category is occupied by two major players, DAK Americas (subsidiary of private Mexican conglomerate Alfa, 2006 revenue $6.8 billion), and Eastman Chemical Company (2006 annual revenue of $7.5 billion).

MEG. Monoethylene glycol (MEG), PET's other primary raw material, is also derived from crude oil. In addition to being used by PET manufacturers, MEG is used to produce antifreeze and coolants for the automotive industry.

MEG's main raw material is ethylene, which is produced in refineries by steam cracking hydrocarbons. Natural gas is also used to make ethylene.

Ethylene is more widely produced than paraxylene and is manufactured by a large number of oil and chemical companies in the United States. The leading ethylene producers in the United States include, ChevronPillips Chemical Company, Equistar Chemical Co., Exxon, Shell and Dow Chemical.

Once ethylene has been produced, MEG manufacturers will purchase it as a feedstock. Some of the large MEG producers in the United States include Eastman, Equistar Chemical Co., Formosa Plastics Corp (Owned by Chinese company Nan Ya Plastics), Huntsman Corp, Old World Industries, PD Glycol, Shell and Dow Chemical.

These companies produce MEG at their facilities and then either use it as a building block for various types of plastic, including PET, or sell down the supply chain to other manufacturers.


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