Welcome, and thank you for joining the LyondellBasell MoReTec technology webinar. My name is David Kinney, and I'm responsible for investor relations at LyondellBasell. Today, we are joining you from the LyondellBasell Technology Center in Ferrara, Italy. Our company has a rich history of innovation and technology development. In 2023, we will celebrate the sixtieth anniversary of Giulio Natta's Nobel Prize-winning work for developing polypropylene right here in Italy. Since that time, our company has developed successful process technologies and catalysts from work here in Ferrara and LyondellBasell's other research facilities around the world. LyondellBasell's technology is utilized in over 300 manufacturing plants that are operated by both LyondellBasell and our competitors to transform monomers into polymers that make modern life possible. Today, we will be talking about our latest technology that we call MoReTec.
MoReTec enables plastic waste to be transformed back into valuable feedstocks to make new polymers that will improve circularity and help solve the problems of plastic waste. Before we get started, I would like to call your attention to the cautionary statements and information related to financial measures that can be found in the presentation slides on our investor website at www.lyondellbasell.com/investorrelations. Today's webinar will begin with a brief review of our MoReTec technology from Jim Seward, our Chief Innovation Officer. Following Jim will be Yvonne van der Laan, our Executive Vice President for Circular and Low Carbon Solutions. Yvonne will describe her group's progress in leveraging our MoReTec technology to build a profitable business that will serve the massive demand for recycled and renewable polymers. Following the presentations, we will take some live questions from the sell-side analysts that cover LyondellBasell.
A little over six months ago, our company unveiled our updated strategy at our Capital Markets Day in New York. LyondellBasell's strategy is supported by three pillars. The first pillar describes how we will grow and upgrade our core businesses with industry-leading assets and capabilities that provide unique advantages and add value. The second pillar is focused on Yvonne's work to build a profitable, circular, and low-carbon solutions business. Our third pillar describes our initiatives to unlock value through our performance and culture. Today, the majority of our focus will be on pillar number two, our progress in growing a circular and low-carbon solutions business. But like all innovations at LyondellBasell, we think MoReTec will also offer opportunities to grow and upgrade our traditional businesses through both organic growth and partnerships around the world.
With that, I will turn the stage over to Jim Seward to walk us through our new technology. Jim, take it away.
Thank you. Thank you very much, Dave. Good morning, good afternoon. My name is Jim Seward. I'm responsible for innovation here at LyondellBasell. I've been with the company more than 30 years, working in a wide range of roles in a wide range of locations, and during that time, I've been lucky enough to be part of many of the technology developments, whether that be catalysis, whether that be process, whether that be product, that we as a company have become well known for. Today, I'm excited to discuss our different technology. Today, we're going to talk about advanced recycling. This is a key part of the solution to plastic waste, and LyondellBasell have developed a proprietary advanced technology called MoReTec. This technology fits within our integrated hub model that provides LyondellBasell with unique advantages, as Yvonne will talk later.
But MoReTec also provides the economic and environmental performance required for commercial success as we address the growing and urgent demand for recycled polymers. So plastics. Plastics are an important part of our everyday life, giving us fresh food, safe water, better healthcare, and all at relatively low carbon footprint. Unfortunately, plastic waste is all too often sent to landfills, incinerated, or lost to the environment. So here at LyondellBasell, our teams are tackling this issue head-on. We're working with customers to improve product design and packaging to make plastics more recyclable. We're increasing LyondellBasell's mechanical footprint, mechanical recycling footprint for the easier-to-recycle plastic wastes, and we're accelerating the development of our advanced recycling technologies, including MoReTec. Advanced recycling often uses pyrolysis to break down plastic waste and create new polymers. Advanced recycling has distinct capabilities. It's a solution for hard-to-recycle plastic waste.
It produces valuable feedstock for our crackers, and it produces polymers indistinguishable from fossil-based materials. However, this group of technologies can face limitations in terms of economic and environmental performance. So now let's look at why we believe MoReTec is a differential advanced recycling technology and fits with our circular and low-carbon business model. So at kind of high level, MoReTec has A, the scale and the plastic-to-plastic yield to drive economics and fit with our integrated hub model, but also the lower energy consumption and higher carbon efficiency to minimize environmental footprint. Let me expand further. Firstly, MoReTec maximizes carbon circularity to high-value feedstocks. We are focused on plastic-to-plastic recycling that maximizes the production and recovery of valuable feedstocks, increasing the overall yield at scale.
We will integrate MoReTec into our existing assets to recover both the pyrolysis oil and gas, and by doing this, we will displace fossil-based feedstocks. Sometimes these pyrolysis gas streams are actually consumed as fuel, but our integrated approach recovers this as a valuable feedstock, which in turn significantly improves our overall yield. In addition, MoReTec is further advantaged by our catalyst technology. Pyrolysis is actually a fairly relatively intensive energy-using process, but we are applying our long history of catalyst development in this space as well, looking at how we can convert polymers back to monomers. Catalysis, typically, you can lower the reaction temperature, making more energy efficient the process, but you can also improve the plastic-to-plastic yield. Then finally, MoReTec has a carbon footprint advantage. We have this through our unique process design and integration with our existing assets.
We see the value of this in the Scope 1, 2, and 3 footprints. Firstly, we are reducing our direct Scope 1 impact by recovering pyrolysis gas for use as feedstock. Second, we are reducing our Scope 2 impact from energy consumption by enabling the use of renewable power with our electrically heated design, and in addition, through lower temperatures, as I've mentioned, as part of our catalyzed process. Three, we are reducing our Scope 3 impact up and down the value chain by replacing fossil-based feedstocks and recovering waste plastic from incineration, landfills, or leakage to the environment. If you put all this together, combining all of this, we believe that pyrolysis feedstock produced from MoReTec has less than 50% of the carbon footprint of fossil-based feedstocks.
So we'd now like to show you a video to discuss some of the aspects of this technology development.
Society faces a challenge with difficult-to-recycle plastic waste. Currently, much of that waste goes to incineration or ends up in landfills. Advanced recycling can process this plastic waste by breaking it down into molecular form. Since 2018, LyondellBasell has worked to develop its own advanced recycling technology called MoReTec.
We believe that we have some advantages around our catalyst and our process knowledge that we could bring to bear to develop an advanced technology.
Throughout our history, we have demonstrated the ability to grow ideas from laboratory bench scale to world scale assets. Our proprietary catalyst technology gives us an advantage over other plastic waste pyrolysis processes by giving us a low energy intensity and carbon dioxide footprint.
What we've discovered through developing this technology is that the use of catalysts, maximizing our yield, and minimizing our energy are all very interconnected. It's really a combination of all these elements that makes it an advanced process.
MoReTec is unique. It provides a higher yield of usable cracker feedstock, minimizes waste and fuel streams, which provides higher value.
So moving forward, as we think about industrialization, it's critical to align the scale of MoReTec with our existing asset base and the needs of our customers. Some technologies that are smaller or modular in approach make them more difficult to integrate into larger hubs, but we believe our scale enables integration at our cracker sites. Purification is needed to utilize pyrolysis oil and pyrolysis gas at higher levels in commercial-scale ethylene crackers, and this is an element in our industrialization path. Scalability both drives economics and also is essential for LyondellBasell to reach our goal of 2 million tons per year of circular polymers. So looking forward, through our innovation capability and differential strategy, we're rapidly developing MoReTec from pilot to commercial scale. We anticipate MoReTec units within each of our integrated hubs.
We plan to start in Wesseling, near Cologne, with a 50 KT plant, where we hope to reach final investment decision before the end of this year... And then we will also move our attention to Houston, and potentially build a larger plant, 100 KT, in the Houston hub area. Longer term, we're also believing that MoReTec will present a licensing opportunity to help us grow and upgrade our core technology and product businesses. This video now will discuss our thoughts as we plan to scale up MoReTec at our Wesseling facility near Cologne.
Our goal is to solve the critical step of transferring a catalytic technology from pilot to commercial scale.
LyondellBasell is uniquely able to integrate MoReTec with our existing naphtha crackers, reducing fossil-based feedstock and fuel consumption in our European assets.
In the near term, we are focused on developing the first commercial MoReTec unit at Wesseling site, with a capacity of 50 kilotons per annum.
We are evaluating electrical heating to reduce carbon footprint, which aligns with our goal to reach net zero Scope 1 and 2 greenhouse gas emissions by 2050.
Plastic waste is a problem, but it also represents an alternative source of carbon. This is exactly what MoReTec has been developed for. MoReTec is part of a value chain producing polymers that can be used in high-value applications, such as healthcare and food packaging. The Ferrara R&D site has a long history of innovation. For example, we have developed here processes like, Spheripol, Spherizone, Catalloy, Hyperzone, Multizone, now it is the turn of MoReTec.
To sum up, advanced recycling is a key element in solving the urgent plastic waste problem. In this space, MoReTec is advantaged due to economics, scale, and environmental footprint. MoReTec fits within our wider differential integrated hub model. LyondellBasell will continue to be a leader in this space to meet the growing demands for recycled polymers. With that, I'd like to turn it over to Yvonne to discuss more broadly our work to build a profitable, circular, and low-carbon solution. Yvonne?
Thank you, Jim, for the great lead in on MoReTec. Good morning, good afternoon. My name is Yvonne van der Laan, and I'm responsible for circular and low-carbon solutions at LyondellBasell. I joined the company 4 years ago, and previously worked on a similar transformation with the Port of Rotterdam. I have over 20 years of commercial and business leadership experience in previous chemical and petrochemical companies. Before this role, I was heading the cracker business for O&P in Europe, and involved from day one in developing the feedstock strategy and the business model for MoReTec. That's an additional reason why I'm so excited today, live from Ferrara, to discuss the progress we are making on, first of all, scaling up MoReTec and being a pivotal part of our circular business model in building a profitable, circular, and low-carbon solutions business.
Let's start by reviewing what we said at Capital Markets Day back in March. Today, we will expand on the topics we discussed at Capital Markets Day. First of all, consumers and society driving the growing demand from our customers for recycled and renewable-based polymers. As a result, we see a way to create significant value through our CLCS business to address this urgent demand. LyondellBasell's differentiated integrated hub model will establish us as a leader in this space. With that, we remain confident in our ability to generate $1 billion incremental EBITDA by 2030. Let's look at how this generates value for LyondellBasell. We see this market growing significantly, and with LyondellBasell reaching 2 million tons per year, reaching a 20% market share for recycled and renewable-based polymers by 2030.
This equates to $500 million EBITDA by 2027, and $1 billion by 2030. This EBITDA is incremental to our existing O&P business, demonstrating the significant and profitable growth opportunity. It's also less capital intense than investing in new world-scale crackers. Our beliefs continue to be reinforced since our Capital Markets Day in March, as we have started to execute on our strategy and grown our business. Let's review the demand situation creating this opportunity. Back in March, we discussed the shortages faced by major consumer brand owners to reach their targets for recycled content. This shortfall in supply extends beyond brand owners when we also take a look at the major retailers facing similar gaps in their 2025 commitments. These combined commitments from retailers and brand owners are driving the changes we see in the market today.
Now, let's zoom out to what this means for the broader supply and demand balance. We see the shortfall in supply is creating a significant imbalance in supply-demand for these circular polymers, and packaging represents the majority of this growing demand. So this shortfall in supply will require additional capacity. But this requires commitment, time, and investments in both the infrastructure and new recycling capacities required, which is substantial. And only a few suppliers have LyondellBasell's capability to provide solutions at scale. We are convinced that the shortfall in supply should support healthy margins for circular products for quite some time. And as Jim describes, advanced recycling can provide a solution for applications such as healthcare and food packaging that require high-quality polymers recycled from plastic waste, being fully complementary to mechanical recycling solutions.
LyondellBasell is uniquely advantaged, with already its large customer base today in polyethylene and polypropylene solutions, and having intense relationships with our customers to allow us to understand and collaborate to meet their needs down the value chain. Listening to our customers, they have made it clear that recycled and renewable-based polymers must be indistinguishable or almost identical to fossil-based polymers. They must provide drop-in solutions, easy for our customers to process efficiently with their current machinery. They must be traceable, with auditable certification of the polymer's recycled and renewable content. They must be global, addressing our customer needs across all geographies in robust supply chains. Last but not least, these solutions must be provided at scale, producing the material at the scale required to meet the ambitions of the global goals for sustainability.
Now, the next video will feature one of our customers, Haleon, highlighting these needs.
Haleon has a purpose to deliver better everyday health with humanity. To deliver that strategy, we rely on running a responsible business that values innovation and scale in sustainability. Haleon has set ambitious goals on how it wants to become more sustainable. Those include trusted ingredient sourcing, reducing our carbon footprint, and importantly, making our packaging more sustainable. One way we can achieve our circularity goals is to utilize alternative plastics, such as polymers produced from renewable or recycled content. It is critical for us to be able to use materials that are indistinguishable from fossil-based materials. This is where solutions such as renewable-based or advanced recycled polymers can have a significant role to play. Not only are they renewable, but also they deliver a reduced carbon footprint.
As a healthcare company, innovation takes time, and not only do we have to test the ingredients for their efficacy, but for every material we include, we have to go through rigorous testing on purity and quality. Matching that with a limited supply of these types of renewable or biosourced renewable materials, means that we're in a constant challenge. Haleon's keen to partner with companies like LyondellBasell because you're an innovation leader, and we want to be part of a circular supply chain. So we're looking for partners that share our corporate goals to make that happen, and with our combined scale, we can create a sustainable model that others can follow.
Looking at the circular value chain, we see a complex system that requires multiple solutions. As Jim highlighted, the gravity of the plastic waste problem today is that it's heavily localized, highly fragmented, and lacks consistent regulation. There is an urgent need to divert plastic waste from landfills, incineration, and the environment in order to create the circular value chain. The sorting of plastic waste is a critical step to maximize the value of plastic waste before it can be appropriately used as feedstock into different recycling technologies. While we see the importance of mechanical recycling growing, we also have to acknowledge it is not suitable to be used at scale in higher quality applications, such as food or healthcare.
When we look at the current landscape for advanced recycling, we see it's in early stage and limited, and it's faced with higher costs than mechanical recycling. It's struggling to reach commercial scale as it goes through its learning curve, and it has lower energy and carbon efficiency. As LyondellBasell, we recognize these challenges and are tackling them piece by piece with our integrated O&P-hub approach, that allows us to build scale, reduce operating costs, and capture value. In the past months, you've seen us rapidly addressing the building blocks of our integrated hub model, by securing feedstocks, while investing upstream in plastic waste sorting with our partners in the capacities needed, and in regional hubs that feed into the integrated hubs.
This allows us, on our flagship sites in Cologne, Germany, and Houston, to leverage our existing assets in heavily dense populated areas that have a high plastic waste potential. Also, we are developing and investing in advanced technologies, such as MoReTec. By doing so, we are the preferred partner, both upstream for the plastic waste owners, as we allow them access to a network that creates optimum value of their waste streams into the different recycling technologies. But also downstream, with our customers and the brand owners, collaborating closely with them to provide comprehensive solutions, covering the full solution space of recycled and renewable polymers. We have demonstrated our ability to move quickly and decisively to build our integrated hubs, and we're making rapid progress towards our goals. These foundations will help us to accelerate growth and become the leader in circular solutions.
So when we then zoom back into MoReTec, and as Jim also explained, MoReTec is so unique in this business model, as it allows us to create sustainable economics, has a lower energy consumption due to LyondellBasell's proprietary catalytic process, and in addition, a higher carbon efficiency that allows us to maximize plastic-to-plastic yield by using both the liquid and the gas phase out of MoReTec. And then last but not least, it allows us scalability. When we compare MoReTec's cost position to alternative advanced recycling technologies, we see a cost advantage of 10%-15% for smaller scale assets, like we plan to build in Wesseling with MoReTec one of 50 kilotons a year. And at higher scale, like we intend for MoReTec 2 , and even beyond, we see this advantage increasing significantly to 30%-50% relative to competition.
This advantage, it reinforces our confidence in our strategy, setting us up for the future to develop and commercialize our own advanced recycling technology. Ultimately, our customer needs are at the forefront of all we do, and customers tell us they're excited by the investments we are making to bring MoReTec to commercial scale and provide the solutions they need. In the next video, we will discuss the value our strategy brings to our customers.
So our society is becoming increasingly environmentally conscious, and one area this is evident is consumer drive to support brands that have sustainable and environmentally responsible packaging and products. Consumer brands and retailers have made significant commitments on circularity and greenhouse gas footprint of their products, and it's important to them to have scalable, sustainable material solutions in order to not only deliver on those commitments, but actually capture value for their brand.
Our approach towards brand owners is unique and tailor-made to the needs of each of the brands. Also, LyondellBasell's circular portfolio covers the full range of offerings, from mechanical recycling to advanced recycling, as well as renewable polymers. By combining our specific and tailor-made approach with our wide range of product offering, we are able to maximize long-term value for all partners. We have significant competitive advantage through investments in new technologies like the one in MoReTec, molecular recycling technology, as well as access to upstream sources of recycled and renewable feedstock, and our downstream relationship with our customers and brand owners. I'm very excited LyondellBasell's future focus, growing the scale and diversity of our portfolio to be the supplier of choice for circular solutions.
We are confident that our strategy will create significant value for LyondellBasell, as well as for our customers and society. We are focused on strengthening our position as a preferred partner for plastic waste feedstock owners, establishing regional hubs complementary to our larger integrated hubs. And on these integrated hubs, utilizing and leveraging the existing assets that provide benefits from scale, logistics, and operating cost optimization, and leveraging our innovation capabilities to develop advanced technologies, such as MoReTec, and collaborating with our customers to provide comprehensive solutions they need.... LyondellBasell is building a leading circular and low carbon solutions business, driven by profitability, scale, and efficiency. To reach our goals, to sell 2 million tons of recycled and renewable-based polymers and generate $1 billion incremental EBITDA by 2030. Thank you so much for taking some time to learn more about our plans and progress.
With that, let me turn things back to our moderator to begin the Q&A session. Thank you.
Ladies and gentlemen, we will now start the question and answer portion of this webinar, with questions from our sell-side analysts. If you would like to ask a question, please use the Raise Hand function at the bottom of your screen, and limit to one question per analyst. Please note, we require all questioners to turn their camera on for this section of the webinar. We will pause for a moment to allow questioners to enter the queue.
Well, thank you, Yvonne and Jim, for those introductory remarks. I think you set us up well for a good interactive session with some of our analysts here. So the first question that I see is coming from Kevin McCarthy, from Vertical Research Partners. Really good to see you this morning, Kevin. What's your question?
Yes, good morning, and thank you for the presentation. My question relates to your cost advantage. On slide 25, on the right side, you assert an advantage of 30%-50% in comparing large-scale plants, which is, you know, obviously a very large advantage. So can you speak to three things? Number one, the basis of comparison there, what exactly you're looking at in the comparison set? Number two, the specific sources of your advantage, whether that's energy efficiency or other factors. And then three, how confident are you in the sustainability of that sort of an advantage, you know, through the decade, for example?
Great questions, Kevin, and I think this is a question for Mr. Technology, Jim Seward, to start out with, and maybe, Yvonne, you can build on it.
Sure.
Um...
Thanks, Kevin. So I think, yeah, there's three good aspects of that. So to start by saying that what is a key differentiator between MoReTec and some of the others we're seeing around there is simply the ability to scale. So the ability not to go kind of cookie-cutter on a modular basis, but the ability to actually scale unit operation. So that's why what we think is, as you get bigger, obviously, that you play to that advantage. So that's an important point. And that's also why when we're at the smaller end, right, where that advantage is much less, basically. So in terms of what's driving that advantage, the first point would be scale.
The second point is that we have a yield advantage, as I said, and part of that yield advantage is our process, and part of that yield advantage is actually our business model and being able to use both pyrolysis oil and pyrolysis gas, which gives us a very strong position in terms of yield. So I think those would be the two areas. In terms of, you know, how copyable this is, I'll make two comments on that. So, you've got to be able, in our business model, to manage the whole value chain. And maybe I'll hand over to you a bit on that, Yvonne, as well, but that's not so easy. So, we're quite well placed in that we're in the technology space.
We also have a great view upstream, and we have a great view downstream, just because of the company we are. So I think being able to manage that, that whole value chain is very, very important in order to be able to officially, efficiently move at scale, managing the upstream side, the feedstock side, as well as managing the downstream side, customers and brands. So, so that's something not to be taken, taken lightly, and what we think is quite a difficult feature that we have to copy. Build on that, Yvonne.
No, the only thing to add is that with MoReTec One, for which we plan to take investment decision by the end of this year, the 50 kilotons is really single train.
Yeah.
I think that illustrates what's around today, Kevin, if you look at other third-party technologies, that's unique, first of its kind at that scale, single train, which doesn't disqualify other models. It's just different.
I think between the two of you, you've looked at quite a few alternative technologies.
Yes.
Yeah.
Yes.
We're technology agnostic at the end of the day.
Yes.
Yeah.
We're also working with some of those third parties.
Right.
Yeah.
Right. Thank you, Kevin. Our next question comes from Josh Spector at UBS. Josh, good to see you this morning.
Yeah. Hi, good morning, and thanks for taking the time today. I just wanted to ask, as your, basically, strategy evolves around how you reach that 2 million ton goal, and as you advance MoReTec, how much of those 2 million tons do you see coming from MoReTec versus recycled technology, or perhaps purchased on the market? I guess when you think about that mix, what does it look like? And as you think about MoReTec build-out over time, first facility in Europe, second in the U.S., how would you think that gets built out regionally as you march towards that 2 million ton goal?
I think you're trying to build out that matrix, Yvonne, so maybe you should be-
Sure
B est placed to answer this.
Sure. So great question. So first of all, if we start looking at where we are today, even though we already have sold and marketed over 220,000 tons of recycled and renewable polymers, it's also fair to acknowledge that today, the majority of that is coming from recover, mechanical recycled, and renew, which is the renewable feedstock based. And towards 2030, we see that balance shifting with advanced recycling solutions on the revive coming in, and by 2030, roughly speaking, half of that is based on advanced recycled and renewable polymers. So we see the share of advanced increasing, and we work there with both third party volumes as well as MoReTec.
Thank you, Josh. Great question. Our next question comes from Dave Begleiter at Deutsche Bank. Good morning, Dave.
Thank you, David. Yvonne, question for you. To generate $1 billion of EBITDA by 2030, how much capital will be required to do that? And also, what type of price premium are you forecasting underpinning that $1 billion of EBITDA by 2030? Thank you.
Thank you. Great questions. So first of all, on the capital intensity, it's a lot less capital intense than investing in world-scale crackers. So, it's a minority portion of our average annual spend CapEx, somewhere around 15%, that is needed in the coming years to build up these positions around the different recycled technologies, of which MoReTec is a very important part of that CapEx needed. Then coming back to your question around margins, is that in a market that for the foreseeable future is actually not so much a question of demand, but a supply imbalance created by a shortage in supply, we foresee these margins to be attractive and providing really a solid business case to invest in these recycling technologies.
Anything more to add, Jim? You agree?
Yeah, no. I mean, it's hard to see when that imbalance is going to balance, right? So I think that for the runway ahead of us, I think that if you can take meaningful position in this space, it's, yeah, the premiums of that have just driven by supply demand, let alone the sort of quality benefits we're hoping to give, I think will be a strong motor. And I think I heard you right on capital 15, 15.
Correct.
Yeah.
Yes. Not 50, to be clear.
So if I do some quick IR math-
Yeah
- on 15% of perhaps two to 2.5 billion of CapEx over the next 7 years, I come to somewhere around $3 billion of capital investment for a $1 billion return.
That's not bad.
That sounds like a good business to me.
Solid business case.
Right. Well, thanks, Dave. Our next question comes from Aleksey Yefremov at KeyBanc. Good morning, Aleksey .
Yeah, thanks, and good morning, everyone. I had a question about your broader recycling business. It's quite clear you're making the case for MoReTec to be a proprietary, you know, technology, so there is advantage. But even if you are a first mover in recycling, why would it be hard for your competitors or followers to replicate what you're doing? It seems like it's not y ou know, your competitors are well capitalized as well. And so how do you expect to maintain these high margins or excess returns in the future?
Yvonne?
Sure. Thank you. Great question. So the reason why we believe we're so uniquely positioned is, on the one hand, based on the market position in polyethylene and polypropylene we already have today with these customers in these solutions. So that's one. Two, we happen to have flagship sites in both Cologne, Germany, and in Houston, that are world scale, and that are in heavily dense populated areas in both of those areas. So we can develop in parallel in those two mature markets where the demand growth for circular polymers is the largest. We can leverage those assets, and with that, achieve the scale and the operating needs. So we're also not just putting our bets on just one technology. It's both mechanical recycling technologies as well.
To copy all of that and catch up on that, that's quite a challenge.
Sounds like a very comprehensive business model. Well thought out, Yvonne.
Can I just add one comment?
Yes, please.
Just behind the question. Actually, a number of our competitors are not basic in technology in this space. What you see, it's a bit of the Wild West, isn't it, at the moment, right? You've got a lot of people out there, but a lot of them are smaller companies, startup companies, you know, very innovative companies. There are not many like us that are basic in this sphere of technology, and therefore, can bring not just the kind of, you know, the sort of experience, finance, expertise to it, but also can join up with what we're trying to do in the marketplace and what we're trying to do with feedstock. So I think it's all of those, of those three things, which gives us at least some barriers to entry, which makes it somewhat more difficult, I would say, to copy.
Great. Thanks, Yvonne and Jim. Our next question comes from Mike Leithead at Barclays. Good to see you, Mike.
Great. Thanks, Dave. Question for Jim. Can you just speak to how LyondellBasell is approaching the licensing opportunity for MoReTec?
Sure. It's a great question. I mean, I run our global licensing business, and I'm sure you know very well we have a very successful and we're very proud of our licensing business, right? So, it's in our nature to think through opportunities also through the view of licensing. So this is where we are at the moment, I would say. So I think that, when you look at the very significant imbalance, short to medium term, supply-demand, right? Then the addressable market is not the end-user market that's crying out for it. The addressable market is a supplier market, right? So that is quite important in our thinking at the moment. What does that mean?
That means as we think about licensing, we might, it's quite likely that you'll see us earlier partnering in the way we license. In other words, forming strategic partnerships, that could be across value chain, that could be across geography. In other words, using our licensing capability, both in terms of the technology itself, but also we kind a know how to license. We're quite comfortable in licensing. But doing that in a very strategic way, and doing that in a way which hopefully also builds the benefit of both parties, probably in some kind of partnership. That's how we're thinking about that at the moment.
So it kind a hits on pillar one of our strategy as well as pillar two. It's not just-
Well put, yeah.
For the circular business.
Yeah.
It's also a part of growing and upgrading our core businesses.
Yeah. Very good.
Okay, thanks, Mike. Our next question comes from Vincent Andrews at Morgan Stanley. Good morning, Vincent. Good to see you.
Thank you, and good morning, everyone. I have a two-part question. The first would be just clarifying that the CapEx figure that you're discussing, the 15% of future CapEx for MoReTec, does that include the upstream parts of the value chain that you discussed, the sorting and so forth, or would that be incremental to the 15%? And then secondly, you know, what's left in terms of gating events for you to make final investment decision by the end of this year?
Yvonne, I think, the capital program, you could start off with that.
Sure.
Mm-hmm.
So, on the capital program, yes, the proportional investment needed also in the advanced sorting is included in that. So we also made an announcement end of last year for the JV in Germany, Source One Plastics, and that capacity actually is under construction right now. And that will feed roughly 70% of the feedstock needed for MoReTec one. And then on your second part of the question, related to the FID decision, so we're currently tying up the dots and the i's to actually bring that through our process of gating to our managing board later, before the end of the year.
On that, Vincent, I don't see technical barriers to that. I think this is a very important decision. We've got due process to follow. But it's more the kind of view I see of this. It needs good scrutiny, good challenge as we move through that process. But I'm excited.
We've been here in Ferrara with the technical team over the past few days, and I've, I've just gotten more and more confident over the past 48 hours. It's just incredible, the work they're doing here and the work they've done over the past 5 years. Great job. So our next question comes from Patrick Cunningham at Citibank. Patrick?
Hi, good morning. Thanks for taking my question. My question is around the pyrolysis oil, you know, offtakes that you highlighted. You know, what level of specificity and purification are customers going to require for that? I'm just curious on, you know, what the economics of that will trend like over time, and if you plan to be net long or net short pyrolysis oil.
Jim, you want to start with the technical-
Yeah
A nd then we'll move to the business position?
Yeah, exactly. And then, well, I think we'd love to be net, net long, wouldn't we?
Yes.
So sorry, the answer.
We're very short at the moment.
Yeah, the answer to your first question. So, pyrolysis oil, firstly, we don't anticipate selling pyrolysis oil to our customers. We're going to use pyrolysis oil in order to generate polymers, which we'll then sell. So we are the kind of internal customer for that. The pyrolysis oil has a kind of a range of different quality, I would say. To be honest, we are a pretty experienced runner of crackers, so we're used to taking a very wide range of different sorts of materials anyway, within our crackers. Pyrolysis oil essentially is backing out naphtha, so it needs to be, you know, fit for that purpose. We believe that, as you get...
As the pyrolysis oil becomes more and more part of the fraction within the cracker, if that makes sense, as the percentage of pyrolysis oil gets more and more, you're very likely gonna hit an area where you're gonna need to do some post-treatment at it in order to make sure that, you know, that we're managing that down into our polymer units. But as I say, we have a very high level of expertise in this area. We've already worked quite a lot over the last couple of years in this. We have the advantage, again, because we're fully integrated, of kind of doing trials and taking, you know, levels up and looking at different cuts of pyrolysis oil .
We're getting pretty comfortable, actually, in terms of, you know, in terms of how this is gonna look as we move forward.
And maybe to add to that, Jim, if I can, this is actually also part of our integrated hub model. So it allows us to acquire scale, both by our MoReTec on the cracker side, and then also from regional hubs, the pyrolysis oil, to bring it to the central integrated hub to make sure that we can actually purify the streams at scale. So that's also part of how we see an opportunity also to achieve scale and getting the operating cost down of the purification.
A nd I think as we begin to think about MoReTec, too, in Houston, we might have some assets at the refinery that might be useful for that, right, Yvonne?
Absolutely.
Yeah.
That's actually something that we are studying as we speak, how we can use part of those assets for repurposing it for purification of pyrolysis oil at scale.
Great. Okay, thank you for that, Patrick. Our next question comes from Matthew DeYoe over at Bank of America. Good to see you, Matt.
Good morning. Thanks for the presentation. I wanted to touch a little bit more on the cost side. So, I appreciate that MoReTec is more cost-effective than some of the molecular recycling peers or technologies, but how close are you to matching more traditional naphtha economics?
I think this is a business question, a market question.
Yes
Really, Yvonne, when you get down to it.
Yes, because this is ultimately a very different value proposition than fossil-based feedstock. This is really about the value proposition of creating recycled and renewable content in polymer solutions, and it's actually replacing fossil-based feedstock partially in our crackers. So it's, it's, it's a different value proposition, and it's really addressing the commitments made by the brand owners and retailers for recycled content by 2025 in their packaging solutions.
A different market with different economics.
Different markets, different economics-
Yeah
D ifferent supply-demand drivers.
Well said. Our next question comes from Frank Mitsch at Fermium Research . Mr. Mitsch ? Frank, we're I think you're on mute, Frank.
So I have a comment and a question. My comment is, I have never seen an investor relations department usurp a board of directors' decision on an FID. I mean, basically, what you have done here today is make MoReTec a large part of the Lyondell story. So the board of directors has no decision come the Q4, so congratulations on that. My question surrounds the Houston refinery and then the conversion to circularity. Part of the reason our understanding is that, you know, there's such a good installed employee base at the refinery that they're, you know, that they could be retrained, what have you, to come into the circularity part of things.
Can you talk a little bit about how you would anticipate that transition taking place and, you know, kind of the timeline as to when we would see the Houston location, you know, become large in the circularity part of things? When, what, how do we think about the timeline in Houston?
Yvonne, would you like to take that?
Sure.
Yeah.
Thank you, Frank, for the question. Firstly, and the comment, we intend to run the refinery until the end of Q1 2025. Before that, we are looking at what we can do to repurpose some of the assets of the refinery, and part of that is to locate also the MoReTec 2 at the Houston Refinery location, and with that, also repurposing part of the hydrotreatment columns for pyrolysis oil purification. Those are two very concrete parts of that transformation, and then we're also studying other options to see how we can repurpose some of the refining assets, as well as the logistic and utility assets at the Houston Refinery site. More to come and all to be looked at and decided on more in the second half of the decade.
Well said. And, you know, so we have the hydrotreating, we have the MoReTec 2 , and I think we also have, you know, part of a hydrogen hub in the Houston area with Air Liquide, with Chevron, with Uniper, and a lot of things that are going on at the refinery-
Yes
T hat, will-
It's one of the other options that we are studying.
We'll need those people to help us out-
Yes
T o build these projects. So I think that's all the questions that we have for today. It was. I appreciate the time that everybody's spent to investing in LyondellBasell in the past hour to ask some questions and learn more about our MoReTec technology. I'm sure you will have more questions as you think about what we said today, and you know, the investor relations group would be glad to set up additional time to talk with you about any questions that you might have, investorrelations@lyondellbasell.com. Thank you for your time today, and I hope you have a good rest of your day.