Polyethylene Wax, Nobel Prize in Chemistry, and Partially Renewable Chemicals
Mergers and Acquisitions:
SK Capital Closed their acquisition of the Baker Hughes Specialty Polymers business this week. They will be rebranding the business as NuCera Solutions and a leadership change will also occur Steve McKeown being appointed as CEO and Shawn Ham as the CFO. Baker Hughes was always focused on providing goods and services to oilfield sites and there has always been some need for polymers and chemicals in oilfield operations. NuCera originally started as “Bareco Oil Company” in 1934 and was known for selling microcrystalline waxes into oilfields and it was eventually absorbed into the larger conglomerate of Baker Hughes. NuCera’s product line may have originally been complementary to the Baker Hughes’ business, but the foundation technology of polyethylene waxes and similar products has expanded into other end markets such as adhesives, coatings, plastics, and personal care. The press release can be read here.
Does it make sense for an oilfield technology company to be making polymers designed to go into personal care products, polyolefin extruders, or adhesives? SK Capital and the shareholders of Baker Hughes didn’t think so either. In this era of chemical businesses being highly specialized the general consensus seems to be that shareholder value is enhanced with a less diverse business. In the Baker Hughes case as the future of oil is murky due to acceleration of electric cars, alternative energy generation, and as the use of technology enabled devices changes historical businesses.
It makes sense for NuCera to attempt to stand on its own away from Baker Hughes and grow its own business on its technology of making low molecular weight polyethylene derivatives. The cash from the sale will also give Baker Hughes capital to invest into goods and services that may be focused outside of the oilfield such as renewable energy and digitization of the energy industry. Can Baker Hughes transition from oil field services provider to energy services provider?
What are Polyethylene Waxes?
Polyethylene wax is a substance that comes from oil and it can have properties similar to waxes we might use on a daily basis such as parrafin, soy, or beeswax. Polyethylene waxes can be tailor made to the needs of the end markets, which is what gives NuCera the ability to say “specialty.”
Polyethylene wax is a shortened version of the polyethylene that most people come into contact with on a daily basis. Polyethylene that most people know derives its use from its mechanical properties such as being flexible and repelling water. The properties of polyethylene from food packaging and bags are dependent on the length of the polyethylene polymer chains.
While ICI was the first to discover the polymerization of ethylene into polyethylene and was used to coat communication cables there has since been a focus by many polymer chemists to develop better control of how those polymers are put together. Karl Zeigler and Guilo Natta would go on to develop catalysts used to make polyethylene and polypropylene in new ways and be recognized for their work with a Nobel Prize in 1963. All of this work was focused on growing polyethylene and similar polymers to be longer chains or as polymer chemists might say, “High Molecular Weight.”
So why do we call short polyethylene chains a wax? It’s because the properties of these short polymer chains or “Low Molecular Weight” polymers are similar to waxes than the plastic bags. Polyethylene waxes are used in everything from candles to adhesives to personal care products to coatings.
The Nobel Prize in Chemistry
The 2020 Nobel Prize in chemistry was awarded to Emmanuelle Charpentier and Jennifer A. Doudna for their work in discovering CRISPR/Cas9, which enables the manipulation of genes, which are found in DNA. We can also think of DNA as being a very complex biopolymer (polymers are everywhere it turns out). When I was in graduate school and visiting the biological focused labs of my thesis adviser (I was not biologically focused, thus the visiting) the only thing people wanted to talk about was using CRISPR to edit genes of microorganisms so that we could produce complex molecules that were very difficult to synthesize with conventional methods. In 2013 most people knew that CRISPR would win the Nobel Prize and that it was just a matter of time.
Think about editing a yeast to make surfactants, fuel, or polymers and the only things you need to feed them are fat, sugar, water, and air. The concept of utilizing microorganisms to make or chemicals will grow in sophistication over time and CRISPR is a key tool that scientists and engineers can use to manipulate organisms. Imagine a future where a company like NuCera who makes a specialty polyethylene wax as a component of lipstick, but instead of getting ethylene from ExxonMobile and synthesizing the wax conventionally they were able to ferment that wax in a big vat much the same way that beer is made.
It takes a long time to make crude oil (millions of year) that we can extract, refine, and use to produce chemicals. I do not think we will see the transition from oil anytime soon, but I know that the chemical industry and society at large will change significantly in my lifetime as our dependence on oil is reduced and microbes become better at doing synthetic chemistry than our traditional methods.
I always look at CRISPR from the perspective of a polymer chemist, but think about any sort of disease due to genetics and then having the ability to edit those genes. There are tons of ethical questions for humans and animals and CRISPR that are being debated now and will be debated in the future.
Perstorp announces renewable carboxylic acids
The Swedish company Perstorp is on the slow road of making their products renewable by transitioning much of their supply chain towards sustainable chemical sources. They recently announced that their 2-ethylhexanoic acid (25% renewable) and valeric acid (20% renewable) are partly renewable and these base chemicals join their Pro-Environment Solutions product line, which all have some renewable content. 2-Ethylhexanoic acid and valeric acid are used to make plasticizers, lubricants, and corrosion inhibitors that might go into airplanes, automobile radiators, and paint.
Perstorp is making building blocks for their customers with an already disclosed renewable content. This seems trivial and obvious to some, but this the direction that the industry needs to take. As someone who looks at suppliers and tries to figure out which products from which supplier to use this is beneficial to me and eventually to society.
Advertising renewable content on products to consumers is just that — advertising. When the broader market is required to disclose the renewable content of their supply chain and how far those products traveled to get there, i.e. how many times did it cross the Pacific ocean, does making a purchase decision on environmental impact make sense.
If it seems insane to know a product’s environmental impact score I would point out that it was once acceptable to dump chemicals into rivers, sell unregulated food, and generally treat the consumer with derision and disrespect.
Perstorp is one of the companies leading the way on the sustainable supply chains and this might be a unpopular decision with some shareholders for the short term, but I am sure that these decisions will pay dividends for Perstorp in the long term.
All of the opinions are my own and do not reflect the views of any of my employers nor are they investment advice.
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