Occidental Petroleum 2001 Annual Report Download - page 8

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synergist
----------------------- ---------------------------------------- ------------------------------------------------------
Vinyls Vinyl chloride monomer (VCM) Raw material for polyvinyl chloride
---------------------------------------- ------------------------------------------------------
Polyvinyl chloride resin PVC pipe for municipal, plumbing and electrical uses.
External construction materials such as window and
door profiles, fencing, and decking. Flooring, medical
and automotive products, wire and cable insulation,
and packaging.
----------------------- ---------------------------------------- ------------------------------------------------------
Specialty Vinyls Polyvinyl chloride (PVC) resin and films Resins for flooring, medical gloves and other flexible
vinyl applications. Calendered films for automotive,
packaging and consumer products
----------------------- ---------------------------------------- ------------------------------------------------------
RAW MATERIALS
Nearly all raw materials used in OxyChem's operations are readily available
from a variety of sources. Most of OxyChem's key raw materials purchases are
made through both short and long-term contracts. OxyChem is not dependent on any
single nonaffiliated supplier for a material amount of its raw-material or
energy requirements. Equistar supplies virtually all of the ethylene
requirements (up to 2.55 billion pounds per year) for OxyChem's chlor-alkali
business and OxyVinyls' business. Although earnings have been adversely affected
by higher natural gas, electricity and feedstock prices for most of the past
year, operations have not been curtailed as a result of any supply
interruptions.
PATENTS, TRADEMARKS AND PROCESSES
OxyChem owns and licenses a large number of patents and trademarks and uses
a variety of processes in connection with its operations, some of which are
proprietary and some of which are licensed. OxyChem does not regard its business
as being materially dependent on any single patent, trademark or process.
SALES AND MARKETING
OxyChem's products are sold to industrial users or distributors located in
the United States, largely by its own sales force. OxyChem sells its products
principally at current market or current market-related prices through both
short and long-term sales agreements.
No significant portion of OxyChem's business is dependent on a single
third-party customer. However, OxyChem has entered into significant supply
arrangements with certain of its affiliates. In 2001, PolyOne purchased raw
materials pursuant to PVC resin and VCM sale contracts at market-related prices
from OxyVinyls valued at approximately $184 million. Consequently, changes in
demand by PolyOne will affect OxyVinyls. In addition, in 2001, OxyChem and
OxyMar purchased a combined total of approximately $490 million of ethylene at
market-related prices from Equistar. Finally, OxyMar, which is OxyChem's
affiliate, sold VCM resin at market-related prices valued at approximately $291
million to OxyChem affiliates in 2001. In general, OxyChem does not manufacture
its products against a backlog of firm orders.
7
COMPETITION
The chemical business is very competitive. Since most of OxyChem's products
are commodity in nature, they compete primarily on the basis of price, quality
characteristics and timely delivery. Because OxyChem's products generally do not
occupy proprietary positions, OxyChem endeavors to be an efficient, low-cost
producer. OxyChem's size and the number and location of its plants also produce
competitive advantages, principally in its ability to meet customer delivery
requirements.
PROPERTIES
As of December 31, 2001, OxyChem, which is headquartered in Dallas, Texas,
operated 27 chemical-manufacturing plants in the United States. Many of the
larger facilities are located in the Gulf Coast areas of Texas and Louisiana. In
addition, OxyChem operates six chemical-manufacturing plants in four foreign
countries; its largest investment is in Brazil. A number of additional
facilities process, blend and store the chemical products. OxyChem owns or
leases an extensive fleet of railroad cars.
All of OxyChem's chemical-manufacturing plants are owned, except for a
portion of OxyVinyls' plant at La Porte, Texas, which is leased. The charts
below list OxyChem's principal facilities and plant capacities.