Darren Woods: Yes, sure. I think maybe just take both sides of the equation with Chemicals. I’ll start with the demand side of the equation, which you referenced and you’re right. I think one of the things we saw last year was with the China lockdowns and the lack of growth in China, which is a big, as you know, chemical market that that had an impact on the demand side of the equation. My expectation as we move into this year and the China economy continues to open up, we’ll see that demand pick back up again. And then again, a function of whether how deep and how widespread the recessions are around the world, that’s going to have an impact. If current conventions and thinking holds and recessions are milder than people anticipated, I think that’ll see a benefit in the chemical on the demand side as well.
From a supply side, which is a big part of what’s suppressing margins today, as we came out — went into the pandemic, there were a lot of chemical projects that got put on hold and deferred investments. And you’re now seeing as we came out of the pandemic and you look at margins in 2021, 2022, very strong chemical margins, we saw those investments get leaned into and a lot of that capacity coming online. So, we’ve got this a large capacity additions coming on at the same time where we’ve had some demand slowdown. So, I think what we’re seeing play out here is that what I would say is the typical supply/demand swings in that commodity cycle exacerbated somewhat by the effects of the pandemic, still kind of playing itself out, but not inconsistent with what we had anticipated coming out of the pandemic.
And so it’ll be — it’ll take a little time for that demand to pick up and fill that capacity, but it will get back on the growth trajectory, markets will get tight again. So, that’s how we’re thinking about the Chemical business. With respect to our projects, feel really good about — we had to pause those, as you know coming out of the pandemic where we had to make some tough choices about how we spend our capital. We’d never done that before in terms of stopping some projects in midstream. But I again, I’ll tell you the organization did a great job of putting those on pause, preserving where we’re at, continuing to work with contractors to drive efficiency, and now we’re bringing those back on basically in line with the plans that we’ve laid out in the pandemic.
We just brought on the polypropylene unit in Baton Rouge. We’ve got our Baytown Vistamaxx, and LAO projects, which we anticipate coming on here middle of this year, and then China One is making really good progress and expect that to come on in 2025. So, I think all those investments we feel really good about and are on the path that we had anticipated.
Devin McDermott: Great. Thank you.
Darren Woods: You bet.
Operator: We’ll go next to Doug Leggate with Bank of America.
Doug Leggate: Thank you. Good morning, everyone. Good morning Darren.
Darren Woods: Morning Doug.
Doug Leggate: I don’t know what show whether you — or Kathy, which one of you two would like to take this, but I want to ask you about your treatment of the European windfall taxes. I’m understanding as you are, I guess suing to try and get some resolution there and treating these as non-recurring. So, can you can you walk us through your rationale versus how your peers are thinking about this? And any cash impacts that you had to incur in the current quarter I guess, would be my clarification question? But thank you for taking my question.
Kathryn Mikells: Sure. So, I’ll first I’ll first just talk about the financial impacts. In the current quarter, we wouldn’t have had material impacts. Obviously, there were some countries in Europe that had passed incremental taxes earlier this year. So, I’ll point to Italy and the UK, as an example. And so we would have been accruing those appropriately. You would have seen as part of our identified items that we booked $1.8 billion associated with 2022. Overall, increased additional European taxes. Now, in terms of the cash impact that doesn’t really hit in 2022, we just took the we took the overall accrual and those payments will end up occurring both in 2023 and in 2024. It just depends on the individual countries. But if I take an overall step back and say we looked at what happened in the EU and said, it’s not legal and it’s the opposite of what is needed, right.
So, what’s needed right now is more supply and instead, what’s been put in place is a penalty on the broad energy sector. So, I’ll contrast that with what’s happened more recently in the United States with the Inflation Reduction Act, right. There you see policy that’s put out to incent industry, both to accelerate technology and decelerate investment, that’s greatly needed, especially in areas where the industries in terms of lowering emissions are still pretty nascent, things like hydrogen and CCS, and you’re already seeing investment start to flow into those industries.
Darren Woods: And I would just add, Doug, I think, obviously, we’re — we’ve been engaged with governments throughout Europe. And I do think there is a sensitivity to the impact on future investments and industries’ appetite to continue to invest in what is a challenging market environment in the first place with respect to Europe, becoming more uncertain and less stable. So, I think there was some concern going into this and my suspicion will be many in industry, this will be yet another reason to pull back on their investments in Europe. And I’m not sure you’re going to then see that begin to propagate around the world just because of the negative impact it has on an industry that requires stable policy and some certainty when you’re making the size of investments that the industry makes over the time horizon that we make them in.
So, my sense is that there will be a lot of unintended negative consequences that come from this and as that manifest itself, a lot less appetite for doing this.
