Jack P. Williams
Senior Vice President at Exxon Mobil
Thank you, Stephen, and good morning. We're very pleased with the company's performance for the first six months of this year from a number of perspectives, including safety, reliability, earnings, cash flow and debt reduction. We've also made progress in our efforts to reduce emissions, advanced lower carbon solutions and further advance the depth and quality of our portfolio.
I'll spend a few minutes providing some highlights and perspectives on this progress, and let's start with a look at the business environment. Second quarter saw a rapidly recovering environment with significant improvement in all our product markets. Oil and gas prices increased materially since the fourth quarter of last year and were back within the 10 year range, driven largely by economic recovery as the pandemic-related restrictions were relaxed.
Downstream margins moved close to the low end of the 10-year band. They continue to be impacted by an unbalanced global refining system, resulting primarily from an oversupply of distillates from low international jet demand. Nonetheless, U.S. demand growth drove substantial improvements from the historic lows of the fourth quarter. Importantly, significant earnings potential remains as the Downstream continues to recover from the lingering effects of the pandemic.
And to build on that point and demonstrate just how quickly things can change, Chemical prices and margins were far above the 10-year band and drove record earnings. Chemical's record results were driven by strong base reliability, robust demand and tight supply for both polyethylene and polypropylene in the North American and European markets. Looking ahead, although we anticipate lengthening of supply and rising feed across the regions, our outlook is for Chemical margins to remain strong in the coming months.
Given the dynamic market and record results, I'd like to spend a few minutes talking more deeply about the Chemical markets and our business. Starting with a closer look at the current market environment. The last 18 months have been a testament to the underlying resiliency in demand for chemical products, and that is especially true in a surge in global economic recovery as these products are widely needed for food packaging, hygiene and the recovering automobile sector among others. This year, polyethylene and polypropylene margins across North America and Europe increased by more than 140% versus the fourth quarter of last year. The recovery in Asia has been more challenging due to pockets of COVID resurgence, higher supply and increased crude and naphtha prices.
Strong margins in Atlantic Basin are the result of several factors. First, hurricane impacts in late 2020 followed by winter storm Uri earlier this year with reduced inventory levels. Second, unplanned industry shutdowns and turnarounds. Third, global shipping constraints of finished products caused by port congestion, container availability and increased shipping costs from Asia to the U.S. And then finally, demand growth in the U.S. commensurate with growth in GDP.
Our Chemical business has benefited from this tightness with 70% of our polyethylene capacity located in these regions. A material portion of this is typically exported to Asia, but was redirected to Europe and North America, enabling us to capture more than our share of demand growth. The scale, global footprint and multitude of product lines in our Chemical business provides competitive advantage and strong earnings potential, as amplified in tight markets like today, and is also durable when looking at longer timeframes.
ExxonMobil Chemical's earnings over the past decade were 80% higher than the industry average. In the first quarter, our earnings were double the industry average. And our second quarter result is materially higher than the first. The core strategy of our Chemical's business is growing technology-driven, higher value performance products. These have proven over the test of time to add significant value for our customers versus commodity chemical products. Our diverse product offerings and global reach are significant advantages. ExxonMobil Chemical is number one or number two in more than 80% of the markets where we compete. This provides resiliency across a wide range of market scenarios and upside in the market like today.
In addition to the product diversity, I want to highlight the benefits we've seen this year from three important drivers. First, our ability to optimize feed and unit operations at our integrated facilities and leveraged regional feedstock supply chains has generated about $1.4 billion of earnings for the first six months of this year.
Second, as we discussed during Investor Day, we've sharpened our focus on making our Chemical's business a leader in cost efficiency. As a result, costs were down significantly in 2020. And even with the higher sales volumes this year, ongoing structural efficiencies such as digital enhancements, manufacturing efficiencies and previously announced staffing reductions are expected to support $1 billion in annual reductions versus 2019.
And third, the recent advantaged project investments, including the world scale U.S. Gulf Coast steam cracker and polyethylene reactors, delivered $600 million in earnings in the first half of this year. And there are more advantaged projects in flight today that will grow our supply of performance products and have an even larger impact on earnings. These projects will grow our supply of performance products by 70% by 2027 and grow the earnings contribution by 100% due to the higher value slate of new products.
These products bring significant benefits to our customers. They support lower emissions, improve the performance of technologies that enable the energy transition and improve efficiencies. And those advantages ultimately are reflected in higher margins. For example, polyethylene packaging has lower lifecycle emissions compared to alternatives. Performance polyethylene like our Exceed XP is stronger, enabling thinner films for the same applications. We're developing the capability to produce certified circular polymers from plastic waste using our proprietary advanced recycling technology and polypropylene used to reduce the weight of vehicles, improve fuel economy and battery life.
The projects gain advantage not just from the higher margin products they produce, but also from advantage fee, scale, proprietary catalyst technology and the integration with our existing Chemical and Downstream facilities and logistics. Our focus going forward remains on advancing a number of major Chemical and also Downstream projects that will further strengthen our integrated manufacturing platforms and upgrade our product mix to meet a range of future demand scenarios.
As you may recall, many of these projects were paced to preserve cash during the market downturn last year. Our global projects organization has done an excellent job managing this activity to preserve long-term value. This group of projects are expected to still be completed within the FID estimate. As an aside, this is the same organization that will be delivering future carbon capture projects advancing through our Low Carbon Solutions business. This capability continues to be an enduring competitive advantage and will only increase in importance going forward.
In the Chemical business, our large Corpus Christi chemical complex is ahead of schedule and under budget. We just announced a mechanical completion of the three derivative units, including a monoethylene glycol unit and two polyethylene reactors. Full site start-up is anticipated by year end. Progress is ongoing at the polypropylene growth project in Baton Rouge with start-up anticipated next year. Our Baytown chemical plant expansion will include a new Vistamaxx unit and a full range linear alpha olefins unit. It's on track for a 2023 start-up. Our China One venture captures the advantage of being located in the world's largest growth market. We signed several important agreements to advance the project, including a contract with Sinopec for basic engineering design, procurement and construction.
In the Downstream, we're moving crude to the Wink to Webster pipeline from the Permian Basin and preparing to ship third-party production in the fourth quarter of this year. In Beaumont, process unit modules are on site and we're ramping up construction activity for start-up in 2023. And our Singapore and Fawley projects are also progressing. However, they are a bit further out in terms of full project restart. Even in the current challenging refining environment, these downstream projects are still attractive and materially improve the competitiveness of our integrated sites.
If these four projects were online at today's margins, it would be contributing more than $1 billion in annual earnings. For example, our Singapore resid project will produce 20,000 barrels a day of high quality lube-based stocks and would have added to our strong Lubricants result this quarter. Collectively, this world-class chemical and downstream project portfolio delivers 30% returns at 10-year average margins. That's more than $4 billion of annual earnings at 10-year average margins and $2 billion at 10-year low margins.
We're also benefiting from ongoing attractive upstream investments as well, especially in the Permian as development performance continues to improve, resulting in rapidly growing value. We produced 400,000 oil equivalent barrels a day this quarter, which was up approximately 50,000 oil equivalent barrels a day versus the second quarter of last year, excluding the impact of the economic curtailments. We expect to grow production a further 40,000 oil equivalent barrels per day in the third quarter. And importantly, value is growing even faster as operating and development performance continues to improve at a rate exceeding our plans.
Relative to 2019, we've more than double the lateral feet we're drilling per day, and recently set an industry record by drilling the Delaware Basin 12,500 foot lateral in just 12 days. At the end of the second quarter, our drilling rates are approximately three times more efficient than in 2019. Another way to think about this is that the eight rigs we're running today are achieving the same lateral length as it took close to 25 rigs to drill just two years ago.
Completions are improving too. Our frac rates are around 50% faster. This has resulted in a reduction in drilling and completion costs of more than 40%. And on top of that, we've also improved lease operating expense by about 35%. Our environmental performance also continues to improve. We achieved record low flaring intensity levels during the quarter, which was top quartile in the industry.
As we've discussed previously, the advantaged short cycle development profile of the Permian gives us flexibility within the portfolio. The parameters setting our pace of development have not changed. First, delivering positive free cash flow across a broad range of price scenarios. Second, demonstrating we are achieving industry-leading capital efficiency. And third, ensuring double-digit returns at $35 a barrel or less.
This low price resiliency also applies to our deepwater developments in Guyana and Brazil. In Guyana's Stabroek block, we've added three new discoveries since the first quarter, including the Whiptail discovery announced this week. The Uaru-2 well encountered 120 feet of high quality oil-bearing reservoirs. The Longtail-3 well encountered 230 feet of net pay. And both of these results included newly identified intervals below the zones originally discovered. Resource quantification is ongoing.
The Whiptail-1 well encountered 246 feet of net pay. And drilling is ongoing at the Whiptail-2 well, which has encountered 167 feet of net pay both in high quality oil-bearing sandstone reservoirs. This additional resource will add to the 9 billion oil equivalent barrels we discussed at Investor Day, further increasing our confidence in the resource size and quality in the area east of Liza and supporting our view of an ultimate block-wide footprint of seven to 10 developments.
The projects in progress remained on schedule. With the expected arrival of the Liza Phase 2 Unity FPSO in Guyanese &As waters early in the fourth quarter. Payara, the third major development on the block is on track for a 2024 start-up with top sides construction ongoing. And pending government approval, we're targeting a final investment decision on Yellowtail, our fourth major development later this year with start-up planned for 2025. Offshore Brazil, we confirmed the final investment decision on the Bacalhau development during the second quarter and expect this 220,000 barrel a day project to start-up in 2024. It will deliver more than a 15% rate of return at $50 a barrel.
I'll now turn the call back over to Darren to discuss our Low Carbon Solutions business and long-term plans.
