Chemical Industry Summary
Mergers and acquisitions and cost savings activities dominate the chemical industry as companies continue to grapple with shrinking demand and softening chemical margins. The proposed merger of US chemical giants DuPont and Dow Chemical appears to be proceeding well with minimal significant anti-trust issues. There are reports that BASF will make a competitive offer. The completed Olin/Dow Chlorine Products acquisition and the Dow Chemical/DuPont proposed merger have major implications for changing the structure of the industry. The recently announced the proposed acquisition of Syngenta by ChemChina, a US$43 billion deal, has similar implications for consolidation and globalization of the Ag chemical sector. The combination of companies and the push for margin improvement from cost savings have pushed many companies to announce restricting and headcount reductions.
While fundamentals differ sector-to-sector, it is difficult to find much positive news. Monsanto recently reduced the mid-point of earnings estimates for fiscal 2016/2017 by US$0.75 per share or 14%. The USDA has forecast strong crop yields this year sending corn inventories to 12-year highs and wheat inventories to the highest levels in three decades. Commodity TiO2 producers were hit with Q4 and full-year TiO2 prices down around 15%. While prices are down significantly, margins for olefins in Europe and Asia have been helped by falling oil prices as reasonably good demand and plant outages (both permanent and temporary) have trimmed regional availability of polyolefins.
Macroeconomics and Geopolitics
US GDP growth in 2015 is coming in at 2.4%, flat with the 2014 result. The year ended slowly with the final Q4 GDP report at 1%. Most forecasts for 2016 are coming in below 2.5% and the Conference Board forecast for US GDP growth for 2016 is only at 2%.
In February, a relatively strong jobs report saw 242,000 jobs added, down only 9% from last year. This represented a better year-on-year comparable result than the prior three months which saw jobs fall by 28% on average. Many of the newly added jobs were in the retail and service sectors. The energy-related industry continues to lose jobs with energy E&P companies laying off approximately 300,000 employees worldwide in the last two years. Halliburton recently announced an additional 5,000 lay-offs bringing the company’s total to 27,000 or 30% of its peak 2014 workforce.
The February, the US manufacturing PMI index fell to 51.3, very near the 38-month low of 51.2 recorded in December. This result is barely in expansion territory and has declined in three of the last four months.
For January, US housing starts were 1.1 million, down 4% from a December that saw generally mild weather. January starts were up 2% from last year. For the full year 2015, housing starts averaged 1.11 million starts, up 11% from 2014. This final result is somewhat below the consensus forecast that for most of 2015 was in the area of 1.2 million starts. In its most recently published forecast, the NAR (National Association of Realtors) projects 2016 starts at 1.21 million (up 8.6% from 2015), and for 2017 it is forecasting 1.33 million starts (up 10.1% from the 2016 forecast). Sales of existing US houses were 5.47 million, up 11% over last year and flat with a strong December. Average prices for January slipped to $213,800, down 4% in the month, but still up 7% from last year.
In February, US auto sales of light cars and trucks were 17.43 million, on a seasonally adjusted annualized basis, up 8.0% from last year, and nearly flat with January. For the full year of 2015, US auto sales averaged 17.3 million, up 5.6% over 2014. For the last three years, US auto sales have been up an average of 6.2% per year.
Against the backdrop of continued slow growth and low inflation, the ECB is considering the expansion of its stimulus program. The program, launched in early 2015, included the purchase of €1.5 trillion of debt in an attempt to inject cash into the economy and promote growth-related borrowing. Targets currently approved include increasing bond purchases by €10 billion per month and lowering interest on cash deposits to perhaps a negative 0.4%. European GDP growth remained positive in 2015 at nearly 1%, but Europe’s manufacturing activity slowed a bit at the start of 2016 with the reported February PMI index at 51.2, down from the January result of 52.3 and December result of 53.2. The February result is the lowest in 12 months. Nearly all countries in the Eurozone are reporting slowing manufacturing activities.
China’s economy continues to struggle with some estimates of growth in the 3-3.5% range rather that near the official growth number of nearly 6.5%. China’s manufacturing sector continues to decline with a PMI result of only 48.0 recorded in February, down from 48.4 in January. This was the 12th consecutive month in contraction territory. As part of officials’ attempt to re-balance the economy away from exports and investment-related growth and towards domestic consumption and consumer demand, calls for stimulus spending represent a return to the old approach.
China’s auto production and sales showed signs of recovery in November and December after four consecutive months of poor year-on-year comparisons. Still, production of passenger cars for all of 2015 was up only 3.3% from last year, after being up an average of 9% per year in the prior three months.
Feedstock – Crude Oil
Crude oil prices have been quite volatile in February, primarily associated with speculation that there may be some level of coordination of crude oil production among some producers. Brent crude eased over $40/Bbl this week for the first time since early December. The recent lifting of the US crude oil export ban has resulted in WTI and Brent’s prices nearly converging. For the week ending March 4, the EIA reported that US crude oil stocks not in the SPR (strategic petroleum reserve) hit a record level of 522 million barrels. In addition to new tankage being built at Cushing, OK, there are reports of railcar storage being utilized. High global crude inventories and the specter of Iranian supplies adding incrementally to the global supply glut have resulted in this capacity overhang. The IEA reports that the current crude oversupply and high inventories are likely to persist for the next 1-2 years.
Moody’s has completed its review of the E&P sector, and based on current forecasts for oil prices in 2016 and 2017, debt ratings for sixteen E&P-related companies have been downgraded. Of these companies, nine were reduced from investment grade to non-investment grade status. Oil producers are announcing steep cuts in CAPEX and drilling investments in their year-ending earnings conference calls. Shale oil E&P companies that had taken on debt during the oil boom are making deep cuts in spending to preserve cash, as some observers see as many as one-third of US exploration/production companies facing bankruptcy by mid-2017. Recently, NYMEX oil futures have seen prices strengthen incrementally to just above$40/bbl for December of 2016. However, future prices for December of 2017 are only up an additional 10% from the end of 2016 to near $44/Bbl.
Feedstock – Natural Gas & NGLs
Heading towards the end of March, the US is concluding the high winter demand season and is starting the re-injection season. Weekly inventory numbers are flattening. Unfortunately for US gas producers, inventories are near 5-year average maximum levels, this does not bode well for gas prices going forward. There is some concern in the industry about inadequate storage and very high inventory levels that could be achieved before the next winter demand season sending late-fall prices into a downward spiral.
In the last week, Henry Hub gas spot prices have fallen to below $1.75 per million BTUs. Spot prices for gas in the Marcellus area have fallen to below $1.00 per million BTU. NYMEX future gas prices for December 2016 are just above $2.00/MM BTU, down about $0.40/MM BTU from the start of the year.
With crude oil prices strengthening and gas prices dropping, the widely watched oil-to-gas price ratio has recently improved to the area of 20:1 to 25:1. Compared to gas-to-oil prices seen in 2013 and early 2014, the relative convergence of prices has eroded, but not yet eliminated, North American’s competitive advantage in the ethylene chain.
Global liquefied natural gas prices have come under pressure and East Asian gas is currently in the $8.00 to $8.50 per million BTU range. Prices for spot gas to Japan are near this range, down 40%-45% from last year. The recently completed Cheniere Sabine Pass LNG export terminal is now online and has made its first liquefied natural gas shipment in late February. This is the first liquefaction train and LNG facility to be activated in the US.
On February 15, Royal Dutch Shell announced the closing of its$50 billion acquisition of BP Group PLC. This acquisition places the company as a leading global LNG supplier. Shell’s proposed Kitimat, Canada LNG project was indefinitely postponed on February 4.
For the week of March 4, U.S. Energy Information Agency (EIA) reports that US propane/propylene inventories have eased to 62.3 million barrels, down 40% from the record of 106 million barrels set last November. This is due to higher seasonal demand and the start-up of a new LPG terminal capacity in December. Spot propane prices have moved up over $0.10 per gallon in early March to a level of near $0.47 per gallon.
US Olefins & Polyolefins
In early March, US contract ethylene prices for February settled up 1.0 cents/lb to 22.25 cents/lb on a net transaction price basis. This increase offsets the 1.0 cents/lb decline seen in January, a settlement that represented a 13-year low. Headed into turnaround season, spot ethylene prices have moved up and helped support the February contract. Incrementally higher oil prices provide additional support.
US propylene prices settled down by 1.5 cents/lb in February and are down 2.0 cents/lb from the start of the year. The chemical grade contract price is 28.5 cents/lb with polymer grade at 30.0 cents/lb. The March contract price negotiation, expected to be concluded this week, is considering a proposed increase of 1.5 cents/lb.
For February, contract PE prices in the US declined 2-3 cents/lb. This is in addition to a decline in January that was reported to be 3 cents/lb. For March, all producers are pushing for an industry-wide price increase of 5 cents/lb. While not yet conclusive, several factors may support this initiative. These include rising oil prices, increasing spot ethylene prices, and the impending season. In addition, there remains a relatively tight international PE with strong pricing supporting positive regional arbitrage and firm export values.
For January, exports of US PE continued the strong year-over-year performance seen in 2015. January exports of 420 thousand tons were up 30% from a year ago. Total PE exports from the US were up 17.5% from volumes seen in 2014. The low NA prices are helping overcome the strong dollar to boost exports.
In February, US PP prices rolled over, despite the slight easing of contract monomer prices and an additional 1.5 cents/lb. This increase was equivalent to one-half of the nominated amount of 6 cents/lb but was pushed through despite the easing monomer price. PP supply is reportedly tight. This month, Enterprise announced the delay of its new 1.65 billion pounds per year PDH project. This project is now expected to come online in the second quarter of 2017 instead of the end of the year 2016.
After six months of declines totaling 6 cents/lb, in February US PVC contract prices settled flat. In the US, Westlake Chemical has made an unsolicited offer to acquire PVC competitor Axiall (formerly Georgia Gulf), by offering $20 per share, a significant premium to the prevailing price before the offer. Axiall’s board has rejected the offer and Westlake has since nominated its own set of directors.
European Olefins & Polyolefins
For March, European the contract ethylene price softened by an additional €30/ton to a level of €800/ton. This was primarily due to recent crude oil price strengthening. European ethylene prices have seen declines in three consecutive months, totaling €128/ton.
Film grade HDPE is currently €1,250/ton on a spot basis, down €120/ton from levels seen at the beginning of the year.
European contract polymer grade propylene settled a rollover of €560/ton in March. Contract butadiene prices for March again settled at €495 per ton, a rollover from last month and down €95/MT from December.
Asian Olefins & Polyolefins
With the restart of activity following Asian the Chinese Lunar New Year holidays, prices are generally moving in a positive direction, admittedly from very low levels. Some of the rebound is related to oil price and some are related to inventory re-building. In the recent week, olefins prices have eased up with spot ethylene approaching $1,000/MT, up from a low point near $900/tonne earlier this year. Spot propylene prices have been flat since the beginning of 2016 at nearly $600/MT and benzene prices have also been near this level. High-density PE is between $900 and $1,000 per tonne and is slowly improving.
Global Chlor-alkali
The Chlorine Institute reported that effective operating rates in January were 81%, down 3.3% from December. The US chlor-alkail market remains oversupplied due to additional capacity that was added by Westlake and Dow Chemical. Olin has announced that it will be shutting down 250 to 250 thousand tons of capacity. In the company’s Q4 conference call, management stated that the likely number was going to be on the high side of this range. Particular locations to be idled have not been announced, but the company will optimize its manufacturing footprint across an integrated Dow Chlorine Products/Olin footprint.
In Q3, US chlor-alkali producers announced a $65/ST price increase for caustic to be implemented in the fourth quarter. Olin reported that the industry was able to implement caustic price increases of around$30 per ton with $10/ton seen in Q4. In November, the industry announced an additional $40/ST increase for caustic that if successful will be implemented as contracts allow in the first half of 2016. Chlorine prices eased up about $10/ST in Q4.
Prices for other alkali products have eased including KOH (down 14% YoY) and HCL (down 14%) is soft primarily due to reduced drilling and fracking activities.
European chlor-alkali operating rates in January were 80.3% of industry capacity, flat with last year. Operating rates in Europe have been stuck at low levels for the past several years as the industry grapples with overcapacity on poor demand growth in addition to a cost structure that doesn’t support exports. A pending deadline for mercury cell closure has resulted in 500,000 MTPA capacity being taken offline, primarily in the UK and Spain, reducing European caustic export volumes. This number could more than double in the next few years. This would provide a much-need boost for the industry. For all of 2015, industry operating rates were near 80%, up 3% from last year. Year-ending caustic stocks of 238 thousand tons were 4.4% lower than last year but rose by 10.7 thousand tonnes in January.
AMERICAS
Enterprise postpone the start-up of its PDH unit in Texasto in 2017
Enterprise Products has postponed the targeted start-up of propane dehydrogenation (PDH) by half a year. The PDH unit is designed to consume 35,000 barrels per day of propane and produce 825 KTA of polymer-grade propylene
Comments: The volatility in global oil prices and the downtrend that started last year have led to PDH projects losing some of their allure. When this plant was planned along with the other PDH plants in the US there was a shortage of propylene in the US market. As these plants would use propane to produce propylene, as long as there was a wide spread between propylene and propane prices these PDH plants would be profitable. With a sharp decline in propylene prices resulting in a narrow gap between propane and propylene prices, the economics of running a PDH plant does not seem very attractive in this scenario. Ascend also suspends its PDH project in Chocolate Bayou, Texas due to that same.
Shell inaugurates alpha olefin expansion project in Louisiana
Shell Chemicals has broken ground on its US$717 million new alpha olefin (AO) plant at the Geismar complex in Louisiana. The new AO plant will be the fourth one at the Geismar complex and add an AO capacity of 425KTA, which will bring the AO capacity at the Geimar complex to over 1,300KTA
Comments: The Shell Geismar Chemical Plant is located next to the Mississippi River, about 20 miles south of Baton Rouge, Louisiana. It is a stand-alone chemicals manufacturing plant, operated by Shell Chemical LP. In addition to Geismar, Shell produces alpha olefins at Stanlow in the UK, operated by Essar Oil (UK) Ltd on Shell’s behalf as part of an integrated oil refinery and petrochemicals site. With the investment in the new Shell Chemicals plant, the company is well-placed to respond to increased global customer demand for linear alpha olefins. The presence of strong technology coupled with ethylene feedstock advantage from nearby Norco and Deer Park sites will empower Shell to have the operational flexibility to respond to market conditions. The chemical site is expected to be used for the production of stronger and lighter polyethylene plastic for packaging and bottles, as well as engine and industrial oils and drilling fluids.
Asahi Kasei to open sales subsidiary in Mexico
Japan-based Asahi Kasei Chemicals has accounted plan to set up a Mexican subsidiary, named Asahi Kasei Plastics Mexico, to expand its sales network and provide technical support for performance plastic compounds
Comments: Asahi Kasei Chemicals has operating bases for plastic compounds in Japan, the US, China, Thailand, Singapore, and Belgium. Continued demand growth for plastic compounds was were forecasted in Mexico by Asahi Kasei, where various manufacturing facilities are increasingly located, especially by US, European and Japanese manufacturers in the automotive industry. To meet this growing demand, a new subsidiary in Mexico was established in 2015 and began performing sales and technical support in the last quarter of 2015. Asahi Kasei Plastics Mexico enables an increased market share to be gained in the growing Mexican market for plastic compounds with marketing and technical service focused on the needs of customers in Mexico. Asahi Kasei Chemicals continued to study the possibility of local manufacturing of plastic compounds in Mexico since the establishment of the sales and technical support office. With the expected start-up of the compounding unit, Asahi Kasei will be able to cater to this market locally.
Mexichem, OxyChemeye Q1 2017 to launch JV ethane cracker in Texas
Ingleside Ethylene is a 50:50 JV between Mexico’s Mexichem and OxyChem for an ethane steam cracker in Ingleside, Texas. The planned JV cracker is scheduled to come on stream in the first quarter of 2017
Comments: Ingleside Ethylene LLC will produce ethylene from shale gas-based ethane feedstock in Ingleside, Texas. Almost all of the ethylene produced at this site is expected to be used in VCM manufacture, which will be used by Mexichem to produce PVC in Mexico. This will allow both companies to capitalize on the feedstock advantage available from shale gas abundance in North America, especially in the commodity PVC market. After the start-up of the 50/50 JV, Mexichem will become a vertically integrated manufacturer that produces all materials in the vinyl chain from salt and ethylene to PVC and PVC compounds.
EUROPE
SOCAR to modernize the ethylene-polyethylene facility
Azerbaijan’s state-ran Oil Company SOCAR has selected Technip for modernization work on a cracker and HDPE plant at Sumgayit Chemical Industry Park. The modernization project includes upgrading 300 KTAcracker and building a new 120KTA HDPE plant using the INEOS Innovene™S process to substitute the existing one. The construction is scheduled to be completed by 2019.
Comments: To take advantage of its massive oil and natural gas resources along with its geographic location between Asia and Europe, Azerbaijan has the national initiative in place to pull more value out of natural resources as well as to play a more important role in the global petrochemical market. With an upgraded capacity of HDPE, SOCAR can not only fulfill the growing demand for petrochemicals in the domestic market but also put itself in a competitive position in export markets, such as Eastern Europe and Western Asia. As a national executor of the development of the petrochemical industry, SOCAR currently has several petrochemical projects underway in various stages, including a 180KTA polypropylene facility, a 600KTA carbamide unit, and a 360KTA ammonia plant. However, the US$8.5 billion petrochemical project in Sangachal, which is proposed to build refineries, a gas processing facility, and a variety of downstream units, has been put on hold due to plummeting oil prices. The project is still likely to restart the project if oil prices recover.
Alupol Films to expand investment in BOPP film production
Polish Alupol Films has announced its plan to further invest US$20 million to US$29.5 million by 2022 for an additional production capacity of BOPP film in the Kraków Special Economic Zone in Poland. The expansion project will be built at the 12-acre development site which Alupol Films acquired last year from a local authority in Oswiecim, Poland.
Comments: Poland has recently become one of the most attractive markets in Europe for investment in polyolefin films. The domestic market currently has only one domestic supplier of PP film, Flexpol, with almost half of the country’s demand supplied through imports, although that will soon change, as several foreign and domestic suppliers have announced plants in 2014-2015. Grupa Kety has previously considered getting rid of its fringe film business, but instead reversed course due to robust demand growth in the domestic packaging sector coupled with relatively low production costs, and invested in additional capacity for both polyethylene and polypropylene film. Since 2011, the company has added a 9-layer high barrier polyethylene blowing line and downstream extrusion coating, laminating, and printing equipment. The company is now set to enter the BOPP market later this year with a world-class Bruckner line and accompanying metallizer, flexographic printing press, and laminator from Bobst.
Italy’s Eni seeking partnership for Versalis
According to the 2015 annual financial report, Italy’s Eni classified its wholly-owned chemical subsidiary Versalis as a discontinued operation. Eni has been in negotiations with a potential industrial partner who would acquire a majority of the stake in Versalis and support Eni’s implementation plan in upgrading Versalis.
Comments: Eni has been considering sales of its chemical division Versalis since November 2015 to realign corporate focus on the oil and gas exploration business. “Discontinued operation of Versalis” released on the annual financial statement confirmed that Eni’s with potential partners for sales of Versalis almost conclude. Versalis had been in deficit since 2008 due to the combination of declined market demand and increasing competition in the commodity segment. After a series of moves on cutting commodity capacity and divestment of non-competitive assets, the company finally returned to profitability in H1 2015. Versalis has strategically refocused on differentiating its portfolio into bio-based products and specialties and increase international presence for growth. According to Reuters, SK Capital, which is an American fund, will take over Eni’s majority of stake in Versalis. At this point, no official statement made by Eni is released in response to this report.
MIDDLE EAST & AFRICA
Egypt’s Ethydco targets mid-2016 to start up petrochemical complex
Ethydco currently has 97.2% complete on its petrochemical complex in Alexandria, Egypt in Q2 2016, with a targeted start-up in Q2 2016. Once the complex is up and running, it will produce 460KTA of ethylene, 200KTA ofLLDPE, 200KTA of HDPE, and 36KTA of butadiene.
Comments: Egypt is the second largest oil refining country in Africa with a total refining capacity of 730,000 bbl/day and a net exporter of high-quality naphtha. However, limited downstream capacity makes the country heavily reliant on imported petrochemicals. Over 60% of the domestic demand for polymers is met by imports. Due to its geographic location proximity to Europe and the Middle East, Egypt has been establishing a complete downstream production network by 2019 in an attempt to fill the domestic supply gap and further capitalize on the growing demand for plastics in other African countries. Sidpec currently is Egypt’s only PE produce and has a 225KTA PE plant in Alexandra that support approximately 35% of domestic PE demand. Once Ethydco’s complex become operational, the new PE output is expected to make the nation self-sufficient in PE. Carbon Holdings also has the Tahrir project underway which will include various downstream production facilities to address the nation’s over-reliance on other imported petrochemicals.
ASIA PACIFIC
Formosa to begin commercial production at new EVA plant in China
Formosa Plastic Corp., one of the largest petrochemical companies in Taiwan, is underway for preparation of commercial production at its 72KTA EVA facility in Ningbo, China. The EVA output will mainly focus on higher vinyl acetate content (VA% > 26%) for the application of high-melt adhesives and solar encapsulant films.
Comments: Formosa Plastic is one of the major suppliers of EVA in Asia. The 72KTA EVA plant is Formosa’s first EVA production unit in China with an intent to capitalize on China’s growing demand for high EVA (VA content > 26%). The demand for high EVA in China is driven by solar encapsulation film and hot melt adhesive, of which both are required VA content higher than 26% and a higher technical threshold. However, there are currently only four domestic producers of high EVA, including Beijing Organic, Beijing Huamei, Beijing Yanshan, and BASF-YPC, most of which focus on foam application. The upcoming EVA output is expected to fill the EVA domestic supply gap for solar films and hot melt adhesives. Furthermore, the new EVA in China holds its hold strategic location and benefited from China’s Free Trade Agreement (FTA) with ASEAN nations. Under the FTA between China and ASEAN, Formosa’s products can further find their way into Southeast Asia markets with cost advantages from zero tariffs.
Petro China introduces UHMW-PP
Liaoyang Petrochemical, a subsidiary of stated-own PetroChina, has successfully developed ultra-high molecular weight polyethylene (UHMW-PE)and introduced UHMW-PE products into the Chinese market.
Comments: UHMW-PE is a specialty material with a combination of excellent mechanical properties -including superior impact strength, outstanding abrasive resistance, a wide range of service temperatures, high chemical resistance, and non-sticking and self-lubricating properties –due to a much higher molecular weight over standard PE. Ticona, a subsidiary of Celanese, and DSM hold their leading positions in the UHMW-PE market. In China, UHMW-PE, due to the government-back development of the coal industry, has increased its usage in piping systems of coal powder for coal mining, coal-fired power plants, and coal-to-chemical facilities. The major consumption of UHMW-PE in China comes from military applications. China has classified UHMW-PE as one of the key development materials under the so-called 863 program, which is China’s National High Technology Research and Development Program, since 2009. The development of UHMW-PE by State-owned PetroChina is part of an effort to narrow the technology gap between domestic producers and foreign players.
USI Corp. to start up new EVA facility in Q2 2016
Taiwan’s USI Corporation expects to complete the construction of its two 45KTA LDPE/EVA swing plants in Kaohsiung, Taiwan in Q1 2016, with a targeted start-up in Q2 2016.
Comments: USI Corp. and Formosa Plastic are the only two suppliers of EVA in Taiwan, which altogether make up 80% of the Taiwanese EVA market. USI Corp. offers EVA resins for foams, hot-melt adhesives, and solar encapsulant films. Due to limited domestic demand in Taiwan, EVA is an export-oriented type of business and is mainly exported to China. Foam (for making shoes) is the largest EVA application in China, with all Chinese producers of EVA participating and intensive competition. The two upcoming EVA plants will be separately operated by USI Corp. and Asia Polymer Company, which is USI’s subsidiary with a main focus on foam grades. Despite China’s slowing economy, the increasing usage of EVA in solar films and hot-melt adhesives is still anticipated to drive the consumption of EVA in China. The new capacity will allow USI Corp. to boost the production of higher-margin EVA grades, which many Chinese competitors are still incapable of producing.
Kraton, Formosa eye to complete JV elastomer facility in mid-2016
US-based Kraton and Taiwan-headquartered Formosa Plastic plan to mechanically complete their 50:50 JV hydrogenated styrene block copolymer (HSBC) plant in Mailiao, Taiwan by mid-2016. The HSBC plant is built at Formosa’s Mailaio petrochemical hub and Kraton has the exclusive right to purchase all products from this HSBC facility.
Comments: Kraton and Formosa first announced this project in early 2013. Kraton was deciding about building the plant either in mainland China or in Taiwan and initially encountered some environmental permitting issues with the Taiwan environmental agencies. That issue was later resolved and Kraton decided Maililao would be the location for the proposed plant as Taiwan offered a more favorable location in terms of feedstock availability and logistics.
SHALE GAS DEVELOPMENT
South Africa to permit shale gas exploration
South Africa has announced its intent to grant license applications for shale gas exploration in Karoobasin in the next 12 months. Related exploration activities are expected to commence in 2017.
Comments: According to US EIA estimates, South Africa is ranked as the world’s eighth largest holder of shale gas with 9 trillion cubic feet (Tcf) of technically recoverable shale gas, mostly in the Karoo desert. South Africa consumes 180 billion cubic feet annually, of which two-thirds imports from neighbor Mozambique via pipelines. The domestic demand for natural gas, especially in the power generation segment, is anticipated to grow fast. South Africa has looked into shale gas in response to electricity constrain. Many foreign energy firms, such as Shell and Chevron, have been waiting for years for approval of exploration licenses, due to environmental concerns and public resistance. The legislative green light for shale gas exploration will possibly keep foreign investors staying for development and move the nation’s shale segment into the next stage, although the realization of fully utilizing massive shale gas resources is still expected to be decades away.
BIOBASED
Versalis, Genomatica produces bio-based polybutadiene
Italy’s Versalis and bioengineering company Genomatica have announced successful pilot-scale production of bio-butadiene from various sugars. Versalis has further used bio-butadiene to produce the small scale of bio-based polybutadiene at its R&D center in Ravenna, Italy. The company is also planning to test the bio-based butadiene in the production of other butadiene derivatives, such as ABS, SBR, and SBS.
Comments: High ratios of oil to natural gas prices through 2014 and the resulting change to lighter cracker feedstock have led to a reduction in butadiene supply. Prospective tightness in butadiene caused large petrochemical players to invest in on-purpose butadiene production, including bio-butadiene. Genomatica’s partnership with Braskem has identified enzyme pathways in microorganisms that ferment sugar to produce butadiene, and researchers have selected and amplified the highest-yield pathway to 1,3 butanediol, the key intermediate, using engineered strains, achieving consistent lab-scale production in late 2015. Versalis is responsible for carrying out the purification and dehydration stages at their research centers. The company claims that both the butadiene and butadiene rubber conforms to industry standards.