ADI Chemical Market Resources Newsletter
April 5, 2010

AMERICAS

LyondellBasell Updates

LyondellBasell prices USD 2.75 billion senior notes

LyondellBasellIndustries (LBI) has priced a senior note offering at USD 2.75 billion to support the chemical company’s emergence from Chapter 11 bankruptcy protection.

The notes will be issued by LBI Escrow Corp., which will merge into subsidiary Lyondell Chemical Co., as part of Lyondell Chemical’s climb out of bankruptcy, which is expected to occur around April 30, if its reorganization plan is approved.

The senior notes are made up of USD 2.25 billion of 8 percent senior secured notes and €375 million of 8 percent senior secured notes, both maturing in 2017. The offering is scheduled to close on April 8.

The company plans to use proceeds from the offering, which will be put in escrow until its reorganization plan is approved, to repay debt.

Access may boost Lyondell’s stake post-bankruptcy

Access Industries could seek to take a greater than 15 percent stake in LBI when the company exits bankruptcy later this year.

Access, which led the 2007 merger that created LyondellBasell, has already agreed to commit as much as USD 800 million to backstop a rights offering to take the company out of bankruptcy, along with additional funds from private equity investors Apollo Management and Ares Corporate Opportunity funds.

That deal could leave Access with about a 15 percent stake in the company, but Access could seek to build a larger stake if the price was right.

Lyondell plans to list its stock on the New York Stock Exchange post-bankruptcy, and Access could seek to boost its stake on the open market as well.

LyondllBasell to license Trans4m process technologies

LBI has expanded its licensing portfolio of olefin recovery and conversion technologies to create a comprehensive offering of processes under the new trademark Trans4m. Trans4m process technologies offer tailored solutions for C4 and higher olefin separation process requirements, as well as isomerization and extraction processes.

The Trans4m portfolio of processes includes catalytic technologies for the selective conversion of low-value, mixed olefin streams from crackers to ethylene, propylene, and butene. The Trans4m portfolio of processes also features a comprehensive set of technologies for the separation, purification, and isomerization of the C4 and C5 olefin streams of cracker operations.

First Trans4m S technology license

The first Trans4m S technology license has been granted to a chemical company in China. The “S” stands for the skeletal isomerization of butene to isobutene, which provides feed to a Methyl Tertiary Butyl Ether (MTBE) unit producing high-octane gasoline.

The Trans4m S process configuration features simple and moderate operating conditions with minimal investment costs. In addition, the process can be integrated with MTBE/Ethyl Tertiary Butyl Ether (ETBE) or isobutylene, and butene-1 units, or tertiary amyl methyl ether (TAME) units for significantly increased production.

Obama advocates offshore drilling to boost the economy, jobs

Reversing its previous stance, the Obama administration is proposing that offshore oil and gas drilling be allowed along parts of the Atlantic coast, the eastern portion of the Gulf of Mexico, and in 130 million acres in the Arctic Ocean north of Alaska.

According to estimates from the Mineral Management Services of the Department of the Interior, there are between 39 billion and 63 billion barrels of economically recoverable oil and between 17 trillion cubic feet and 29.4 trillion cubic feet of economically recoverable natural gas in the eight planning areas under consideration for leasing under the 2012-17 program.

MMS said that represents as much as 80 percent of the undiscovered economically recoverable oil and gas on the U.S. outer continental shelf. The oil industry, along with the plastic and chemical industries, has long petitioned the government to open up more acres of water to offshore drilling to help reduce the price of feedstocks and fuels and reduce dependency on foreign fuels.

Actual drilling in much of the newly opened areas would not begin for years, as the administration’s proposal calls for the Interior Department to first conduct geological and environmental impact studies, with no lease sales scheduled before the 2012-17 oil leasing period.

The eastern Gulf area is considered the most oil-rich of the three areas, with an estimated 3.5 billion barrels of oil and 17 trillion cubic feet of gas, as estimated by MMS. However, drilling there often has been opposed by both environmental groups and several politicians in Alabama and Florida.

Dow’s new catalyst system improves the PP manufacturing process, end-product quality

Dow Chemical has expanded its catalyst system offering with CONSISTATM D7000 Donor, designed specifically for high melt flow (HMF) applications. The first product in Dow’s new portfolio of advanced catalyst systems, it enables polypropylene manufacturers to achieve the performance differentiation needed to enter premium markets, while realizing the benefits of better on-stream time, better plant operability, and reduced production costs.

The new catalyst system was developed to optimize high-melt impact copolymer PP used in automotive interior applications and food contact applications -all challenging but financially rewarding markets for manufacturers. For each of these segments, CONSISTA D7000 helps meet specific quality requirements -from high impact/stiffness balance to improved polymer taste/odor profile in food contact applications, to reduced C emissions, the volatilized organic chemicals responsible for the “new car” smell.

Chris Pappas Appointed to Lead Styron

Former Nova Chemicals CEO Chris Pappas has been appointed president and CEO of Styron, Dow Chemicals’ former styrenics business. The appointment was announced by STY Acquisition Corp., an affiliate formed by Bain Capital to facilitate Bain Capital’s $1.6 billion purchase of Styron, announced earlier this month. The appointment of Pappas will be effective upon the closing of the transaction, which is expected in June subject to regulatory approvals.

Pappas will succeed Mark Remmert, who will begin a transition period commencing upon the completion of the sale. Remmert has served as CEO of Dow’s Styron division since July 2009.

Pappas, age 54, brings 30-plus years of experience to Styron, including time served as president and COO of Nova before his appointment to CEO in May of 2009. He retired from Nova on December 31, 2009. He started his career with Dow in 1978, holding a variety of positions until 1995. Pappas also held several positions at DuPont Dow Elastomers from 1996-2000.

“Chris Pappas is an exceptional leader with the right set of skills and experiences to grow and strengthen the Styron business and help achieve its full potential as a global leader,” says Steve Zide, managing director at Bain Capital. “Chris knows the industry and the business well. He will complement the culture of excellence and quality and will work seamlessly with Styron’s business leaders to build the Styron franchise in close partnership with its customers and business partners and Dow.”

Mexico spending USD 12.5 million on the training center

Mexico’s federal government and the government of the heavily industrialized State of Mexico are investing up to USD 12.5 million to build the first stage of one of the most advanced centers of industrial engineering and design in the country.

Much of the center’s activities will be concentrated on training engineers for the plastics processing industry.

The center, to be built in the municipality of Lerma, just west of Mexico City, is the largest project of its kind ever undertaken by Mexico’s National Science and Technology Council, known as Conacyt (Consejo Nacional de Ciencia y Tecnología de México), and its 27 regional subsidiaries.

The center will train about 30 professionals in plastic processing per year. Mexico has 3,500 plastics processing companies, of which about 60 percent are in the State of Mexico and the Federal District of Mexico City.

Just over a third of the initial investment of USD 12.5 million will be used to buy the 350,000 square feet of land on which the center will be built. The rest will be spent on infrastructure and equipment.

Braskem mulls building second green PE plant

Braskem is considering building a second plant to manufacture polyethylene from renewable resources, depending on the success of the first plant which is due to start up in October this year.

Braskem has not revealed any specific plans for the proposed plant, but it is internally evaluating the second plant and methods to continue the biopolymers business to bring it to the market as soon as possible. The company is most likely looking to build in the center of the country, Brazil’s sugar cane heartland, to have ready access to ethanol.

Clariant opens masterbatch plant in Mexico

Clariant Masterbatches has inaugurated a new 43,000-square-foot manufacturing facility close to the Mexican capital.

The plant, in the municipality of Santa Clara, includes offices, laboratories, a showroom, and warehouses and is triple the size of Clariant’s former plant in the nearby municipality of Naucalpan, which closed in October.

The plant has been built primarily to serve customers in Mexico, although specialty masterbatches for Central American markets will also be produced here. The company’s objective is to bring new technology, including new liquid masterbatches, to processors throughout the region.

The Santa Clara plant will produce liquid color and additive masterbatches, taking advantage of product and dispensing technology perfected by the former Rite Systems Inc., which Clariant acquired in 2008.

Production capacity for color and additive masterbatches at Santa Clara is 25 percent greater than at the old site and is expected to double within four years.

Comments: Clairant’s move to set up a masterbatch plant makes sense as Mexico is among the top 20 consumers of plastics in the world and the second largest in Latin America. Mexico would also be an ideal location for Clariant as it would be able to serve both Mexico and Latin America.

Clariant was formed in 1995 as a spin-off from the chemical company Sandoz, which was itself established in Basel in 1886. Clariant in recent years has been expanding through a number of acquisitions. The company 2000 acquired BTP plc (UK), 2006 Ciba’s Masterbatches, and in 2008 Rite Systems and Ricon Colors.

EUROPE

Romania’s Rompetrol to expand Constanta HDPE plant

Romania’s Rompetrol Petrochemicals has announced it plans to expand the capacity of its modernized high-density polyethylene (HDPE) plant in Constanta by more than 70% before March 2011.

The company, part of leading Romanian oil producer Rompetrol group, is investing USD 18 million in this project which will raise the site’s total capability to 100KTA of HDPE.

The latest capacity project will be carried out in two stages. The installation’s granulation tower will be rehabilitated and modernized on site by August 2010, and the increased overall plant capacity will be operative from the first quarter of 2011.

Comments: Rompetrol is one of the largest refiners in Romania and is part of the multinationalRompetrol Group. Its Petromidia Petrochemicals Complex houses one of two wholly owned refineries –the Petromidia refinery is Romania’s latest and most sophisticated refinery and is perceived to be reasonably competitive in the CEE context.

Rompetrol Petrochemicals was established in 2002 when the production of polymers was separated from refining operations in the Petromidia complex. Even though Rompetrol Petrochemicals has a strong presence in the Romanian PP market, it has not focused on developing its HDPE capabilities in the past.

Its HDPE plant, originally shut down in 1996 because of a lack of ethylene feedstock, underwent a major upgrade in 2006 and restarted production with a 60 KTA capacity at the end of 2007. Rompetrol invested around USD 14.5 million in the upgrade.

MIDDLE EAST & AFRICA

Aramco, Dow mull petrochemical complex relocation to Jubail

Saudi Aramco and Dow Chemical are considering relocation of their planned USD 20 billion-plus petrochemical complex to Jubail or Ras Azzour from Ras Tanura. The complex at Ras Tanura was planned to produce 8000 KTA of petrochemicals. However, the high cost of land reclamation in Ras Tanura, and congestion at the site have evoked a change of plans. About two to three months will be required to get approval for the relocation from Saudi authorities. The size of the project was expected to be unchanged with a slight additional cost for reconducting studies on the new area and laying of pipelines. However, the overall project cost is expected to fall due to the lower land expense. The Saudi government has already completed an expansion phase of infrastructure at Jubail, where plots of land are ready for construction.

Dow Chemical explores PO/PG plant in Asia, Middle East

US-based Dow Chemical is exploring opportunities to build a world-scale PO/PG facility in the Middle East and Asia.

The size of the plant would likely be similar in scale to its 390KTAHPPO (hydrogen peroxide to propylene oxide) plant being built in a joint venture with Siam Cement at Mab Ta Phut, Thailand. The latter facility is scheduled to come online in the second half of 2011.

ASIA-PACIFIC

Hyundai is to hand over the polypropylene plant to PetroVietnam by the end of May

Rogers to acquire polyurethane foam manufacturing plant in South Korea

Rogers Corp. has signed an agreement with SK Chemicals Co. Ltd. of South Korea, to acquire SK Utis Co., Ltd., its high-performance polyurethane foam manufacturing unit located in Ansan, South Korea. The parties expect the transaction to close within the next few weeks. The total purchase price for the intellectual property, technology assets, and stock of SK Utis Co., Ltd. is USD 29.1 million. The agreement calls for Rogers to acquire a 90 percent majority share of SK Utis from SK Chemicals immediately upon close, and the final 10 percent share two years later. During the period of the partnership, Rogers and SK Chemicals will work together to ensure a successful transition of the business for customers and employees. Rogers plans to bring the business into its High-Performance Foams Division, a world leader in sealing, cushioning, isolation, and energy management solutions for customers worldwide.

Comments: Rogers’s move to acquire the high-performance polyurethane foam unit of SK Chemical will allow it to gain a firm footing in the South Korean market. South Korea has a vibrant automobile market with major producers such as Hyundai and KIA. South Korea is the fifth largest automotive producer in the world producing 3.5 million vehicles per year. Rogers will also be able to take advantage of the appliance market where major players include Daewoo, Samsung, and LG, an area where polyurethane foam is widely used.

Rogers Corporation was founded in 1832. The company in recent years has gradually expanded its reach in the Asian market. In 1984, Rogers INOAC Corporation (RIC), a joint venture with Japan-based INOAC Corporation was formed to serve the Japanese market. In 2004, the JV formed another joint venture in Suzhou, China forming Rogers INOAC Suzhou Corporation (RIS) to manufacture polyurethane foam materials for the Chinese market.

HMC Polymers to increase the annual capacity of polypropylene at the plant in Map Ta Phut by 300KTA

HMC Polymers will inaugurate its PP plant in Map Ta Phut after capacity expansion in Q2-10. Annual polypropylene production capacity has been increased by 300KTA in addition to the existing capacity of 450KTA in a bid to serve the growing demand for polypropylene both domestically and internationally. The company is an affiliate of PTT and LyondellBasell. HMC Polymers’ capacity expansion project for polypropylene was not included in the recent Central Administrative Court’s suspensions for the Map Ta Phut area, so it can proceed with construction work. HMC Polymers is Thailand’s first polypropylene resin manufacturer.

Comments: The 300 KT Polypropylene plant was initially scheduled to start up in August 2009. For additional comments please refer to volume 7 issue 2.

GAIL seeks assured gas supply from Qatar for USD 1.3 billion Qatari petrochem plant with RIL

India’s state-owned oil major GAIL India Ltd has sought assured natural gas supply from Qatar to set up a US 1.3 billion petrochemical plant with Reliance Industries in the gas-rich nation. Last year’s preliminary discussions with Qatar Petrochemical Company (QAPCO) are being followed by detailed discussions about the project.

RIL and GAIL signed an MoU to jointly set up a mega gas-based petrochemical plant in December 2007. The two partners plan to float a special-purpose vehicle with an equal stake to set up the overseas petrochemical plant.

Kuraray to enter acrylic TPE business back to Headlines

Kuraray Co. Ltd. plans to establish production at its Niigata, Japan, facility for a new acrylic thermoplastic elastomer.

The firm will be able to produce 5KTA of the material, a block copolymer of methyl methacrylate and butyl acrylate that uses Kuraray proprietary technology. The TPE is transparent, soft and has adhesive properties, and can be used in the optical and molding material fields.

Kuraray has been producing the TPE since 2004 at a pilot plant. The full-scale operation will cost $53.8 million, employ about 20, and open in September 2011.

RIL loses race for Canadian firm

Reliance IndustriesLtd.(RIL)has been pursuing a strategy of overseas expansion/acquisitions in the recent past. After its bids for bankrupt petrochemicals company LyondellBasell and subsequently for Canadian oil sands firm Value Creation were unsuccessful, RIL now intends to strike a joint venture with US-based Atlas Energy to develop the latter’s Marcellus Shale gas operations.

RIL possesses cash and cash equivalents of more than Rs 15,000 crore (USD 3.3 billion). In addition to this, it also has treasury stock worth Rs 35,000 crore (USD 7.8 billion) and is looking at potential investment opportunities. Atlas is seeking a partner for its operations in the booming Marcellus Shale, in the eastern US.

In the case of LyondellBasell, LBI’s board rejected RIL’s $14.5-billion bid while with Value Creation, RIL lost to BP, which is acquiring a majority control in the Calgary-based company’s largest oil sands project, Terre de Grace.

Sinopec to Build Gas Chemicals Plant in Kazakhstan

China Petroleum & Chemical Corp. (Sinopec)has won a contract to build a $1.7 billion polypropylene plant in western Kazakhstan. Sinopec has agreed to buy and export all the polypropylene produced at the facility. The Export-Import Bank of China will provide a $1.26 billion loan for the project.

TOO Kazakhstan Petrochemical Industries, 51 percent held by the London-traded unit of state-owned KazMunaiGaz National Co., will invest $300 million of its own money, and Kazakhstan will provide a “budget credit” of $140 million.

The polypropylene plant will form part of a gas chemicals complex, which will be able to produce 450KTAmetric tons of polypropylene and 800KTA of polyethylene once completed in 2014.

Taiwan Government boosts spending on plastics R&D

Taiwan’s plastics industry is betting big that a focus on research will help it find a competitive path between the huge numbers of lower-cost machines coming out of China and the top-end, high-priced ones from traditional strongholds like Germany and Japan.

Industry and the Taiwanese government are looking to increase research spending and form new partnerships, as Europe’s sluggish market has made it cheaper for some firms to snatch up good research talent. Last month, a group of machinery and mold-making firms located in Tainan, Taiwan, launched a partnership to build stronger links with plastics researchers at 10 universities and garner more government research grants.

Called the Taiwan Exquisite Machinery and Mold Strategy Alliance, the group comprises about 70 companies, including large Taiwanese injection press makers Fu Chun Shin Machinery Manufacture Co. Ltd. and Chuan Lih Fa Machinery Works Co. Ltd.

Taiwan’s government also has increased spending on one of its main plastics research centers, the Plastics Industry Development Center in Taichung. The center, which receives funds from both industry and government, has roughly doubled its budget to USD 13 million since 2006 and boosted staff by 50 percent to almost 200.

The government spending is part of an effort to expand research support for “traditional” industries like plastics, bicycles, and precision machinery, to help them remain competitive and generate jobs, particularly in the economic downturn. The economic downturn among European plastics machinery firms also seems to be benefiting research efforts in Taiwan.

Mitsui Chemicals and Idemitsu Kosan Link in Chiba Cracker JV

Mitsui Chemicals and Idemitsu Kosan have formed an equally owned joint venture to operate their two naphtha crackers at Chiba, Japan in a move that will save the two firms a combined Y3 billion/year (USD 33 million) within 18 months. Mitsui and Idemitsu last May submitted proposals to the Ministry of Economy, Trade and Industry highlighting a plan to optimize their Chiba cracker operations.

Mitsui Chemical operates a 553KTAnaphtha cracker at Chiba while Idemitsu runs a 374KTA plant. The move will increase the two companies’ competitiveness, particularly at a time when Asian producers add large-scale olefin plants, and the Mideast brings online increasingly more gas-based ethylene complexes. Japan has a 7800 KTA ethylene capacity produced at 15 separate crackers.

India offers a stake to Kuwait in ONGC and IOC’s petrochemical plants

India has offered Kuwait a stake in Oil and Natural Gas Corp’s (ONGC) Rs.12440 crore (USD 2.8 billion) petrochemical plant at Dahej in Gujarat on the West coast, and Indian Oil Corp ́s (IOC) proposed chemical plant at Paradip on the East coast. Kuwait Petroleum Corp has repeatedly rebuffed offers for a stake in Indian refinery projects since its demand for auto fuel distribution rights is not possible, due to India’s policy that only state-owned firms qualify for government subsidies. However, Kuwait has indicated a willingness to discuss the opportunity further after a recent offer by India’s Petroleum Minister to his Kuwati counterpart.

ONGC’s Dahej petrochemical complex is to have an annual capacity to produce 1100KTethylene, 340KTApropylene, 135KTAbenzene, and 95KTAbutadiene. C2-C3 (ethane and propane) compounds extracted from imported liquefied natural gas (LNG) will be used as feedstock. ONGC holds 26% of ONGC Petro-additions (OPaL), the special purpose vehicle (SPV) formed for setting up the chemical complex, 5% is held by Gujarat State Petroleum Corp (GSPC) and 19% is held by GAIL India. The scope for a foreign partner will be for 20-25% stakeholding.

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