My Turn – Commentary on Global Petrochemical Industry Issues – Saudi Arabia Downstream Developments – Dr. Balaji B. Singh
The Kingdom of Saudi Arabia, the largest of the Gulf Cooperation Council Countries has always been at the forefront of petrochemical developments in the Persian Gulf.
The Kingdom of Saudi Arabia (KAS) is interested in increasing the downstream value addition. The KSA’s offset programs in Petrochemicals will be instrumental in developing the industry.
The international petrochemical organizations will have a pivotal role in developing the downstream petrochemical industry in the Kingdom based on the feedstock advantages and the Kingdom’s desire to extend to the downstream industry as a means of the long-run reduction of Oil economy dependency. All of the major petrochemical organizations including ExxonMobil, Dow, Shell, Mitsubishi, Basell, and others are very actively pursuing these opportunities. We also see more opportunities for medium-sized organizations – converters, compounders, and processors in KSA due to its proximity to the future growth regions.
See the article and presentation included.
SABIC and ExxonMobil to conduct a feasibility study for petrochemicals expansion in Saudi Arabia
Saudi Basic Industries Corporation (SABIC) and ExxonMobil Chemical announced that they have begun work on a feasibility study to define a potential project that would grow their two joint petrochemical ventures at Yanbu and Jubail. The project would target a domestic supply of carbon black and rubber and thermoplastic specialty polymers (EPDM, TPO, Butyl, SBR/PBR) to serve emerging local and international markets. The expected project start-up is in 2011.
The project would utilize feedstock allocated by the Ministry of Petroleum & Mineral Resources of the Kingdom of Saudi Arabia, and additional feedstock from other sources in the Kingdom that will be processed at Saudi Yanbu Petrochemical Company (YANPET) in Yanbu and Al-Jubail Petrochemical Company (KEMYA) in Jubail.
Comments: The petrochemical industry in the Middle East started with the concept of monetizing natural gas that was being flared. The emphasis during the initial development stages was to participate in the high-volume commodity markets by competing on cost. As the petrochemical industry evolved the newer participants started to compete in the industry based on cost and some differentiation.
The next stage in the evolution of the petrochemical industry in Saudi Arabia will focus on (1) downstream products that use commodity plastics such as PE and PP and (2) medium to low-volume differentiated commodities and specialties. Players from developed markets such as North America, Western Europe, and Japan will have a significant role in this phase of development. The precursors to success in this stage will change from just cost advantage to a combination of factors such as cost advantage, technical expertise, research & development, technical support, knowledge of channels to market, and knowledge of end-users & end-use markets.
The current feasibility study being conducted by Sabic and ExxonMobil indicates that the petrochemical industry in Saudi Arabia is evolving at a significant pace. We will see more announcements on projects of similar nature.
OMV and Borealis complete joint investment in Austria
Borealis announced the completion of upgrading its European assets: inauguration of a 350,000 tons per year Borstar® polyethylene plant and expansion of an existing Borstar polypropylene plant from 210,000 to 300,000 tons per year in Schwechat (Austria).
OMV and Borealis follow their integrated feedstock-olefins-polyolefins strategy: expansion of OMV (35% owner of Borealis) cracker in its Schwechat refinery to 900,000 tons per year The joint investment for two companies was about EUR 400 million in Schwechat.
This joint EUR 400 million investment turns the OMV/Borealis Schwechat location into one of the largest plastics manufacturing sites in Europe with 900,000 tons per year of production by OMV and more than a million tons per year for Borealis. The construction of the OMV and Borealis plants and crackers began in early 2004 and the start-up was according to plan in the Autumn of 2005.
The EUR 200 million investment by OMV to upgrade its cracker extends OMV’s ethylene capacity by 150,000 tons to 500,000 tons per year and its propylene capacity by 100,000 tons to 400,000 tons per year. These basic petrochemicals products are delivered by pipeline to neighboring Borealis plants and used in manufacturing advanced polyethylene and polypropylene plastics.
The new Borstar PE plant has enabled Borealis to capture the growing demand for linear low-density PE for enhanced, differentiated film products, for flexible consumer packaging and industrial applications in particular.
Comments: The joint EUR 400 million investment is the largest single investment ever made in that location by the companies. This will help them strengthen and consolidate the competitive position of Schwechat as a European petrochemical center.
Borealis was formed in 1994 by the merger of the polyolefins business of Neste and Statoil. OMV had been in negotiations with several polyolefins companies such as Repsol, Hoechst, BASF, and Borealis. In 1997, OMV AG bought 25 percent of Danish petrochemical firm Borealis A.S. from Finland’s Neste Oy for 4.5 billion shillings ($352.2 million). In exchange, OMV sold its subsidiary Petrochemie Danubia (PCD) to Borealis.
Chemtura plans to sell its EPDM and rubber chemicals business
Chemtura announced its plans to sell its EPDM synthetic rubber and certain rubber chemicals businesses, which have a combined turnover of some $300 million by the end of 2006. According to the company, a letter of intent has been signed with an unidentified party and progress towards a definitive agreement is underway.
The rubber chemical business centers on the Geismar plant in Louisiana as well as the Flexzone antiozonants business worldwide. Chemtura will use the proceeds primarily for debt reduction, according to the group, formed from a merger of Crompton and Great Lakes Chemical. The company also reported that Lion Chemical Capital is a potential buyer of the company’s EPDM and rubber chemical business.
Comments: Chemtura was formed when Crompton merged with Great Lakes Chemical in 2005. Chemtura is one of the main producers of EPDM in North America with a production capacity of 210 million pounds. In North America, the demand for EPDM in 2005 was close to 770 million pounds and grew at close to 2.7%. The automotive market continues to be the major demand driver accounting for over 23% of the demand. Major applications include weather stripping, profiles, hoses, and others. Roofing is the other major demand driver for EPDM.
EPDM in recent years has been facing increasing competition from metallocene-based elastomers in polymer modification applications. EPDM is normally used where high temperature and high compression set are required and so are less venerable to new generation polyolefins.
The recent rubber chemicals-related price-fixing issues tarnished the industry’s reputation and impacted several players.
Mehr HDPE project back in Iran
The $225-million Mehr petrochemical project of Iran, which had been off course due to the nuclear dispute between the United States and Iran, will be starting again by the end of 2008.
Siam Cement, Thailand’s largest industrial corporation, holds a 38 percent stake in the $225-million Mehr petrochemical project in Iran. In this project, Siam Cement is intending to produce high-density polyethylene (HDPE), with a capacity of 300,000 tons per year.
Other shareholders in the venture are the National Petrochemical Co of Iran with 40 percent, Itochu Corporation of Japan (12 percent), and Thailand’s PTT Chemical Plc (10 percent).
Comments: There is a significant new investment planned in Iran. The successful or unsuccessful completion of these projects will significantly impact the global petrochemical industry. There are speculations of both project delays or cancelations in Iran due to the political climate. The operating rates being forecasted for the 2009/2010 time frame will have to be continuously adjusted as the status of some of these projects becomes clearer.
Russian company Rosneft considers the construction of a petrochemical complex
Russia’s state-run Rosneft announced that it is considering building a petrochemical complex at the Komsomolsk refinery in Far East Russia, to process around 1 million metric tons of naphtha.
The naphtha is currently exported to China, but the company was hoping to produce olefins and other petrochemical products instead. The company is considering the possibility to produce some 500 KT of ethylene and over 200 KT of propylene to process naphtha rather than export it.
The plan was one of several possible options for the plant’s development, he said, adding that there were also possibilities to produce methanol or other products at the site.
Rosneft’s investment committee could make a decision on the issue by the end of the year. Should the committee decide to go ahead with the petrochemical project, the complex could be built by 2009-2010.
Comments: The Russian state oil company Rosneft recently completed the consolidation of its 12 subsidiaries into a single company. These include: (1) Rosneft-Krasnodarneftegaz, (2) Rosneft-Purneftegaz, (3) Rosneft-Sakhalinmorneftegaz, (4) Rosneft-Stavropoineftegaz, (5) Yuganskneftegaz, (6) Severnaya Neft, (7) Selkupneftegaz, (8) the Komsomolsk refinery, (9) the Tuapse refinery, (10) Rosneft-Arkhangelskneftepdodukt, (11) Rosneft-Nakhodkanefteprodukt, and (12) Rosneft-Tuapsenefteprodukt.
The consolidation of Rosneft’s subsidiaries will make the company more manageable from the viewpoint of its corporate structure, rendering it’s stock more liquidity on stock exchanges in Russia. Now the company is considering investments in the downstream sector to capture the value and growth of the products.
Yukos had a minority stake in Yuganskneftegaz, one of the subsidiaries of Rosneft.
ExxonMobil Chemical to expand halo butyl rubber capacity at Baytown, Texas
ExxonMobil Chemical announced a major expansion of halo butyl manufacturing at its plant in Baytown, Texas. The US facility will increase the capacity to produce Exxon™ Bromobutyl rubber by 60 percent by modifying existing equipment and adding new equipment. The expansion is part of the company’s commitment to satisfy strong demand and high growth in the global halo butyl rubber market and the tire industry. Construction completion is anticipated during the second quarter of 2008.
The ability of halo butyl to be vulcanized with other rubbers, providing unique properties such as low air permeability, high heat resistance, excellent flex cracking resistance, and processability, makes it valuable in tire inner liner applications. The superior moisture vapor barrier properties of halo butyl inner liners help prevent the rusting of steel cords in the belts and carcass of passenger and truck tires. Better inflation pressure retention (IPR) afforded by halo butyl rubber has been demonstrated to improve the durability of aged tires.
ExxonMobil Chemical is a major supplier of halo butyl rubber to the global tire industry and has expanded its capacity to produce this polymer by 80 percent in the past decade.
In 2002, the company completed an expansion at Baytown that quadrupled its halo butyl capacity. Japan Butyl Co. Ltd., an ExxonMobil Chemical joint venture, recently completed an expansion that increased its halo butyl production capacity to 70,000 tons a year to meet growing demand in the Asia Pacific. In another expansion at the Baytown butyl plant, the company is doubling its capability to produce proprietary Exxpro™specialty elastomer, used for new high air barrier technologies for tire inner liners. Announced in 2005, the project is targeted for completion by year-end.
Comments: ExxonMobil Chemical (EMC) is a major supplier of halo butyl rubber to the global tire industry. It seems that EMC is committed to maintaining its leadership position in this specialty elastomer – Butyl Technology Business which has been a “cash cow” over these years. Obviously, some of the plants are getting old and EMC is investing in their expansion and modernization to meet the growing market need. Not too long ago – in October 2005, EMC announced a multimillion-dollar investment to double production capabilities for its proprietary Exxpro™specialty elastomer used in DVA advanced inner liner construction. The expansion of the company’s plant in Baytown, Texas, was targeted for completion in the fourth quarter of 2006.
EMC expects to commercialize a DVA resin product in the latter half of 2007. A milestone in the development of improved tire inner liners was announced recently by EMC and The Yokohama Rubber Co., Ltd. (YRC) following tests to qualify their jointly developed technology for use in passenger vehicle tires in harsh winter conditions.
EMC manufactures and markets high-quality synthetic rubber polymers worldwide: Butyl, Bromobutyl, Chlorobutyl, Star-branched Butyl and Halobutyl, and Exxpro specialty elastomers. From its Butyl breakthrough over 68 years ago to the specialty elastomers of today, EMC has been at the technological forefront of the rubber industry. ExxonMobil Chemical’s butyl polymers are used in a variety of applications – tires, automotive, healthcare and medicals, construction, consumer products, and adhesives.
Unipetrol to sell its Spolana stake to Anwil
Czech Republic company Unipetrol announced its plans to sell its 82 percent stake in PVC producer Spolana to Polish chemical group Anwil. A court-appointed company is now undertaking an independent assessment of the sale price, which ultimately must be approved by Unipetrol’s supervisory board when it next meets. Polish refiner PKN Orlen, which owns a 63 percent stake in Unipetrol, is also majority owner of Anwil, which media have long speculated would buy the Spolana stake.
Part of the agreement includes long-term supplies of ethylene from Unipetrol to Spolana.
Comments: Earlier this year Unipetrol decided to sell Spolana because the firm does not fit with the main field of its business. Unipetrol’s main focus was the operation of refineries, the petrochemical sector, and fuel sales.
The company will use the cash to reduce its debt or to acquire strategic businesses. Unipetrol is owned by PKN Orlen.
Newell Rubbermaid sells its global Little Tikes business to MGA Entertainment
Newell Rubbermaid Inc. announced that it has completed the previously announced sale of its Little Tikes business unit to MGA Entertainment, Inc., a global consumer entertainment products company.
This transaction is consistent with the company’s intention to narrow its portfolio to focus on businesses that are best aligned with its strategies of differentiated products, best cost, and consumer branding.
Little Tikes contributed approximately $250 million in revenue in 2005, reported in the company’s Other segment. In connection with this transaction, the company continues to expect to record a net gain of $15 to $25 million in the fourth quarter of 2006.
Comments: Rubbermaid has been consolidating its operations over the last two years. MGA Entertainment, being a global consumer entertainment products company will be able to benefit from this acquisition. Little Tikes is MGA’s first acquisition – and the Tikes roto molding plants in Hudson and Slupsk, Poland, are the company’s first manufacturing operations. Until now, MGA was outsourcing the production of its toys to China. This acquisition will give the company advantage of integration into manufacturing and expand its product portfolio.
Rubbermaid and Little Tikes played a great role in polyolefins and elastomers development in the last 25 years. Its symbiotic relationship with the polyolefins and elastomers industry will continue.
ICI to build Elotex re-dispersible powder polymers facility in China
ICI has announced its intention to build a new re-dispersible powder polymers manufacturing plant in China as part of its strategy to grow aggressively in the country and the Asia Pacific region. ICI is currently in the process of selecting the plant location. The new facility for Elotex, a business unit of ICI’s National Starch and Chemical Company, is scheduled to begin operations in 2008 and shall have a production capacity of approximately 20,000 tons/year.
ICI currently has seven major facilities in China producing decorative paints, adhesives, electronic materials, and flavors and fragrances for the China market and the Asia Pacific region. Three more facilities are to be completed by 2008, including the new Elotex plant, a Regional Technical Center for flavors and fragrance product development and a China Research Center for Group R&D. ICI employs nearly 2,000 people in China, where it had sales of more than US$400 million in 2005.
Comments: Redispersible powders are organic polymer powders produced by spray-drying aqueous polymer dispersions. Water-soluble colloids are post-added to the dispersions to improve the efficiency of the spray-drying process and to enhance the dispersibility of the final product. During the spray-drying process, anticaking agents are added to provide free-flowing and non-agglomerating properties.
Redispersible polymer powders combine the performance benefits of liquid latex modifiers with the convenience, reliability, handling, and storage advantages of one-component dry systems. These are mainly used in the construction industry, primarily as additives for cement- or gypsum-based dry blend products. Other applications include (1) tile adhesives, (2) thermal insulation systems, (3) self-leveling flooring compounds, (3) tile grouts, and others.
Redispersible polymer powders are generally made by spray-drying aqueous dispersions. The dispersions are mainly based on vinyl acetate homopolymers, vinyl acetate/vinyl-versatile copolymers, or vinyl acetate/ethylene copolymers. The major suppliers of re-dispersible powders include (1) Wacker, (2) National Starch, (3) Dow, (4) BASF, and others. Wacker produces and markets its products under the trade name Vinnapas®. National Starch products are sold under the trade name Elotex®, which was acquired from Celanese.
INVISTA to acquire nylon 6 business in Asia Pacific
INVISTA reached a definitive agreement with Honeywell to purchase, via a wholly foreign-owned enterprise in the Peoples Republic of China, the assets of Honeywell’s nylon 6 bulked continuous filament (BCF) business in Asia Pacific, including its plant in Shanghai, China. Closing is expected in early 2007, subject to regulatory approvals and customary closing conditions.
The purchase will include the plant in Shanghai, China which produces white dyeable and solution-dyed nylon 6 BCF. It also has processing equipment to make heathered, twisted, and heat-set yarns.
According to INVISTA, the goal of this acquisition is to better serve the needs of mill customers and consumers in Asia Pacific by adding locally produced BCF to our present Antron® carpet fiber and STAINMASTER® carpet offerings.
INVISTA plans to integrate the production and marketing of type 6 nylon BCF into its business offering in Asia Pacific. This will expand the comprehensive portfolio of branded, differentiated and unbranded nylon BCF offerings to customers in this region for the commercial, residential, transportation, and rug segments.
Comments: This acquisition will help INVISTA to better serve the needs of mill customers and consumers in Asia Pacific by adding locally produced BCF. The plant in Shanghai also provides an excellent growth platform for future expansions of our nylon 6,6 business in Asia Pacific.
Davis-Standard was acquired by a private investment group
Davis-Standard, LLC announced that the Company has been acquired by management and an investor group led by Hamilton Robinson LLC, a Stamford, CT-based private equity firm. The acquisition supports Davis-Standard’s strategy to grow its global converting and extrusion systems businesses as well as Chemtura Corporation’s decision to divest a non-core business and focus instead on its specialty chemical business.
It has only been eighteen months since Davis-Standard and Black Clawson Converting Machinery, Inc. merged.
Davis-Standard, LLC has facilities in Pawcatuck, Conn.; Somerville, N.J.; and Fulton, N.Y.; as well as in Germany and the UK. Davis-Standard, LLC is a global leader in the design, development, and manufacturing of extrusion systems, feed crews, barrels, and process controls for the flexible web converting, plastics processing, and rubber industries.
Comments: Chemtura sold its majority interest in the Pawcatuck-based Davis-Standard LLC to the firm’s management team and a Stamford-based investment group for $72 million in cash. The company had inherited Davis-Standard when Great Lakes Chemical and Crompton merged. Davis-Standard was formed in 2005 by Crompton as a joint venture with Hamilton Robinson LLC. Chemtura is selling its non-core assets including EDPM and rubber chemicals business.
The new ownership structure will continue to be led by the existing Davis-Standard management team and the Company’s financial strength will be preserved under the new capital structure.
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