My Turn – Commentary on Global Petrochemical Industry Issues – The Future Options for the U.S Gulf Coast –The panel discussion at FlexPO2006 by Dr. Balaji B. Singh
At our recent FlexPO2006 conference at Houston/Galveston, we invited several retired senior executives from the chemical industry including (1) Mr. Eugene Allspach – Ex CEO of Equistar-Lyondell, (2) Mr. Peter Hanick – Ex CEO of Millennium Chemicals, (3) Mr. Jeff Dancer – Ex-president of Philips Driscoll Plpe in Singapore, (4) Dr. Seetha Kammula Coleman – ex VP of Innovation, Basell and (5) Mr. Steve Arbogast – ex Treasurer of ExxonMobil Chemical Company.
The major conclusions from the panel discussion:
1. Most of the past oil price fluctuations were due to Global political instability. The current disruption of oil prices is complicated by the increase in demand for oil (China and India) in addition to the Global political instability. This will change the “business cycles” that have no current precedent.
2. The U.S. alternative energy programs are driven by oil prices and it is imperative on the part of the U.S. government that we do not repeat the 1990s history of scrapping the alternative energy programs as soon as the oil prices come down.
3. The current level of alternate feedstock programs- biofuels, ethanol, MTO/MTG is not economically feasible and will take another decade before being economically viable – assuming we continue on this path
4. The natural gas supply/price issues unique to the United States in the past decade had more impact on the industry than the demand. The Government has to address these issues.
5. The U.S. Gulf Coast can do better on a long-run basis by focusing on its neighbors Mexico and Latin America to develop heavy crude processing and growth in the regions than mass migration to China.
6. The developments in China and India are good for those regions and for the current U.S. giants that are interested in monetizing the trends. The U.S. as a region has to become more competitive to avoid the current organizations becoming the future U.S. divisions of major Chinese Companies.
San Francisco to ban polystyrene food service products in restaurants
A Board of Supervisors committee approved legislation that would ban the use of Styrofoam and other polystyrene products in city restaurants by June 1, 2007.
The legislation introduced by the Board of Supervisors President Aaron Peskin would apply to about 3,400 restaurants in San Francisco. The manufacture of PS foam involves polluting chemicals, and polystyrene is blamed for filling up landfills. A number of other cities in California and around the country already have banned the material.
The city’s restaurant industry generally supports the legislation, with most restaurant owners now using alternative food-service products.
Comments: In US other cities including Oakland, Portland, Ore., and Berkeley, have banned polystyrene containers for a long time now. California has also been at the forefront of introducing legislation against chemicals that are environmentally unfriendly. In 1988, the Board of Supervisors adopted an ordinance that banned the use of food service ware made with chlorofluorocarbons, which were linked to the deterioration of the earth’s ozone layer.
California’s Governor Arnold Schwarzenegger is supportive of the general environmental issues of California.
Basell JV with Sahara Petrochemical Company secures Shariah-compliant financing
Al-Waha Petrochemical Company, the joint venture between Basell (25%) and Sahara Petrochemical Company (75%) in Al-Jubail Industrial City in the Kingdom of Saudi Arabia, completed the signing of the Shariah-compliant Financing Facilities Agreement and all related financing documents with six regional banks.
Engineering, procurement, and construction (EPC) activities for the 450 KT per year Spherizone polypropylene plant and a propane dehydrogenation unit began in January this year based on an early works agreement with Tecnimont and Daelim. The EPC contract was signed on September 18, 2006, and commercial production is foreseen in the first quarter of 2009.
The Spherizone process is Basell’s most advanced polypropylene technology and can produce the full range of PP grades, as well as new families of propylene-based polymers with enhanced product properties. Basell operates a Spherizone plant in Brindisi, Italy, and has granted eight Spherizone process licenses with an aggregate capacity of 2.5 million tons per year.
The Al-Waha joint venture is Basell’s third major investment in Saudi Arabia. A first joint venture with Tasnee Petrochemicals, involving a polypropylene plant and a propane dehydrogenation unit, commenced commercial operations in May 2004. Its current capacity of 500 KT per year will be expanded to 800 KT by the end of 2008.
In June this year Basell’s second joint venture in the Kingdom, Saudi Ethylene and Polyethylene Company, was established jointly with both Tasnee Petrochemicals and Sahara Petrochemical Company. The new company is currently constructing a cracker for the production of 1000 KT per year of ethylene and 285 KT per year of propylene; one 400 KT per year high-density polyethylene (HDPE) plant using Basell’s latest generation Hostalen ACP process, and one 400 KT per year low-density polyethylene (LDPE) plant using Basell’s Lupotech T technology. The start-up of these facilities will be in the fourth quarter of 2008.
Comments: In December 2004, Basell and Sahara Petrochemical Company signed an agreement for the construction of a polypropylene and propane dehydro complex at Al-Jubail industrial city. Sahara had licensed Basell’s Spherizone technology for the manufacture of polypropylene. Subsequently in May 2006, Tasnee, Sahara, and Basell signed a joint venture agreement for the construction of a new integrated ethylene and polyethylene complex. The complex will include a gas cracker and two 400 KT per year polyethylene plants. One plant is based on Basell’s Hostalen process for HDPE, and the other plant is based on Basell’s Lupotech T technology for LDPE. The current announcement seems to indicate that the project is on track. The industry will hear more announcements from the companies as the project progresses.
Haldia Petrochemical to invest about $180 million by 2008
Haldia Petrochemicals Ltd (HPL) announced its plans to invest Rs 800 crore ($180 million) by March 2008 for revamping its existing plant and ramp up capacity by about 28 percent.
Besides capacity building, HPL is also evaluating the possibility to switch over to a coal-fired power plant from the existing naphtha-based unit to reduce the cost of energy by around Rs 140-160 crore per annum.
The company board has recently decided on a detailed feasibility study, for another major expansion, including a second plant adding the feasibility report would be ready in a year. The company is also looking into cost reduction measures including energy and logistics as the cost of naphtha-based power is very high. HPL has a 75 MW naphtha power plant, HPL Cogeneration Company, to meet its current needs. The plant is managed by a 51:49 joint venture, between Larsen & Tubro and HPL.
Comments: Located in West Bengal, India, Haldia is a producer of polyolefins: PP, HDPE/LLDPE, and chemicals (benzene, butadiene, cyclopentane, C4 Hydrogenated (LPG), pyrolysis gasoline (Py Gas) and carbon black feedstock). It is jointly promoted by West Bengal Industrial Development Corporation, Chatterjee Petrochem (Mauritius) Co. Ltd., and the Tata Group with an investment of $1.2 billion.
The company has been contemplating an IPO for the last 2 years and the construction of a second naphtha cracker. The plans were delayed due to the company’s negotiations with the Chatterjee group for acquiring an additional stake. The demand for PP is growing at a very healthy rate in India and by capacity expansion; the company will be able to capture some of the market growth.
Al-Zamil and Chemtura to study the construction of a new metal alkyls plant
Al-Zamil Group and Chemtura Corporation announced an agreement to further develop the formation of a joint venture to build world-scale metal alkyls manufacturing facility in Jubail Industrial City, Saudi Arabia. The facility would be designed to satisfy the growing regional demand for aluminum alkyls that serve as specialty catalysts for a variety of olefins, including polyethylene and polypropylene.
The Chemtura – Al-Zamil joint venture would license Chemtura’s proprietary technology and serve as the sales and marketing arm of Chemtura’s aluminum alkyls in Saudi Arabia and other Gulf Coast Countries. Chemtura would be responsible for sales of the joint venture outside the Gulf Coast Countries and would provide technical service and product application knowledge.
Comments: Saudi Arabia is expanding its petrochemical industry in an effort to diversify its oil-based economy. It seems that the polyolefins supporting industries such as the co-catalyst manufacturers are also getting their chances, taking advantage of the “gold rush” – emerging opportunities in Saudi Arabia. As it approaches the first anniversary of the marriage of Crompton Corp. and Great Lakes Chemical Corp., Chemtura Corp. is making sure it is well-poised to meet product demand in fast-growing regions. The cocatalysts area is a niche market in that player like Albemarle (supplier of MAO), Akzo-Noble (metal alkyls), Chemtura, and others have profitable businesses in North America. This is a win-win situation for both parties – for Chemtura in expanding its market in the Arabian peninsula and establishing a home-field advantage for Al-Zamil Group in the cocatalysts business. The new facility, which would be located in Jubail Industrial City, would serve the growing demand in the region for aluminum alkyls. Such alkyls are used as catalysts for olefins, including polyethylene and polypropylene. Responsibility for sales of the metals alkyls outside of the Gulf Coast Countries would fall to Chemtura. The American corporation’s proprietary technology would be used at the site.
The Al-Zamil Group and Chemtura also are partners in an antioxidant manufacturing facility in Saudi Arabia that produces stabilizer products and has been in operation since 2000. Al-Zamil Group is a diversified industrialist group established in both intermediate chemicals through direct investment, and in basic chemicals through two established Saudi joint stock companies that Al-Zamil Group incorporated with others. Chemtura Corporation, with pro forma 2005 sales of $3.9 billion, is a global manufacturer and marketer of specialty chemicals, crop protection, and pool, spa, and home care products.
Chemtura – Al-Zamil announcement is the first one on the downstream developments – look for more such announcements in the future. See our analysis of the downstream developments in Saudi Arabia on our website CMR Inc. presentations.
Dow & Tonen to restructure their JV Nippon Unicar
Dow Chemical and Japanese company Tonen Chemical have reached an agreement in principle on a wide-ranging restructuring plan for their equally held Japanese polyethylene joint venture Nippon Unicar.
Nippon Unicar’s core activities of sales and marketing, logistics, and R&D will be outsourced to Dow’s Japanese subsidiary, Tokyo-based Dow Chemical Japan, while plant maintenance and safety and various aspects of mechanical design work will be outsourced to Tonen. Nippon Unicar will take care of production, quality control, human resources, IT systems, and planning. About 80 staff members will be transferred from the company to its parent companies.
Nippon Unicar operates a 200 KT/year LDPE 100 KT/year HDPE/LLDPE plant at Kawasaki. With the restructuring, Dow aims to merge Nippon Unicar’s products into its global strategic product portfolio, increase market development, chiefly in the area of electrical-wire encapsulants, and develop high-performance applications in the steadily growing copolymer segment.
With improved business efficiency resulting from the restructuring, Nippon Unicar intends to reduce its staff level from about 270 to 200, and in the medium term to 150, and anticipates a 10% reduction in operating costs. Linking with Dow’s global lineup will result in a large-scale revamp of its portfolio, with some grades merged or scrapped, and a 10% positive effect is expected in terms of operational optimization and added value.
Comments: Dow acquired Nippon Unicar Company, Ltd. from its merger with Union Carbide in February 2001. Nippon Unicar is the previous JV of Union Carbide and Tonen, Nippon Unicar currently has manufacturing locations at Kawasaki and Komatsu, Japan with a production capacity of 200KT of LDPE and a 100KT LLDPE plant that co-produces HDPE. The Company currently has an 8% share in the Japanese polyethylene market. The restructuring will allow Dow to better market the product in the growing polyethylene demand in the Asian region.
This will be the last of Union Carbide remnants now completely under Dow.
Iranian firm National Petrochemical Company to build downstream units
National Petrochemical Co (NPC) will build a further five units downstream of its pipeline project. Three 300 KT/year high-density polyethylene (HDPE) units will be built at Mamasani, Dehdasht, and Brujen, Iran, and a 300 KT/year low-density polyethylene (LDPE) project at Andimeshk. NPC’s planned 300 KT/year HDPE unit at Miandoab, will produce polyvinyl chloride (PVC). NPC affiliate Petrochemical Industries Development Co has awarded the first five downstream contracts.
Mitsui Engineering & Shipbuilding and Petrochemical Industries and Design Engineering will build a 450 KT/year mono ethylene glycol (MEG) unit in Gachsaran, using Shell technology, while Uhde and Sazeh will build a 300 KT/year HDPE unit in Kermanshah, using Uhde’s technology. Tecnimont and Nargan plan a 300 KT/year LLDPE unit in Khoramabad for Lorestan Petrochemical, and a 300 KT/year HDPE/LLDPE swing plant for Mahabad Petrochemical, both based on Basell technology.
Comments: There have been significant announcements of new capacity in Iran as the country continues to monetize its natural gas. By 2010 Iran is projected to account for 5% of the global HDPE capacity, 4.8% of the global LDPE capacity, and 2% of the global LLDPE capacity. As the local demand in Iran is not sizable these materials will be exported, most likely to China. Iran has a significant cost advantage and would be able to market these materials with relative ease.
The status of the Iranian petrochemical industry is also dependent on the political climate of the country. The global policy might have some impact on the Iranian capacity and indirectly it might impact the global operating rates of the industry in the 2010-2011 time frame.
Sinopec-Saudi refinery deal to advance Aramco foothold in China
China Petroleum & Chemical Corp (Sinopec) is expected to sell a 25 pct stake in an east China refinery to Saudi Aramco. Sinopec’s tie-up with Aramco at a refinery under construction in Qingdao will allow the company to limit some supply-side risks posed by the OPEC production quota.
China’s demand for energy has been expanding at a rapid pace as it needs to fuel its fast-growing economy. The Asian nation wants to line up stable sources of crude oil – and the oil-rich kingdom has been one of China’s main suppliers. Meanwhile, Saudi Aramco has been looking to ensure its position in the market and believes a stake in refineries is the preferred strategy.
Comments: This is a win-win situation for both Sinopec and Saudi Aramco. It combines the low-cost feedstock supplier with the company in a very high-demand growth region. Aramco is the largest supplier of crude oil to China and investment in China will ensure maintaining of the supply.
Saudi Aramco has been planning a refinery in China for a long time now. In 1997, the company received approval from the State Planning Commission (SPC) for the construction of a 230,000 bbl/day refinery in the Huangdao district. This was in partnership with Sinochem (40% stake), Ssangyong Oil (15% stake), and Saudi Aramco (45% stake). However, the ethylene capacity was not approved due to the government’s policy to revamp existing units rather than build new ones.
Saudi Aramco began discussions in 2002 with Sinopec for the construction of a refinery in Qingdao. Sinopec, Saudi Aramco, and ExxonMobil then planned the construction of a refinery and ethylene cracker at Meizhou Bay in Fujian, Eastern China. The 240,000-bpd project is expected to cost US$3.5bn and will be completed in 2008. Sinopec will hold a 50% stake in the refinery and a 55% stake in the associated marketing venture, with the remaining stakes divided equally between Saudi Aramco and ExxonMobil.
The company started negotiations for the stake in Sinopec’s refinery in 2005 and will be able to close the deal in the next few months.
China to lower polyolefins import duties
China’s import duties for high-density polyethylene and low-density polyethylene are expected to be reduced to 7.8% from the current 9.1% as of January 1, 2007. The import tariffs are then expected to be gradually reduced from the 7.8% figure to 6.5% by the beginning of 2008 when they will be in line with the guidelines set when China entered the World Trade Organization.
Comments: This decrease in import duties is in line with the planned decrease after China’s inclusion in the WTO. According to the import duty reduction plan announced by China the import duties are expected to decrease to 7.8% in 2007, 6.5% in 2008, and 5% by 2010. LLDPE import duties are at 6.5% and are expected to remain at 6.5% in 2007. PP duties are currently at 8.6% and are expected to decrease to 7.6% in 2007. Polyethylene and polypropylene are commodities that are traded on a global basis and the industry hopes that all countries will remove tariffs in the next few years.
Solvay joint venture SolVin launches PVC-based nanocomposite
Solvay announces today that it’s vinyl joint venture in Europe, SolVin, is launching NanoVin®, an innovative nanocomposite combining polyvinyl chloride (PVC) and nanoparticles of clay. This specialty product displays exceptional properties in terms of plasticity, viscosity, and flow. These distinctive rheological properties make NanoVin® a so-called ‘smart material’, capable of sensing and reacting to changes in its environment (see Notes to the Editors below).
More specifically, NanoVin® is a ready-to-use product suitable for PVC paste applications, which require non-dripping and shear-thinning properties – meaning that the viscosity of the material decreases when shear stress is applied to it and recovers a high value when the stress is released. These applications include for instance bodywork in the automotive industry as well as so-called thick coatings, such as artificial leather.
NanoVin® was developed at Solvay Research & Technology, the Group’s R&D campus in Neder-over-Heembeek (Belgium). The product is now entering into a pre-commercial phase, with a pilot production unit located in Jemeppe (Belgium).
SolVin combines the competences of Solvay and BASF in the European vinyl sector. The synergies achieved in know-how and organization, the complementarities of product ranges as well as upstream integration have built up SolVin as a leader in the PVC and PVDC markets. The joint venture has operations in France, Germany, Spain, and the Benelux countries and a total annual production capacity of 1.3 million tons of PVC, with nearly 2000 employees. Solvay owns 75% of SolVin and BASF, the remaining 25%.
Comments: This is a very interesting product development by SOLVIN by applying emerging nano-technology to a well-trodden polymer family – PVC. Toyota and others tried to commercialize similar materials based on PP/clay nanocomposites but did not go far due to cost and other technical issues. By using a low-cost PVC as a matrix and taking advantage of its inherent polarity to exfoliate the filler particles in place of the expensive organic clay, SOLVIN may be able to commercialize this innovative but economical product – NanoVin. It is also interesting development that may bring some debate on the use of PVC in new products such as nanocomposites. While the environmentalists are against the use of PVC, here we see an innovative technology promoting the use of PVC.
For more than 10 years, PVC’s environmental reputation has been the subject of controversial debate. PVC’s production, use, and end-of-life operations are probably the most thoroughly investigated areas. PVC producers have continuously invested a lot of money to improve production safety and reduce the impact on the environment and health. An independent audit has shown that 93% of European PVC “suspension process” plants (85% of total PVC production) and, among them all SolVin PVC sites, comply with the ECVM (European Council of PVC Manufacturers) Charter for PVC production signed in 1995. PVC manufacturing complies with the most rigorous regulations regarding safety and the environment, including the “Best Available Technology for PVC production” adopted unanimously by all 25 member countries of the Commission for Protection of the North Sea and the Atlantic (OSPARCOM), applicable since 2003. Of its superior properties, PVC is the material of choice for many reasons in many applications, and its end-of-life processing is handled under the agreements of the Voluntary Commitment. This discussion has finally resulted in the EU Commission’s “horizontal study”, with its five studies and the publication of a “green book”.
GE Plastics develops new polyetherimide-based film
GE Plastics introduced a new film based on polyetherimide mainly for electrical/electronics applications. According to the company, this is an alternative to choosing between the high cost of specifying polyimide (PI) to achieve desired performance or downgrading an application by using lower-performing polyethylene naphthalene (PEN), or polyester (PET), New Ultem® 5000B film from GE Plastics offers excellent high performance coupled with cost-effectiveness.
The properties include high temperature and flame resistance, low moisture absorption, and excellent dielectric properties which are suitable for E/E applications such as insulating tapes and laminates, diaphragms and voice coil for loudspeakers, high-temperature bar code labels, and flat flexible heaters.
The new GE film offers a wide choice of processing, including thermoforming, drilling, die-cutting, cold-forming, laminating, metal sputtering, and ultrasonic welding. It is heat-sealable to itself and other materials. In contrast, PI standard grades cannot be thermoformed and Aramid Paper releases dust during some processes.
Comments: Ultem® resin grades are based on amorphous polyetherimide. These grades are normally used in high-performance applications such as medical and chemical instrumentation, where heat resistance, solvent resistance, and flame resistance properties are required. Ultem grades exhibit high strength and rigidity at elevated temperatures, long-term heat resistance, high dimensional stability, good electrical properties, broad chemical resistance, and are injection moldable. These resins generally exhibit exceptionally high mechanical properties and can perform in high heat conditions and are rated for 338°F and 356°F continuous-use temperatures. Typical applications for Ultem resin grades include transportation, electrical/electronic appliances, medical components, industrial uses, packaging, appliances, and jet engine components. GE’s development of this new product will expand its product portfolio for use in high-end applications.
INEOS Oligomers to expand its global polyalphaolefin manufacturing units
INEOS Oligomers announced a significant new investment in its global Polyalphaolefin (PAO) business. The company plans to increase PAO manufacturing capacity by up to 50 thousand metric tons per year over the next three years. INEOS Oligomers has PAO manufacturing facilities in Laporte, Texas, and Feluy, Belgium.
According to the company, the expansion will enable them to further expand sales of its new Durasyn® 120 and 150 series products as well as those of Durasyn® 140 and 160 series grades. PAO offers enhanced performance such as low volatility and superior thermal-oxidative stability to meet the needs of demanding applications and extreme conditions.
Comments: INEOS inherited the polyalphaolefins business from BP when it acquired the company’s olefins and derivatives arm. PAOs are used as synthetic lubricants, the demand for which is growing in Europe. INEOS integrated all Innovene units into seven business units after the acquisition.
BASF to cut costs through job reduction
BASF has established a new global program to further increase efficiency and streamline business processes. The program includes a number of site and plant restructuring measures. The company expects it to result in total savings of EUR300 million per year by 2008. Implementation of the program will result in total one-time expenditures of EUR160 million as well as write-downs of EUR270 million, with the larger part being recorded in 2006. The measures are associated with a reduction of 1,000 positions, primarily in Asia and North America. The large majority of these reductions have been communicated in the regions.
Honeywell Specialty Materials expands Asian R&D center
Honeywell Specialty Materials announced that it will expand its Shanghai-based Asia Technology Center to boost its research and development capability and meet increasing customer needs in Asian markets, particularly China.
The $3.2-million expansion will triple laboratory space for Specialty Materials in Asia. The new lab space is part of a larger, $13.5-million expansion of Honeywell lab and administrative space at the facility, which is located in Zhangjiang Hi-tech Park in the Pudong New Area of Shanghai.
Specialty Materials currently has 17,000 square feet (1,600 square meters) of research space at the Shanghai facility. The 16 Specialty Materials labs at the Honeywell facility, which opened in 2004, include six analytical labs, four chemical synthesis labs, three application labs, and two electronic material development labs. Current research projects focus on fluorine chemicals, specialty chemicals, electronics materials, and performance materials used for application-related research and development.
The new expansion will add 39,000 square feet (3,600 square meters) of research space. Ten new labs will be added, including a clean room and chemical blending lab for electronic materials research; an air conditioning and heat pump lab; and a high bay area for polyvinyl chloride, or PVC, extrusion line to develop, test and evaluate performance additives. Construction of the new buildings is expected to start this month and be completed in July 2007.
The Specialty Materials labs in Shanghai currently employ 40 researchers. When the expansion is completed, employment is expected to rise to 60. The technology center also collaborates with leading Chinese universities through 16 cooperative projects.
Comments: Honeywell is also adapting the strategy to increase its resources where the markets are. The company’s Asia Technology Center is a strategic part of Specialty Materials’ global research and development efforts. Honeywell operates seven R&D centers globally located in Seelze, Germany; Des Plaines, IL; Richmond, VA; Buffalo, NY; Sunnyvale, CA; and Morristown, NJ.
In 2004, Honeywell International announced that it was going to invest $30 million in Shanghai’s R&D center. The first phase of the center was a $5 million specialty materials laboratory, which was completed in mid-2004. This followed the company’s $500 million investment in China.
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