My Turn – Commentary Petrochemical Step Children of Big Oil Companies – Time to Wake Up! Dr. Balaji B. Singh
Global petrochemicals can broadly be classified into two classes: (1) those with oil company heritage and (2) those without oil company heritage.
The petrochemical companies with oil company heritage suffer a double whammy – When the oil prices are up and the parents are making more money than some of the United Nations members, the petrochemical divisions are left to fend themselves to compete in the market without any benefit and are required to show profit just like other petrochemical firms. When oil prices are low, the parents essentially disown their petrochemical children because the parents are suffering.
This trend is more obvious in recent years –petrochemical stepchildren of oil companies have not demonstrated innovations, developments, and/or progress – all in the name of “we have to compete just like any other chemical company” The trend in the past was to shed the petrochemical divisions completely – e.g., BP/AMOCO, Shell, Total, etc., Maybe that was not a bad idea after all. The lack of innovation and planning on the part of existing petrochemical stepchildren of the oil companies moves them nowhere.
Petrochemical Step Children of Oil Companies – Time to Wake Up!
Saudi Aramco and ConocoPhillips to evaluate a refinery in Saudi Arabia
The Saudi Arabian Oil Company (Saudi Aramco) and ConocoPhillips signed a comprehensive Memorandum of Understanding (MOU) to conduct a detailed evaluation for the proposed development of a 400,000-barrel-per-day, full-conversion refinery in Yanbu, Saudi Arabia.
The refinery would be designed to process Arabian heavy crude and produce high-quality, ultra-low sulfur refined products that meet current and future US and European product specifications. The project is targeted to start up in 2011.
The MOU sets forth the agreement between Saudi Aramco and ConocoPhillips regarding the key parameters of the project, the project configuration, and a broad range of major technical, commercial, legal, and financial terms.
The proposed project represents an opportunity for both companies to work together to construct a state-of-the-art, full-conversion, heavy crude refinery to serve multiple markets with high-quality, refined products in an environmentally sound manner. For Saudi Arabia, this project would not only add value to the Kingdom’s petroleum product exports, but it would also be a platform for increased industrial development in the Kingdom. In addition to attracting foreign investment to The Kingdom of Saudi Arabia, the project is expected to expand its economy and provide increased job opportunities for Saudi nationals.
Longer-term, the MOU contemplates Saudi Aramco and ConocoPhillips forming a joint venture company with equal ownership interests to own and operate the proposed new refinery. Subject to required regulatory approvals, the parties may offer up to 30 percent interest in the project to the Saudi public. Saudi Aramco would supply the project with 400,000 barrels per day of Arabian heavy crude oil. Saudi Aramco and ConocoPhillips would each be responsible for marketing one-half of the refinery’s production.
Comments: This is the first of two anticipated MOUs destined for signature in the near future. The Conoco Phillips export refinery in Yanbu is the first signed and a second is anticipated with Total at a location to be announced. Export refineries that process the full conversion of Saudi heavy crude oil into ultra-low sulfur products like this project will fit well into the world’s fuel needs in the coming years. With global demand for refined products growing at about 2%/year in spite of high oil prices, several more of these projects could fit into the supply-demand balance. Even if high oil prices do slacken demand for refined products, there still will be a need for gasoline and diesel products in Europe and North America.
The Conoco Phillips proposed project at Yanbu is on the Red Sea Western Coast of Saudi Arabia which is logistically suited for export to Western markets. According to industry experts in refining, a complex of this size could cost in the range of $8-$10B which is certainly a mega project and one that will be on a fast track if the startup is slated for 2011. An MOU is not a project kick-off however the partners, Conoco Phillips and Saudi Aramco both have the expertise, assets, and market exposure to mount this project.
We would anticipate that there is an almost certain probability that this project will proceed as indicated. The fact that the parties may offer up to 30% of the project to public market ownership is also a new trend for more privatization of refining and petrochemical projects in Saudi Arabia. The public offering strategy increases the probability that such a complex and large project will be financed internationally and proceed.
GAIL to implement Rs. 5460 crore Assam Gas Cracker Project in India
Indian firm, GAIL announced its plans to implement the Rs. 5460.61 crore Assam Gas Cracker Project. The project to set up an integrated Petrochemical Complex at Lepetkata, District Dibrugarh shall be implemented by a Joint Venture Company to be promoted by GAIL with 70% equity participation. The remaining 30% equity will be shared equally among OIL, NRL, and Govt. of Assam. The project will be completed in 60 months from the date of approval.
The project is expected to give rise to substantial employment generation as a result of investments in downstream plastic processing industries and allied activities. It has been estimated that about 500 plastic processing industries are likely to come up in the northeastern region if this project becomes operational. The Government of Assam has agreed to grant Exemption from Entry tax on capital goods, Exemption from Works Contract Tax during construction, and Sales Tax / VAT exemption on feedstock and products for 15 years from the date of commencement of production.
The Feedstock for the Petrochemical Complex is 6.0 MMSCMD gas from Oil India Limited (OIL) Duliajan and 1.35 MMSCMD gas from Oil & Natural Gas Corporation Limited (ONGCL) upto 31/3/2012 and 1.00 MMSCMD thereafter. The Petrochemical Complex shall also utilize 160,000 TPA of petrochemical-grade Naphtha from Numaligarh Refinery Limited (NRL).
The petrochemical complex will comprise of a cracker unit, downstream polymer, and integrated off-site/utilities plants. The complex has been configured with a capacity of 220,000 tons per annum (TPA) of Ethylene and 60,000 tons per annum of propylene with Natural Gas and Naphtha as feedstock. The site has been identified by the Govt. of Assam and necessary Environmental clearance has been obtained.
The existing LPG plant of GAIL at Lakwa will be modified to process gas for recovery of ethane and higher hydrocarbon fraction which will be transported to Lepetkata through a pipeline.
The Products from the Petrochemical Complex shall be 220,000 Tons per annum (TPA) of HDPE/LLDPE, 60000 TPA of Polypropylene, 55000 TPA of Raw Pyrolysis Gasoline, and 12,500 TPA of Fuel oil. The Assam Gas Cracker Project was proposed as a part of the implementation of the Assam Accord signed by the Government of India on 15th August 1985. Letter of Intent was issued to Assam Industrial Development Corporation (AIDC) in January 1991. In February 1997, LOI was transferred to Reliance Assam Petrochemicals Limited (RAPL), a joint venture company of Assam Industrial Development Corporation and Reliance Industries Limited. RAPL was granted various concessions by the Government of India for the implementation of the Gas Cracker Project. The work could not be started due to the non-availability of sufficient feedstock and other reasons.
A Pre-Feasibility Report (PFR) for the project was prepared considering an integrated Petrochemical Complex. Thereafter a Detailed Feasibility Report (DFR) was prepared by GAIL & EIL. The financial appraisal of the project has been carried out by IFCI Ltd.
Comments: Asia, and in particular China and India, is one of the fastest-growing regions for ethylene and propylene derivatives. A sizable amount of new capacity is being added to address these fast-growing markets. GAIL is an established player in the Indian petrochemical industry with capacities for ethylene, propylene, and polyethylene. GAIL is the country’s largest organization involved in the transmission, processing, distribution, and marketing of natural gas and its by-products.
It owns most of the gas infrastructure in India. GAIL procures natural gas from producers such as Oil and Natural Gas Corporation (ONGC), Oil India Limited (OIL), and gas private sector joint ventures based at the Ravva field in southern India and Panna- Mukta and Tapi fields to the west.
As the petrochemical industry in India is growing GAIL is increasing its participation in this industry. Currently, the company’s revenues are split between gas distribution (70%), LPG (18%), polymers (10%), and others (2%). However, with vertical integration, GAIL will slowly increase its share of revenues from polymers. Reliance Industries Limited, the largest petrochemical company in India, will see more competition in the next decade from established and new players such as GAIL, Haldia Petrochemicals, Indian Oil Corporation (IOC), and Oil & Natural Gas Corporation (ONGC).
Further details on Kazakhstan petrochemical joint venture announced
Further details on the construction of a $3.5 billion petrochemical project in Kazakhstan were announced by the joint venture partners. The partners are Kazakhstan’s state energy company KazMunayGaz Exploration & Production; private-sector company SAT & Co. (Almaty); and Basell.
The petchem joint venture to be called Kazakhstan Petrochemical Industries will be owned 50% by SAT, which, together with KMG EP, owns the only petrochemical complex in Kazakhstan. Basell is expected to own 35%, and KMG EP, 15%. The complex will include an ethane extraction unit at Kulsary and an integrated petchem manufacturing complex at Atyrau.
The complex will include an 850 KT/year ethylene plant and a 400 KT/year propane dehydrogenation facility. The two units will feed three downstream plants, all based on Basell technology. They will have the capacity for 400 KT/year of low-density polyethylene (PE), 400 KT/year of linear low-/high-density PE, and 400 KT/year of polypropylene (PP).
About 70% of the total cost will be covered by loans from international banks. According to the partners, a project management contractor (PMC) will be selected by mid-May, and licensers for the ethylene and propane dehydro units will be picked by the end of the year. Completion of the project is planned for 2010.
According to the partners, the complex will be supplied with cheap local gas and be competitive with similar projects in the Mideast, in export markets such as China, Russia, Turkey, and Western Europe. Marketing offtake agreements have not been finalized, but Basell will have the right to offtake a majority of the output.
Atoll owns two petchem units in Kazakhstan—a mothballed 30 KT/year PP plant at Atyrau and a 300 KT/year polystyrene (PS) plant at Aktau. The PS unit was built in the 1970s and is not running at full capacity.
Comments: KazMunayGas (KMG) was created in 2002 with the mandate to develop and upgrade Kazakhstan’s oil and gas resources. With the ambitious goal to become a global player, this proposed project will undoubtedly kick-start the development of the polyolefins industry in the country. Basell, with its leading position in the polyolefins industry, is expected to provide technology, marketing, and sales expertise. With equity ownership, this project will also benefit Basell by providing it with operations that have advantaged feedstocks. Basell is also developing additional projects in the Middle East with a similar intent.
Borealis to invest in R&D centers in Europe and the Middle East
Borealis announced its decision to develop the Innovation Centre in Linz, Austria into the center of its international research activities. This will include significantly increasing the number of employees at the Centre and investing EUR 25-30 million in facilities over the next five years.
The decision is part of a broader agreement with the government of Upper Austria to invest around EUR 19 million by 2011 in strengthening Upper Austria as a plastics industry research hub. In close cooperation with Johannes Kepler University and Wels Advanced Technical College, this commitment will lead to enhanced educational activities and general facilities.
An additional investment of EUR 6-7 million in 2006 by Borealis was announced for improvements at its Innovation Centre in Finland. Plans were also revealed regarding the creation of an Innovation Centre in Abu Dhabi as part of the continued growth and success of Borouge, the company’s joint venture with the Abu Dhabi National Oil Company (ADNOC).
Comments: Borealis’ decision to develop its Innovation Centre in Linz, Austria into the center of its international research activities & establish an Innovation Centre in Abu Dhabi are both part of the company’s continued efforts to strengthen R&D capabilities to support its Middle East and Asia Pacific operations.
Recently, many companies have announced their plans to establish or move their R&D efforts in either Asia Pacific or Europe. Growing investments in petrochemicals in Asia and the Middle East have spurred R&D activities in these regions.
Basell adding PP capacity in Suzhou
Basell NV announced its plans to double the size of its polypropylene compounding plant in China. This decision is driven by faster-than-expected growth in its core automotive and appliance markets there.
Basell plans to increase capacity at its Suzhou plant by September, to 27,000 metric tons a year, about a year ahead of schedule. The company opened the plant in January 2005 with a capacity of 12,000 metric tons, but it filled that capacity and started turning a profit within six months.
The company is also opening up a compounding technical center later this year at the Suzhou site, rather than next year as initially planned, with a research and development line and testing equipment.
Comments: We hear this type of news all the time, “Driving by the demand in China, XYZ company is starting a new facility, expanding their current capacity, or establishing an R&D center in China…” Dow, ExxonMobil, GE, Dupont, Bayer, BASF, BP, Shell… are all doing it. China has essentially become a critical part of the strategic planning of any global company. In this sense, there is nothing new.
A key issue here is exporting cars “Made in China” to developed countries. China is becoming the second largest car producer in the world, surpassing Japan. At present, cars made in China are mainly for the domestic market with some exported to developing countries. The threshold for exporting Chinese cars to countries like the US, Japan, and European countries is due to the tight requirement for exhaust and other related safety and environmental issues. However, the debut of Chinese automaker Geely at the Detroit Auto Show made a big swirl early this year. The company plans to export to the US market at under $10,000 starting in 2008. You can say there is still a long way before Chinese automakers become as successful as Korean automakers. However, the questions are: If and when will that happen? How will it impact the plastic producers and compounders in other regions?
BASF increases its bid for Engelhard and single investor Heyman owns a 5.6% stake in Engelhard
BASF announced its “last, best, and final offer” for Engelhard Corporation. BASF raised its all-cash offer for Engelhard Corporation to $39 per share from its previous offer of $38 per share.
The company said that under no circumstances will it raise the price again. If Engelhard’s shareholders do not elect all of our nominees at Engelhard’s Annual Meeting, BASF will let its offer expire and pursue other opportunities. After numerous meetings with holders of a substantial majority of Engelhard shares, BASF made its last, best, and final offer at this time to avoid the need to extend BASF’s tender offer beyond June 5, 2006.
Through its wholly owned subsidiary, Iron Acquisition Corporation, BASF has extended the expiration date of its $39 cash tender offer for all of the issued and outstanding shares of common stock of Engelhard Corporation to midnight, New York City time, on Monday, June 5, 2006. The tender offer had previously been scheduled to expire at 5:00 p.m., New York City time, on Monday, June 5, 2006.
Investor Samuel Heyman reported in a regulatory filing that he holds a 5.6-percent stake in U.S. catalyst maker Engelhard Corp.
Comments: This offer by BASF for the acquisition of Engelhard will put an end to the ongoing negotiations between the two companies. BASF had made its initial offer of $37 per share to acquire Engelhard at the beginning of this year. This offer was rejected and then BASF. increased its offer to $38 per share.
Before this, Engelhard had rejected BASF’s offer of $37 per share. Engelhard has a strong position in the catalyst markets mainly in automotive, refining, fluid catalytic cracking, and others. The acquisition of Engelhard will help BASF gain significant market share in the catalyst business. For more information, please refer to our Global PO&E – Strategic News Analysis – Volume 4, Issue 1.
Heyman, also the chairman of International Specialty Products, holds a “passive” stake in Engelhard. Investors must file with the SEC when they acquire more than 5% of a company. Heyman has previously taken stakes in chemical companies such as Dexter and Hercules and launched proxy battles for control.
BASF and Engelhard reached an agreement
BASF Aktiengesellschaft announced that it signed a definitive agreement with Engelhard Corporation (NYSE: EC). According to the agreement, Engelhard will recommend that Engelhard shareholders tender their shares to BASF in exchange for $39 per share in cash and will withdraw its $45 per share self-tender offer for approximately 20 percent of the company’s shares.
According to BASF, this is a crucial step toward our goal of acquiring Engelhard. The company said that it is confident that Engelhard’s shareholders will tender their shares into the offer, following the recommendation of Engelhard.
BASF’s $39 per share all-cash offer for all of the issued and outstanding shares of common stock of Engelhard Corporation is scheduled to expire at midnight, New York City time, on Monday, June 5, 2006.
Shaw Group to construct styrene and polystyrene plants in China
The Shaw Group Inc. announced that its Shaw Stone & Webster unit has been awarded two contracts to provide technology, engineering, and procurement services to PetroChina for its Dushanzi Petrochemical Company’s new petrochemical complex in Xinjiang Province, China. The contracts, which have a combined value of approximately $50 million, cover technology, basic engineering, procurement of key equipment and materials, technical training, and commissioning and start-up services.
The first contract provides that Dushanzi’s new 320,000 metric-tons-per-year ethylbenzene/styrene monomer (EB/SM) plant will be based on ethylbenzene and styrene technology licensed to Dushanzi by Shaw Stone & Webster. Under the second contract, the new Dushanzi 130,000 metric-tons-per-year polystyrene plant will be based on proprietary technology provided by Shaw Stone & Webster through its license from General Electric Advanced Materials (GEAM) and its alliance with Process Development Services (PDS). When completed, the polystyrene plant will produce 40,000 metric tons per year of high-impact polystyrene and 90,000 metric tons per year of general-purpose polystyrene.
The Shaw Group Inc. is a leading global provider of technology, engineering, procurement, construction, maintenance, fabrication, manufacturing, consulting, remediation, and facilities management services for government and private sector clients in the energy, chemical, environmental, infrastructure, and emergency response markets. Headquartered in Baton Rouge, Louisiana, with over $3 billion in annual revenues, Shaw employs approximately 22,000 people at its offices and operations in North America, South America, Europe, the Middle East, and the Asia-Pacific region.
Comments: This project is a great development for Shaw Stone & Webster and PetroChina for its Dushanzi Petrochemical Company’s new petrochemical complex in the Xinjiang Province of China. This project is located in the interior of North Western China away from most of the petrochemical activity in China’s coastal provinces. The project is a 1,000,000 KT ethylene cracker with a host of derivatives in polyolefins, aromatics, and styrenics. The project is supported by importing crude oil from pipelines from Kazakhstan and Russia. The first oil to be received is in May 2006 and marks a milestone of China’s first oil import through cross-border pipelines. To accommodate the import of crude oil from the pipelines, PetroChina Dushanzi has been significantly expanding its refinery and downstream capabilities.
On a global scale, the addition of 320,000 KT of styrene monomer, 130,000 KT of polystyrene, and 90 KT of SBS is not significant but to the world of styrenics which is in a global excess, any capacity addition is noteworthy. These plants are so far in the center of Asia (North Western China) that all the capacity will undoubtedly be used internally in China’s growing petrochemical and polymer sectors instead of any exports directly. The plant’s styrenic capacity could displace styrenics to the coastal zones that are also expanding and this material could find its way into the world styrenic trade.
The Shaw Stone & Webster/GE/PDS team in polystyrene is particularly strong. The HIPS products have a particularly high rubber efficiency and the GPSPS is produced by an efficient and less complex and less capital-costly process than competing licensors. The product has ultra-low volatiles which is a big plus for the growing packaging segment. The big competition for this process license was probably ABB Lummus who offers BP’s polystyrene technology to the third-party marketplace. The GE/PDS process is reported to be simpler and easier to operate than the competition. This PS project is not a joint venture like most of the other large polystyrene plants in China such as that with BASF. The project startup date is reported to be in the 2008 time frame so any E&C activity will have to be fast-tracked.
Sumitomo to withdraw from PS joint venture Nippon Polystyrene with Mitsui Chemicals
Sumitomo Chemical announced its plans to withdraw from the polystyrene (PS) business, exiting the company’s 50-50 Nippon Polystyrene joint venture with Mitsui Chemicals. Nippon Polystyrene’s 100 KT per year PS plant at Sumitomo’s Chiba, Japan complex will close next September. Mitsui will continue to operate a 100 KT per year PS plant at Osaka that currently forms part of the joint venture.
Comments: This move is just one more statement about the health or lack thereof in the international styrenics businesses. Initially, Mitsui Toatsu Chemicals, Inc. and Sumitomo Chemical Company announced in August of 1997 that the two companies would establish a new 50-50 joint venture called Japan Polystyrene, Inc. The 50-50 merger combined the companies’ production, sales, and research and development activities. The joint venture initially held a joint manufacturing capability of 242,000 mt/year and became the second largest domestic maker of polystyrene after Asahi Chemical Industry Company.
There have been major capacity adjustments made by producers in North America and Europe also, so why not in Japan? Polystyrene is globally just a long commodity with no profitability and no end in sight of the bad conditions – particularly with more and more capacity coming on stream in China. It sounds like the Asian balance situation was just not attractive for Sumitomo Chemical to continue and they are in good company elsewhere in the world with the likes of Nova, Innovene/Ineos, and Dow, to name a few who have also shuttered polystyrene capacity in recent quarters. We look to more rationalization in the rest of the world in polystyrene other than China in months to come.
Kraton Polymers introduces new technology for hot melt butyl sealant applications
Kraton Polymers LLC (Kraton) introduced a new technology created for hot melt butyl sealant manufacturers which allows for an increase in the range of product service temperatures, as well as the potential for expanded use in new markets, including insulated glass windows for warmer climates. The addition of this Kraton® G hydrogenated SBC (HSBC) to hot melt butyl sealants improves both their high-temperature slump and creep resistance while maintaining excellent processability.
Conventional hot melt butyl sealants are 100 percent solid thermoplastics, typically exhibiting extremely low moisture vapor transmission with excellent adhesion character, while being applied at very low cost. These butyl sealants are used in a variety of sealing applications such as insulated glass windows, automotive weather stripping, and automotive taillight lens sealing. Although easily processable and cost-effective, butyl sealants can become rather fluid at higher temperatures causing increased flow, slump, or creep during use. In more demanding applications, such as insulated glass windows, they often must be used with thermosets to improve performance, at the expense of processability. By using this Kraton HSBC technology, sealant manufacturers can capture the aforementioned processing benefits of conventional hot melt butyl sealants, with an increased range in service temperature and improved creep and slump resistance.
Comments: Kraton Polymers, a global leader in hydrogenated SB Copolymer (HSBC) have been at the forefront of innovative applications. The largest consumption of HSBC is in polymer modification with close to 33% of the total demand. The adhesive and sealant applications consume close to 10% of the demand restricting their use in markets where high heat resistance is required.
The main disadvantage of butyl use as a hot-melt material is its vulnerability to high temperatures. Butyl generally softens at temperatures above about 160 deg F. This disadvantage can easily lead to problems such as if the car is parked in the sun with the windows closed, the temperature can easily get hot enough for the butyl seal to weaken or fail.
This new technology will overcome the temperature resistance disadvantage and allow Kraton Polymers to expand its product portfolio and increase its SEBS market share.
Medical bag producers introduce non-PVC IV bags
Major medical bag suppliers Baxter HealthCare and Hospira Inc. introduced PVC-free IV bags.
Baxter introduced a bag made from polypropylene geared to niche markets that will be available to limited pilot sites this year. According to the companies, the alternative products will cost more than PVC bags.
Hospira, the second-largest manufacturer of IV bags, with a 35-40 percent share of the US market announced that its Austin, Texas, plant will begin production next month of a broad-based, next-generation, non-PVC product that has the potential to reduce waste from IV bags by 40-60 percent and reduce the risk of infections and contamination for both caregivers and patients. The new VISIV line from Hospira is made from a multilayer thermoplastic film that includes polypropylene. According to the company, the thermal characteristics, moisture barrier, and inertness of the materials eliminate the need for the overwrap used in PVC IV bags.
Hospira said its VISIV line initially will be available in 250- and 500-milliliter sizes and will be offered for use in 70 percent of the most common IV applications, with production expected to increase steadily through 2007 and 2008. Hodges said that when market demand is appropriate, Hospira will consider also making the new PVC-free bags at its Rocky Mount, N.C., plant.
Baxter said its new AVIVA premium line is targeted for use with newer therapies and lipid-containing nutrition products, and in neonatal, pediatric, and oncology applications. Baxter said the line will be premium-priced because of higher costs for raw materials and higher manufacturing costs. Hospira said its VISIV products will cost more than existing lines, but will be competitive, and the total cost to hospitals will be lower because of reduced disposal costs and greater caregiver efficiency.
Comments: Replacement of PVC in medical bags application has been an ongoing issue. Baxter has announced in the past that it will eliminate the use of PVC bags but has not done so due to a lack of a cost-effective alternative.
PVC-based medical bags have been under attack for a long time now. Hospitals have been looking for alternatives to PVC medical devices, which release dioxins when burned and some studies have shown the plasticizer used to soften PVC — di(2-ethylhexyl) phthalate – is linked to health hazards and can leach into bloodstreams in certain applications.
Additionally, PVC bags typically are not compatible with new biotechnology therapies, solutions containing lipids, and some oncology medications. The introduction of PVC alternatives will be beneficial in niche markets when there are drug-compatibility issues and for newer therapies or cancer-therapy drugs.
For more information on PVC-based medical bags, please refer to our multiclient study “Intermaterial Competition of Flexible PVC” or call us at 281-557-3320.
Biopolymer Technologies to increase biopolymer production capacity
Biopolymer producer Biopolymer Technologies announced its plans to expand production at its plant at Schwarzheide, Germany, to reach an annual capacity of 17 KT by the middle of next year.
BIOP produces the Biopar® family of biopolymers, which are derived from blends of potato starch. Biopar production was transferred to Scharzheide from the Netherlands in October 2005. The company has supplied Biopar products to a number of Dutch retailers, including Albert Heijn, Schuitema, and C 1000.
Comments: Over the last decade, companies have used different approaches to biodegradable polymers including (1) Modification of existing materials, (2) Chemical Co-polymerization of biodegradable materials, and (3) Development of new materials.
As a result of this, there have been several biopolymers developed in the last ten years. The different types of biopolymers developed include (1) Starch-based biopolymers, (2) Lactic acid-based biopolymers, (3) biopolyesters, and (4) Polyvinyl alcohol-based biopolymers.
Biodegradable resins are produced from wheat protein and starch blended with existing polymers. Starch, the reserve carbohydrate of plants, is a cheap, renewable, and readily available raw material for biodegradable products. The physical properties of native starches already make them important in food and industrial applications, but a modification of these properties by chemical means is a key factor in the widespread, large-scale use of starch.
With the increasing feedstock prices and hence polymer prices, biopolymers are becoming popular in niche markets.
Indian Petrochemicals Corporation Ltd to merge its six polyester manufacturing subsidiaries
Reliance subsidiary, Indian Petrochemicals Corp. (IPCL) announced its plans to combine the polyester operations of its six subsidiaries. These include (1) Apollo Fibres Ltd (AFL), (2) Central India Polyester Ltd (CIPL), (3) India Polyfibres Ltd (IPL), (4) Orissa Polyfibres Ltd (OPL), (5) Recron Synthetics Ltd (RSL) and (6) Silvassa Industries Pvt Ltd (SIPL) with the company.
The merger is subject to necessary approvals from shareholders, creditors, and other regulatory authorities.
IPCL board of directors has recommended an exchange ratio of one equity share of IPCL for every 25 equity shares of AFL, 23 shares of CIPL, 28 shares of IPL, 28 equity shares of OPL, 34 shares of RSL and 38 equity shares of SIPL, IPCL informed the Bombay Stock Exchange. This would result in the issuance of 3.91 crore equity shares of the company, to the shareholders of the merging companies, and post-merger, IPCL’s share capital would increase to 28.73 equity crore shares from 24.80 crores equity shares.
Comments: After this merger, IPCL will become the third largest producer of polyester with a total capacity of about 280-300 KT per year. The consolidation will allow the units to reduce excise duty and other taxes paid on the transfer of intermediates from petrochemical complexes owned by IPCL. This would also help IPCL to take advantage of raw material integration and economies of scale.
Halliburton subsidiary Kellogg Brown Root files for IPO
Kellogg Brown and Root (KBR), the engineering and construction subsidiary of Halliburton filed a registration statement with the SEC for a planned initial public offering (IPO) of $550 million in common stock. The company plans to use the proceeds to pay Halliburton’s debt. The number of the shares issued in the IPO and shares reserved for employee compensation plans represent about a 20% stake.
KBR reported first-quarter earnings of $62 million, down 34% from the same period last year. Sales were down 13%, to $2.3 billion. KBR’s energy and chemicals unit reported earnings of $42 million, a slight increase over the year-ago period. Energy and chemicals reported a $5.4 billion backlog in the first quarter, approximately the same as last year.
Comments: KBR owes its parent company about $774 million related to a 7.5 percent note due in 2010. KBR has more than 50% global market share for building liquefied natural gas facilities, a market that is expected to double in size by 2012.
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