AMERICAS
LyondellBasell Updates
RIL raises an additional US$763 million to fund Lyondell’s buy
Reliance Industries Ltd has raised US$763 million (Rs 3,465 crore), its third big equity fundraising in under four months. With this, the company has raised over Rs 9,000 crore (US$2 billion) by selling treasury stocks in three tranches.
Reliance sold 33 million existing treasury shares at about a 5 per cent discount to foreign institutional investors. The deal follows a US$577 million (around Rs 2,675 crore) share sale to the state-run Life Insurance Corp of India and a US$660 million (around Rs 3,188 crore) share sale by the country’s largest listed company in September 2009.
Reliance Unlikely to Up LyondellBasell Offer
Reliance Industries Ltd. is unlikely to raise its offer price to take a controlling stake in LyondellBasell Industries. Lyondell’s current restructuring plan values it as high as US$15.5 billion, but the US$15 billion-$16 billion price tag could be too high and economically unviable for RIL
Bankruptcy judge gives LyondellBasell extension to file a plan of reorganization
Reliance Industries Ltd. is unlikely to raise its offer price to take a controlling stake in LyondellBasell Industries. Lyondell’s current restructuring plan values it as high as US$15.5 billion, but the US$15 billion-$16 billion price tag could be too high and economically unviable for RIL.
Comments: The U.S. bankruptcy judge in Manhattan would like LBI to focus on the reorganization plan to get it done by April 15, 2010, and not to open up exclusivity to anybody other than the debtors. The unsecured creditors had requested permission from the court to work with strategic investors such as Reliance Industries Limited to come up with their plans. LBI will continue to operate without interruptions during the process.
Judge approves resumption of merger talks between Braskem and Quattor
A Rio de Janeiro judge has removed an injunction prohibiting negotiations between Brazilian petrochemicals majors, Braskem and Quattro. A possible merger between the two will result in further consolidation of the Brazilian petrochemicals industry leading to a virtual monopoly in Brazil, as Quattro could potentially disappear as a company if it eventually does merge with the much larger Braskem.
Comments: Brazil’s petrochemical industry began in the early 70s when intense demand emerged for petrochemicals, especially plastics. During the 80s the industry grew based on the tripartite model comprising Petro bras, a foreign technology partner, and Brazilian entrepreneurs –each with an equal (one-third) stake in the company. In the 90s, there was a wave of privatization in which Petro brass old its stake to several domestic and international players leading to a fragmented industry. In late 90s there was a significant opportunity for consolidation and so was the case in the past decade. From 2001 there were several mergers including the formation of Braskem in 2002, an integration of six companies: Copene, OPP, Trikem, Nitrocarbono, Proppet, and Polialden. Braskem, owned by Odebrecht Group (62.3%), Petroleo Brasileiro SA (Petrobras) (31%), and BNDESPAR (Brazil’s National Bank for Economic and Social Development), became the largest petrochemical company in Latin America. In 2007, Braskem acquired Grupo Ipiranga leaving very few petrochemical players. Petrobras made a move on acquiring Suzano, which was another petrochemical company in Brazil. The merging of Suzano with Unipar created the Southeast Petrochemical Group. All of this consolidation was thought to have ended until the two major polyolefin players Braskem and Quattor, recently announced in 3Q 2009 the plans to merge in 3Q of 2009.
Once the deal goes through, Braskem and Quattor would have a combined revenue of about USD 17.5 billion. The merger of Braskem and rival Quattor will create Brazil’s largest petrochemicals player and its sole polyolefins producer with a combined capacity of over 3,000KTA of PE, nearly 2,000 KTA of PP, and 510KTA of PVC. The deal will essentially nationalize the petrochemical industry and build a unified force to compete with global petrochemical players seeking market share in the emerging region.
Petrobras to ready new plans for Comperj petrochemical refinery
Petrobras’ new plans for the Comperj petrochemical refinery are expected to be ready shortly and will be forwarded to the board for approval at its next meeting. Petrobras plans to change the scope of the Comperj complex to include fuel processing, envisioning a module that will be devoted to producing diesel oil from heavy oil.
Since it encountered problems finding partners for the project, the Brazilian major was forced to consider the shift. It was originally estimated to process 150,000 bpd of heavy oil from the Campos Basin and have petrochemicals output including polyethylene, polypropylene, PTA, PET, ethylene glycol, and styrene, along with petroleum coke, sulfur, heavy naphtha, benzene, as well as diesel oil and petrochemicals feedstock.
Comperj was originally designed as a US$8.5 billion petrochemical plant and was expected to commence operations in 2012. It was part of Petrobras’s US$174.4 billion, 5-year investment plan announced in January 2009, which included five new refineries to boost output.
Comments: At present, the main petrochemical complexes in Brazil which are integrated with the feedstock cracking units are Capuava in São Paulo, Camaçari in Bahia, Triunfo in Rio Grande do Sul, and Duque de Caxias in Rio de Janeiro. The Rio de Janeiro Petrochemical Complex (Comperj) is a megaproject developed by Petrobras with a total investment of over USD 8 billion and it will be the primary component of the Southeast complex. With 100% operational startup expected in 2013/14, Comperj will increase domestic heavy petroleum refining capacity, while also producing 1,300 KTAof ethylene and 880 KTAof propylene, along with xylene, benzene, butadiene, and other oil distillates.
The interest held by the private sector is yet to be defined, but the Brazilian petrochemical companies will be participating at some level. COMPERJ’s main purpose is to increase the production of petrochemicals in Brazil, using as feedstock 150 thousand bpd of domestic heavy crude, the Marlim oil from Campos Basin.
EUROPE
Ineos drops IPO options
Ineos’s PE production at Grangemouth was affected by the inclement cold weather –the 320KTA facility will be out of service for about two weeks due to weather-related problems.
The announcement comes amidst rumors that the debt-burdened firm has shelved the idea of an IPO. There are no longer any immediate plans for a listing. Ineos, which has debts of more than € 7 billion (US$9.9 billion), has also been looking for partners for its Grangemouth operation. Discussions have been conducted with a number of interested parties including Petro China.
Comments: Ineos finally decided, at the advice of Barclay Bank, not to pursue an IPO due to the probable difficulty caused by its heavy debts. The sale of assets and partnerships are other options to stabilize the finances of Ineos.
DINA-Petrokemija increases polyethylene capacity
DINA-Petrokemija has started its polyethylene plant after expansion in Omisalj on northern Krk Island, Croatia for €18 million(US$25.5 million). Capacity has been augmented from 70KTA to 90KTA.
State-of-the-art technology LUPOTECH T of Basell was implemented for the production of polyethylene DINALEN®. The new technology, which uses organic peroxides to initiate the polymerization of ethylene, has resulted in obtaining higher levels of stability of polymerization together with the promotion of quality.
Plant modernization was commenced in April 2009, and is estimated to be complete by 2011 at an investment outlay of €100 million (US$141 million) to produce 500KTA of polymers.
Comments: Dina-Petrockemija is the polymer arm and one of the six operations under the umbrella of Dioki Group in Croatia. It produces LDPE (licensed from Atochem and Dow in tubular reactors and ICI in autoclave reactors) as well as polystyrene (general purpose, expanded, and high impact grades). This Lupotech T technology, licensed from LyondellBasell was originally developed by BASF. Other Baltic States such as Serbia and Slovakia also have reasonable polyethylene capabilities (about 110 KTA and 170 KTA respectively) to supply the needs of the region. Overall, this region is gradually developing its petrochemical industry as the social-political situation stability is achieved stabilized.
MIDDLE-EAST & AFRICA
Dow Chemical and PIC Set for Arbitration Hearing
Dow Chemical and its Kuwaiti partner have set a date for a London arbitration hearing. Dow is seeking more than US$2.5 billion in compensation from Petrochemical Industries Co. (PIC) over PIC’s decision at the end of 2008 to pull out of their planned US$17.4 billion joint venture, K-Dow. In February 2009, Dow notified the U.S. Securities and Exchange Commission that it had initiated arbitration proceedings against PIC, alleging that PIC had breached its agreement by failing to close the deal on January 2nd, 2009.
Comments: for the time being, Dow is pursuing the arbitration route, not the litigation, due to concerns over the possible repercussions from other JV with Kuwait. All the while in 2009, Dow raised USD 3.4 billion to pay the bridge loan in acquiring Rhom & Haas. Due to the high margin of the specialties business from Rohm & Haas, Dow’s stock is improving, and the debt reduction is ahead of schedule.
Sibur holds talks to invest in Iran’s Petrochemicals Industry
A Russian-Iranian working group held a meeting at Sibur’s headquarters in Moscow to discuss cooperation in the field of energy and petrochemicals. The meeting looked at the possibility of cooperation in petrochemicals between Sibur and National Petrochemical Co. (NPC), and the launching of a road map for the next 30 years covering investments in hydrocarbon projects. Iran plans to double gas output to 1 billion cu meter/day in the next five years and increase oil production by 1 million bbl/day to 5 million bbl/day, as well as build new refineries and petrochemical plants.
Comments: The SIBUR group founded in 2002 is Russia’s leading petrochemical company. The company has a total of 34 plants and subsidiaries producing over 100 petrochemical products. Sibur has recently been focusing on the petrochemical industry and currently has a number of projects that are underway including 500 KT PP and 500 KT PE Plant. The planned investment in the Iranian Petrochemical industry indicates its direction and focus on becoming an international player in the industry.
New Petrochemical Complexes Planned by Iran to increase capacity by 50MTA in the Next 5 Years
Iran’s 20-Year Outlook Plan envisions petrochemical output to reach 100,000KT by 2015. In a bid to meet these targets, Iran plans the construction of 46 new petrochemical complexes in the next calendar year (to begin March 21, 2010) to boost its production capacity by 50,000 KT. An investment outlay of US$25 billion has been planned. Currently, the 29 projects being built at the cost of US$18 billion are estimated to add 22,500 KT to the current production capacity.
Comments: In the global petrochemicals landscape, Iran will play a growingly important role. This is based upon 1) huge oil and gas reserves (ranked #2 in the world), 2) a logical long-term plan and good execution for staged expansions (now entering its 5th five-year plan since 1989), and 3) a methodical approach for privatizations. All the petrochemical complexes are managed and directed by the National Iranian Petrochemical Company (NIPC) under Iran’s Petroleum Ministry. To provide a suitable environment to attract foreign and local investments, NIPC has made a good effort to develop two special economic zones, one in Bandar Imam called ‘Petrochemical Special Economic Zone (PETZONE) and the other in Assaluyeh named “Pars Special Economic/Energy Zone” or PSEEZ. Both Bandar Imam and Assaluyeh are strategically located in southern Iran close to the Persian Gulf and adjacent to Kuwait. The infrastructure is such that Iran will be a major exporter of petrochemicals. The current petrochemical capacity in Iran is about 56 MTA, which is expected to be doubled in the next 5 years.
Consortium for Jazan Refinery and PetrochemicalsComplex
Tasnee, Nama Chemicals, and Advanced Refining and Petrochemical Co. have submitted a joint bid to the Saudi Ministry of Petroleum and Mineral Resources (MinPet) for a previously announced private sector, multi-billion-dollar export refinery and petrochemical complex in the Jazan region of Saudi Arabia.
MinPet has indicated that the selection of the winning proposal will be made in the first quarter of this year.
The Jazan refinery will be designed to process 250,000-400,000 bbl/day of crude oil, supplied under a 30-year agreement with Saudi Arabian Oil Co., and in the first phase, is expected to include an 800KTApolypropylene plant based on refinery propylene. The second stage is expected to involve the construction of an olefins complex.
ASIAN-PACIFIC
Korean Petrochemicalfirmsto invest US$12.5billion by 2012
South Korea will invest a total of about won14.4 trillion ($ 12.5 billion) between 2010 and 2012 on various projects.
The petrochemical firms will invest a total of won4.7 trillion this year (US$4 billion), won5.9 trillion (US$5.1 billion) in 2011, and won3.8 trillion (US$3.3 billion) in 2012. The firms invested a total of won3.6 trillion (US$3.1 billion) in 2009, which was 17% lower than the investment in 2008.
Comments: The petrochemical companies in South Korea have aggressively been expanding their production capacities and market efforts as they thrive to become global players. The companies have been investing heavily in ongoing research and development activities to develop innovative products to obtain a competitive edge over established global players. Specialty and environmentally friendly products have been a specific focus area targeted by petrochemical organizations.
MRPL plans to speed fund flows into Phase III Refinery, PP unit, CDU/VDU revamp project
India’s Mangalore Refinery and Petrochemicals Limited (MRPL) plans to speed up until 2011, fund flows into three major projects -the Phase III Refinery project, the Polypropylene unit, and the CDU/VDU revamp project.
Thai PTT Plc to complete the merger of four petrochemicals and refining units by 2012
PTT Plc aims to complete the merger of its four petrochemical and refining units by 2012. Thailand’s number one energy company expects to conclude the merger plan of three listed subsidiaries -PTT Aromatics and Refining Plc (PTTAR), PTT Chemical Plc (PTTCH), and IRPC Plc -within Q1-2010. Thai Oil Plc will be excluded from the first phase of the merger because unlike the other three that are located in Rayong, it is located in Chon Buri.
Comments: The merger will bring PTT to among the top three-energy companies in Asia. The consolidation will also result in a more integrated company with PTT to be integrated both upstream and downstream giving it a better position to control its operations more closely knitted. The merger will allow it to cut costs and improve efficiency. Recently, PTT’s consolidation plan was affected when the Thai Central Administration Court suspended the construction of 76projectson environmental grounds. All the projects were located in Mab Ta Phut, Rayong province.
Planned maintenance at 22 Asian crackers in 2010, Middle East capacities to benefit
Asian crackers with a combined capacity exceeding 13,000 KT are scheduled for routine maintenance shutdowns this year. This is expected to result in a loss in supply from Asia for 2010 of about 2500KT. This is equivalent to two new world-scale plant start-ups and majorly above levels of 2009 when a loss of 1400 KT was seen with 15 maintenance shutdowns. Ethylene and derivative demand is expected to be fairly tight through H1-10 due to the shutdowns in Asia, possibly leading to firmer petrochemical prices.
Comments: As the turnaround generally takes around 30-45 days of low run-production rates, therefore, there will be a reduced supply of petrochemicals from the domestic suppliers. This will would lead to result in a larger amount of imports from the Middle Eastern Region. As most of the Middle Eastern players are highly competitive in the Asia region, this will be a good opportunity for them to get an increased hold in the Asian market.
In addition, due to the feedstock advantage, the Middle Eastern players have higher leverage in the margins, which would allow them to retain their supply position over some of the existing customers of domestic Asian players.
IRPC to invest US$1.2 billion over the next 5 years to improve and expand refining and petrochemical projects
IRPC, the operator of Southeast Asia’s biggest integrated petrochemical complex, plans to invest US$1.2 billion over the next five years. Out of this, about US$135 million will be invested this year. The investment will be towards improvement in refining and petrochemical projects and capacity expansion at a styrene monomer plant in Rayong.
The run rate at its215,000 bpd refinery will be increased from the current 70% to 75% to provide additional feedstock for petrochemical plants that are expected to run at full capacity this year.
Comments: Thailand in recent years has aggressively been marketing its products for local consumption and exports. The investment IRPC is making would increase the production capacities of petrochemicals and take advantage of the growth phase the region is currently in. Thailand’s main export destination is currently China and Asean countries. Exports to the United States and South America are gradually increasing. The IRPC is a vertically integrated company with products ranging from diesel to downstream products such as HDPE, PP, ABS, SAN, PS, GPPS, and HIPS
Tri Polyta plans30% capacity expansion
In a move to benefit from rising domestic demand and maintain its 40% market share, Indonesia’s Tri Polyta plans to increase polypropylene production capacity by about 30% to 480KTA. An investment outlay of Rp 300 billion (US$32.7 million) has been earmarked to build the new plant, scheduled for completion by December and fully operational in Q1-2011. Between 1999 and 2008, demand for polypropylene has grown by an average of 5.6% pa in Indonesia. In 2011, the domestic demand for polypropylene will be 1100 KTA.
Comments: Indonesia, like many other Asian countries, has seen increased growth in its economy in the past few years. This region has experienced a shortage of PP supply in the recent past, leading to price increases. The demand for PP has been influenced by growth in the packaging industry, as more people are enjoying higher disposable incomes. This capacity increase would allow the region to meet its polypropylene demand for the next few years. The current total capacity for PP is 670 KT. In addition to this expansion, Pertamina announced in June that it had selected Dow Chemical’s UNIPOL PP Process technology for its new 250 KTA PP plant at its Balongan complex, to be completed by 2011.
Huntsman sets up polyols JV in China
Huntsman’s polyurethanes division has created a new, China-based joint venture with Jurong Ningwu Chemical to research, develop, manufacture, and sell base polyether polyol products.
The joint venture, which was announced on 12 January, will be known as Jurong New Ningwu Chemical and will be based in Jurong City, in Jiangsu province. It will be run as a standalone operation, led by Ying Jun, who has been appointed general manager of the JV.
Comments: Huntsman Polyurethanes already has had an established presence in the Chinese market for over a decade. The company has a wholly owned system house, a joint venture MDI production plant, and a trading company integrating storage and distribution. With the strong market for polyurethane in China and the trend expected to continue for the next few years, Huntsman is in a perfect position to take advantage of this industry. The company is one of the world’s largest manufacturers of MDI. The company produces flexible and rigid polyethers, polyesters, polyether amines, and propylene oxide, as well as blended polyether polyol systems and polyurea systems. The current growth for polyurethane in China is close to 8% driven by applications such as flexible foam, rigid foam, adhesive and sealant, and coating.
SABIC Signs US$2.7 billion financing agreements for Tianjin
SABIC has announced the signing of financing agreements by its affiliate Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), totaling RMB18.26 billion (US$2.68 billion), including RMB12.26 billion (US$1.8 billion) long-term financing, and an additional RMB 6 billion (US$879 million) in working capital facilities to finance its petrochemical complex at Tianjin, China that is equally owned by SABIC and Sinopec.
The financial package included financing by leading Chinese banks and financial institutions, including China Construction Bank, acting as the agent, Industrial and Commercial Bank of China, Bank of China, China Development Bank, the Agricultural Bank of China, and Sinopec Finance Co.
Comments: Attend FlexPO2010 June 9-11, 2010 to get more details.
Reliance’s increased gas sales help the first profit gain in five quarters
Reliance Industries Ltd (RIL). reported its first profit increase in more than a year as higher natural gas sales outweighed lower earnings from processing oil.
Net income in the three months ended Dec. 31 rose 16 percent to 40.08 billion rupees (US$868 million) from a year earlier, making it the first increase in profit in five quarters. Reliance increased output at India’s biggest gas field after starting production in April and higher earnings may help fund the company in its bid to acquire LyondellBasell Industries AF.
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