BASF's Jennings Outlines Growth Strategies for the Nafta region

30 August 1999 00:00  [Source: ICB Americas]

BASF Corporation is rapidly accelerating its capital investments in North America to expand its downstream operations and strengthen its back-integration into petrochemical building blocks. Investments have increased from $400 million in 1995 to more than $1 billion this year, according to Carl A. Jennings, president of the chemicals division of BASF Corporation.

"Our strategy is to secure positions upstream to increase chain margins with lower-cost raw materials," Dr. Jennings says. "We also want to move downstream, where we see higher margins and less cyclicality."

To that end, BASF's chemicals division is planning around $2 billion in investments in North America over the next four to five years to build an olefins base and to strengthen its core technologies, including butanediol, acrylic monomers, C4 oxo alcohols and ethylene oxide and glycol. Selected acquistions are also a factor in the company's strategy.

BASF and its joint venture partner Fina are building the world's largest steam cracker in Port Arthur, Tex. The $1 billion project is on schedule and should start up by the first quarter of 2001. The facility will have an annual capacity of 1.83 billion pounds of ethylene and 1.9 billion pounds of propylene.

"Before partnering with Fina, we looked for sources of proyplene that would support our growing appetite for this key raw material and provide cost advantages. When we looked at the economics offered by a large cracker back-integrated with a refinery, we were astonished," he says.

The company will garner 1.1 billion pounds of propylene and 1 billion pounds of ethylene from the Port Arthur facility. The site's propylene output will be boosted using metathesis technology for enhanced propylene production.

Dr. Jennings says the company's integration benefits at Port Arthur are estimated at more than $50 million per year.

BASF will use virtually all of its share of the Port Arthur cracker's output for downstream operations at Freeport, Tex., which is propylene dependent, and Geismar, La., which is more dependent on ethylene. Dr. Jennings says the company considers the latter two plants as integrated "Verbund" sites.

"As part of our growth strategy, we have re-engineered both sites to converge to common maintenance, engineering and logistics processes, as well as a common financial system and organizational structure," he says. "Both sites are on co-generation and share common spare parts. Productivity and efficiency improvements at Geismar and Freeport to date exceed $50 million per year relative to the 1996 base."

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