BASF consolidates Chinese involvement

08 October 2001 00:00  [Source: ICB]

BASF's involvement in China comes on apace with the building of an integrated petrochemicals project in Nanjing, reports John Baker

The groundbreaking late last month for BASF's integrated petrochemicals complex in Nanjing, China, being built with partner Sinopec, marks an acceleration of the German company's investments in that country, indeed in Asia as a whole. The two partners will spend $2.9bn on the complex, which is based around a 600 000 tonne/year ethylene cracker, with nine downstream units (see table).

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Speaking at the ceremony, BASF chairman Jürgen Strube commented that 'the project is visible proof of the excellent partnership between BASF and Sinopec. The new plants constitute BASF's biggest investment in Asia, showing the important role China will play in our strategy.'

BASF already has eight production ventures in the country (see table), and has experience of working at Nanjing through its 60:40 production joint venture with Sinopec subsidiary Yangzi Petrochemical Company (YPC). This started with production of ethylbenzene, styrene and polystyrene in 1997 and an expandable PS plant was added in 1999.

The new complex, first proposed in 1995, is being built on the YPC site and YPC will be the direct partner in the joint venture, designated BASF-YPC Co Ltd. A 220-hectare site has been in preparation since the start of this year and construction is scheduled to start in January next year, with mechanical completion expected in late 2004, after an aggressive 47-month project schedule.

The cracker is being engineered and built by Stone & Webster, part of the Shaw Group, and the downstream units will all use BASF technology, except the ldPE plant which will use technology licensed from Basell, a BASF joint venture with Shell. To ensure the construction is carried out to programme, an integrated management team has been established, consisting of personnel from BASF, YPC and project management contractor Fluor Daniel.

The $2.9bn investment includes utilities for electricity, steam and industrial gases, although these units will be run by outside contractors once built. Naphtha feedstock for the cracker will be obtained largely from nearby Sinopec subsidiary Jinling Petro-chemical, while natural gas will be piped to the complex in the West-East Pipeline, which is expected to be completed in 2003. BASF is also boosting its presence in China with a planned complex at Caojing, near Shanghai, for MDI and TDI.

The MDI plant was originally included in the Nanjing development, but was moved at the request of the Chinese. It is now one of the lead developments at the Shanghai Chemical Industry Park being developed at Caojing. The $1bn project is a complex one and is being pursued as a series of joint ventures with Huntsman Polyurethanes and a group of Chinese partners. The 160 000 tonne/year crude MDI unit and associated nitric acid and aniline plants will be built by Shanghai Isocyanates, a partnership of BASF, Huntsman and Chinese firms Shanghai Tian Yuan, Shanghai Huayi (Group), Sinopec and Sinopec Gao Qiao Petrochemical. The crude MDI will be used by two downstream joint ventures led by BASF (Shanghai BASF Polyurethane) and Huntsman (Huntsman Polyurethanes Shanghai), both with capacity for 100 000 tonne/year of finished MDI.

The BASF finishing joint venture will also build with its partners a 130 000 tonne/year TDI unit with associated nitric acid and dinitrotoluene plants.

The project was first agreed in early 1997 and the Chinese approved the final scope of the development in June this year.

The partners are currently involved in final feasibility studies, which are expected to be completed this month. The complex plant is expected to be onstream by the end of 2005. Shanghai Tian Yuan will build an associated chlor-alkali plant at Caojing to supply chlorine to the isocyanates units.

Both these major investments will be needed to meet BASF's targets for business in China and Asia generally. The company has openly stated its goal of achieving 20% of group sales and chemicals earnings from Asia by 2010, with 70% of sales coming from products made in the region.

That ratio is currently 46%, increased from 35% in 1990 after a E2bn ($1.8bn) capital expenditure programme in Asia over the past decade. Earnings in Asia have picked up sharply since 1997, and stand today at E200m.

As Strube remarked at the groundbreaking ceremony, 'the new Verbund site at Nanjing will make a major contribution to this effort'. The Nanjing complex alone will add E1.4bn/year of sales when up and running, from its 1.7m tonne/year of output. This compares with BASF's sales in Asia of around E5bn in 2000, up from the figure of E2.3bn reported just 10 years ago, although this year is expected to be flat compared to 2000.

But Strube admits the target will be a challenge. Economic growth is currently slowing in Asia, from 7% last year to 4% this year, although China seems to be close to maintaining its 7%/year GDP growth. BASF expects Asia to see an average GDP growth rate of 4.1%/year in the decade ahead, up from 3.4%/year between 1990-99, with chemicals production growth approaching 5.3%/year, slightly down from the 5.9%/year achieved from 1990-99.

PROPOSED SCOPE OF THE NANJING COMPLEX

Product	Capacity, tonne/year
Ethylene	600 000
LdPE	400 000
Ethylene glycols	300 000
Acrylic acid	160 000
Acrylates	215 000
C4 oxo-alcohols	250 000
Formic acid	50 000
Propionic acid	30 000
Methylamines	30 000
Dimethylformamide	30 000

SOURCE: BASF

BASF PRODUCTION VENTURES IN CHINA*

Wholly owned
BASF Colorants and Chemicals	Pudong, Shanghai
Joint ventures
BASF-YPC	Nanjing
Yangzi-BASF Styrenics	Nanjing
Shanghai Gao Qiao-	Pudong, Shanghai
BASF Dispersions
BASF Shanghai Coatings	Minhang, Shanghai
BASF Hua Yuan Nylon	Qingpu, Shanghai
BASF Headway Polyurethanes	Nansha, Guangdong
(China)
BASF-JCIC Neopentylglycol	Jilin, northeast China
BASF Vitamins	Shenyang, northeast China
MDI/TDI jvs	Caojing, Shanghai

* Investment level is $600m excluding BASF-YPC and MDI/TDI projects
SOURCE: BASF

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