EC opens detailed investigation into NWE propylene pipeline project

11 November 2003 16:10  [Source: ICIS news]

LONDON (CNI)--Plans by a consortium of chemical companies to build an approximately Euro200m ($229m) northwest Europe (NWE) propylene pipeline network suffered a setback on Tuesday when the European Commission (EC) announced a detailed investigation into the legality of state subsidies underpinning the project.

In announcing an extended inquiry into the proposed Rotterdam-Ruhr project, the EC said it aimed to establish whether the amount of subsidy is limited to the minimum necessary and whether the proposed level of state support "generates undue distortions of competition, particularly to the detriment of the chemicals industry in other European Union (EU) regions".

Final plans for a propylene pipeline linking Rotterdam to Cologne and the German Ruhr area via Antwerp in Belgium and Geleen in southeast Netherlands were submitted to the EC at the end of September by the European Pipeline Development Co (EPDC).

The EPDC, which consists of eight chemical companies, had hoped the project would be approved under the EC Competition Directorate's simplified procedure. This would have given the go-ahead this month and allowed the first phase of the project to be operational in mid-2005, according to Bas Kostering, olefins and styrene marketing director for Sabic EuroPetrochemicals - one of the EPDC members.

This initial phase, to partly use existing pipelines, would link Gelsenkirchen, Germany, with other chemical complexes at Marl and Oberhausen in Germany. The rest of the approximately 360 km long network would have beeen ready by late 2006. These sections would link Antwerp and Rotterdam with chemicals facilities at Geel and Berengen in Belgium, Geleen and German plants at Wesseling, Knapsack, Lovenich and Worringen.

Sabic and its other EPDC partners (DSM, Shell, BASF, Celanese, BP/VORP, Degussa/Rutgers and Sasol) believe the 1m-1.5m tonne/year capacity project is vital if major chemical companies in Belgium, Netherlands and Germany are to avert a propylene supply shortfall estimated at about 1.55m tonne/year by 2006. The Gelsenkirchen area alone is expected to have a propylene shortfall of 885 000 tonne/year from 2006.

However, the EC's decision to take an in-depth look at the proposed state subsidies has thrown this schedule into serious doubt.

The EC said today that the authorities in Germany, Belgium and the Netherlands plan to contribute aid amounting to about Euro18.7m, Euro4m and Euro3.7m respectively. Part of the project in the Ruhr area would receive a further Euro25m in public aid, the EC added.

In addition to strategic benefits to the NWE propylene producing and processing industry, the EPDC and authorities in Germany, Belgium and the Netherlands have also argued that transporting propylene by pipeline has major environmental and other benefits. 

It would, they said, substantially reduce emissions compared with alternative road, rail and barge methods, help reduce road traffic congestion and increase safety. The proposed pipeline was also expected to increase flexibility in propylene supply management and help improve the European chemical industry's competitiveness.

By: Neil Sinclair
+44 20 8652 3214

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