EC Approves Subsidies for Propylene Pipeline

21 June 2004 00:01  [Source: ICB Americas]

Responding to a plea from a consortium of chemical companies, the European Commission has approved state subsidies of €27 million ($33 million) for a propylene pipeline in northwest Europe. The European Pipeline Developmen Company (EPDC) argued that public sector aid was vital to the viability of the project.

The German state of NorthRhine Westphalia is proposing to provide €18.7 million for the project, while the Dutch and Belgian governments will contribute €4 million and €3.7 million, respectively.

The 360-kilometer pipeline, esti-mated to cost around €200 million, will extend from the ports of Rotter-dam, the Netherlands, and Antwerp, Belgium, through Tessenderlo in Belgium and Geleen in the Nether-lands to Cologne and the Ruhr area of Germany.

Members of the EPDC, the consortium which will own and run the pipeline, include BP, Saudi Basic Industries Corp. (Sabic), EuroPetrochemicals, Sasol, Shell, BASF and Celanese.

EPDC said that state aid was necessary to meet the high start-up costs of the pipeline, which will initially have to run below its planned capacity of up to 1.5 million tons per year.

The consortium also reasoned that the pipeline, which is likely to be in full operation in 2007, qualified for subsidies because it will be an infrastructure asset and its benefits will spread beyond the petrochemical industry.

Commission officials had said that approval of subsidies for the plan would be unusual because state aid for pipelines is normally only permitted in economically deprived regions, not relatively wealthy regions such as northwest Europe.

However, in a statement approving the proposed aid last week, the Commission acknowledged that the pipeline is “strategically important for the continued viability and competitiveness of the propylene producing and processing industry” in the Benelux countries and northwest Germany.

“The industry’s main stakeholders identified lack of an appropriate infrastructure as a major factor hampering their competitiveness,” the Commission said. “By comparison, in the US the propylene industry relies heavily on an extensive network of nation-wide pipelines.”

It also conceded that pipelines produce less pollution and are safer than other modes of transport, while also helping to ease traffic congestion.

In addition, the project would not have a negative impact on competition in logistics since the pipeline would have open access and fees similar to those charged by railcar and barge operators.

“The Commission’s approval is thrilling news,” says a spokesperson for Netherlands-based Sabic Euro-Petrochemicals. “It will enable our two main sites at Geleen in the Netherlands and at Gelsenkirchen in Germany to operate effectively as a single unit because of this pipeline link.”

Sabic EuroPetrochemicals, a sub-sidiary of Sabic, currently has to transport propylene 160 kilometers by railcar from Geleen to Gelsenkirchen. It has 505,000 tons per year of polypropylene capacity on the site, whose feedstock needs cannot be fully met by an adjacent BP-owned ethylene cracker.

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