Can Europe wait to extend the petchems pipeline network?

22 June 2004 13:26  [Source: ICIS news]

European olefins producers and users will be benefiting from a key infrastructure development in a few years time - only 10 or so years late.

 

The sector finally won approval this month from European Union (EU) authorities for public funding of the final pieces of a new propylene pipeline that will link major cracker sites in northwest Europe.

 

Developing infrastructure is a long and tortuous process, particularly in Europe and especially when a unique public/private partnership like this is concerned. One can only hope that the industry is in a condition to benefit from the new product links – that will provide the chance at least to balance product flows and reduce volatility in the business – once they are complete.

 

The EU has finally had its say on the European propylene pipeline project, approving aid from Germany, Belgium and the Netherlands of Euro27m ($33m) of the total estimated Euro200m costs. The way is left now for the European Pipeline Development Company (EPDC) to outline its plans once details of the EU decision are made available. A startup date for the 360km (225 mile) pipeline, linking the ports of Rotterdam in the Netherlands and Antwerp in Belgium through Tessenderlo (Belgium) and Geleen (the Netherlands) to Cologne and the Ruhr in Germany is expected to be revealed by the company in late July.

 

The approval signals the end of years of debate and wrangling over European petrochemical industry competitiveness and the importance of carrying more material by pipeline – as opposed to road, rail or barge.

 

The competitiveness argument is well made, as is the assertion that moving less by rail, road and barge has positive environmental and safety implications. The EPDC consortium had sought state aid, though, based also on the argument that the project would provide benefits in terms of industrial development and employment well beyond the bounds of the chemicals sector and to cover startup costs.

 

This project, so long in the making, demonstrates the problems producers face if they try to work collectively and with regional as well as European authorities to develop something to their advantage. It looks as though, in this instance, they will get there in the end but a great deal is lost along the way. At the outset 15 companies were shareholders of EPDC. Given industry consolidation there are now just over half that number.

 

Companies understandably hold different views but the economic case for projects of this sort have to be robust. Propylene pipeline links in northwest Europe might well have been achieved more easily if market forces had been allowed freer rein. On the other hand, a project of such scope is unlikely to have been possible without greater cooperation.

 

The project, and its foreseeable conclusion, therefore, raise questions about how the now wider EU of 25 member states will develop its industrial pipeline infrastructure in the 21st century. The petrochemicals pipeline infrastructure in central and eastern Europe is much less well developed than it is in the west. Producers in the region are consolidating fast and want to be able to lift their competitiveness further.

 

A challenge for industry players in the new Europe will be to balance feedstock and product flows. (Producers in central and eastern Europe are short of naphtha and the olefins pipeline grid is limited.) Whether private/public partnerships are a good model for future industry projects in the region remains to be seen.

 

By: Nigel Davis
+44 20 8652 3214

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