INSIGHT: Basell moves quickly on Kazakhstan

31 March 2006 17:28  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Even as they scour the world for feedstock opportunities petrochemicals producers horizons tend to be relatively limited.

Not so Basell, who’s new owner, Len Blavatnik, has opened up a new world of opportunity for the firm in central Asia beginning with a stake in a new worldscale cracker and polyolefins complex in Kazakhstan.

Kazakhstan may not spring to everyone’s mind when it comes to petrochemicals or to talking about feedstock or logistics advantages. For Basell, however, the close links its new owner has established in the country make a competitive feedstock position even more attractive.

Basell chief executive Volker Trautz said in no uncertain terms at the start of this week that Basell was interested in Kazakhstan. Its plans were at the early stage, he indicated, but opportunities for development of petrochemicals development in the country were significant.

By their very location, polymer plants in Kazakhstan could serve markets in China or Europe by rail. A worldscale complex using state-of-the-art technology and linked to a low cost feedstock source fits most of the criteria as far as low costs of production are concerned.

Trautz is certain that feedstock advantage will define global polyolefins production for the next five to ten years. The polymers business is becoming increasingly commoditised. At the same time inter-regional polymers trade is set to boom.

Basell has forecast inter-regional polymers trade of 10m tonne a year by 2010 as new capacity comes on-stream in feedstock rich areas and demand rises strongly in other parts of the world. China will continue to draw in polyethylene (PE) and polypropylene (PP) even though the total level of imports may be already past its peak.

The demand pull is in Asia, production is largely in the Middle East. However, production in other parts of the world cannot be ruled out – central Asia and North Africa are examples.

Basell’s early stage plans in Kazakhstan include an 850,000 tonne/year ethane cracker, a 400,000 tonne/year propane dehydrogenation unit, a 400,000 tonne/year polypropylene (PP) plant and two 400,000 tonne/year polyethylene units. One of the plants will produce low density (ldPE); the other swing between linear low density and high density PE (lldPE/hdPE).

Critically, the project includes an ethane extraction plant as the direct link to local gas supplies. State-owned KazMunayGas is part of the deal. It was created in 2002 with the goal of developing Kazakhstan’s oil and gas resources.

Blavatnik’s links in central Asia and his financial clout lie at the heart of this project. Trautz stressed in an interview with ICIS news at the 31st NPRA International Petrochemical Conference in San Antonio last weekend that the company’s new owner was interested in growth and not cutbacks. Basell’s current structure that embraces technology and advanced polyolefins as well as significant polyethylene and polypropylene businesses would remain in place, he said.

The Kazakhstan step in strategic terms links with the two joint venture projects in Saudi Arabia Basell expects to confirm within the next few weeks. Under new ownership Basell is able to move faster and the decision making process is much improved.

Basell wants to build in Kazakhstan within four years. When operational in 2010, this facility will establish a new benchmark for the polyolefins industry, Trautz said on Friday. The polyolefins business in future will be all about costs, technology and logistics. Basell is setting out to prove the point.

By: Nigel Davis
+44 20 8652 3214

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