INTERVIEW: Shell Chemicals looks to strong 2007

02 February 2007 17:33  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Shell Chemicals is set to post solid results in 2007 as it reaps the fruit of rising output from its new Nanhai joint venture in China, a senior company official said on Friday.

Sven Royall, vice president for customer services and intermediates, told ICIS news in an interview that expected better earnings could also be due to still strong industry fundamentals.

“If we look out six months or so the fundamentals continue to be strong,” Royall said.

“Going into 2007 it will depend on whether some planned capacities will come on-stream or be delayed.”

Nanhai worked particularly well for Shell in 2006, Royall, said and profits from the venture helped balance softening profit margins from the rest of the business in the fourth quarter.

Shell Chemicals on Thursday reported a significant increase in underlying fourth quarter 2006 profits to $273m from $8m in the hurricane hit fourth quarter period of 2005.

Fourth quarter 2006 operating rates were sharply lower, however, at 77% compared with 82% in Q4 2005, due to planned but extended maintenance in Europe and the US.

It was not yet possible to determine whether the margin softening towards the end of 2006 was due to de-stocking or to a more fundamental drop off in demand, Royall explained. “You do not tend to get a feel for that until the end of the first quarter,” he said.

Royall said Shell had some operability issues to address – in the fourth quarter it had a heavy maintenance turnaround programme in Europe and the US and was hit by unforeseen events such as the lightning strike at Moerdijk in the Netherlands in early December.

“We are going to have to work hard on reliability in 2007,” he added.

Commercial operation of the Nanhai complex was proceeding to plan, he said, with output exceeding expectations for sales volumes in the first year of operation.

The complex, based on an 800,000 tonnes/year cracker, is expected to be fully operational within this year.

The Infineum additives joint venture with ExxonMobil and the Sadaf joint venture in Saudi Arabia, also contribute strongly to income in the fourth quarter and in full year 2006.

Royall said the European petrochemicals market was quite strong in the fourth quarter but market conditions in North America were variable over the three months.

Royall stressed that Shell expected to grow organically in chemicals in over the next four to five years capitalising on its investment in Nanhai and on the $3bn cracker complex it will build in Singapore.

By the time the Singapore complex comes on-stream Shell will have one third of its chemicals assets base in Asia/Middle East, he said.

By: Nigel Davis
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