Firms pull plug on NWE propylene pipeline network

23 February 2007 12:26  [Source: ICIS news]

(Updated - adds company comment in paragraphs 8-12)

LONDON (ICIS news)--Plans to build a pipeline network to transport propylene through northwest Europe have been cancelled due to increasing investment costs, the European Pipeline Development Company (EPDC) said on Friday.

Project costs have been impacted by escalating steel line pipe prices, a tight pipeline construction market and increasing financing costs.

The decision was likely to come as a blow to many producers situated on the proposed pipeline, who had cited the lack of appropriate infrastructure as a major factor hampering competitiveness.

The market for propylene in Europe is around 15m tonnes, half of which is consumed in areas that were due to be served by the project.

The network was planned to extend from ports of Rotterdam, via Antwerp, Tessenderlo and Geleen, to Cologne and the German Ruhr area, and was expected to require a €300m ($393m) investment.

At a recent meeting at the EPDC the investment decision was rejected by shareholders - a consortium of BASF, Celanese, DSM, INEOS, SABIC, Sasol, Shell and Westgas.

The network had already been delayed until the end of the decade in an attempt to keep costs down, with required investment reported to have doubled from the EPDC’s initial estimates.

DSM regretted that the process would not be taken further, said company spokesman Hans Bluyssen.

The pipeline would have alleviated possible supply problems should DSM’s Geleen activities stop receiving propylene supply from SABIC’s nearby crackers.

A propylene trader based in Germany was not surprised to hear the project had been shelved.

In addition to the costs of the pipeline itself, companies along the proposed pipeline deal mainly with chemical grade propylene and would have extra expense dealing with the polymer grade-chemical grade conversion, he said.

It was thought SABIC would be particularly hard-hit by the cancellation, with large amounts of the product from its Geleen crackers in transit to derivatives production at Gelsenkirchen.

A source at the Nordrhein-Westfalen economics ministry said that instead of the original route a shorter network could still be built from Duisburg to Marl in Germany, thought to cost around €40-50m.

Companies holding stakes in the project were not immediately available to comment.

($1 = €0.76)

Hilde Ovrebekk and Nel Weddle contributed to this article

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