INSIGHT: INEOS grasps Noretyl opportunities

05 June 2007 14:30  [Source: ICIS news]

By Nigel Davis

Noretyl furnace (cracker) at Rafnes, Norway. Pic downloaded from Noretyl image library on 7 Nov 2005. Caption changed from Noretyl ethylene cracker to illustrate article 2 March 2006 on division over bi-monthly ethylene contracts in Europe. Pic reused on 29th March 2006 to illustrate story on EULONDON (ICIS news)--INEOS continues to mop up petrochemicals assets in Europe to consolidate a portfolio of businesses that should perform better under a single umbrella while opening up intriguing possibilities for the future.

The €290m ($392m) debt-free purchase of the remaining stake in the Noretyl cracker which it does not already own and associated polymer units at nearby Bamble fits the company’s existing network like a glove.

In chief executive Jim Ratcliffe’s words, the acquisition presents important opportunities for INEOS to support existing assets in the northwest European ethylene network. The gas-fed Noretyl assets are well placed. “This acquisition is perfectly timed and provides a significant step forward in the development of INEOS,” he says.

INEOS has bought the 50% of the Noretyl cracker at Rafnes in Norway it did not purchase last month when it acquired Norsk Hydro’s polyvinyl chloride business Kerling for €670m.

The latest acquisition includes a 175,000 tonne/year polypropylene (PP) unit; a 140,000 tonne/year linear low density polyethylene (LDPE) plant; and a mothballed 110,000 tonne/year high density polyethylene (HDPE) plant at Bamble.

The polyolefins assets make plastics for the growing moulding, film and fibre, and extrusion coating industries in northern Europe, Borealis says . The 1977-vintage cracker was upgraded in 2005 to a nameplate capacity of 557,000 tonnes/year.

Fed with ethane and liquefied petroleum gas (LPG) under long-term agreements with oil and gas major Statoil , the Noretyl cracker is somewhat feedstock advantaged but isolated from downstream markets and located in a high cost part of the world.

The HDPE plant closure left the Bamble area with a surplus of about 100,000 tonnes/year of ethylene which was shipped to Belgium.

INEOS will be in a position to balance its ethylene availability across northern Europe given its control of Noretyl and Kerling. The acquisition from Borealis improves feedstock integration across assets in Grangemouth, Scotland, Antwerp, Lillo and Geel in Belgium, Cologne and Wilhelmshaven in Germany and Lavera in France.

Locally at Bamble there is concern about the future of the polymer units.

INEOS said it still intended to go ahead with plans to build a worldscale cracker at Wilhelmshaven in Germany. That unit would serve a different local market.

The Wilhelmshaven development, however, depends on pipeline plans to bring Norwegian gas close to the site for ethane extraction. With Noretyl, INEOS has further options.

The move opens up the possibility of tapping into well-advanced ethane pipeline plans for eastern Norway, western Sweden and Denmark. Seven companies have agreed to own 70% of the pipeline and nine have agreed to pay to use it. A deadline for binding gas use contracts of 30 June 2007 has been set.

Pre-engineering is due to start and a final development decision is expected in 2009.

INEOS with Noretyl could eventually tap into to more advantaged feed for its northwest Europe frontier. The company’s game plan, as usual, makes a great deal of sense.

($1 = €0.74)

By: Nigel Davis
+44 20 8652 3214

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