US Eastman pushes coal-gas project - CEO

24 October 2008 16:17  [Source: ICIS news]

TORONTO (ICIS news)--Eastman Chemical is well positioned to cope in the current recessionary environment and was pressing ahead with a $1.6bn (€1.2bn) coal-gasification project in Texas, CEO Brian Ferguson said on Friday.


Ferguson told analysts during the company’s third-quarter results call that despite the current economic environment, Eastman continued to pursue the coal-gasification project in Beaumont.


Synthesis Energy Systems announced on Thursday it was abandoning its coal-gasification project in West Virginia due to the economic and credit crisis.


While Eastman somewhat slowed activities on the project and focussed on improving its design, capital costs were now moving in its favour, he said.


“I would like to think we were smart, of maybe we were just lucky,” said Ferguson.


“It may be counter-intuitive to say this, but we think that the overall attractiveness of this project is actually set to improve as world events play out,” he said.


Some of the analysts on the call were skeptical about the risk of the Beaumont project in the current environment and suggested that acquisitions may be less risky and a better use of Eastman's money.


They suggested to Ferguson that Eastman could buy the acrylic acid and ester business Dow Chemical plans to sell off as part of its merger with Rohm and Haas, and one even suggested Eastman should make a hostile bid for Celanese.


Ferguson dismissed the Celanese suggestion outright, but added: “We should keep our eyes open to all the choices … go for the highest value creation, and don’t fall in love with one project.”


Eastman expected to update investors on the Beaumont project in February next year, he said.


Eastman’s product portfolio was much stronger than in the last recession earlier this decade, he said.


Since early 2000-2001, the company had sold polyethylene (PE), fine chemicals and several polyethylene terephthalate (PET) plants, and it reduced its staff to 10,000, from 15,000, he said.


Another positive was the low level of industry capacity additions in Eastman’s product lines, Ferguson said.


“For our propylene derivatives, acetyl derivatives and other major product lines the recession issue for us is lower volume demand due economic conditions, not large capacity additions we had in prior recessions,” he said.


Following its divestments and portfolio improvements, Eastman did not have significant exposure to ethylene and acetic acid, he added.


Another advantage for Eastman was its use of coal as a raw material to make many of its products, for example acetate tow.


($1 = €0.78)


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By: Stefan Baumgarten
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