Petrochemicals: Versalis focusses on bio-BD strategy

10 August 2012 12:21  [Source: ICB]

The bio-based butadiene (BD) joint venture (JV) announced recently by Italian major Versalis may be the first of many new partnerships that form the ­company's latest strategy to seek ­alternative routes of chem-ical production.

Versalis revealed on July 24 that it would build commercial plants for on-purpose production of bio-based butadiene (BD) as part of a deal with technology firm Genomatica and biodegradeable plastics producer Novamont.

Versalis, formerly known as Polimeri Europa, will hold the majority interest in the project.

In an exclusive interview with ICIS, CEO Daniele Ferrari suggested that similar projects were also being considered:

 

Versalis finds strategic partners (left: Schilling, right: Ferrari)

"One of the key elements of our new strategy was to act on converting existing non-profitable or obsolete technologies and explore new ways to make chemicals," said Ferrari.

"Closing Porto Torres and replacing it with Matrica was the first example. It made news around the world and started to attract people who offered us a lot of projects. This butadiene joint venture is one of those but there are at least another two or three at the moment we are looking at. This is not part of the Matrica project but has been inspired by it," he said.

This agreement brings together the core competencies of all three companies, said Ferrari. The ­partnership will combine Genomatica's proprietary technologies and intellectual property for BD production, and Versalis's catalysis process development and market applications of BD derivatives, as well as Novamont's ­experience with renewable feedstocks.

"Versalis and Novamont are ideal partners to join us in ­leading the development of process technology for the production of butadiene from renewable feedstocks," said CEO of Genomatica, Christophe Schilling. "Together we can cover the entire value chain, and drive from innovation to commercialization, providing a comprehensive solution. This partnership is further validation of the ability of Genomatica's technology platform to address multiple chemical market opportunities."

Ferrari added: "We had the know-how about agriculture and supply, we knew about the construction and industrialization of projects, but we were missing the fermentation side, which transforms the sugar into the specific chemical. Genomatica provides these competencies.

"We were very keen to hold the main share because butadiene is so strategic for our market; given that a pillar of our strategy is to become a global leader in elastomers, then obviously we want to exploit the integration where it makes sense," Ferrari said.

Bio-based BD supply has become significant to Versalis's strategy, removing some of its dependence on the naphtha cracking processes.

VOLATILE PRICING

BD is a key intermediate for Versalis's elastomers business, but is under long-term pressure from volatile pricing and anticipated supply shortages.

The combination of thriving automotive and tire markets - particularly in the BRIC countries (Brazil, Russia, India and China) - and the trend towards gas cracking using ethane rather than naphtha-based facilities is exacerbating the situation.

BD is a raw material used to produce rubber tires, plastics, electrical appliances, footwear, building components and latex.

"We clearly need to support the growth with the right butadiene supply, which would come essentially from a three-step strategy," Ferrari said.

"The first part, which is immediate, is to debottleneck or create opportunities in our existing crackers - for instance, the investment in Dunkirk that will come on stream at the end of 2014. In the medium term, we're also supporting the dehydrogenation of butanes - which is technology that we own - and want to go down a non-petrochemical route to be completely disengaged from crackers and refineries.

"That's why we're embarking on this project; this is going to give us a completely new perspective," he added.

licensing opportunities

Under this agreement, the new company will have the exclusivity to license the technology in regions such as Asia, Latin America and Europe. "I would say that within the next two to three years, we are definitely going to be capable of industrializing at least part of the technology, with a plant possible within four years," Ferrari says.

"At the moment we don't have a precise location for any plants, but obviously it has to be close to an agricultural supply chain and supply of biomass, and has to be close to the elastomers business in the future. We don't know about the size of the plants because we need to decide on the process and technology first," he said.

"The consequence of this JV is a complete integrated new biochemical complex. The concept we're trying to develop is the ability to modify the enzymes or bacteria that will provide this transformation in order to produce a specific grade of chemical.

"In theory, we have no limits as to what kind of monomers we want to produce," added Ferrari.

"We continue to be a big player in alternative processes for creating monomers. We want to globalize our business and this will be another way of doing so. It will also be a vehicle for licensing our technology. It's a great integration of competencies among partners," he said.

The agreement between the three parties builds on a series of recent key events including the June 2011 formation of Matrìca, a 50:50 joint venture in bio-based chemicals production between Versalis and Novamont; the announcement that Versalis plans to heavily invest in innovation and capitalize on elastomers, and Genomatica's successful production of pound quantities of bio-based BD last August.

SHAREHOLDER COMMITMENT

Ferrari said: "We've been able to convince our shareholders to embark on something which is quite revolutionary for an oil company and shows further commitment from them that they believe we'll be able to do something different with our chemical business.

"We are talking about investing tens of millions of euros over a four-year program. The final objective is to arrive at the industrialization of the process and to build up the first commercial scale plant with our technology," he maintained.

SUPPLY ISSUES DRIVE EXTREME GLOBAL BUTADIENE VOLATILITY

International butadiene (BD) prices have been subject to huge swings in the past several years, reaching record highs and displaying extreme volatility.

For example, US prices jumped by 49% in quarter one this year, then fell 26%, and dropped another 16% between June and July, according to Michael McDonald, CEO of US-based TPC Group.

ICIS data shows that prices in all world regions have plummeted by at least 50% this year, before recovering once more in quarter three.

Asian prices were at a high of $3,900-4,000/tonne (€3,141-3,221/tonne) CFR (cost & freight) NE (Northeast) Asia in February, but had dropped to $1,800-1,900/tonne in June.

On August 3, numbers had recovered to $2,250-2,300/tonne

The trend was repeated in Europe and the US. European February prices of $3,550-3,725/tonne FOB (free on board) ARA (Amsterdam, Rotterdam, Antwerp) plunged to $1,400-1,500/tonne in June, when US numbers of 160-165 cents/lb ($3,527-3,638/tonne) CIF (cost, insurance & freight) US Gulf also tumbled to 80-85 cents/lb. Prices have since rebounded in Europe to $2,000-2,060/tonne in early August and are at 90-95 cents/lb in the US.

The main factor behind the fluctuations in pricing is a continuing supply shortage, which has been exacerbated by a shift to cracking lighter feedstocks, notably ethane, with less BD output.

In contrast, demand into synthetic rubber and acrylonitrile-butadiene-styrene (ABS) is growing at healthy levels, particularly in Asia where demand for cars is rising rapidly.

However, a weakening global economy has dampened sales of automobiles and tires this year and SBR producers have cut operating rates at their plants.


By: Andy Brice
+44 20 8652 3214



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