Price and market trends: INEOS CEO expects capital spending to gavitate towards the US

05 April 2013 09:36  [Source: ICB]

Capital will flow to US projects while Europe remains in a difficult place. Company trying to make solid returns in Asia

INEOS will invest more in the US to capitalise on the country's shale gas advantage, while company restructuring in Europe is likely, chairman and CEO Jim Ratcliffe said.

Shale gas is having an enormous impact on the petrochemical industry in North America and will have a negative impact on Europe, he suggested.

"The story is one of two halves," he said in answer to questions following his acceptance of the 17th Petrochemical Heritage Award from the Chemical Heritage Foundation, which was presented at the American Fuel & Petrochemical Manufacturers (AFPM) International Petrochemical meeting (IPC).

"It's not rocket science; our capital will gravitate towards the US," Ratcliffe said.

INEOS CEO at IPC

 Award: INEOS CEO at IPC

CAPITAL EXPENDITURE
INEOS spends about $700m (€539m) a year on capital expenditure, he added.

The company has a 4bn lb/year (1.8m tonne/year) gas cracker at Chocolate Bayou in Texas and just over 2bn lbs/year of polyethylene capacity alongside other olefins and derivatives, according to its Olefins & Polymers USA website. Its total petrochemicals capacity in North America is 7.5bn lbs/year.

"We have a long-term issue in Europe," Ratcliffe said, referring to the region's current debt and economic problems. "Europe remains in a difficult place."

Swiss-headquartered INEOS has a lot of assets in Europe, he added, and the company is looking at how any of these could be underpinned by cheap feedstock from the US.

The company has plans to ship ethane from Marcus Hook in Pennsylvania, US to help feed its cracker at Rafnes in Norway and potentially its site at Grangemouth, in the UK. The INEOS CEO warned, however, that Europe's problems were persisting. "There will have to be some rationalisation in Europe," he said.

In Asia, INEOS will only invest if it can make a good return, he noted. "We've spent a lot of time looking at Asia and the Middle East," Ratcliffe said.

The company had taken seven years to negotiate an acceptable deal on a world scale phenol plant in China, he noted.

INEOS is to make its largest ever investment in China with state-controlled Sinopec for a 1.2m tonne/year cumene, phenol and acetone facility.

The plants will produce 400,000 tonnes/year of phenol, 250,000 tonnes a year of acetone and 550,000 tonnes/year of cumene. The project is expected to cost about $500m (€385m) and is due for completion at the end of 2015.

"We are looking at a number of things in Asia," Ratcliffe said, without expanding further. "It's quite difficult to go to Asia and solidly make money out of it."


By: Nigel Davis
+44 20 8652 3214



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