September 2010 Archives

Shell Chemicals moves on from "cracker plus one" strategy

By Will Beacham on September 30, 2010 3:23 PM | No Comments | No TrackBacks
Shell-logo.jpg
Integrated oil and chemical producers such as Anglo-Dutch Shell can make good money out of petrochemicals if they can capitalise on their ­in-built feedstock advantage.
This was the key message from Shell executives at a media briefing I attended this week in London. The company has subtly changed its chemicals strategy away from the previous "cracker plus one" derivative concept towards becoming a "highly profitable 
upgrader of hydrocarbons."
Executive vice president of chemicals, Ben van Beurden, said that the cracker plus one concept was useful for when the company was going through its portfolio rejuvenation process. Now that this is largely completed, Shell will move on with a new focus to capitalise on its feedstock advantage. "Everything we do must help us to hold on to that feedstock advantage. Don't give it away by producing second-class assets or in the wrong geography," he said.
Now that rationalisation has given it a more high quality refining footprint, Shell is trying to integrate its chemicals operations more cleverly, adding scale and complexity so that a wider variety of feedstocks can be used producing a flexible product portfolio.   
For example, Europe Shell might boost the use of ­hydrowax - which is of low value for fuels - as a feedstock for high value petrochemicals. In the US, feedstock advantage means continuing the shift towards greater use of ethane. In 2007, Shell cracked around 70% liquids compared with 25% in 2010.
And globally Shell is examining how it can make better use of methane and syngas. "We're investing a lot of time in methane to chemicals," said van Beurden. Shell is also examining new routes for coal to chemicals and is interested in developing bio-based feedstock
With demand for transport fuels in mature economies expected to decline, it is more important than ever for integrated firms to have flexible assets that can switch towards chemical production, he told us, adding: "Chemicals are an important enabler for upstream value chains."
By focusing so heavily on feedstocks, "we have the aspiration of becoming more profitable than the average at Shell. We have discovered a whole seam of feedstock advantage."
Van Beurden warned that Europe's chemical sector would thrive only if it was not damaged by its regulatory environment. He said the Emissions Trading System is a major concern but he is hopeful a workable solution can be found

Saudi Kayan delay is good news for US/European chemical producers

By Will Beacham on September 23, 2010 10:45 AM | No Comments | No TrackBacks
Reports that Saudi Kayan will delay the startup of its 1.5m tonnes/year Al Jubail petrochemical complex until late 2011 will be heartening news for many in Europe and the US. 
In the short term it means less downward pressure next year on pricing for commodity chemicals as Middle East capacities come onstream and exports ramp, mainly to Asia and Europe. 
But the delay also adds to the argument that mixed feed plants in the Middle East are much less competitive than ethane-based crackers against those in Europe and the US. This is especially true the further downstream from the cracker you go. As Leslie McCune of Chemical Management Resources recently told me, beyond the second derivative you stop making money in the Middle East due to high construction costs linked to the need to import expensive foreign kit and manpower. Logistics costs are also prohibitive for less stable liquid products.
According to Ahmed Hassan of Alembic Global Advisors, the Saudi Kayan delay is linked to cost over-runs as the project is 25% over budget and requires around $1.2bn in extra funding to cover the $2.5bn in cost over runs.
As the table below shows, this project does go into several downstream derivatives.http://www.zawya.com/story.cfm/sidZW20100921000078
Saudi Kayan Projects (1)

Czech Unipetrol downgraded on lack of growth potential

By Will Beacham on September 16, 2010 9:17 AM | No Comments | No TrackBacks
Raiffeisen Centrobank has downgraded its rating on the stock of Czech petrochemical producer Unipetrol to 'Reduce' from 'Hold' noting its lack of growth potential, according to ICIS news.

"We like Unipetrol's restructuring and debt reduction track record and we think that with its specialisation in niche petchem products, the company will be able to tackle future challenges, especially the upcoming Middle Eastern petchem competition, the bank said.

"However, with the strategy of [Polish parent company] PKN Orlen, we see little growth potential other than the organic growth fuelled by the incremental central & eastern (CEE) European petchem demand," Raiffeisen added in an analyst report.

Since being swallowed up by Poland's PKN Orlen, Unipetrol seems to face real difficulties in pursuing an active modernising management style. Previous CEO, Francois Vleugels, moved on soon after the takeover and complained then about interference from Orlen.

Putin commits to Russian petrochemical development

By Will Beacham on September 14, 2010 1:45 PM | No Comments | No TrackBacks
ITAR-TASS: MOSCOW, RUSSIA. SEPTEMBER 9, 2010. Russian PM Vladimir Putin (C) at a session of the Russian government s presidium. (Photo ITAR-TASS/ Maxim Shemetov) Photo via Newscom
Russian prime minister, Vladimir Putin, pledged yesterday to speed up development of the country's petrochemical sector by removing barriers to new project development.

ICIS news reports Putin said the authorities should remove "all administrative and infrastructure barriers" that hinder development of the petrochemical industry, speaking to a top-level meeting in the Nizhny Novgorod region on Monday.

The Russian Energy Ministry must simplify procedures to approve new petrochemical projects, he said in televised remarks. Putin also suggested the creation of a national centre that would develop new chemical technologies.

It certainly looks like Russia's chemical sector is on the move at last. There were many years of grand announcements of projects which never came to fruition, held back by lack of finance or corporate inertia.

Now companies such as Sibur are forging ahead with a raft of projects which will transform production by boosting capacity and allowing for the closure of old Soviet-era plant.


ICIS Top 100 chemical company list reveals sales dip to below $1 trillion

By Will Beacham on September 13, 2010 11:20 AM | No Comments | No TrackBacks
Top 100 2010 logo.JPG
Revenues for the world's 100 biggest chemical companies fell sharply to below $1,000bn in 2009 for the first time since 2005, according to the Top 100 chemical company listing published by ICIS today.

As the financial and economic crisis sent the global economy into recession, the chemical sector was hit hard, suffering a 19.7% fall in sales to $997bn, the listing, sponsored by global logistics group DAMCO, shows.

For the Top 100 chemical companies, sales declined by an average of 14.7% in reported currencies and 12.0% in US dollars in 2009. Total profits of the Top 100 fell 17.5% in US dollars.

To download the article and listing click here http://ow.ly/2CnlU


Even the top 10 biggest players suffered badly, with revenue falls of between 13% and 44% in local currencies and some drastic falls in profitability. Global leader BASF of Germany suffered around a 50% drop in net profit last year.

Company names listed within the Top 10 this year are exactly the same as last year, but there has been quite a lot of reshuffling. BASF retained the top spot, while Dow Chemical and ExxonMobil, both US, swapped places.

The most startling movement upwards is China's Sinopec, which moved from eighth to fourth. With a domestic market that more or less shrugged off the recession, this is unsurprising. Sliding in the opposite direction is Switzerland-headquartered INEOS, moving from six to 10. The company has a heavy dependence on mature markets that contracted sharply last year.

Chemical Week update: IHS is a major print publisher!

By Will Beacham on September 10, 2010 6:01 PM | No Comments | No TrackBacks
After having stated in my last post that I thought IHS, the new owners of Chemical Week, are not print publishers, I've now discovered they really are. Jane's Defence Weekly, for example, is a major weekly print title focussed on the military. Perhaps IHS will focus and invest in Chem Week's print side after all. The IHS website misled me as it focuses on the business intelligence side of the business. I stand corrected!

Does the sale of Chemical Week spell the end for its print title?

By Will Beacham on September 9, 2010 10:44 AM | No Comments | No TrackBacks
Chemical Week.jpgThe sale was announced this week of our competitor, Chemical Week, to IHS a US-headquartered business information publisher. A quick glance through the IHS website does not show any evidence that they publish conventional, weekly, print magazines.

Even more tellingly, perhaps, is the description of Chemical Week in the IHS press release: 

"Chemical Week - e-subscription business and market-leading source for news and analysis of the chemical, petrochemical and specialty chemical markets"

Chemical Week has, in recent years, started dropping so many issues each year that it is light-heartedly referred to as "Chemical Fortnight" in this office.

Could the end be in sight for its print title?  

ICIS Top 100 chemical companies list out next week

By Will Beacham on September 7, 2010 10:51 AM | No Comments | No TrackBacks
Soccer Player Kissing Trophy
Next Monday 13 September ICIS publishes its annual Top 100 chemical companies listing. 2009 was an incredibly tough year for the industry and the results reflect that. Will there be any new entrants? Will any of the global superstars - BASF, ExxonMobil, Dow Chemical, LyondellBasell Industries, Shell, INEOS, SABIC, Sinopec, DuPont and Mitsubushi Chmical - fallen off the top 10 or will the order just have changed?
The following week sees us analyse the regional top players, including central and eastern Europe/Russia. 
Follow the link to last year's ICIS Top 100 table so you can compare.   



 

Azerbaijan's Azerkimya in desperate need of modernisation

By Will Beacham on September 2, 2010 4:12 PM | No Comments | No TrackBacks
A new report suggests that Azerbaijan's leading petrochemical producer, Azerkimya, needs to undergo a serious modernisation programme if it is survive in the global chemical arena. 
According to Business Monitor International , Azerbaijan is likely to be plagued by volatility and low capacity utilisation until Azerkimya undergoes restructuring and expansion.

We write very little at ICIS on Azerbaijan's chemical sector - maybe it is time to expand coverage. According to a recent press report, state-controlled oil group, Socar, this year took control of Azerkimya. I wonder what the real story is behind the scenes there?  

The report says: "In 2009 Azerkimya produced chemical goods worth AZN163.1mn (US$203.11mn), down around 20% y-o-y. BMI has raised its 2010 chemicals output growth forecast from 25-30% to 30-35%, although most local demand will continue to be met by imports as the industry is unable to fulfil all domestic requirements.

his will come after an estimated decline of around 35-40% in 2009, but close to the 35% growth reported in 2008. While the company has heralded the results in 2010 as proof that restructuring is producing significant results, the level of output is still very small-scale and until production facilities are upgraded and expanded it is unlikely that Azerkimya will compete effectively against foreign rivals on both domestic and export markets.
 
Rather, for the time being it owes its existence to state patronage and protection, while remaining plagued by major disruptions in output caused by periodic rapid rises in electricity and raw material costs. Azerkimya's output has tended to be highly sensitive to changes in the non-oil economy with the rate of petrochemicals sales growth tending to be two or three times the rate of overall economic growth, amplifying the overall economic trends. 

While the strongly pro-cyclical nature of the industry is likely to result in high rates of growth with real GDP growth forecast at 11% in 2010, with low level of capacity it will not add much value and Azerbaijan will remain dependent on imports of chemical products. Moreover, with economic growth set to decline to 7.5% in 2011 and 5.0% by 2014, unless the industry is improved and restructured it will see yet further declines in the years ahead."

 

Russia's Sibur reveals plans for 1m tonne/year gas cracker

By Will Beacham on September 1, 2010 11:30 AM | No Comments | No TrackBacks
I've just interviewed Dmitry Konov, the young president of Russian petchem giant, Sibur. He celebrates his 40th birthday tomorrow (2 September) and has been in charge at Sibur since 2006. I also turned 40 this year but have not had quite so meteoric a career so far.
Konov has really put Sibur into a period of major expansion. He revealed plans to build a pyrolysis gas processing cracker that will produce over 1m tonnes/year of ethylene at the existing Tobolsk-Neftekhim site at Tobolsk, in western Siberia (see map for location of Tobolsk).
A decision about the project will be made late in 2011. If approved, Konov said the project would become operational by 2015-2016.
After Sibur's current group of projects is completed, from 2013 the company will show "healthy, positive cash flow", which will help fund the project, according to Konov.
The plant will process natural gas liquids (NGLs) containing ethane, propane and butane into ethylene.
Russia's feedstock supplies tend to be located far from domestic or export markets, leaving chemical producers there with the dilemma of locating either near to markets or feedstocks, but not both.
"The project site is located in western Siberia, where the climate is not overly severe. While it's not ideally situated in terms of either domestic or export markets, this is a very good position in terms of obtaining its feedstocks," said Konov.
"We would transport the production by either train or truck. Our existing NGL processing plant is located at this same site," he said.


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