December closed with ominous signs for the industry.
Dow Chemical's proposed commodity petrochemicals joint venture with Petrochemical Industries Co (PIC) was scrapped after strong protests from Kuwaiti opposition leaders who believed that the deal was overpriced at a time when oil prices were falling.
This is a major setback for Dow and raises questions about its planned $13bn acquisition of Rohm and Haas. This report summarises some of the difficult choices that Dow faces.
LyondellBasell with $26bn in debt is struggling to escape from bankruptcy. The company has held discussions about entering Chapter 11 bankruptcy protection internally and with banks.
One Wall Street analyst pointed out that LyondellBasell's situation was an example of the challenges faced by leveraged chemical companies as they encounter a tough combination of soft end markets, inventory destocking and sharply higher cost of capital.
There was also news that Qatar has put on hold a planned joint venture between Qatar Petroleum and Honam Petrochemical for a cracker and derivatives complex because of "international market turbulenece".
But this turbulence has not deterred ONGC from taking forward its cracker project at Dahej. Linde and Samsung Engineering have secured a contract to build the 1.1m tonne/year cracker and benzene and butadiene units. Bids for polyethylene (PE) and polypropylene (PP) plants downstream of the cracker are due to be submitted next month.
ONGC, Gail and other government companies are set to hold close to 50% stake in the project with the balance likely to be offered to a strategic investor or to the public through an IPO once financial market conditions improve. ONGC had offered a 9% stake to Gail but the latter is interested in raising its holding to 19%.
So it appears that ONGC has, for now, abandoned plans for a foreign investor. It is also probably safe to say that prospective foreign investors are no longer keen on this project as they have many more pressing issues to worry about.