Czech Rep's Slovnaft to raise ethylene, PE capacity by 50%

Source: ICIS News

2002/12/09

PRAGUE (CNI)--Slovnaft, the Slovak petrochemical and refinery concern, aims to increase ethylene and polyethylene (PE) production by 50% in the second half of this decade, the company’s chief executive Vratko Kassovic told CNI in an interview.

The planned upgrade is part of Slovnaft’s strategic aim to focus on plastics and to become a regional leader in petrochemicals, he said. Capital cost of the planned expansion was not disclosed.

Slovnaft is a part of the Hungarian oil, gas and petrochemical group MOL, which also has a controlling interest in compatriot chemical concern TVK.

Last month, Slovnaft announced it will build a new polypropylene (PP) unit that will almost quadruple current output of 70 000 tonne/year to 255 000 tonne/year. The new unit will come on stream in early 2005.

“After the completion of this PP project, which will be the beginning of the upgrade of the petrochemical part of the company, we are planning to expand or increase the ethylene and polyethylene (PE) production by 50% of the existing production facilities, that’s the current steam cracker," said Kassovic.

“Then we are planning to build a new PE production unit. That [will both happen] in the second half of this decade,” Kassovic added.

He confirmed that the PP contract, which was awarded to German engineering group Linde, is worth Euro130m ($129m), for both the unit’s licence and its construction.

Slovnaft’s ethylene cracker, which uses LPG (liquefied petroleum gas) or virgin naphtha feeds, has a current capacity of 200 000 tonne/year and dates from 1976. Following the expansion, it will be able to produce 300 000 tonne/year.

Currently, the company also has seven lines of PE with a combined capacity of 170 000 tonne/year. After the planned expansion, PE capacity will rise to 255 000 tonne/year.

Slovnaft’s plastics focus comes after it spent more than $500m on turning its refinery into one of Europe’s most complex, a process that was completed in 2000.

“Our refinery is one of the best in Europe. We’ve [now] decided to upgrade the petrochemical part of the company,” said Kassovic.

Slovnaft wants to use its comparative advantage of being an integrated petrochemical-refinery complex since “it is clear the main cost of petrochemical production comes from feedstocks,” he said.

“We have decided to harmonise the development of the petrochemical part of the company with development of [Hungary’s] TVK.

“This is also very important for Slovnaft because we can use additional synergies from harmonised development,” said Kassovic.

MOL last month raised its stake in Slovnaft to 67.8% after buying the 31.6% held by Slovnaft’s managers in a $360m cash-plus-shares deal.

TVK, in which MOL has 34%, has also started a $430m expansion project that will increase ethylene capacity from 360 000 tonne/year to 610 000 tonne/year by 2005.

The group plans to increase polymer sales by 7% per annum in central and eastern Europe.

“Slovnaft has a very important role in the strategy of MOL,” said Kassovic. “In the case of plastics, at both locations of Slovnaft and TVK, this group will have a significant role in the plastics business in Europe, especially in central Europe.

“It’s our aim to be the regional leader, definitely, and a significant player in Europe with TVK.

“Without MOL we would not harmonise the development of the petrochemical part together with MOL and especially with TVK.

“Neither would we be able to build such a high production capacity [at the PP unit] as 255 000 tonne/year.”

While Slovnaft had intended to upgrade its petrochemicals in the past anyway, Kassovic said that MOL’s involvement has led to the scope of the upgrade being bigger.

Kassovic also said certain parts of Czech petrochemical and refinery group Unipetrol, which is being privatised, remain interesting for Slovnaft but that it was too early to make a commitment to the sale process.