EPCA interview: Repsol YPF’s Benjamin Palomo Sanz on how Europe can attract investment away from Asia and the Middle East

Repsol YPF confident about EU petrochemicals

As investors flock to Asia and the Middle East, will Europe be left to languish?

John Baker/London

FOR EUROPE’S petrochemical producers, “competition is getting tougher,” says Benjamin Palomo-Sanz, managing director for chemicals at Repsol YPF. But, he adds, “we are still in a strong position and the sector is very important for the European economy.”

Despite some low value-added customer industries moving out of Europe into regions with lower costs of production, there will still be demand for petrochemicals “and the EU will require a strong production base for years to come,” he argues. “But it comes as no surprise that the ratio of new investment is declining in Europe, with the Middle East and Asia-Pacific taking a larger share thanks, respectively, to their lower feedstock costs and faster growth.”

Repsol YPF is playing its part in Europe, with a series of strategic investments in Spain and Portugal. In Spain, it has just expanded its propylene oxide (PO) and styrene monomer (SM) unit at Tarragona, with an associated polyols expansions downstream of the unit. This year it will bring on a 190,000 tonne/year benzene facility at the same location.

But the bigger news is a major investment in the Sines complex in Portugal, which it acquired from Borealis in 2004. Here it is boosting the cracker to 570,000 tonne/year and adding linear low density polyethylene and polypropylene capacities of 300,000 tonne/year each. When the €600m ($834m) investments come on stream in 2010, the site will be balanced, reducing the need to export ethylene and propylene.

Palomo points out that these investments are indeed expansions and not just scrap-and-build projects. The new output will satisfy growing demand for chemical and polymers in southern Europe and the Mediterranean markets, which, although not as large as those of northern Europe, have plenty of potential for growth. Initially, however, Repsol YPF will export material from Sines into the rest of Europe, and even look for customers in Asia and Latin America until the local markets catch up with the large increases in capacity.

Palomo, one of the newest members of the EPCA executive committee, has been with Repsol YPF throughout his 30-year career in the industry, working as a process engineer, then in sales and, finally, general management.

Despite his general optimism, he cautions that there are still many pressing issues for Europe’s petrochemicals producers. High energy and feedstock costs are a continuing concern, and, he explains, given that the sector is a relatively small customer of the oil industry, it has little ability to impact its cost base and has to compete with the energy markets for its feedstocks. Like other producers, Repsol YPF has been concentrating, therefore, on passing on the feedstock hikes to customers and getting the most out of the refinery integration it enjoys at its major sites.

Another major issue in Europe, he points out, is the growing cost of logistics. “Basically, we are spending one-third of our value-added in storing and moving products around. We need wider cooperation amongst producers and logistics providers as a priority for the industry.” He points to the US as a low-cost example, where there are better pipeline networks and the ability to move product in bulk, using 70-tonne railcars.

Finally, says the industry needs to improve the poor perception that it has in the public’s mind, and demonstrate that petrochemicals can be a help in the battle against, rather than a cause of, global warming.