BASF expects to continue Ludwigshafen production in gas emergency

Tom Brown

27-Jul-2022

LONDON (ICIS)–BASF expects to be able to maintain operations at it’s Ludwigshafen site and other key facilities in Germany in the event of the federal government activating the “emergency” phase of its response plan to natural gas shortages, CEO Martin Brudermuller said on Wednesday.

Governments across Europe and at the EU level are drafting response plans to reduced supplies of natural gas in the wake of dwindling supplies from Russia following the sanctions response to the war in Ukraine.

The final phase of the Germany government’s Emergency Plan for Gas sets out non-market measures that could be taken by authorities to limit consumption and ensure supply to residents and certain other protected entities.

Members of BASF’s management team have warned in the past that production at Ludwigshafen, which represents 4% of German gas consumption, could be shut if natural gas deliveries to the site fall below half of the usual amounts.

“Should the German government declare the third and final “emergency” stage, we currently expect that BASF would still receive sufficient natural gas to maintain operations at the Ludwigshafen site at a reduced load,” BASF chief Martin Brudermuller said, speaking at a press conference on Wednesday.

The company is also confident operations at Schwarzheide, its second-largest site in Germany, will be able to continue, given that the site generates 100% of power and steam demand using fuel oil, he added. Production across the rest of Europe is expected to continue even in an event of gas shortages, he added.

The German government is currently in the second phase of the gas emergency plan.  Current responses to lower Russia gas deliveries include restarting mothballed coal-fired power plants, the planned opening of an auction platform for industrial gas consumers, and for providers to achieve an 85% fill target at storage facilities by 1 October.

The plan also requires key consumers including BASF to report to the Federal Ministry of Economic Affairs each day, according to Brudermuller.

Russian gas deliveries along the Nord Stream 1 pipeline to Germany are expected to fall to 20% of normal levels from Wednesday with potential to fall further in future. On 26 July, EU member states backed a voluntary 15% reduction in gas consumption from 1 August this year.

The continuing erosion of volumes from Russia increases the odds that the German government could move to the third phase of the emergency plan, after entering phase two in late June, but protections are expected to be in place for strategic industrial firms, according to Brudermuller.

“Certain consumer groups are particularly protected,” he said. “These groups include households, social institutions such as hospitals, and gas[1]fired power plants that also supply heat to households.” “But they also include industrial companies that manufacture products that are crucial for society. In this case, gas is allocated according to the relevance of the company to society,” he added.

The voluntary gas consumption reduction measures agreed by EU member states also includes potential for derogations from the targets for countries that “are heavily dependent on gas as a feedstock for critical industries,” according to a Council of the EU statement this week.

BASF has taken an active role in the media in responding to advocates for a comprehensive gas embargo on supplies from Russia, Brudermuller said, by showing more clearly the extent of the impact of such a move on value chains across Europe.

BASF is… [the] largest consumer in Germany. I think, in that respect, it is fair that we ought to take a leading role in terms of risk mitigation for our shareholders,” he said.

“How we then allocate and how we maximise the macroeconomic output and value added was a very, very important part [of the gas reduction debate] and I would claim that BASF had an active role in this very important public discussion,” he added.

Thumbnail picture: BASF’s steam cracker at Ludwigshafen, Germany. Source: BASF

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