INSIGHT: Abu Dhabi makes big moves in Americas chemicals

NEW YORK (ICIS)–Abu Dhabi, the emirate and capital of the United Arab Emirates (UAE), is making big moves in the Americas, through its national oil company ADNOC and investment arm Abu Dhabi Investment Authority (ADIA).

The latest is a joint bid with private equity firm Apollo for Brazil-based Braskem, the sole polyolefins producer in Brazil which also has a majority stake in the largest integrated polyethylene (PE) complex in Mexico, and major polypropylene (PP) facilities in the US and Europe.

A source with knowledge of the negotiations confirmed to ICIS on 8 May that ADNOC and Apollo’s non-binding offer for Braskem had been sent to controlling shareholder Novonor and its creditor banks late on Friday, 5 May.

Abu Dhabi sovereign investment fund Mubadala already acquired a refinery in Bahia, Brazil, from Petrobras for $1.65bn in 2021. The Mubadala refinery is close to Camacari, one of Brazil’s petrochemicals hubs, where Braskem owns several production facilities.

Abu Dhabi ownership in the Americas
Vehicle	Asset	HQ	Status
Mubadala	NOVA Chemicals	Canada	Owned since 2017 after transfer from IPIC
Mubadala, ADNOC	Bayport Polymers	US	Minority stake via NOVA, Borealis
ADIA	Univar	US	Minority stake with partner Apollo. Close of deal pending
ADNOC	Braskem	Brazil	Joint bid with partner Apollo

Abu Dhabi has also teamed up with Apollo on a successful $8.1bn bid for US-based chemical distributor Univar Solutions. Apollo would be the majority shareholder with a subsidiary of the ADIA taking a minority stake.

Univar is the leading chemical distributor in North America, with $7.5bn in sales in the US, $1.1bn in Canada and $800m in Latin America – including Mexico – based on 2022 figures. It also has a sizeable $2.1bn in sales in Europe.

Mubadala also owns Canada-based NOVA Chemicals, a large integrated producer of PE with a growing business in recycled plastics.

NOVA had been owned by Abu Dhabi’s IPIC (International Petroleum Investment Corp) which bought it in the depths of the great financial crisis in 2009, and ownership was transferred to Mubadala in 2017.

In the US, Bayport Polymers – which is slated to start up its PE project in Texas this year – is a 50/50 joint venture between Total Petrochemicals & Refining USA and Novealis Holdings, the latter which is itself a JV between NOVA Chemicals and Borealis. NOVA, as mentioned, is owned by Mubadala while Borealis is 75% owned by Austria-based OMV with ADNOC holding a 25% stake.

NOVA Chemicals also runs a cracker in Geismar, Louisiana, US, acquired from Williams Companies in 2017. The cracker is not integrated into any downstream units, and NOVA has decided to keep it for now, after running a sale process for the asset in 2022.

ACQUIRING LEADING POSITIONS
If ADNOC and Apollo are successful in their joint bid for Brazil’s Braskem and also close on US-based Univar Solutions, Abu Dhabi would boost its chemicals presence in the Americas in a very big way.

Through its investment vehicles and national oil company, it would own the largest polyolefins producer in South America and the only such producer in Brazil, the largest PE producer in Mexico (Braskem Idesa), the largest PE producer in Canada (NOVA Chemicals), with a major stake in the Bayport Polymers integrated PE project in Texas, US, along with one standalone cracker in Louisiana through NOVA.

Plus, it would have a stake in the leading chemical distribution network in North America (Univar Solutions).

The specifics of any potential synergies between all the businesses are unclear, as the various vehicles could well operate the businesses independently, but one could imagine the potential as you look across the vast customer and supplier base, connected via a formidable distribution infrastructure.

NORTH AMERICAN RE-SHORING
The North American manufacturing renaissance and re-industrialisation of the economy was highlighted by Univar Solutions CEO David Jukes in a February 2023 interview with ICIS, prior to the announcement of the deal with Apollo and the ADIA.

“We have a real competitive moat with our asset footprint in a re-industrialising North America which means we have great growth opportunities here. No one has a better set of contiguous assets for inorganic and organic chemistries in North America than we do,” said Jukes.

“You can’t readily replace those assets. You can’t go out and quickly build out tank farms, replicate rail sidings and 600-700 railcars for specific products. All these new industries are pouring into the US,” he added, referring to semiconductor manufacturing, as well as manufacturing products for the green energy transition.

The $280bn US CHIPS and Science Act to build local semiconductor manufacturing capabilities, and the $369bn US Inflation Reduction Act (IRA) to incentivise manufacturing of electric vehicle (EV) batteries, solar cells, wind turbines and build out infrastructure for hydrogen and carbon capture and storage (CCS) is set to spur a renaissance in high-tech US manufacturing which will require massive volumes of chemicals.

This not only incentivises manufacturing in the US, but also in Canada and Mexico which are covered by free trade agreements with the US.

Re-shoring or ‘friend-shoring’ is a key trend that will shape dynamics in the global chemical industry for decades to come.

Chemical and other manufacturing companies are lining up to maximise the incentives from the US IRA, CHIPS Act as well as the Infrastructure Investment and Jobs Act – all of which prioritise the development and use of materials, components and products produced in the US, along with Mexico and Canada in certain cases.

BRAZIL’S POTENTIAL AS A LOW-COST PRODUCER
While South America is not specifically part of the equation when it comes to US government incentives, Brazil has the potential to become a cost-advantaged producer as it seeks to boost supplies of ethane feedstock from the offshore pre-salt formations being developed by state-operated oil and gas company Petrobras.

In the meantime, it has been importing US ethane feedstock for its cracker in Duque de Caxias in Rio de Janeiro state.

Once local supplies are available, Braskem could undertake a major expansion of ethylene and PE capacity at the site – something it has been considering since 2015.

“We would be interested [in the expansion] if there are more NGLs [natural gas liquids] available from pre-salt reserves [as] we would be interested in having access to those volumes. The most competitive investment in Brazil today would be expanding our cracker in Rio,” said Braskem CFO Pedro Freitas on 23 March.

“That would be the best alternative for the country about where it allocated additional feedstocks if they become available. We keep tracking pre-salt activity and are in constant dialogue with players in the industry to be positioned [to have access to those feedstocks],” he added.

Additional reporting by Jonathan Lopez and Al Greenwood

Insight article by Joseph Chang

Thumbnail image shows Abu Dhabi coastline with ADNOC logo. Source: Shutterstock