March 07 Chemical Update

CHEMICAL UPDATE

MARCH 2007

TABLE OF CONTENTS

UNITED STATES

U.S. Oil Giant Halliburton Plans Switch to Dubai

International Paper Sells Arizona Chemical

Praxair to Expand Storage and Industrial Gas Production at Kirtland, New Mexico Facility

INTERNATIONAL

EU Chemicals Industry in 2007 Forecast 3 percent Growth

Germany's Chemical Industry Agrees to 3.6 percent Wage Increase

Germany’s ThyssenKrupp Unit To Build Petrochemical Plant in Egypt

ExxonMobil Chemical to Expand Hydrocarbon Fluids Capacity in Antwerp, Belgium

LP Oxo Technology Licensed to Tianjin Soda Plant

China to Build Asia's Largest Coal Chemical Base

China National Chemical Engineering Launches Middle East Expansion in Egypt

Reliance to Buy All of Indian Petrochemicals

Punj Lloyd to Build a 300 ktpa LDPE Plant in S. Arabia

U.S. Oil Giant Halliburton Plans Switch to Dubai

The Houston, Texas-based multinational oilfield services Halliburton Energy Services plans to move its cooperate office to Dubai, it was revealed Sunday.

Halliburtons chairman, president, and chief executive officer David J. Lesar revealed the plans in Manama on the sidelines of the opening of the 15th Society of Petroleum Engineers Middle East Oil & Gas Show and Conference (MEOS 2007).

Lesar said the move would help the company focus on the Middle East, as he would lead efforts to increase Halliburton business in the Eastern Hemisphere.

'The Middle east would be the seat of our operations,' said Lesar. 'As we invest more heavily in our Eastern Hemisphere presence, we will continue to build upon our leading position in the North American gas-focused market through our excellent mix of technology, reservoir knowledge and an experienced workforce.'

He said the opening of a headquarters in Dubai was the next step in a strategic plan announced in 2006 to focus on expanding Halliburton customer relations with national oil companies.

At the same time, more of the company's investments and resources would be concentrated on growing business in the Eastern Hemisphere.

Lesar added that he did not expect oil prices to go below 40 dollars per barrel.

'I personally do not believe that the price of oil will get much below 40 US dollars, even if we have substantial capacity or economic distribution in the world going forward,' he said.

The 52-year old executive, who took office following the departure of the former CEO and present US Vice President Dick Cheney, did not rule out that his company would get involved in ventures and partnerships as they expand their operations.

'We will look for business opportunities with respect to making business lines we are not into today, or some of the business lines we have but we would like to continue to expand,' he said.

During 2006, more than 38 per cent of Halliburton's 13 billion dollars oil field services revenue was generated from the Eastern Hemisphere, which encompasses four regions with more than 16,000 employees, more than 80 per cent of which are localized.

The announcement by Halliburton, which has been active in the Eastern Hemisphere energy services market since 1926, comes on the footsteps of an earlier announcement by another US oil service company giant, DuPont, which is also focusing on expanding its operations in the region.

DuPont's director for oil and gas in Europe, Middle East and Africa, Dirk Bosman, predicted double-digit growth for his company's expanding regional operations, which comprise not only oil and gas but also food, human health, animal health, water and petrochemical markets.

International Paper Sells Arizona Chemical

International Paper (NYSE: IP) completed the sale of its Arizona Chemical business to Rhone Capital III L.P. for approximately $485 million. In addition, International Paper will acquire a minority interest of approximately 10 percent in the acquisition vehicle to be formed by Rhone Capital.

Arizona Chemical (http://www.arizonachemical.com/) has been a global leader in pine chemistry for more than 75 years. The company is headquartered in Jacksonville, Fla., and supplies high-quality pine chemicals to the adhesives, inks and coatings, and oleochemicals markets.

Arizona Chemical has 11 manufacturing facilities worldwide, located in Panama City, Pensacola and Port St. Joe, Fla.; Savannah and Valdosta, Ga.; Dover, Ohio; Bedlington and Chester-le-Street, England; Niort, France; Oulu, Finland; and Sandarne, Sweden. Arizona Chemical also has research and development capabilities and a network of sales offices throughout the world, including a research and European headquarters in Almere, Netherlands, as well as a research laboratory in Savannah, Ga. The company employs nearly 1,500 team members.

Rhone Capital specializes in mid-market leveraged buyouts, recapitalizations and partnerships with particular focus on European and Trans-Atlantic investments. The acquisition of Arizona Chemical will be an investment of Rhone's third private equity fund.

Praxair to Expand Storage and Industrial Gas Production at Kirtland, New Mexico Facility

Praxair, Inc. recently announced that it will expand its storage and industrial gas production capacities at its Kirtland, N.M., facility. The expansion doubles the current storage capacity and increases production capacity by 100 to 150 tons per day over the next two years.

“This phased-in expansion is in response to the growing demand by oil and gas production customers located in the San Juan basin in Colorado and New Mexico,” said Scott Kaltrider, regional vice president, west region, North American Industrial Gases.

Praxair supplies an array of products and services to the energy sector, including nitrogen and carbon dioxide injection and rejection, mobile nitrogen pumping services, foam-fracturing applications, portable coal-bed methane recovery systems and clean dry-air systems.

Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2006 sales of $8.3 billion. The company produces, sells and distributes atmospheric and process gases, and high-performance surface coatings.

EU Chemicals Industry in 2007 Forecast 3% Growth

EU Chemicals Industry in 2007 Forecast 3 percent Growth

The European Chemical Industry Council (Cefic) expects output by the industry (excluding pharmaceuticals) to tally a 2.5% growth in 2006. This compares to 1.5% in 2005. The growth is above the average increase over the past five years.

In 2006, the European chemical business improved strongly, mainly driven by robust domestic demand and dynamic growth of trade activities with major EU business partners. Chemicals sales have improved continuously since the beginning of 2006. Domestic sales are expected to grow by 4.6% in 2006. The favorable business climate and stronger domestic demand for chemicals in the EU have mainly driven this upswing in domestic sales.

Trade development with major EU partners has been a second driver for industry growth. Exports of chemicals exceed imports, resulting in an encouraging trade surplus. Most chemicals sectors have benefited from the improved business conditions. Basic inorganics, polymers and petrochemicals experienced expansion in 2006. Fine and specialty chemicals are expected to grow by 2.8% in 2006—after a 1.2% drop last year. Healthy household confidence supported higher consumption that is driving up consumer chemicals activity by nearly 4% in 2006.

However, the business climate deteriorated slightly during the last quarter of 2006. Current chemicals confidence is still good but optimism is gradually softening, according to Cefic. Looking ahead, the world economy is expected to experience a slowdown in 2007, essentially in the US. Oil price development and the weak US dollar are still a source of uncertainty. Irrespective of these dampening factors, Cefic expects an output growth of 3% in 2007 for the EU chemicals industry as a whole (including pharmaceuticals).

Source: Hydrocarbon Processing

Germany's Chemical Industry Agrees to 3.6 percent Wage Increase

Germany's chemical industry agreed to a new wage deal that gives the sector's 550,000 workers a pay rise of 3.6 percent.

Germany’s powerful IG Metall industrial union has demanded a rise of 6.5 percent, and its wage deals are seen as a bellwether for other talks.

"The metalworking and engineering industry can easily absorb a wage increase of 6.5 percent," IG Metall's nationwide chairman Juergen Peters was quoted as saying in weekly Bild am Sonntag.

Source: Reuters

Germany’s ThyssenKrupp Unit To Build Petrochemical Plant in Egypt

Uhde GmbH, a construction unit of ThyssenKrupp AG, won a contract to build a petrochemical plant in Egypt’s tax-free zone of Port Said.

The plant will produce propylene and polypropylene, the Dusseldorf, Germany-based company said in a statement. Egyptian Propylene and Polypropylene Co. is developing the $680 million factory to supply domestic and foreign markets.

The plant will be completed in 2009, ThyssenKrupp said, and will use propane from Egyptian natural gas supplies. It will produce 350,000 tons of both propylene and polypropylene each year.

Port said is about 100 miles northeast of Cairo.

ExxonMobil Chemical to Expand Hydrocarbon Fluids Capacity in Antwerp, Belgium

ExxonMobil Chemical Belgium is expanding the capacity of its hydrocarbon fluids plant in Antwerp to 700,000 tons per year. The project is expected to be completed during the fourth quarter of 2007.

"This investment demonstrates ExxonMobil Chemical’s long-term commitment to meeting the regional and global demands of its hydrocarbon and oxygenated fluids customers," said Gary Wilson, vice president, Fluids Global Business, ExxonMobil Chemical Company. "It also enhances our ability to serve this market. ExxonMobil Chemical is the premier global supplier of these products, providing its customers with consistently high-quality fluids from manufacturing facilities in the United States, Europe, Asia and Latin America."

ExxonMobil Chemical has consistently invested in its hydrocarbon fluids manufacturing, technology and supply-chain capabilities. “As a global supplier, we understand the strategic importance of developing differentiated products that provide customers with tailor-made solutions to meet their application needs, while complying with the latest regulatory changes. This investment will enable us to continue to meet the increasing demand for these products," said Cindy Shulman, global marketing manager, Fluids Business, ExxonMobil Chemical Company.

ExxonMobil Chemical offers the broadest portfolio of differentiated hydrocarbon fluids, specifically designed for a wide range of applications including drilling mud oil, mining, agricultural chemicals, metal working, polymerization process, water treatment, adhesives, coatings and reprographics. Leading brands in the portfolio include Isopar™, Solvesso's ™ and Exxsol™ D fluids.

China National Chemical Engineering Launches Middle East Expansion in Egypt

China’s top chemical company has signed a deal to set up its first factory in Egypt, which aims to become the launch pad for investments in Africa and the Middle East. The National Bank of Egypt signed a memorandum of understanding with the China National Chemical Engineering Co. (CNCEC) last month for the establishment of a soda-ash factory in this city, south of Cairo.

The deal marks CNCEC’s first entry into both the Egyptian market and the Middle East, the Egyptian trade ministry said.

CNCEC, a leading manufacturer of petrochemicals, fine chemicals and fertilizers, is also mulling a deal with the Egyptian-Kuwait Al-Kharafi Group for a $700 million complex in Fayyoum.

“This deal is one result of the sustained efforts by Egypt to strengthen and deepen its economic ties with China,” said Egyptian Trade Minister Rashid Mohammed Rashid, trade minister for Egypt. “We want to attract Chinese investors to use Egypt as a production base and natural gateway to Europe, the Middle East and Africa.”

Egypt is currently in talks with China and Italy aimed at ensuring that close to 100 percent of Chinese exports to Europe pass through the Suez Canal, up from the current level of 60 percent, in exchange for lower transit fees.

Cairo has been shifting the focus of its trade strategy from its traditional Western partners toward China, which it says could replace the United States as its top trade partner by 2012.

PetroChina GuangXi Petrochemical Company's New Polypropylene Plant will Utilise Dow's UNIPOL Technology

Dow Technology Licensing, a business group of The Dow Chemical Company and its consolidated affiliates (Dow), announced that its world-leading UNIPOL™ PP Process Technology has been selected for a new 200 KTA polypropylene (PP) facility to be constructed at the PetroChina GuangXi Petrochemical Company complex in GuangXi Province, The People’s Republic of China.

The PetroChina GuangXi plant will be the second in China to utilize the UNIPOL PP Process Technology. Consistent with its drive to provide licensees with comprehensive and top quality services to aid in project execution, Dow is collaborating on this project with Aker Kvaerner, a leading global provider of engineering and construction services that has designed and/or built numerous UNIPOL PP lines around the world. Aker Kvaerner will provide the basic engineering design and certain offshore equipment for the new plant, which is expected to come on line in 2008. The process design package provided by Dow has been delivered, and Aker Kvaerner is in the final stages of delivering the basic engineering design.

“Demand for polypropylene in China is growing rapidly and we are pleased that our world-class technology is recognized as a safe, reliable and cost-effective source of PP production,” said Dr. Molly Peifang Zhang, global vice president, Dow Technology Licensing. “Our customers choose our technology because of its simple and safe design, its extremely economical production process and broad product mix as well as the benefits of low energy costs and waste during plant start up. Together, these qualities make UNIPOL™ PP Process Technology one of the most attractive polypropylene licensing options on the market today. And, this further demonstrates our technology’s leading position in energy effectiveness and environmental protection. We are of cause pleased to contribute to sustainability in this way.”

The evaluation team for the Guangxi PP project commented, “We are committed to implementing the most advanced technologies and processes in our plants, and that is one of the main reasons we selected the UNIPOL PP process for our new polypropylene plant in GuangXi. We are also very impressed with Dow’s R&D capabilities, which show that their polypropylene expertise is more than just technology-related – it is deeply-rooted knowledge capital that the company brings to every licensee.”

There are more than 40 UNIPOLPP production lines that are either being constructed or are fully operational around the world. These lines account for more than 6,500 KTA of global polypropylene production.

LP Oxo Technology Licensed to Tianjin Soda Plant

Dow Chemicals and Davy Process Technology have licensed LP Oxo Technology to the Tianjin Soda Plant in China, for a new 2-ethylhexanol (2EH) and butanol plant - used for PVC plasticisers and solvents

Dow Technology Licensing, a business unit of the Dow Chemical Company and its consolidated affiliates, and Davy Process Technology, a Johnson Matthey company, announce that the Tianjin Soda Plant of the Tianjin Bohai chemical industry Company has selected LP Oxo Selector 10 Technology for its new facility in the Lingang Industrial Area, Tianjin, in the People's Republic of China. The LP Oxo technology is cooperatively offered by DPT and Dow Technology Licensing. The new global scale LP Oxo plant, which will be the largest of its kind in China, is slated to produce 250 KTA of 2-ethylhexanol (2EH) and butanols.

Design and engineering is scheduled to begin in March 2007 and start-up is expected to occur in June of 2009.

The new LP Oxo facility is part of the Tianjin Soda strategic plans to relocate to the new Lingang Industrial Area from its existing site in the Tanggu District of Tianjin, and expand its production capabilities to include petrochemical products.

2EH and butanols are used as plasticisers for PVC, and as solvents for coatings and adhesives, respectively.

Demand for these products is expected to increase by seven percent over the next several years, driven by a robust Chinese economy.

'Davy and Dow have the leading oxo alcohols technology as well as a long history of cooperative projects in China,' said Mr Lai Zhenguo, vice president of Tianjin Bohai Chemical Industry and president of Tianjin Soda: 'We have great expectations of this project and hope to cooperate in many fields in the future'.

At the contract signing ceremony in Tianjin on January 30th, David Tomlinson, president of DPT said 'This will be the largest LP Oxo alcohols plant to be built in China, and it is particularly prestigious given its location within a completely new complex.

We licensed our oxo alcohol technology in China first in 1978, and Tianjin Soda will be the fourth Chinese company to operate this technology, as well as the twenty-second licensee worldwide.

We are very pleased to welcome Tianjin Soda into the oxo alcohols family'.

Joseph Bromley, global business director for LP Oxo Alcohols at Dow commented: 'For nearly a century, the Tianjin Soda Plant has upheld a solid reputation for high quality and service in the chemical industry.

So when they decided to expand into the petrochemical area, they went through a very stringent evaluation process before choosing a preferred oxo process technology.

We are honored that Tianjin Soda Plant has chosen LP Oxo Technology, which enables the licensed plant to enjoy low feedstock and energy requirements as well as low environmental impact.

We are also pleased to contribute to sustainable development of China'.

LP Oxo Technology is a low-pressure hydroformylation process that uses propylene and synthesis gas (a mixture of hydrogen and carbon monoxide) to produce normal and iso-butyraldehydes.

These butyraldehydes are then converted into 2-ethylhexanol (2EH) and normal and iso-butanol.

For more than 30 years, DPT and UCC have co-marketed and delivered LP Oxo Technology licenses and services.

To date, 31 projects have been implemented in 15 countries, on four continents.

LP Oxo Technology is recognized as the world's leading licensed oxo technology, contributing to more than 85 percent of the world's licensed propylene based oxo capacity.

Source: Processingtalk.com

China to Build Asia's Largest Coal Chemical Base

Northwest China's Ningxia Hui Autonomous Region plans to invest more than 100 billion yuan (12.9 billion U.S. dollars) to build Asia's largest liquefied-coal base, according to the regional development and reform commission.

The first group of projects, designed to produce methanol and other chemicals from coal, are under construction in the Ningdong Chemical Resource Base, which is located near coal deposits containing 80 percent of Ningxia's known coal reserves, said Hao Linhai, director of the regional commission.

Chemical plants will be able to convert more than 5 million tons of coal annually into chemicals such as dimethyl ether, olefin and methanol, which are fuel additives, he added.

Several plants that will turn coal into diesel fuel are now under construction and will go into production in 2020. They will be able to convert 50 million tons of coal into 10 million tons of diesel a year, said Hao.

"We are negotiating with South Africa-based Sasol and Royal Dutch Shell Group to introduce liquefaction technologies needed to produce diesel fuel," said Wang Jian, general manager of Shenhua Ningxia Coal Industry Group Co., Ltd.

Wang said they will invest 10 billion yuan (about 1.29 billion U.S. dollars) this year alone.

By 2020, the base will have a liquefaction capacity of 10 million tons and be able to produce 830,000 tons of methanol and 1.22 million tons of olefin, he said.

The area will become the largest coal chemical conglomerate in Asia, said company chairman Zhang Wenjiang.

Zhang said the base is designed to add value to the region's vast coal reserves. "We can't just dig the coal and sell it. Chemical processing of coal is a way to upgrade the local coal industry and make best use of the energy source," he said.

Zhang said the company has also taken measures to minimize the impact on the environment, including recycling sulfur dioxide using German technologies, and reducing emissions by liquefying them within the mines.

The liquefied coal is more completely burnt than conventional fuels, according to Feng Shiliang, deputy secretary of China Petroleum and Chemical Industry Association.

Ninety-four percent of China's fossil fuel is from coal and boosting liquefied coal production is seen as a practical way for the country to become less dependent on oil imports, Feng said.

China is the world's second-biggest oil consumer. The country saw an increase in its energy consumption in 2006. The consumption included 2.37 billion tons of coal, up 9.6 percent year on year; 320 million tons of crude oil, up 7.1 percent; 55.6 billion cubic meters of natural gas, up 19.9 percent.

According to statistics from the China Coal Research Institute, production cost of CTL fuels is around 25 U.S. dollars a barrel, lower than current oil price.

Although liquefied coal fuels are seen as viable alternatives to crude oil, many worry about the enormous costs involved. Lin Boqiang, an energy professor in east China's Xiamen University, said it takes about four tons of coal to produce one ton of oil, and such projects will more rapidly deplete the country's coal resources.

The National Development and Reform Commission (NDRC) has issued regulations to ban local governments from approval of new minor projects that do not have a viable technology and fail to meet the government's criteria.

The Ningxia coal chemical base is the second major liquefied coal project in China. The other is being built by China's top coal producer Shenhua Group in Erdos, Inner Mongolia Autonomous Region. Construction started on that project in 2005.

Ningxia, which covers about 60,000 square kilometers, has 31.1 billion tons of recoverable coal reserves. It is estimated to have unexplored coal reserve of 200 billion tons, ranking sixth in China after Shanxi, Shaanxi, Inner Mongolia, Xinjiang and Guizhou.

Sasol, based in South Africa, is the world leader in producing fuel from coal. The multinational has produced more than 1.5 billion barrels of oil equivalent fuel in South Africa, where it meets about 30 percent of transportation fuel needs.

Source:Xinhua

Reliance to Buy All of Indian Petrochemicals

Reliance Industries, India's most valuable company, approved a plan to buy all the shares it does not own in Indian Petrochemicals, aiming to consolidate chemicals manufacturing in one company. Shareholders of Indian Petrochemicals will get one share in the parent for every five shares held.

Absorbing the unit could help the company's billionaire chairman, Mukesh Ambani, increase Reliance's earnings from chemicals after prices rose as much as 27 percent last year. Chemicals make up about 45 percent of earnings. Reliance will also save on tax it pays for supplying naphtha to Indian Petrochemicals for making chemicals.

"It will help Reliance spread operating costs across a wider revenue base and improve profitability," said Jon Thorn, a fund manager at India Capital Fund in Hong Kong. "They will be much better off managing any risks or downside in business."

The merger will help shareholders of Indian Petrochemicals mitigate risk of being in a single commodity business, the company said. The move will give investors shares in Reliance which has businesses in oil and gas exploration, refining, chemicals and retailing, the company said.

"The merger will create value through synergies and scale that shall enhance the sustainable competitive advantages of Reliance," Ambani said in the statement. The merger will "provide shareholders of IPCL an opportunity to participate in Reliance's diversified business portfolio."

Reliance's share capital will increase to 14.54 billion rupees, or $329 million, after absorbing the unit, from 13.94 billion rupees now, the statement said. PricewaterhouseCoopers and Ernst & Young recommended the exchange ratio.

Reliance, owner of the world's third- largest refinery, acquired control of Indian Petrochemicals from the government in 2002. The company's revenue from chemicals could rise as much as 4 percent after Indian Petrochemicals is absorbed, Kenin Jain, an analyst at ASK Raymond James, said Wednesday.

Reliance paid the government 15 billion rupees for a 26 percent stake in the Vadodara-based Indian Petrochemicals and bought an additional 20 percent in a subsequent offer to the public. Reliance is India's most valuable company and the nation's biggest maker of chemicals.

Indian Petrochemicals owns three plants that produce chemicals to make plastics. The largest one, at Nagothane in Maharashtra state, has a capacity of 400,000 metric tons a year, according to the company's Web site. The plants in Vadodara, with a capacity of 175,000 tons a year, and Gandhar, with capacity of 300,000 tons, are located in the western state of Gujarat.

Prices of ethylene, the building block of plastics and synthetic fibers, rose 27 percent to an average of $1,142 a ton in Southeast Asia last year from the 2005 average of $898 a ton, according to data from chemicals pricing service ICIS.

Acquiring the company will double Reliance's ethylene-making capacity and help save tax on naphtha, Harshad Katkar, an analyst at UBS, said in a note on Friday to clients. Indian Petrochemicals has capacity to make nearly one million tons of ethylene a year and produced 5.8 million tons of chemicals in the year ended March 31, Katkar's note said. Reliance has capacity to make three-quarters of a million tons of ethylene a year and produced 11.9 million tons of chemicals in the same year, the note said.

Reliance's ethylene-making capacity will increase to 1.78 million tons a year after the merger, the company said.

The merger will enhance the "financial strength" of the company and help to expand businesses in India and overseas, Reliance said in the statement Saturday.

In February, Ambani announced the construction of a $3 billion chemical plant near its refinery in Jamnagar in Gujarat. The plant will make ethylene and propylene, used in plastics.

On Jan. 18, Reliance said it increased its production capacity for yarn used to make textiles by 550,000 tons a year, raising annual capacity to two million tons.

Ambani and his associates agreed to increase their stake in Reliance Industries to remain majority shareholders.

Reliance's board approved the sale of 120 million warrants, convertible into an equal number of shares, to the so- called promoters of the company, the company said. Ambani and his associates now own 50.62 percent, according to the Bombay Stock Exchange Web site.

Source: Bloomberg News

Punj Lloyd to Build a 300 ktpa LDPE Plant in S. Arabia

Punj Lloyd, through its subsidiary Simon Carves, inked a letter of intent to build a new 300 ktpa LDPE plant in Saudi Arabia for the Saudi Kayan Petrochemical Company, an affiliate of Saudi Basic Industries Corporation (SABIC).

The plant, due to start up in the first quarter of 2010, is to be built at Saudi Kayan`s petrochemical complex at Al-Jubail Industrial City, KSA, and will incorporate technology from Basell.

The letter of intent is on the basis of a fixed price for contractor`s services and a conversion to a lump sum engineering, procurement, construction (EPC) price, once detailed engineering is sufficiently defined.

Simon Carves is a petrochemical giant with as many as 125 years of experience in successfully delivering plants safely, on time and within budget to customers internationally. This project is the 39th high pressure polyethylene plant of this type executed by Simon Carves.

Source: IRIS

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