The polyolefins-making family tree that now contains Borealis AG, Borouge and Nova Chemicals Corp. continues to bear fruit.
Both Vienna-based Borealis and Nova of Calgary, Alberta, are majority-owned by International Petroleum Investment Corp., a state-owned firm based in Abu Dhabi, United Arab Emirates. Borouge is a joint venture between Borealis and the Abu Dhabi National Oil Co. (ADNOC). IPIC purchased Nova Chemicals last year in a deal valued at around $500 million.
Polyolefins maker Borouge opened a compounding plant in Shanghai in April, and will add a second Chinese compounding plant during 2012. The Shanghai plant has annual capacity of at least 110 million pounds, CEO Abdulaziz Alhajri said in a news conference at K 2010. The second plant to be built in Guangzhou will have annual capacity of about 230 million pounds.
Abu Dhabi-based Borouge also recently completed the second phase of construction there, tripling its annual polyolefins capacity to more than 4 billion pounds per year. The $5 billion Abu Dhabi expansion included two new polypropylene units with combined annual capacity of almost 1.8 billion pounds. The site's polyethylene capacity also was expanded and now stands at 2.5 billion pounds.
Work is under way on the third phase of the project, which when completed will give the site total annual capacity of almost 10 billion pounds of petrochemical products. The finished site will be the world's largest integrated polyolefins plant, Alhajri said.
At the news conference, Nova CEO Randy Woelfel also commented on how Nova's future prospects might be improved by larger supplies of underground natural gas being discovered in North America. Natural gas is used to produce ethane, a key feedstock for PE. Low natural gas prices have given the material an advantage over PE passed on by higher-priced crude oil.
Natural gas is an opportunity for the North American industry as a whole, Woelfel said. We're extremely active in continuing to develop projects in the western part of North America to get back on the growth path.
Earlier this year, Nova agreed to purchase the entire ethane output of a Hess Corp. plant in North Dakota to supply its massive PE/ethylene site in Joffre, Alberta.
The answer isn't only in Alberta, but also in areas with oil sands. We've got a game-changing opportunity to move [natural gas liquids] from Williston [North Dakota] to Alberta. It's a dramatic breakthrough.
The eastern portion of North America also could benefit, particularly from the massive Marcellus Shale gas deposit, which lies under parts of New York, Pennsylvania and Ohio. Nova's PE works in Corunna, Ontario, could play a key role if these fields are developed.
We're convinced that Corunna is the destination of choice for the ethane in that gas, Woelfel said. I know in the past we've talked a lot about the 'Alberta Advantage,' but I'd like to be asked about the 'Ontario Advantage' some day.
In an interview after the news conference, Borealis CEO Mark Garrett addressed issues facing the European PE market and the global field as well.
Globally, Garrett said that Borealis expects polyolefins demand growth to average 4.5 percent for the next 10 years. The growth rate in Europe during that time will be lower, at 2 percent. PP growth will be stronger than PE in both scenarios because of PP's wider range of applications and products, Garrett added.
IPIC's shared ownership of Borealis and Nova could produce more benefits in the future. Already, Nova has gained business from some of Borealis' larger European customers, Garrett said. On the product side, he added that customers continue to seek lightweighting in auto and aircraft parts and downgauging on film grades used in packaging.
Garrett added that the possibility of Borouge sending some of its Middle Eastern PE output into North America is unlikely.
There's no doubt that [Borouge] can send product to land in Chicago cheaper than any North American producer can, he said. But they get a better return on Asia and Europe and Brazil.
Moving forward, Garrett said that the three interrelated firms have to ask the strategic question of how to develop our assets.
He also admitted that he was a bit nervous' about business prospects heading into 2011.
Next year could be tougher than this year, Garrett said. I know that goes against every newspaper in the world that's predicting good results, but the markets are making me nervous.