BASF CEO to Take ‘Deeper Dive’ Into U.S. Shale Opportunities

BASF SE (BAS) is taking a “deeper dive” into investigating opportunities to harness shale gas in the U.S. as feedstock costs threaten to squeeze margins, Chief Executive Officer Kurt Bock said in an interview.

The German maker of plastics, additives and catalysts is the third-largest chemical maker in the U.S. and like Dow Chemical Co. (DOW) is benefitting from cheaper feedstock at the operations it does have there, Bock said in a Bloomberg television interview.

Minimizing feedstock costs is paramount as Bock said passing on raw-material inflation has become more difficult. Global chemical production will likely slow to about 3 percent this year as a result of economic turbulence, with demand expected to remain stagnant in the fourth quarter, the CEO said.

“We have now to take a deeper dive to see essentially what could be investment opportunities in the area of shale gas in North America,” Bock said, adding that it’s too early to make any decisions on this.

The Ludwigshafen, Germany-based company is already installing a new formic acid plant in Geismar, Louisiana that benefits from fracking-based feedstocks. At the moment, the company is reviewing other opportunities for additional investments, the CEO said.

BASF is looking to bolster its own oil-and-gas division, Wintershall, following a $1.35 billion deal to acquire North Sea oil-field operations from Norway’s Statoil ASA. (STL) The deal marks a transition toward production from a mainly exploration operation. The purchase will boost Norwegian production to 40,000 barrels from an existing 3,000 barrels.

“Our ambitions are to grow a very profitable business further on and we have done this over the last 15 years, increasing the reserve ratio dramatically and improving the regional portfolio,” Bock said. “It’s a very strong contributor in terms earnings as well as cash flow and I don’t see why this shouldn’t be a nice fit for the biggest chemical company in the world.”

To contact the reporter on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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