Borealis Considering Import of U.S. Ethane in Ineos-Style Move

Borealis AG, the petrochemical and plastics company owned by Abu Dhabi and OMV AG (OMV) of Austria, may consider bringing in cheap ethane from the U.S. if it’s a cost-effective way of supplying petrochemical plants.

All options are being considered as the petrochemical crackers have the flexibility to take a lighter feedstock such as ethane, Chief Executive Officer Mark Garrett, a former executive at Ciba Specialty Chemicals AG and DuPont Co., said in an interview. Most crackers in Europe and Asia process naptha.

“We’re exploring all opportunities for ethane, it would be silly not to given our position,” said Garrett, adding that there is nothing to announce on the subject yet, and there are other options. “It doesn’t matter where the ethane comes from.”

Ineos Group, based in Rolle, Switzerland, is pioneering a move to import U.S. ethane, seeing an opportunity from the shale boom there to access cheaper feedstocks even with the cost of the port infrastructure and tankers needed to transport supplies. LyondellBasell Industries NV (LYB) CEO James Gallogly said on April 26 that he doesn’t expect Ineos’s move to develop into a broad trend.

For the past decade, Borealis has had a strategy of scrapping plants at the end of their life and replacing them with new ones so it has modern, flexible plants with the latest technology. The company is a joint owner of Borouge, a manufacturer of polyolefin plastics such as polyethylene, used in packaging. Abu Dhabi National Oil Company, or Adnoc, is the other partner.

Cost Cuts

With inflated feedstock prices in Europe, those companies with non-integrated sites and older technology are under the most pressure from input expenses, Garrett said.

LyondellBasell said May 8 that by operating in North America and through a joint venture in Saudi Arabia it had a cost advantage over 60 percent of the world’s production, because of lower feedstock prices. Shale gas has transformed U.S. ethylene producers to a cost position almost on par with the Middle East.

Rotterdam, Netherlands-based LyondellBasell said it’s advancing a cost-cutting plan in Europe amid challenging markets, with talks with labor unions under way.

Borealis is making its own efforts to improve efficiency, Garrett and Chief Financial Officer Daniel Shook, who previously worked at Linde’s BOC Group, said in the interview yesterday. Net income at Borealis fell 56 percent in the first quarter to 61 million euros ($78.6 million). Sales increased 5.2 percent to 1.98 billion euros.

Borealis’s recent acquisitions include fertilizer operations purchased from Total SA (FP) and a plastomers venture bought from Royal DSM NV (DSM) and Exxon Mobil Corp. (XOM) The company plans to undertake a “significant” investment in ammonia as the agriculture-driven demand cycle is different to that of plastics.

Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemicals maker, has said it plans to cut about 1,050 positions and close some assets in Europe.

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

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

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