Borealis Plans First Production This Month From Expansion

Borealis AG, an Austrian petrochemical company controlled by Abu Dhabi, plans to get the first drops of ethylene flowing by the end of May from a plant expansion in the emirate costing more than $4 billion.

The mechanical works for the Borouge 3 ethane cracker were signed off eight weeks ago, and since then engineers have been setting systems for cooling, testing and safety, and getting the ethane-fed furnaces to an operating temperature of 1,000 degrees Celsius (1,800 Fahrenheit), Chief Executive Officer Mark Garrett said in a phone interview.

The expansion project began in 2009 with a handshake between Garrett and his counterpart at Borouge partner Abu Dhabi National Oil Co. in a hotel in Fuschl, Austria. Annual capacity at Borouge, about 155 miles (250 kilometers) from the city of Abu Dhabi, will more than double to 4.5 million tons from 2 million tons of ethylene and the derivative polyethylene and polypropylene plastics used in car parts and packaging.

“Now it’s real,” and it will be time for the “small bottle of champagne at home,” Garrett said.

First-quarter net income surged 67 percent from a year earlier to 102 million euros ($140 million) as higher demand for polyethylene offset a “soft market” for the fertilizer business, Vienna-based Borealis said in a statement today. Sales jumped 14 percent to 2.26 billion euros.

Government Cutbacks

In addition to lower fertilizer demand, unreliable plants meant Borealis missed out on selling some supplies on the spot market at higher prices, Garrett said. The company is also combating weakness in the European infrastructure market, where governments have cut spending on such products as plastic water pipes, Garrett said.

“We see a generally better margin environment across the different markets,” though “we’re not out of the woods yet,” the CEO said.

Borealis has also upgraded plants in Kallo, Belgium, and Grand-Quevilly, France. An abundance of U.S. shale gas makes it increasingly likely that supplies will flow into Europe by ship, Garrett said. Borealis is still studying whether it should import U.S. ethane as an alternative to obtaining the feedstock from the North Sea, and such a move would be potentially “very interesting,” given the coastal location of its crackers, the CEO said.

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

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Tom Lavell, Kim McLaughlin

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