Chem­i­cal brothers bond for strength

China Daily (Hong Kong) - - BUSINESS - By CE­CILY LIU and ZHANG CHUN­YAN in Lon­don

based chem­i­cals ma­jor Ineos Group Ltd is bank­ing on its up­com­ing projects in China to drive growth in the rapidly chang­ing global en­ergy mar­ket.

China’s huge petro­chem­i­cals mar­ket and steady de­mand are key fac­tors pro­pel­ling growth in the global mar­kets, says Jim Rat­cliffe, the 61-yearold founder and chair­man of Ineos, the fourth largest chem­i­cals com­pany in the world in terms of rev­enue, af­ter BASF, Dow Chem­i­cal and Lyon­del­lBasell. It is also the largest pri­vately owned com­pany in the United King­dom

Rat­cliffe says the eu­ro­zone cri­sis has made Europe’s en­ergy mar­ket un­com­pet­i­tive, while the de­vel­op­ment of shale gas has opened up new in­vest­ment op­por­tu­ni­ties in the US. China, on the other hand, is be­com­ing in­creas­ingly self-suf­fi­cient in petro­chem­i­cals, he says.

Ineos, which started op­er­a­tions 15 years ago, has 51 sites in 11 coun­tries and em­ploys 15,000 work­ers glob­ally. The com­pany re­ported rev­enue of $43 bil­lion in 2012.

Over the past few years, Ineos’ prof­its have halved in Europe and tripled in Amer­ica, largely be­cause of the com­pany’s in­vest­ment in new shale gas as­sets in the US. Ac­cord­ing to Rat­cliffe, more than two-thirds of the com­pany’s as­sets are still in Europe and the fall­ing yields there are a cause for con­cern.

In­vest­ments in China, how­ever, have pro­vided enough room for op­ti­mism, he says. Rat­cliffe says the com­pany is set­ting up two chem­i­cal plants in China next year, in­volv­ing in­vest­ments of more than $1 bil­lion, to cater to the grow­ing do­mes­tic chem­i­cal mar­ket.

The first project is a joint ven­ture with Tian­jin Bo­hai Chem­i­cal In­dus­try Group Corp to pro­duce acry­loni­trile in Tian­jin, while the sec­ond is a joint ven­ture with Sinopec Yangzi Petro­chem­i­cal Co to pro­duce phe­nol in Nan­jing.

Both acry­loni­trile and phe­nol are im­por­tant in­gre­di­ents that could fuel China’s in­dus­trial boom. Rat­cliffe be­lieves Ineos can be a key player in the tech­nol­ogy trans­fer process.

“Our prin­ci­pal con­tri­bu­tion is tech­nol­ogy. We’ve been the world lead­ers in phe­nol and acryni­trile pro­duc­tion with 15 years of ac­cu­mu­lated tech­nol­ogy ex­per­tise,” Rat­cliffe says.

Al­though both plants are still await­ing fi­nal ap­proval from the Chi­nese gov­ern­ment, Rat­cliffe says this will hap­pen soon and he ex­pects work to com­mence next year and pro­duc­tion to be­gin in 2016.

The phe­nol plant is de­signed to pro­duce 400,000 tons of phe­nol and 250,000 tons of ace­tone ev­ery year. Ineos claims that the plant will be the largest of its kind in China.

How­ever, phe­nol is also a harm­ful sub­stance that can ir­ri­tate eyes and skin. If ab­sorbed in large amounts it can dam­age the liver and kid­neys. It has also raised en­vi­ron­men­tal pol­lu­tion con­cerns in China in re­cent years.

In 2012, wa­ter sup­plies in the Yangtze River be­came pol­luted af­ter phe­nol leaked from a South Korean ship that was docked in Zhen­jiang, in East China’s Jiangsu prov­ince.

Rat­cliffe, how­ever, says Ineos places huge em­pha­sis on the safe pro­duc­tion of phe­nol. It will use the same qual­ity stan­dards it uses in the West in its Chi­nese fa­cil­i­ties, he says.

Ineos also has huge ex­pec­ta­tions from Petroi­neos, the re­fin­ing and trad­ing joint ven­ture set up in 2011 with PetroChina. Petroi­neos has two re­finer­ies, one in Lav­era, France, and one in Grange­mouth, Scot­land. The Chi­nese en­ergy com­pany has in­vested $1 bil­lion eq­uity in th­ese two re­finer­ies.

“We were look­ing for part­ners for th­ese two re­finer­ies, es­pe­cially com­pa­nies that had a wider reach in the oil world. We looked at PetroChina five or six years ago. They were the best fit. It has been a good re­la­tion­ship since then,” Rat­cliffe says.

PetroChina has brought cap­i­tal, huge ex­pe­ri­ence in re­fin­ing and its ac­cess to crude oil from Asian mar­kets to the joint ven­ture. Ineos’ ac­cess to crude oil is fo­cused more on Europe, he says.

The wider ac­cess to crude has helped the re­finer­ies re­duce raw ma­te­rial costs and im­prove prof­itabil­ity, Rat­cliffe says.

“I think it’s more of a twoway re­la­tion­ship. We learn a lot from PetroChina, and they learn some­thing from us. I think they re­spect our man­u­fac­tur­ing ca­pa­bil­ity and they want some­one lo­cally to man­age the re­finer­ies.”

De­spite the promis­ing prospects of the part­ner­ship, the joint ven­ture has faced chal­leng­ing times in re­cent years af­ter the eu­ro­zone cri­sis made Europe’s en­ergy mar­ket in­ef­fi­cient and un­com­pet­i­tive, Rat­cliffe says. Con­tact the writ­ers through ce­cily.liu@chi­

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