Record Fine For BP

Following on from my previous comment on BP Texas City, the  BBC has now reported that BP has been fined a record $87m (£53m) for failing to correct safety hazards at the site.

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As noted previously, the Occupational Safety and Health Administration (OSHA) cited 270 violations at the oil refinery. BP said it believed it was in "full compliance" with a 2005 settlement agreement with OSHA and would work with the agency to resolve the issue.

The $87m fine is the largest in OSHA's history.

Mixed News as Companies Report on Q3

Mixed news for the chemical and process industries as companies reported Q3 results

• BASF reported third quarter profits down 69% year on year to €237M. BASF expects a long slow climb out of recession. BASF expects some employees will remain on short-time working into 2010. Whilst business has stabilised the climb out from the trough will be slow.
• Shell reported a collapse in Q3 profits from $10.9 billion in 2008 last year down to $3 billion. As a result of this poor performance, Shell will axe some 5000 jobs worldwide in its 'Transition 2009' programme
• BP's results were some 50% better than city analyst's expectations, with replacement cost profit of $4.98 billion. BP has already cut costs following reorganisation and efficiency improvements and aims to do even more this year. BP noted that they had achieved a 7% increase in production as well as a number of new developments in the Gulf of Mexico, Iraq and China, amongst others.
• GSK showed that the pharma sector is still reasonably strong. Profits were up 12% at $2.4 billion. Demand for the H1N1 vaccine has help bolster GSK

Overall, things remain tough for commodity sector, and particularly for those who rely on housing starts and the automotive sector for a major proportion of their demand. The end to the various stimulus packages will also create issues as volumes drop back to the 'new normal'.

Some sectors are clearly much less affected, such as pharma, although cost cutting and a move to generics will make things tougher.

For manufacturers, we can anticipate another tough year, chartacterised by reorganisations, reduced capital expenditure and some site closures as we slowly start to pull out of recession.

World's Largest Polymer Park Changing Face of Plastics Conversion

photo: Arabianoilandgas.com

With up to 15 million tonnes of new polymer capacity coming on stream in the GCC region from highly integrated and effficient plants, the obvious next step was to improve the integration of these plants with the downstream convertors. The new Abu Dhabi Polymers Park is a huge step in achieving that goal.

The park, developed by the Abu Dhabi Basic Industries Corporation (ADBIC), a state owned organisation, will cost some €3.5 billion to complete and once fully operational, will consume up to 2 million tonnes per year of polymers (mostly PE, PP, PVC and Polyester).

The park's developers have given considerable thought to the design of the cluster and have come up with a very well structured package. The park will have purpose designed logistics facilities, a nearby deep-sea container port, flexible supply chain and technical service capabilities and competitively priced utility and land costs. Unlike existing clusters, the concept has been carefully designed from the outset, rather than evolving out of large corporate supersites, as was the case with many of the European clusters.

So with leveraged procurement, high quality logistics, on-site technical support capability and competitive land and utility costs, it sounds pretty good. Add to that a growing local market and zero tax on company and private income and you have an irresistible opportunity.

Shell - Integration Key To Successful Growth

photo : Hydrocarbons Technology

Shell believes that integration is key to delivering what it calls the 'oil chemicals advantage' in its petrochemical facilities.

Downstream Today has reported a recent speech at the recent Petchem Arabia 09 in Abu Dhabi by Aslam Moola, Business Development Manager for Shell Chemicals. Mr Moola cites various examples of projects and existing installations that clearly demonstrate the benefits of integration.

Integration, together with strong project implementation and effective production and energy management, is increasing the competitiveness of plants such as SEPC on Jurong Island, Singapore as well as other integrated Shell complexes around the world, according to Mr Moola.

The Middle East is set to benefit fom this integration. This will be even further enhanced by the development of downstream manufacturing capabilities, such as the polymer parks in Abu Dhabi and the growth of domestic markets in the region.

At International eChem, we have long argued that the critical success factors for petrochemical operations are integration, size, technology, global reach and location. Clearly, all of these factors must be supported by a strong business strategy, together with highly effective delivery of that strategy.

Recent projects in the Middle East and Asia tick all of the boxes and will increasingly dominate supply in the years to come.

RSC Identifies Top-Ten Challenges for the Chemical Sciences

photo : RSC

Using a series of workshops and on-line conultations, Royal Society of Chemistry (RSC)  has been working for the last year to identify priorities and challenges for the chemical sciences. The intention is to set the science agenda for the coming years.

In total, 41 challenges were identified, with the following top 10

• Agricultural productivity
• Conservation of scarce natural resources
• Conversion of biomass feedstocks
• Diagnostics for human health
• Drinking water quality
• Drugs and therapies
• Energy conversion and storage
• Nuclear energy
• Solar energy
• Sustainable product design

Next step for the RSC is to identify partners and start to develop implementation plans for associated projects.

Clearly many of these challenges will increasingly impact the chemical industry and chemicals manufacturers. Involvement in these challenge areas will help address these challenges and support business development. As mentioned in many previous posts, innovation and flexibility are key to long term success.

OSHA Rejects BP's Request For More Time In Texas City Follow-Up

photo : ABC

In a letter seen by Reuters, OSHA has rejected BP's request for more time to fix safety problems at its Texas City Refinery.

OSHA has forwarded the dispute to a review commission and objected to BP's appeal, arguing that BP had failed to show how it would fix safety problems found after the deadly 2005 explosion at the refinery. OSHA has also said that BP could not ask for more time whilst simultaneously claiming that the refinery had met the terms of a four-year agreement to fix the safety issues which led to the explosion in March 2005 which killed 15 people and injured 180 other workers.

BP has said the commission would find the company has lived up to its agreement to comply with federal safety regulations at Texas City.

Without the detail, it is impossible comment on specifics. In broad terms however, it is fair to say that questions of interpretation can be argued and debated but questions of fundamental process safety must be fully addressed.

Friday News Round Up

Friday once again, so a time to update on various past stories and news items

• ICIS has analysed the various chemical companies job loss related annoucements reported to them since the start of the financial crisis in September 2008. The figures show that chemical companies have cut over 77,000 jobs since the crisis began.

• In the UK, NEPIC, the North East Chemical Industry Cluster, will investigate the commercial feasibility of chemical production from biomass. The 30-month project is being carried out on behalf of the UK Government department DEFRA

•  BASF has announced that it will close its maleic anhydride plant at Feluy, Belgium by the end of this year, with the loss of 133 jobs

• As Copenhagen approaches, UK Prime Minister, Gordon Brown expressed his views on climate change. He warned delegates at the Major Economies Forum in London (representing 17 of the world's biggest greenhouse gas-emitting countries) there was "no plan B" regarding climate change and that negotiators had "50 days to save the world from global warming".
  
  
• Paul Hodges sets out his views on what's to come for 2010 in his analysis 'Budgeting for a New Normal'. In his summary, he states "2010 to be a transition year. Full economic recovery is unlikely to take place much before the 2011/13 timeframe. But the return of economic growth will offer companies the opportunity to identify likely future market needs. Those that focus on this new reality, rather than simply hoping for a quick return to the Boom years, will position themselves for future success."

Outlook Mixed For Chemical Engineers

photo : http://www.poiseuille.blogspot.com/

According to the US based publication Chemical Engineering, the employment outlook for Chemical Engineers is something of a mixed bag at the moment.

Key findings are:

• There are fewer job openings generally and corporate hiring processes are tougher
• Chemical Engineers with creativity and a broad skill set will always be in demand
• Median salaries are 7% higher than in 2007
• Recruitment firms are reporting fewer job searches
• Replacement hiring is down by about half and growth hiring (for expansion of production) is very low
• Chemical Engineers of the 'baby boomer' generation are working for longer, contributing to the drop in replacement hiring
• There are fewer entry-level positions but salaries are higher than in 2007
• New opportunities exist in renewables and green technology
• Process Control and Process Safety Engineers are in short supply
• Demand is significantly down in sectors supplying automotive and construction markets

Not all doom and gloom by any means. Chemical Engineering is still a highly flexible degree and gives the holder opportunities in a wide range of technical and non-technical jobs. Whilst the climate is tough currently, things should start to improve but as with business, creativity and flexibility are the keys to long term success.

Shale Gas - The Next Petrochemical Feedstock?

photo : Energy Tribune

Is shale gas set to become the next major feedstock for the Chemical Industry? Shale gas, oftern referred to as an 'unconvetional' source of natural gas, has become an increasingly more important source of natural gas in the United States over the past decade, and interest has spread to potential gas shales in Canada and Europe.

Some projections suggest that shale gas could supply as much as half the natural gas requirement in North America by 2020 as well as providing a significant proportion of Europe's gas supply.

Recent improvements in extraction techniques have attracted the major players into the arena, with companies such as Shell, ExxonMobil, Statoil and BG Group becoming increasingly involved.

Shale gas currently costs more to produce than gas from conventional sources, due of the expense of extraction process but this is expected to eveolve quickly as more major players become involved.

Given current overcapacity and new investment in plants in the Middle East and Asia, shale gas will not revolutionise petrochemicals manufacture but it is very likely to play some part in shaping it.

Industry Fatalities High In Developing Nations

Alarming figures on industrial fatalities from Dr Sanjeev Saraf's excellent Risk and Safety Blog. Apparently, data from the International Labor Organization (ILO), shows that, in 2005, there were 11 deaths every 100,000 workers in India, compared with 2 in the US and 0.01 in Japan.

What's more, the lack of formal, national accident tracking systems in some countries means that figures in in some instances are under significantly under-estimated.

Whilst the figures cover all industries, it is not unreasonable to anticipate a similar set of issues in the chemical industry.

We can all understand that manufacturing companies relocate to developing countries for economic reasons but whatever the local legislation, relocating companies have a corporate citizenship obligation to ensure the highest possible standards of health and safety. Clearly there is still work to be done.

Huntsman - 2010 and 2011 Will Be More Difficult Than 2009

We can expect 2010 and 2011 to be difficult years for commodity chemical producers. That's the view expressed by Peter Huntsman, CEO of Huntsman Corporation in his interview with India's Economic Times.

Huntsman's view is that the emerging superpowers in the chemical industry such as SABIC and Reliance will start to assert themselves in global markets, with the impacts of large scale, state-of-the-art investments imposing themselves on global supply.

This new and high quality supply will make things very tough for the ageing, smaller scale plants in the US and Europe.

Nothing particularly new in this analysis. We are already seeing new plants coming on stream and further investment in capacity such as Borouge 3 in Abu Dhabi. Investment levels are increasing again, and the only thing constraining further Middle Eastern expansion is the increasing tightness of ethane feedstock availability due to the relatively slow exploitation of the gas fields in the region.

Due to what Peter Huntsman saw as an inability to compete, his company moved out of commodity chemicals and into speciality chemicals. Huntsman's current product portfolio is based on technology and innovation, where these factors are more important than price or raw material availability.

His view is about right, we cannot expect major investments in commodity chemical production in Europe and North America, although we can expect some of the current commodity chemical plants to have a reasonable future if they are innovative, flexible and well maintained. However for innovation in speciality chemicals and green technologies, the future can be positive in Europe and North America, as long as governments and industry take care to maintain the infrastructure and skill base.

Friday News Round Up

Friday again, so a good time to update on various past stories and share some news snippets.

• Problems persist at Lavéra, with Arkema forced to prolong its force majeure on PVC. This was due to on-going problems on the Vinyl Chloride Monomer plant at Lavéra. According to the La Provence newspaper, issues included a minor chlorine leak which led to site emergency procedures being initiated. Arkema report that there was no adverse environmental impact.

• The UK chemical cluster at Wilton was again in the news. It was announced that a study will  be conducted with businesses on the Wilton site to understand their immediate and future needs, and the outcome will dictate what extra action is needed to support them.

• The American Chemical Society (ACS) are holding a small & medium business Webinar to give participants an opportunity to learn about trends in the chemical industry that can impact jobs and businesses. Scheduled for Thursday, Oct. 22, 2-3 p.m. Eastern Time, the free webinar will feature my colleague Paul Hodges, author of the  ICIS "Chemicals and the Economy'" blog. The webinar's topic is "What you need to know about Chemistry and the Economy! Secrets to finding hidden opportunities."

          Registration details are available by following this link.

• The debate about climate change rages on ahead of the Copenhagen Summit. Paul Hudson's BBC blog has led to many exchanges of views, with another senior BBC reporter, Peter Sissons also joining the debate. Cap and Trade is very much the hot topic right now (please pardon the pun), so we can expect this debate to intensify in coming weeks.

UK Corporate Manslaughter Act Faces First Test

Following my previous post on fatalities in the chemical industry, it is worth remembering that the UK Corporate Manslaughter and Corporate Homicide Act 2007, came into force on April 6 2008.

Under this act an offence will be committed if: “A management failure by senior managers of a corporation is a substantial element in a gross breach of duty to take care, causing the death of employees or others.”

Put more simply, a manufacturer will be liable where it owes a duty to take reasonable care of its employees’ safety, and the way in which its activities have been managed or organised amounts to a gross breach of that duty, and, ultimately, causes death.

The first test case will come before the court in the new year. A director of a geotechnical survey company has been charged in relation to the death of an employee in 2008. Under the new act, companies are liable to face limitless fines and there is also the possibility of imprisonment for directors.

So the act obliges companies and individual directors to act reasonably and responsibly and effectively manage corporate health and safety. In reality, no different from the obligation we've always had. The only difference now is that the penalties are much more severe if we fail to meet these obligations.

Climate Change Debate Continues

At the forthcoming carbon sequestration conference in London, US Energy Secretary Steven Chu will be speaking about carbon capture and storage (CCS). Mr Chu has has talked of 'overwhelming scientific evidence' that carbon emissions from fossil fuels are causing climate changes.

Although most national governments take the same line, sceptics point to the fact that global temperatures have fallen since 1998, which was the warmest year on record.

In Paul Hudson's fascinating BBC blog, the various arguments are spelled out. There are many points of view regarding the causes of global warming (natural vs man-made) and the validity of the various studies.

Very interesting and very pertinent as we approach the Copenhagen summit and the introduction of the various emissions trading bills around the world. To quote Paul Hudson ' The debate about what's causing global warming is far from over. Some would say it's hotting up.'

US Chemical Industry Fatalities Down

2008 data published by the US Bureau of Labor Statistics shows a decline in the number of work related fatalities in the chemical industry. A total of 18 employees died from work-related causes in 2008.

Numbers in the chemical industry are improving. The number of fatalities was 33 in 2006 and 24 in 2007 and show that the chemical industry is achieving some success in recognising and addressing hazards.

It is worth noting, however, that in manufacturing, the number of fatalities increased from 400 to 404, despite the reduced levels of activity due to recession. The 404 number included the 14 people killed at Imperial Sugar as noted in my previous blog post.

Across the United States, there were 5071 fatalities in 2008, down from 5657 in 2007. The worst industry sectors were construction (969), transportation and warehousing (762) and agriculture, forestry, fishing and hunting (651)

Despite the improving figures in the chemicals sector, there is absolutely no room for complacency. As this blog has reported several times, far too many easily avoidable incidents are still happening. Even 18 fatalities represents 18 people who went to work and didn't return home to their families. That is 18 too many.

Dust Explosion and Inferno at Sugar Plant

In another stunning video, the US Chemical Safety Board describes the sequence of events that led to a catastrophic incident at Imperial Sugar in Georgia, USA in February 2008.

The dust explosion and subsequent fire killed 14 people and injured many more. The facility was virtually destroyed.

Imperial Sugar failed to understand and address the issues at their site, with spillages of sugar and airborne sugar dust becoming the norm at this facility. Dust control systems were poorly designed and in a bad state of repair. Staff were not trained to identify and deal with the issues and emergency preparedness was poor.

Eventually, a plant modification was made with catastrophic effects, leading to dust explosion, fire and multiple fatalities.

Although the exact sequence of events was specific to this incident, the common themes were all present. As manufacturers we have the following obligations:

• Understand our hazards
• Manage those hazards
• Ensure effective housekeeping
• Have well trained personnel
• Ensure full emergency preparedness
• Have effective management of change procedures
• Measure and review HSE (and process safety) performance using leading and lagging indicators

If anyone claims that it is too expensive to implement the above list, just compare that cost with the human and financial cost of an incident leading to 14 fatalities and a destroyed plant.

Is Now the Time to Start Planning New Investments?

photo : Germanhistorydocs

Although contractors are seeing an increase in the number of requests for proposals, the scale of projects is nothing like those seen just a few years ago. Large scale projects are just not being initiated just now, but arguably this may be a very good time to start to invest wisely.

Engineering contractors are seeing changes in demand patterns, as we move into the “new normal”. The scale of projects is nothing like those seen just a few years ago. But arguably next year may be a very good time to invest wisely, now that costs have come down to more sensible levels.

• Current demand for chemicals has been buoyed by the stimulus packages in place around the world.
• As these packages end (e.g. in autos), uncompetitive manufacturing assets will again come under increased pressure
• Cost pressures coming from climate change related legislation will also make things tougher for older and less efficient plants

Supply and demand will start to rebalance to some extent and although this will be offset by the wave of new capacity coming on stream in the Middle East and Asia, some opportunities will be created.

Although there are differing views on the speed and shape of the recovery, we remain in a cycle and the upcycle will come in the next few years. Many analysts are predicting a next peak somewhere around 2013-2014.

The combination of these factors means that any new investment has to be made judiciously and in the right market sectors. Given that new plant takes typically 3-4 years to complete, now is probably the smart time to start selectively investing in new, efficient and 'green' assets.

Cap and Trade Debate Divides US Opinion

photo : greensolutionsmag

Whilst the Emissions Trading System debate rages in Europe, the proposed US 'Cap and Trade' legislation is dividing opinion across the Atlantic.

The legislation has the same aims; to cut the nation's emissions of greenhouse gases and generate an upsurge in alternative and renewable fuel use.

Opponents argue that the higher price of carbon in the US and Europe will have the opposite effect, making hydrocarbon fuels even more attractive in less regulated parts of the world.

A number of Democrat Senators have written to President Obama, stating that they will not support the climate change bill unless the legislation contains a 'border adjustment provision' - an import tariff in most people's lexicons.

Protectionism definitely isn't the way to address climate change - it will create far more problems than it solves and will likely lead to retaliatory actions by other countries, with catastrophic effects.

As with the ETS, Cap and Trade is based on the very best intentions but in a global market place, global solutions are required, otherwise all that will result is a redistribution of manufacturing facilities to other locations, rather than a true reduction in emissions.

Carbon Trading Hitting Europe's Chemical Industry?

As the forthcoming Copenhagen Climate Summit in December gets
nearer, concerns are being voiced regarding the potential impact of the next phase of the EU Emissions Trading Scheme.

The UK Times newspaper has expressed serious concerns that the level of regulation in Europe is increasingly forcing companies to relocate in regions with less stringent regulation.

The European Commission has reacted to this threat of 'carbon leakage' by giving some exemptions to the compulsory purchase of carbon credits when the next phase of the Emissions Trading Scheme comes into force. The credits will be based on benchmarks for each industrial sub-sector. The principle is that the most efficient are rewarded, whilst the less efficient have an incentive to invest and improve.

The principle is laudable, but in a global marketplace, it can only work in practice if all regions of the world adopt the same standards. If not, the effect can only be to speed up the migration of refining and chemical industries to other regions outside of Europe.

Higher feedstock and labour costs are already making things difficult for European manufacturers. Whilst there is no doubt that a drive to reduce emissions is necessary, a solution has to be found to ensure that regulation affects all regions equally.

Confusion Over Future of Wilton EO Plant

photo : BBC There is confusion regarding the future of the Wilton, UK EO/glycols plant. Back in July, Dow announced that it intended to close the facility primarily due to the uncompetitiveness of MEG and the need for significant investment to upgrade the plant to produce more di- and tri-ethylene glycols. Local unions have expressed concern about the cascading effect of the closure on other industries in the value chain, with downstream Croda and Shell plants directly impacted by the closure. On a UK-wide basis, this closure, together with the LyondellBasell's recently announced Carrington LDPE closure, puts significant pressure on the UK ethylene balance, with supply now significantly greater than demand. On Sunday, the UK Sunday Times published a story that US-based Third Coast Chemicals were looking to take control of the plant, with the UK government providing most of the required £50m funding in what is regarded as the first leg of a strategic review by the government of the chemicals industry. The Sunday Times quoted 'senior industry sources' stating that 'the government was in the early stages of formulating an assistance programme to the beleaguered £60 billion-a-year industry.' On Tuesday, however, the regional industry group, NEPIC, denied knowledge of any such negotiations, noting that although Third Coast had previously expressed an interest, discussions had since broken down. Difficult to pick out the bones from this story. My view is that the UK ethylene network is at serious risk unless something is done to avoid a major supply/demand imbalance. Wilton, as an important chemical cluster, needs plants such as the EO/glycols facility to secure its future as a centre for chemical industry growth and innovation. The process engineering skills based on Teesside are critical to the UK's ability to develop the low carbon technologies of the future. A coordinated approach, involving government, government agencies and industry is the only possible way to achieve this future.

Views from EPCA

The European Petrochemical Association (EPCA) meeting is taking place in Berlin this week. Delegates from many companies are taking part and sharing views on the issues affecting petrochemicals and the outlook for the future. Two subjects are dominating discussions. These are the fragility of the current recovery and the likely impact of new Middle East capacity. The consensus is emerging that conditions will remain difficult for some time. Tom Crotty, INEOS Polyolefins CEO, has shared his view that this recession cycle is likely to be U-shaped, rather than the hoped-for V-shaped cycle . There are a number of critical success factors for petrochemical producers; location, technology and scale of assets are very important. Integrated producers have an advantage over non-integrated producers and global reach is essential in order to flexibly supply the best markets. All of these factors undoubtedly give advantage. In addition to this, and reiterating the theme of sevaral recent blog posts, strong and flexible operational management will give the dexterity that is required to manage the peaks and troughs. One thing is sure, there will be many further changes to the manufacturing footprint as we move forward.

Continuity Meets Flexibility

In my recent post New Reality for Petchems, I discussed the manufacturing implications of a slow recovery from recession punctuated by periods of volatility (based on the article published in the Chemicals and The Economy blog). Given my conclusions from this post, regarding the need to manage costs whilst retaining flexibility, I was very interested to learn LANXESS has won the ICIS company of the year award for its business performance and the fact that it is so well positioned to manage the upturn. According to LANXESS CEO Axel C. Heitmann: “The results in the first nine months of 2008 highlighted that LANXESS was pursuing the right strategy of profitable growth. Then in the fourth quarter came an economic downturn of historic proportions. Our restructuring skills were called upon again and we reacted swiftly with a package of measures. I am confident that LANXESS will emerge strengthened from the crisis.” The phrase 'Continuity Meets Flexibility' was the strapline for the 2008 annual report which can be found here. In recent months, LANXESS has agreed a number of recession related measures with its workforce. Some of these were tough (but necessary) such as remuneration decreases for all management employees. Other measures focussed on flexibility and the need to have the ability to manage the effects of the downturn. In particular, the agreed package 'Challenge12' defines how the company will flexibly use its assets, recognising the fact that demand may fall when government stimulus packages come to an end. This flexibility is being delivered via a number of mechanisms such as bringing forward scheduled maintenance shutdowns, reducing overtime credit balances, bringing forward non-working shifts, shutdowns for vacation periods, flexible working shifts, temporary closure of production lines and temporary closure of entire plants. Simple but highly effective. The fact that LANXESS has identified and agreed, in advance, the measures that it can use to achieve flexibility, means that it will be very well placed to deal with whatever the recovery throws at it.