Reliance Industries Joins Shale Gas Rush

photo : energy.alberta.ca

A regular theme on this blog has been the development of the shale gas industry. Now Indian major, Reliance Industries, has joined the party, investing a total of $1.36billion to acquire and develop a share in Texan shale gas assets.


Reliance has paid Pioneer Natural Resources some $236M for a 45% stake in the Eagle Ford shale assets in southern Texas for $236M and will further invest $1.052B to develop the fields over the next four years.

Back in April, Reliance invested $1.7B to create a venture with Atlas Energy, a deal which gave Reliance a 40% in the Marcellus shale fields in the USA.

This move again shows the growing importance of unconventional oil and gas to the IOCs and the petrochemical majors such as Reliance. With discoveries of conventional oil and gas reserves having peaked some time ago and with control firmly in the hands of the National Oil Companies, we can expect more and more activity in the development of unconventional resources. This will also increasingly shape the future of petrochemicals, now that the peak of investment in crackers based on conventional sources of feedstock appears to have passed.

Weekly News Round Up

This week's round-up of news and updates on previous stories

• The Thai Government has formally ordered construction work to stop at the Map ta Phut petrochemical complex. There is no clear information regarding a likely restart date at this time.

• The new Boeing 787 Dreamliner made its first test flight on Tuesday. Each 787 contains carbon fibre and adhesives to the value of $1M, with the carbon fibre coming from polyacrylonitrile. Boeing has already received 840 orders for the new aircraft.

• Following recent shale gas discoveries, the American Natural Gas Alliance (ANGA) now believes that the US now has approximately 100 years of natural gas reserves. If correct, this could significantly impact future petrochemical investment in the USA. This news follows the recent announcement of ExxonMobil's acquisition of  major US natural gas producer XTO Energy.

• According to reports, the bankruptcy court in New York has adjourned the hearing to consider the LyondellBasell's proposed reorganisation plan, until January 12th. The outcome of the hearing is of much interest for Reliance Industries which has made a preliminary non-binding offer for a controlling interest in LyondellBasell.
  
  
  

Weekly News Round Up

This week's round-up of news and updates on previous stories

• Numerous reports suggest that Reliance Industries is moving quickly in its efforts to aquire LyondellBasell , with executives from the two companies meeting recently in Houston. Reliance is believed to be preparing to make a binding offer for LyondellBasell.

• The Chemical Engineer reports that the European Union has approved a substantial amount of funding for a number of green energy-related projects. The EU had previously set aside €4 billion for green energy projects and has now allocated €1.6 billion for carbon capture and storage projects and €0.6 billion for offshore wind energy projects.

• Shell has opened a state-of-the-art mono-ethylene glycol (MEG) plant in Singapore. The plant uses Shell's OMEGA process, which is claimed to have lower construction and operating costs and maximises the yield of MEG (producing less di and tri-ethylene glycols), when compared with other processes.

• BASF chairman Juergen Hambrecht has spoken positively about his company's fourth quarter results, which were above expectations. 2010 is expected to be 'difficult' given the volatility of global recovery and the fact that central bank interest rates are expected to rise.

• Ineos Bio, together with its partner New Planet Energy, has been selected for a $50M grant for its advanced bioenergy facility in Florida, USA. The facility to use INEOS Bio’s advanced BioEnergy technology to produce bioethanol and power from a range of feedstocks, including forestry waste, agricultural waste, sustainable energy crops, construction waste and municipal solid waste.

Weekly News Round Up

This week's round-up of news and updates on previous stories

• Speculation over the future of LyondellBasell continues. Following the reported $10-12 billion offer from Reliance Industries, a spokesperson for Sinopec has denied that they were considering a joint bid with equity firm TPG.

• Speaking at the Indian Petrochem 2009 Conference in Mumbia. Roland Walzi of Linde talked of the difficulties of 'mega cracker' projects. Mr Walzi exppressed his view that ethylene plants of greater than 2million tonnes/year capacity were unlikely due to 'technical challenges and economies of scale'.

• An investigation has started into two explosions at the SNF Group's factory, located in Andrézieux in France. Four people were injured in the incidents, two seriously, believed to be caused by the mixing of incompatible substances. The incident is believed to be due to human error.

• Moody's Investors Services has updated its outlook for the chemical industry. The view is pessimistic, given limited volume growth, overcapacity and concerns over rising raw materials prices.

• The Qatar-based Qatofin, a joint venture between Total and QAPCO, has inaugurated a new 450 kT LLDPE plant in Mesaieed. Commercial production is expected in January next year.

• ICIS has updated its estimate of the total number of job losses in the chemical industry since the start of the financial crisis. ICIS now estimates that more than 83,000 jobs have been lost so far.

Reliance Bid For LyondellBasell To Kick-Start M&A Activity

Now that both Reliance Industries and LyondellBasell have confirmed that an offer has been made for the world's 4th largest chemical company, we can anticipate a significant increase in M&A activity in the chemical industry.

Some industry analysts believe that the reported price, of somewhere between $10M - $12M, is relatively low, given LyondellBasell's recently published EBITDA results and could initiate a bidding war involving a number of prospective suitors.

The news follows hot on the heels of the various reports that IPIC is in talks with as many as 5 potential targets, including Bayer MaterialScience and other companies possessing technologies technologies which would support the development of the ChemaWEyaat project in Abu Dhabi.

There have also been reports that Dow Chemical has been in talks regarding the sale of a number of assets, as well as reports that Sinopec was looking at a number of potential targets in Europe. I've also heard several suggestions that a number of the Middle East majors will be looking to complete further acquisitions in 2010.

It looks certain that 2010 will be a major year of change in the sector, with the emergence of some new superpowers in the industry and further consequent changes to the asset footprint. Time for the site people to start changing the signposts and the letterheads once again!

Reliance to Purchase LyondellBasell Assets?

photo : LyondellBasell

Speculation is mounting that Reliance Industries is looking to buy the North American assets of LyondellBasell. Various sources suggest that a price of between $3 billion and $6 billion will be offered for the assets.

LyondellBasell was formed back in July 2007, when Basell acquired Lyondell Chemical Co. for $12.1 billion.

Although it is necessary to take into account the fact that Lyondell had assets outside the US, the price range quoted is still much lower than the original price paid by Basell. It is not clear at this stage whether the deal would include any of LyondellBasell's very strong technology licensing businesses - which cover predominantly polyolefins, polyolefin catalysts, olefins, propylene oxide and derivatives - although I would think this is unlikely.

LyondellBasell does have some very good US assets. If Reliance were to acquire these assets it would significantly strengthen its global position and move significantly higher in the ICIS Top 100 chemical companies, where it currently holds 34th place. LyondellBasell is currently in 4th place. Changing times!