China published its 12th Five Year Plan in March this year. Although the very notion of a Five Year Plan was copied from the old Soviet Union, and the concept remains a relic of central planning, this year the Chinese government is insisting that it be called a ‘guideline’ rather than a ‘plan’, in order "to reflect the transition from a centrally planned economy to a socialist market economy". Those who might be tempted to scoff at this as a purely cosmetic touch should at least consider just how far and how fast China has changed over the past decade, and how fast it is still changing. And the new plan shows that the Chinese government is fully aware of China’s problems with pollution and environmental concerns, sustainable growth and inequalities of wealth, and is attempting to take steps to tackle them. This is the first Five Year Plan to mention climate change, for example, and it sets a target for a 17% improvement in energy efficiency.
China is often excoriated as an example of unfettered economic growth and a ‘slash and burn’ attitude to the environment, but in fact the country is – at least in recent years – often more forward-thinking than its critics give it credit for. On a recent visit to China, I was struck by the sheer number of wind turbines that seem to have proliferated across the northern hills, to take just one example. China has revised its target for wind energy to generate 70GW by 2015, higher than the previous target for 2020.
However, China’s main feedstock remains inescapably coal, with 94% of China’s energy currently coming from coal. In attempting to convert this to other uses, possibly involving carbon capture and storage, syngas-based industries will continue to play a key part in China’s economy. Coal to olefins production will need to cover a forecast gap of 6 million t/a of olefins demand by 2015, and the current plans indicate that 5 million t/a of this could come from coal-based methanol to olefins (MTO) plants. The Five Year Plan targets 20% of olefin production to come from ‘diversified’ sources, which for China essentially means coal, and the successful start-up of the Shenhua Baotou plant in August last year has helped to alleviate some concerns regarding MTO as a process route.
Coal to liquids (CTL) production is also estimated to rise to 12 million t/a over the period of the 12th Five Year Plan, and the four huge synthetic natural gas (SNG) projects currently under development are scheduled to be producing 15 bcm per year by 2015, and the approval of a fifth project could take that to 20 bcm.
Ammonia and especially methanol production are also set to increase – methanol demand being bolstered by new national fuel standards on methanol and dimethyl ether (DME) which are due to be published this July. The previously fragmented nature of some of these industries, with small plants, difficulties in accessing coal and access to commercially viable technologies have emerged as the main roadblocks in coal-to-chemicals projects, and so China's National Development and Reform Commission (NDRC) has now set minimum project sizes required to gain approval; the minimum capacity for a new coal-to-olefins plant has been set at 500,000 t/a in terms of olefins, while a 1.0 million t/a limit has been set for coal-to-methanol projects, in order to gain suitable efficiencies of scale. This will be assisted by moves on the feedstock front; another key part of the 12th Five Year Plan is the streamlining of the Chinese coal industry, with the current 11,000 enterprises to be reduced to 4,000, mostly in the hands of 6-8 major coal groups. The bulk of the announced coal-to-olefins projects are from companies that have coal arms or utilities businesses with coal supply, thus ensuring feedstock supplies for the projects.
China has already come to dominate the methanol industry, and is the largest ammonia producer and consumer in the world. It looks as though it will also be setting the pace in the development of CTL, MTO, DME and many other syngas-based industries as well.
Tuesday 26 July 2011
Egypt’s new powerhouse
A couple of months ago it was announced that Egypt’s Orascom, via its Dutch subsidiary OCI Nitrogen, had bought a 50% stake in the Pandora ammonia and methanol project in Texas. In conjunction with Deo van Wijk’s Janus Methanol, which holds the other 50%, the company will rehabilitate the old Beaumont methanol plant, with 250,000 t/a of ammonia production due to re-start by the end of this year, and 750,000 t/a of methanol production next year. The move is yet another sign that Orascom is now a major player in the global basic chemicals market, branching out with this purchase from nitrogen products into the methanol market.
It is only one of a flurry of developments in the past few years. Beginning with the purchase of the Egyptian Fertilizer Company in 2007, with 1.2 million t/a of ammonia-urea capacity at Suez, Orascom has also taken positions in Egypt Basic Industries Corporation (60%) with ammonia and now downstream ammonium sulphate capacity, Notore Chemicals in Nigera (a 23% share, later cut to 13.5%) – where another ageing ammonia-urea plant is being rehabilitated, Sofert in Algeria (51%), with a 1.1 million t/a urea plant now commissioning, and last year the company attracted worldwide attention with its 100% purchase of DSM Agro. It was also named as a bidder for Brazil’s Copebras in 2009, and more recently has also been in the frame as a potential purchaser of the Burrup Fertilizers Plenty River ammonia plant in Australia. While commenting on the Beaumont purchase CEO Nasser Sawiris said that the company is also considering a bid for BASF SE’s nitrogen fertilizer unit at Antwerp. In just four years the company has come seemingly from nowhere to become one of the top ten nitrogen fertilizer producers in the world, and it seems to have an appetite for more. March this year saw agreement with Maire Tecnimont, now owners of Stamicarbon, on project developments in sub-Saharan Africa.
The company can trace its origins to 1950, and remains 55% run by the Sawiris family that founded it. The group’s portfolio includes Orascom Telecom Holding – one of the largest operators in the Middle East, Orascom Hotels and Development, Orascom Technology Solutions, and Orascom Construction Industries (OCI) – the latter is the arm that has been responsible for the group’s move into nitrogen fertilizer production. The group has been widely recognised as one of the most dynamic companies in North Africa, as evidenced by its rapid expansion into nitrogen fertilizers and now methanol. The latest acquisition in Texas pushed OCI shares to 253 Egyptian pounds, valuing the company at $8.8 billion, while profits for Q1 2011 were up 77% on last year at $206 million on the back of higher ammonia and urea prices, and seemed unaffected by the turmoil in Egypt earlier in the year. OCI makes most of its money in Europe and North America now, with less than 10% from North Africa. Industry commentators have noted that the group’s investments have been canny ones, backed by low gas price contracts in Egypt - although there have been warnings that Egyptian gas prices may be set to escalate soon.
A few years ago, as traditional European and North American chemical producers continued to exit the basic chemicals sector, the assumption was that production would devolve either to large integrated oil and gas companies or to state-run firms in the developing world. However, Orascom is a symbol of the new dynamism and confidence of private companies based in Russia, the Middle East and North Africa, China, Brazil and other industrialising regions. It will be fascinating to see where they move next.
It is only one of a flurry of developments in the past few years. Beginning with the purchase of the Egyptian Fertilizer Company in 2007, with 1.2 million t/a of ammonia-urea capacity at Suez, Orascom has also taken positions in Egypt Basic Industries Corporation (60%) with ammonia and now downstream ammonium sulphate capacity, Notore Chemicals in Nigera (a 23% share, later cut to 13.5%) – where another ageing ammonia-urea plant is being rehabilitated, Sofert in Algeria (51%), with a 1.1 million t/a urea plant now commissioning, and last year the company attracted worldwide attention with its 100% purchase of DSM Agro. It was also named as a bidder for Brazil’s Copebras in 2009, and more recently has also been in the frame as a potential purchaser of the Burrup Fertilizers Plenty River ammonia plant in Australia. While commenting on the Beaumont purchase CEO Nasser Sawiris said that the company is also considering a bid for BASF SE’s nitrogen fertilizer unit at Antwerp. In just four years the company has come seemingly from nowhere to become one of the top ten nitrogen fertilizer producers in the world, and it seems to have an appetite for more. March this year saw agreement with Maire Tecnimont, now owners of Stamicarbon, on project developments in sub-Saharan Africa.
The company can trace its origins to 1950, and remains 55% run by the Sawiris family that founded it. The group’s portfolio includes Orascom Telecom Holding – one of the largest operators in the Middle East, Orascom Hotels and Development, Orascom Technology Solutions, and Orascom Construction Industries (OCI) – the latter is the arm that has been responsible for the group’s move into nitrogen fertilizer production. The group has been widely recognised as one of the most dynamic companies in North Africa, as evidenced by its rapid expansion into nitrogen fertilizers and now methanol. The latest acquisition in Texas pushed OCI shares to 253 Egyptian pounds, valuing the company at $8.8 billion, while profits for Q1 2011 were up 77% on last year at $206 million on the back of higher ammonia and urea prices, and seemed unaffected by the turmoil in Egypt earlier in the year. OCI makes most of its money in Europe and North America now, with less than 10% from North Africa. Industry commentators have noted that the group’s investments have been canny ones, backed by low gas price contracts in Egypt - although there have been warnings that Egyptian gas prices may be set to escalate soon.
A few years ago, as traditional European and North American chemical producers continued to exit the basic chemicals sector, the assumption was that production would devolve either to large integrated oil and gas companies or to state-run firms in the developing world. However, Orascom is a symbol of the new dynamism and confidence of private companies based in Russia, the Middle East and North Africa, China, Brazil and other industrialising regions. It will be fascinating to see where they move next.
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