Singapore petrochemicals: Managing high energy costs

Business Times 4 Mar 08;

IN today's high oil price environment, managing energy costs - which account for 15 per cent or higher of manufacturing costs for the chemicals industry - has become more critical for multi-billion-dollar petrochemical complexes worldwide.

Just as spanking new facilities like ExxonMobil's complexes in Singapore are moving to be 100 per cent energy self-sufficient by building in-house electricity/ steam generation capability, so too the established European complexes like BASF's giant 700-hectare integrated Ludwigshafen site.

As part of the German group's six billion euro (S$12.7 billion) package over five years to modernise its flagship complex, it has junked its older, inefficient coal-fired stations at Ludwigshafen.

These have been replaced by new energy-efficient and environmentally-friendly combined cycle gas turbine (CCGT) units that supply power and steam to the more than 250 chemical plants at the complex.

Its latest unit, a 440MW cogeneration plant that cost 240 million euros, raised in-house electricity generation at Ludwigshafen from 65 per cent to over 90 per cent. 'And we are supplying 100 per cent of electricity from this year,' a BASF official told visiting Asian journalists.

Ludwigshafen's cogen units are fuelled by natural gas piped from Russia, he said, adding that BASF has 'through backward integration' ensured security of supply by buying into the Russian gas fields.

'We are a shareholder of gas fields in Siberia through Wingas, which is a joint venture of Russia's Gazprom and BASF's Wintershall,' the official said.

'It's important to have access to gas,' he said with a degree of understatement. Ninety per cent of the power units at Ludwigshafen rely on the fuel, so as a back-up, Ludwigshafen is also connected by pipelines to gas from the North Sea, as well as to liquefied natural gas (LNG) terminals.

High oil prices - which have hit US$100 a barrel in the past year - have forced up natural gas prices about 20 per cent over the same period. Ludwigshafen's challenge is not unlike that faced by the newer complexes coming up in Singapore.

For instance, ExxonMobil, which is building a second petrochemical complex - reportedly costing more than US$5 billion - is building a 220MW cogen plant to supply all its electricity needs at the complex, operational in 2011.

This will be its second cogen unit, after a 150MW unit that supplies its first complex. To ensure supply security, it recently signed a $3 billion-plus long-term deal with Keppel Gas for Malaysian gas supplies.

Ludwigshafen has three cogen plants of 390MW, 440MW and 40MW capacity, an oil-fired 800MW standby plant and another 100MW plant that produces electricity from chemical waste.

Compared with coal-fired power plants, the cogen plants help BASF reduce emissions of the greenhouse gas carbon dioxide by almost 40 per cent. Globally, the group operates more than 16 such cogen plants at its sites.

On our plant tour, our guide pointed out an old coal-fired power station that is scheduled to be pulled down, but hinted that BASF may just leave some of the coal-loading cranes.

'After all, coal still remains an option,' the official said, alluding to new, less polluting and more efficient coal-fired technology in the pipeline. Staying competitive remains the bottom line.