Norsk Hydro Persists with $130 Million New Chlorine Production Plant Investment

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). Although, Norsk Hydro (NYSE:NHY)(Oslo, Norway) will continue to follow its policy of divesting its petrochemical component, the company is going ahead with the construction of a new chlorine plant at the company's Rafnes location in Norway. The $130 million plant, which will start production in 2005, is expected to be highly profitable.

Norsk Hydro's President and CEO, Eivind Reiten says that the investment in the plant will improve the competitiveness of the business and is also necessary for environmental reasons. Regardless of future ownership the plant will ensure the basis for future petrochemical activity in the region. Chlorine represents more than half the raw materials that go into making vinyl which makes competitive production of the chemical a precondition of making plant operations profitable.

With the new plant chlorine production capacity will be doubled to 260,000 tons per annum, it will also produce 140,000 tons of caustic soda per annum. Based on the latest available technology the plant will contain CO2 emissions to the same level as the current plant. The old plant utilizes diaphragm technology whereas the new will be equipped with the latest generation membrane electrolysers that eliminate the need to handle liquid chlorine and the use of asbestos.

The Rafnes site uses liquid natural gas from the North Sea and produces raw materials for PVC manufacture. The complex has three main plants; VCM (vinyl chloride monomer), ethylene, and chlorine. The VCM is sent to two of Norsk Hydro's PVC plants at Porsgrunn (across the fjord from Rafned), and at Aycliffe in the United Kingdom, as well as other customers worldwide.

European chlor-alkali production saw a decline of 4.5% in 2001, compared to 2000 production figures that had reached a 12-year high. Most world chlorine producing regions saw a fall of 15% in 2001 as volumes tracked the slowdown in economic activity. In January 2003, capacity utilization for the European industry stood at 85.6% and production for the month was 806,221 tons with total caustic soda stocks standing at 322,473 tons, as reported by Euro Chlor. The sector produces more than 20 million tons a year of chlorine, caustic soda, and hydrogen.

A total of more than nine million tons of virgin chlorine is produced in Europe per annum and ten million tons of caustic soda. The two chemicals underpin about 60% of Western Europe's chemical industry turnover. Germany produced 3.64 million tons of chlorine, France 1.5 million tons, and the UK 0.78 million tons out of a total European output of 9.26 million tons.