OMV and Borealis Expansions Boost Step Change in Petrochemical Industry

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Researched by Industrial Info Resources (Sugar Land, Texas)--OMV Aktiengesellschaft (WBAG:OMV) (Vienna, Austria) and Borealis AG (Vienna, Austria) have agreed to invest $1.3 billion (899 million euro) to expand their neighbouring plastics production facilities and petrochemical production capacities in Burghausen, Germany. OMV has boosted its annual ethylene production by 110,000 metric tons to 450,000 metric tons, propylene by 315,000 metric tons to 560,000 metric tons and polypropylene by 330,000 metric tons to 570,000 metric tons, addressing growing demand for advanced packaging products and medical applications. The polypropylene expansion has increased Borealis' annual polyolefin capacity by 80% to 745,000 metric tons.

New plants, such as the Burghausen refinery in Germany, have been opened recently and are coming on stream and being highly integrated under the implementation of innovative and metathesis technologies. Today, the Burghausen plant is the ninth largest polyolefin refinery and the third largest polypropylene site in Europe. Recent Borealis investments include the Burghausen polypropylene plant, which incorporates Borealis' pioneering Borstar PP2G technology, the new Borstar pilot Austrian plant (Schwechat, Austria), the recent groundbreaking for the $68 million (50 million euro) expansion of Borealis' Innovation Headquarters (Linz, Austria). Also included is a massive investment program at the Borouge 2 project of Borouge Company (Abu Dhabi, United Arab Emirates), a joint venture between Borealis and the Abu Dhabi National Oil Company (ADNOC) in Ruwais (Abu Dhabi, United Arab Emirates), where Borouge is developing a fully integrated petrochemicals complex. Borstar PP2G, Borstar's second-generation polyolefin technology (2GPE and 2GPP), represents a leap forward in polymer design from a bimodal polyethylene to multimodal polyethylene, facilitating the development of an ever-widening range of new plastics.

Innovations in process design and the implementation of Borealis-owned catalyst technology allow for energy savings of 16,000 megawatt-hours per year and an increase in overall energy efficiency of 20%. Borouge has already initiated the feasibility study for Borouge 3, a further expansion of polyolefin operations in Abu Dhabi to add approximately 2.5 annual million metric tons of capacity by 2014. Because of forecasts predicting higher production capacities, the Burghausen site would benefit from strengthening the Bavarian Chemical Triangle and the Southern German plastics industry. After the kickoff of the 360-kilometer Ethylene Pipeline South between the German cities of Munchsmunster and Ludwigshafen expected for 2009, OMV will be linked to the Western European ethylene network.

OMV is also planning an 800-megawatt combined-cycle power station for electricity generation and steam for the Burghausen refinery to increase the refinery's efficiency by 5% on average and to reduce energy consumption. The decision regarding the investment could be made by the end of 2008, and 2012 could be the earliest start-up date. By 2010, OMV could establish Petrom S.A. (Bucharest, Romania) in Romania, as the southeastern base of its central and eastern European market leadership, ensure the long-term competitiveness of its petrochemical sites through capacity expansions and raise the throughput of the filling stations from 2.8 milion liters per site in 2006 to 3 million liters per site. Together with the Petrobrazi and Arpechim plants and a 45% stake in Bayernoil (Germany), OMV has a total capacity of 26.4 million metric tons equal to 540,000 barrels of oil equivalent (BOE) per day.

By 2010, OMV's profits could grow by leveraging its market leadership in the 13 central European countries already served, and appraise opportunities for acquisitions also outside its core region, in the European "growth belt," aiming to have oil and gas production amounting to at least 50% of its refining capacity. OMV is expected to increase oil and gas production to 500,000 BOE per day, raise refining capacity up to 50 million metric tons by taking opportunities for acquisitions, capitalize on its position in marketing with a market share of 20% in Central Europe, reach gas sales of 20 billion cubic meters per year, achieve a return on average capital employed of 13%, given mid-cycle market conditions, and stand out from regional peer group in terms of market capitalization. Borealis is expected to increase businesses in infrastructure, automotive and advanced packaging, expand the Abu Dhabi complex to supply growth in the Middle East and Asia, strengthen European base, ensure cost competitiveness from feedstocks to customers and develop its base chemicals business.

OMV, founded in 1956, had consolidated sales of 20.04 billion euro in the 2007 fiscal year, 33,665 employees and a market capitalization of about 13 billion euro. OMV is Austria's largest listed industrial company and a leading integrated oil and gas group in Central Europe. OMV is active in refining and marketing; exploration and production; and gas and power. In June 2006, OMV established the OMV Future Energy Fund, a wholly owned subsidiary to support projects in renewable energy, with more than 100 million euro to initiate the change from a pure oil and gas group to an energy group with renewable energy in its portfolio.

Borealis is owned 64% by the International Petroliumn Investment Company of Abu Dhabi and 36% by OMV. Borealis' core businesses focus on polypropylene development, especially for the automotive sector, appliances, advanced packaging and moulding applications. Borealis has two polypropylene plants, one Borstar polyethylene plant, three low-density polyethylene plants and one compounding unit.

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