Wednesday, April 16, 2014

Drew EGC Report

Bloomberg: BASF Mothership Under Siege as Shale Forces Bock to Fight

BASF SE  has spent almost 150 years expanding its German chemical mothership into an organism the size of Midtown Manhattan, whose intricate web of pipes and interlocking plants use every bit of oil and gas brought in.

The so-called Verbund approach is being put to the test. The boom in U.S. shale gas hands competitors Dow Chemical Co. and DuPont Co. an 8 percent profit advantage because they pay less for natural gas, estimates Jeremy Redenius, an analyst at Sanford Bernstein Ltd.

While BASF’s two chemical complexes in the U.S. benefit from the cheap fuel, the flagship site in Germany’s Rhineland is under pressure to perform. Chief Executive Officer Kurt Bock is spearheading the response as he evaluates expansion at home and pushes deeper into higher-margin chemicals. BASF, which consumes as much gas-generated power as Denmark, is reviewing the location for projects, board member Harald Schwager said.

“We really squeeze everything out of every drop of oil,” Bock said yesterday at an American Chamber of Commerce event in Frankfurt. “Shale gas in the U.S. means that we have a disadvantage in energy. But we will be able to cope with it.”  MORE

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