Abu Dhabi joins the shale gas race

IPIC- owned Nova chemicals to utilise shale for its Ontario plant

Abu Dhabi purchased the troubled chemical maker and today the company is profitable and part of the US Shale revolution.
Abu Dhabi purchased the troubled chemical maker and today the company is profitable and part of the US Shale revolution.

Abu Dhabi-owned Nova Chemicals is on track to become one of the first petrochemical companies to utilize shale gas produced in North America for its Ontario plant. The company is wholly owned by International Petroleum Investment Company (IPIC), a strategic investment company focused on the hydrocarbon sector and wholly owned by the Government of Abu Dhabi.

NOVA recently signed long-term supply contacts with two major Marcellus gas producers, as well as a pipeline deal with Sunoco Pipeline, positioning it to be the first company to begin moving shale-based natural gas liquids north to Sarnia sometime in 2013.

In preparation, NOVA is spending $250 million to revamp its Corunna plant so that it can use up to 100 per cent natural gas liquids.

Shale gas finds in North America have become the biggest challenge for the Middle East petrochemical producers whose advantage primarily was competitive feedstock. Many big producers in the Middle East, including the largest petrochemical company, Sabic has been quoted as saying that ‘it is prudent for the producers here to be part of the shale revolution.”

Mohamad Hussein, CEO, Equate when asked if he was threatened by the shale gas, said on the contrary it was a huge opportunity for the producers to look at it as possible feedstock. Apart from competition from shale gas, the region’s’ producers are also worried about dwindling feedstock in the region owing to massive complexes being constructed. Ramesh Ramachandran, CEO, MeGlobal said that shale gas -based petrochemical production is a definite threat to naptha-based manufacturing. He said it was not a catastrophe for the regions’ producers but they will do well to understand the threat.

“Many years ago when the Middle East started producing petrochemicals, industry analysts predicted closure of the US industries and today they predict the worst for the GCC producers. I think the truth is somewhere in the middle and ultimately it is technology that is the game changer,” said Ramachanrdan.

But companies like IPIC are taking advantage of their plants in Canada to be part of the revolution that is sweeping the petrochemical industry.Nova Chemicals had traditionally used crude oil as its feedstock at Sarnia but in recent years, rising oil prices hit the chemical producer's bottom lines. The Abu Dhabi Government purchased the troubled Canadian chemicals maker after losses amounting to hundreds of millions of dollars in 2009.

In 2012, Nova Chemicals had revenue of US$5.05 billion and net profit of US$543.7 million, with a margin of 10.76%.

As at 31st December 2012, Nova Chemicals’ total assets were US$5.64 billion and net debt stood at US$140.2 million. Gearing ratio (net debt/total equity) was 4.90%.




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