BASF reports dent in earnings; eyes shale gas in the US

The cheap shale gas boom in the US has not gone unnoticed by BASF, the world's largest chemicals company by sales, which is considering setting up a EUR1 billion petrochemical plant in the country. BASF announced its possible investment in a world-scale methane-to-propylene complex on the US Gulf Coast, its largest investment in a single facility, along together with first quarter results where its operating earnings went down by 3.3%.

Propylene has mainly been made from petroleum-based naphtha, but cheap shale gas from hydraulic fracturing, or fracking, is gaining importance as a feedstock.

Meanwhile, BASF’s first-quarter earnings before interest and tax (EBIT), adjusted for one-off items, dropped to EUR2.14 billion, partly due to a much stronger Euro. But its chemicals segment, including pesticides, more than compensated for the dent, with the German firm reaping a profit of EUR1.48 billion, up 2% from the same quarter a year earlier.

Its business in North America was the only regional division that achieved a rise in operating earnings.

BASF said it intends to further strengthen its backward integration into propylene and grow its propylene-based downstream activities, leading to a stronger market position in North America.

Propylene is one of the most important basic chemicals in the petrochemical industry and is used in the production of a wide range of higher-value chemicals. These chemicals are used to manufacture products such as coatings, detergents or superabsorbent polymers for baby diapers.

Details on the potential investment, including the capacity of the plant, investment amount and exact location are currently under evaluation.


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