Borealis’ CEO Signals Strong Future for Plastics

As a manufacturer of plastics Borealis relies heavily on the oil industry and with fluctuating prices the company has been kept on its toes over the past 12 months.

With headquarters in Vienna, Austria and 120 offices around the world Borealis’s operation is a global one, supplying high quality piping, plastic bottles and components for the automotive industry.

Founded in 1994 when Neste and Statoil merged their petrochemical polyolefins (used to wrap commodities) businesses, Borealis was taken over by OMV and the International Petroleum Investment Company (IPIC) of Abu Dhabi in 1997 when Neste sold its 50 per cent share.

“Our polypropylene (PP) and polyethylene (PE) products continue to enhance society and address challenges such as providing clean drinking water and sanitation to millions of people around the globe and safe, light, energy-saving components for cars,” says CEO Mark Garrett.

“IPIC has been a very strong partner for us over the years and together, the share has significantly grown, starting with a 25 per cent share in 1997.”

IPIC Takes 65 per cent Stake

In 2005 IPIC and OMV agreed to purchase Statoil’s 50 per cent shareholding in Borealis and the new ownership became 65 per cent IPIC and 35 per cent OMV. Since 2007, IPIC has a 64 per cent stake in Borealis.

“Both our owners, OMV (36 per cent) and IPIC offer stability and privileged access to advantaged feedstock,” adds Garrett.

“Their commitment to the petrochemicals industry and to Borealis enabled us to further develop our operations and together we have ambitious growth plans for the future, in Europe but also in the Middle East and Asia.

“The main raw materials for our polyolefins is oil and natural gas, most of which is exploited for energy.

“As an integrated polyolefins company, Borealis ensures a secure, cost-efficient supply of hydrocarbon feedstock for its crackers, and olefins for its polyethylene (PE) and polypropylene (PP) plants. We operate steam crackers in Finland, Sweden and Abu Dhabi that produce both ethylene and propylene.”

With the oil prices staying volatile, Borealis has seen an impact on its margins with the whole value chain affected and having an effect on the supply and demand in the plastic industry.

“To address this, we will continue to focus on less volatile market segments and take advance of our feedstock flexibility, enabling us to continue providing innovative solutions to our customers expect based on value related pricing,” adds Garrett.

“Through our joint venture with ADNOC in the UAE and Borouge, we are a reliable supplier of polyolefins to the local infrastructure and advanced packaging markets.”

Earlier this year, Borealis installed a 25km 1.6 diameter seawater cooling pipe in Ruwais.

And from simple everyday products that make life easier to step-changing technological developments, Borealis is leading the way with in shaping the future with plastics.

“With our polyolefins solutions we are focusing on three market segments: infrastructure (pipe systems and energy communication cables), automotive and advanced packaging,” says Garrett.

“Leading-edge plastics solutions for example guarantee reliable communication networks that will connect an estimated two billion people on the internet by 2011.

“Food that is shipped across the whole world is transported in plastic packaging that keeps it fresh and makes sure it arrives undamaged at its final destination.”

Garrett also believes that plastics offer solutions to a number of global challenges such as climate change.

“Plastic parts in cars for example reduce the overall vehicle weight; cars consume less fuel and produce less greenhouse gas emissions.”

Taking the Reigns

Joining Borealis at the beginning of 2007 as the Chief Executive Designate, Garrett became the CEO in 2008 and has experienced rapid changes in the polyolefins market since then.

“Managing a company under these circumstances [the economic downturn] is of course a challenge,” he adds.

“But we firmly believe that successful companies do not wait until they are in trouble to make changes and we anticipated the challenging times right from the beginning.

“Another big challenge was the integration of the new melamine and fertilizer business units as a result of the integration of Agrolinz Melamine International into the newly formed base chemicals business group.

“It is also important to mention our continuous efforts in building on our excellent safety record which we believe is the basis for our profitability and operational excellence.”

Investments in Abu Dhabi

At present Garrett say Borealis is concentrating on implementing its big investment programmes Borouge 2 in Ruwais, Abu Dhabi and the low-density polyethylene plant in Stenungsund, Sweden.

“In the second half of 2008, many parts of the world economy fell into the worst recession we have seen in decades,” he adds.

“This in turn led to a significant reduction in consumer and industry demand, resulting directly or indirectly in a dramatic softening of our polyolefins market.

“To mitigate the effects of this situation we stay focused on our Value Creation through Innovation strategy, concentrating our efforts on innovation and commercial excellence in our value-adding key market segments.

“We have also prioritised our cost competitiveness, particularly in Europe and operational excellence without compromising on safety. In addition we have a strong focus on liquidity to ensure we maintain balance sheet strength.”

Borealis’s current strategy focuses on the three key market segments infrastructure, automotive and advanced packaging.

But with plastics being one of the most flexible and resource efficient materials Borealis is always looking into new opportunities but there are no concrete plans at the moment.

“Next to the polyolefins business, Borealis is also building up a Base Chemicals business group comprising feedstocks and olefins, phenol and aromatics as well as melamine and plant nutrients,” says Garrett.

Environmental Programmes

The company is also keeping abreast of its environmental responsibilities with carbon emissions to energy efficiency and from workplace safety to chemicals management.

“Borealis has always embraced health, safety and environmental challenges,” adds Garrett.

“The Responsible Care Global Charter which we signed in 2006 sets the frame towards a more sustainable business. That’s why we have set ourselves the clear and challenging goal to improve our energy efficiency by 2020 by 20 per cent compared to 1990 and we are continuously investing in this area.”

In 2008 Borealis spent Euro6 million on energy investments with energy efficiency and the reduction of greenhouse gas emissions is a strategic objective, for environmental and cost reasons.

Borealis is also working with ADOC to its joint venture, Borouge which started up in 2001.

Borouge is contributing very strongly to our results, and the Borouge 2 project is the centrepiece of our efforts to meet the continuously increasing demand for our products in the Middle East and Asia.

It was announced in 2009 that a feasibility study was completed to assess the further expansion of Borouge’s polyolefin operations and as a result the company has entered the front-end and engineering and design phase (FEED) of the Borouge 3 project.

“I strongly believe that plastics is the material of the 21st century and we see a continuous demand increase in Europe and the whole world over the next decades,” adds Garret.

“That’s why we continue to invest in this business. The EUR 200 million PP plant expansion based on our proprietary Borstar technology was inaugurated in 2008 and in Stenungsund, Sweden, the new 350,000 t/y high-pressure, low-density PE plant is on track to come on stream at the end of 2009 and will supply to growing wire and cable market.”