MOSCOW (MRC) -- BASF SE, a nearly 150-year-old German company whose operations sprawl across this Rhine River city, is shifting more of its production and research investment to the U.S. to ride the nation economic recovery and shale-gas boom, said The Wall Street Journal.
The world's largest chemical maker by sales says the move is designed primarily to take advantage of America's cheaper energy and greater support for emerging biotechnology research. It comes amid a wave of U.S. investments by chemicals and fertilizer makers cashing in on its plentiful shale gas.
"At this point in time, the overall framework - if you consider all the factors including economic growth, the cost of raw materials and the cost of energy - is more favorable in the U.S. than in some European countries," said Hans-Ulrich Engel, BASF's group finance officer and chief executive of its North American division.
BASF has estimated it could save EUR500 million (USD688 million) a year in energy costs if its massive chemicals plant here was instead in the U.S. The company isn't thinking of moving the 148-year-old operation abroad, but it is building up existing plants along the U.S. Gulf Coast and may launch new production there in coming years.
BASF has doubled its investment in its U.S. plants to an average USD1 billion a year in 2012 from about USD500 million a year in the decade to 2010. It also has earmarked about USD4 billion in capital spending in the U.S. through 2017.
Thanks to discoveries of shale-gas in Texas, North Dakota and Pennsylvania, the U.S. price of natural gas is about USD4.30 a million British Thermal Units, about one-third of the price paid by German industry. Germany's push to phase out nuclear for renewable energy has lifted electricity prices this year to 14.87 euro cents a kilowatt hour, about twice the price in some parts of Texas.
A example of BASF's new U.S. investments is its 60/40 joint venture with Total Petrochemicals & Refining USA, which produces chemical building blocks at a plant in Port Arthur, Texas. This year, it converted a steam cracker, which can produce as much as 935,000 metric tons of ethylene a year, to use a natural-gas feedstock, ethane, instead of an oil, naphtha.
The change allowed "substantial margin improvements," BASF said. When the conversion began operation in May naphtha cost about USD100 for a barrel of oil equivalent, compared with about USD30 for an equivalent amount of ethane.
BASF is considering a new ammonia plant in the U.S. in a joint venture with Norway's Yara International AS YAR.OS -2.65% A. The plant, considered for the U.S. Gulf Coast, would produce ammonia for BASF.
The U.S. is also more conducive to developing new growth industries. Last year, BASF moved its global headquarters for plant biotechnology from Germany to Raleigh, N.C., because of restrictions on biotech research and public opposition to the technology in Germany.