Dow Chemical (Midland, Michigan / USA; www.dow.com) and Russian gas giant Gazprom (Moscow; www.gazprom.com), along with Gazprom subsidiary Sibur (Moscow; www.sibur.ru), have signed a letter of intent (LOI) on joint exploitation of gas deposits in the Yamalo-Nemets autonomous district of Siberia. A working group is being set up to study the technical and commercial feasibility of the envisaged projects, which could be part of a joint venture. If the cooperation is successful, it could bring gas-based petrochemical production to Dow’s plants at Böhlen and Schkopau, where it now manufactures, among other products, PE, PP, PS and PET.

The agreement announced in Moscow on 27 November 2007 seems to fit well with Dow’s long-touted “asset light” strategy. Mike Gambrell, executive vice president for basic chemicals and plastics, speaking at K 2007, suggested that the strategy applied to “emerging geographies” rather than to Europe or North America – see Plasteurope.com of 31.10.2007. However, parts of the Russian Confederation (where Dow’s polyolefins possibly could be exported) undoubtedly fall into this category. In any case, back integration with the help of a strong raw materials partner is Dow’s declared goal, and as regards the gas resources no company is stronger than Gazprom.

Converting Dow’s petrochemical plants in eastern Germany to run on gas could make sense from a number of perspectives. Böhlen is interesting from the gas storage standpoint, as it has vast subterranean caverns believed to be presently used, among other things, to store ethylene produced in the naphtha cracker at the site. The oil used by the region’s refineries – including Dow’s own – is piped in from the Baltic Sea and from Russia through the terminal at Schwedt / Germany, on the Polish border.

Cracking gas to produce ethylene – which is the most widely used route to producing polyolefins in North America and the Middle East – is cheaper, as a rule, than using naphtha. This also guarantees some degree of independence from volatile crude oil prices. One prerequisite is that the gas is carbon-rich, and this appears to be the case for the deposits in Yamalo-Nemets. Storing the gas in the Böhlen caverns would be an inexpensive option for Dow.

In 2003, the US chemical group applied for temporary planning permission to build a new naphtha cracker at Böhlen, which was to go on stream in 2008 – see Plasteurope.com of 19.06.2003. However, for unexplained reasons, the plans have not yet been carried to conclusion. With an alternative feedstock basis in place – provided the pact with Gazprom is finalised – a new cracker and downstream units could be built, that would dock into the ethylene pipeline linking Schkopau with Stade on the German North Sea coast.