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Abu Dhabi, UAETuesday 19 June 2018

Nova Chemicals and Borealis finalise $1.7 billion Texas chemicals joint venture with Total

Cheap, abundant shale gas is incentivising Middle East companies to develop US chemical capabilities

Petrochemical refineries and oil storage tanks near Texas City, Texas. Arabian Gulf producers are investing heavily in the state. Luke Sharrett / Bloomberg
Petrochemical refineries and oil storage tanks near Texas City, Texas. Arabian Gulf producers are investing heavily in the state. Luke Sharrett / Bloomberg

Mubadala Investment Company subsidiaries Nova Chemicals and Borealis signed a definitive agreement with France’s Total confirming the development of the companies’ $1.7 billion petrochemicals facility in Texas, as Gulf producers look to capitalise on a boom in cheap US shale gas.

The French oil major will hold a 50 per cent of the stake in the joint venture – first announced last March - with the remainder being owned by Austria’s Borealis and Nova Chemicals through a new company, Novealis Holdings.

The joint venture will commence “subject to customary closing conditions, including receipt of regulatory approvals” the companies said in a statement late on Monday.

The project is targeting a 2020 start-up and is set to create around 1,500 jobs during peak engineering activity, the companies said.

“This agreement is a key milestone for this integrated petrochemicals project,” said Bernard Pinatel, Total’s president for refining and chemicals.

“We look forward to working with Borealis and Nova Chemicals to create world-class facilities and become a major player in the growing US and global market for polyethylene.”

The joint venture comes amid a flurry of stateside investment activity on the Gulf Coast by Middle Eastern producers looking to capitalise on cheap gas available in the US market.

Saudi Basic Industries Corporation (Sabic), the world’s fourth-largest chemicals firm, formed a venture with Exxon Mobil last year to build an ethylene plant in Texas by early next decade. Kuwait’s Equate Petrochemical acquired ethylene glycol-producer MEGlobal in 2015 and is currently building a 750,000-tonne per annum monoethylene glycol facility in Freeport, Texas.

The joint venture between Nova, Borealis and Total will include a million tonnes per year ethane steam cracker already under construction in Port Arthur, Texas, together with Total’s existing 400,000 tonnes per year polyethylene facility in Bayport in the oil-rich southern state.

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Mubadala’s Nova and Borealis form US$1.7bn US petrochemicals JV with France’s Total

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The under construction cracker facility is also adjacent to a Total refinery at Port Arthur, as well as an existing Total steam cracker built as part of a separate joint venture with Germany’s BASF.

The venture also encompasses a new 625,000 tonnes per year polyethylene unit to be built at the Bayport site, after an engineering procurement and construction contract for the project is finalised.

Nova Chemicals, headquartered in Canada, is wholly owned by Mubadala Investment Company. Mubadala also owns a 64 per cent direct stake in Austria’s Borealis. OMV, which holds the remaining shares in Borealis, is 25 per cent owned by the Abu Dhabi-based investment company.

Abu Dhabi plans to substantially increase its petrochemicals interests globally, as well as to expand domestic output by two and a half times, to 11.5 million tonnes per annum by 2025.

In a spending plan approved by the UAE’s Supreme Council of Energy in November, Abu Dhabi unveiled its intention to invest around $109bn over the next five years in exploration for sour gas resources at home as well as downstream ventures abroad.

Saudi Arabia, and the UAE are also looking to buy liquefied natural gas (LNG) from the US as its shale gas boom creates export opportunities to plug rising domestic gas needs, particularly during the summer.