Austrian polyolefins and fertilizers producer Borealis has scrapped plans to build a multi-billion-dollar polyethylene (PE) facility in Kazakhstan’s Atyrau Region, citing economic uncertainties sparked by the coronavirus (COVID-19) pandemic.

The decision not to go ahead with the 1.25mn tonne/yr installation, announced on May 19, is another blow to energy export dependent Kazakhstan, already struggling with the collapse in hydrocarbon prices. Petrochemical projects that could produce value-added products from the Central Asian nation’s vast gas and oil resources are seen as offering the country potential to diversify away from over-reliance on the export of raw commodities. 

The project was drawn up as a 50:50 joint venture with Kazakh state-owned United Chemical Company (UCC). Borealis first announced the project in 2018. The facility was to include a cracker that would process cheaply sourced Kazakh ethane gas feedstock and two PE units that would function with Borealis’ proprietary Borstar technology. 

“Thorough assessment”

“The decision to discontinue this project is based on a thorough assessment of all aspects of the prospective venture and impacted by the effects of the COVID-19 [coronavirus disease 2019] pandemic as well as the increased uncertainty of future market assumptions,” Borealis said. 

UCC had estimated the total investment figure for the petrochemical project would be $6.8bn. 

At the same time that it signed the agreement for the PE facility, Borealis, in 2018, also inked a memorandum of understanding (MoU) to cooperate in realising a 500,000 tonne/yr polypropylene (PP) project with Kazakhstan’s Samruk-Kazyna Sovereign Wealth Fund. Borealis told Chemical Week that its statement on pulling out of the PE project did not also relate to the PP plan.

Philippe Roodhooft, executive vice president/Middle East and growth projects at Borealis, told Chemical Week that the cracker would have had an annual capacity of 1.2mn tonnes fed by ethane from the giant Tengiz oil and gas field. In turn, the cracker was to feed a PE complex based on two third-generation Borstar-process units. The project was planning to target the CIS region’s markets, but to also include some exports beyond that region.

Alfred Stern, CEO of Borealis, and Mark Tonkens, CFO, earlier in May announced plans to cut costs to curb the impacts of the coronavirus pandemic on the firm’s balance sheet. The measures included reducing capital expenditure by 25% to €750mn in 2020.