Energy policy critical for BASF in 2014

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Dr Kurt Bock, CEO of BASF, the Germany-based chemicals company held a lunch in London, UK on Friday to speak with journalists, including European Plastics News, about the company’s recent financial results and the company’s vision for 2014.

BASF performed better in Q3 2013, with sales up by 1.5% to €17.7bn, slightly exceeding expectations (whereas in Q2 sales were slightly below expectations).

Bock said: “We want to beat our sales and profit targets of 2012 and that seems to be possible but we still seem to be uncertain about the course of the economy globally and, frankly, I don’t think much has changed between Q2 and Q3. We have volumes going up which indicates that maybe in some countries the recession is behind us.

“My definition of a real upswing in the economy is a combination of good volumes and good pricing and clearly that is not the case for the time being. And the likelihood that this is going to happen in 2014 is uncertain from the BASF point of view. It might happen if you get an inventory cycle on top of a business recovery and development.”

Despite uncertainty, Bock remains cautiously optimistic: “Going into 2014 we might see a small recovery – albeit from a very low level. We have seen quite good volume development in Asia in 2013.”

Bock noted that Germany’s reliance on renewable energy is blunting its competiveness and that chemical companies in Germany pay an additional cost of €400m per annum to subsidise renewable energy. “We’re not against renewables,” said Bock, “we are very much in favour of energy efficiency because that’s the smartest way to reduce CO2 emissions. The discussion is about the speed of the build-up of renewable energy.”

He said that grid stability was a problem, that during sunny periods of the day, Germany is exporting electricity to Poland, Holland and Austria, sometimes at negative prices. Bock continued: “And then we have to buy it back sometimes later at night because the sun is not shining, the wind is not blowing. That is not really efficient. We’ve asked for a more efficient and more productive system, better grid, better coordination of European energy policies, it has to be tied into the networks of our neighbouring countries.

“Ludwigshafen [BASF’s HQ site] is essentially competitive because we have worked very hard over the last 20 years to make that site better. And you wouldn’t just simply walk away, that is not our intention, we fight for a better regulatory framework to stay competitive in Europe and in Germany and obviously the competition has changed over the last couple of years because we see the emergence of shale gas in the United States. We now get a new continent, a country, which also enjoys cheaper energy. To give you an idea, electricity costs in America are 50% of what they are in Germany. And shale gas [is one third the price] maybe a little bit more. So we have a slight disadvantage in terms of energy costs.”

In a recent interview in Der Spiegel, Bock had spoken in favour of fracking in Germany. And he echoed this sentiment on Friday: “I think it can be done in an environmentally acceptable way. Today in a German newspaper there was an announcement that the association of the water-using industries so, for instance, the beer brewers, who warn against fracking because they are concerned that fracking will lead to the pollution of ground water and drinking water — that is ludicrous, I have to say, absolutely ludicrous.”

He explained that fracking has been used for many years in Germany for the extraction of natural gas and that the process is not that different from fracking for shale gas: it still uses water under pressure, to break rock and release gas.

“We’ve done this for decades, hundreds of events. Not a single accident, not a single [incidence of] pollution of ground water, because you normally don’t drill in areas where you produce drinking water,” said Bock who bemoaned the unwillingness of the German authorities to give additional permits to drill because of their over-reliance on appealing to the ‘public sentiment’.

“We know that we have shale gas reserves that will last for at least 10 years, on 100% consumption of natural gas in Germany. Probably it’s much more. The only request we now make is ‘please allow us to do the testing, under controlled conditions, tested, we can invite all the stakeholders, scientific advice’.  Then we find out two things – whether it’s doable technically and whether it’s acceptable from an environmental point of view, that’s one side, and then whether it’s economical. That’s the only, pragmatic way,” said Bock.


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