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With the first wave of Sino-foreign crackers well underway, attention is turning to the next wave. Companies are lining up, but their partnerships face challenges such as protracted negotiations and culture clashes. Florence Tan reports
AS THE first wave of three Sino-foreign joint-venture cracker projects - Shanghai Secco Petrochemical Co (Secco), BASF-YPC Co and CNOOC and Shell Petrochemicals Co - takes shape and prepares to come onstream in the next two years, attention is turning to a second wave of cracker projects in China; these projects could start up around 2010.
China needs a 1.3m-1.4m tonne/year cracker every year and it is currently short of 9m tonne of ethylene, according to Joe Pai, an analyst with CLSA.
Although other analysts might disagree on these figures, as imports could replace domestic supply, there is no doubt that more crackers are needed in China.
Sinopec is reportedly looking at at least four sites - Zhenhai in Zhejiang province, Tianjin, Shanghai and Wuhan in Hubei province - for building greenfield crackers. Industry sources have told ACN that PetroChina is considering building two new worldscale crackers, in addition to expansions of its subsidiaries' crackers.
Foreign majors, such as Dow Chemical, Atofina and Sabic, have expressed interest in forming cracker joint ventures with the Chinese companies.
Would the Chinese companies - themselves experienced cracker players that have partnered foreign companies in the first wave - shrug them off and pursue these projects on their own? And do they have what it takes to pursue these expensive and complex investments by themselves?
First of all, building a cracker in China is a privilege for foreign companies. The Chinese government's policy is that foreign companies that want to establish a cracker base must find a local partner.
However, there are still synergies local companies can derive from a joint venture.
Chinese companies are attracted to their foreign counterparts for their technology, management expertise, financial backing and global market reach, according to a Sinopec source. 'They (foreign companies) have the technical advantage. In a joint...