Bloomberg News

Kemira Targets Shale-Oil Chemistry Amid Moves by Sabic

November 13, 2012

Kemira Oyj (KRA1V) plans to bring additives for extracting shale oil to market in the next two years as it diversifies beyond chemicals used in natural-gas production, Chief Executive Officer Wolfgang Buechele said.

Europe’s largest maker of water-treatment chemicals expects a quick pick-up by customers when the additives, now being developed, become available toward the end of 2014, Buechele said in a phone interview from Kemira’s Helsinki headquarters.

A drop in gas prices in North America damped production, resulting in a 9 percent third-quarter revenue decline at Kemira’s oil-and-gas division. Volume is recovering, and Saudi Basic Industries Corp. (SABIC) is among petrochemical companies seeking expansion in the industry. Growth in shale-oil additives would help protect against gas-price volatility, Buechele said in the interview yesterday.

“Everybody is trying to make stronger inroads into oil and gas,” Buechele said. “It’s a competitive market but, at the end of the day, it’s a market that requires innovation. We are strong in shale gas, but we at this point have little to no chemistry required for shale oil.”

Producers operating in the Eagle Ford shale formation in Texas are shifting to extracting oil from a focus on gas, according to a Bloomberg Industries study released yesterday. Sabic, as the Saudi chemical maker is known, plans to invest in the U.S. and elsewhere to gain technology for turning shale gas into chemical products, Mohamed Al-Mady, CEO of the Riyadh-based petrochemical company, said yesterday in an interview.

Career Helps

Buechele drew on careers at BASF SE (BAS) and Blackstone Group LP (BX:US) to put together a savings blueprint for Kemira, dubbed “Fit for Growth,” that went into effect in July.

The chemical maker is ahead of schedule on simplifying its organization and raising earnings before interest and taxes to more than 10 percent of sales by 2014, the CEO said. Working in private equity helped Buechele spot opportunities for short-term savings, while being head of fine chemicals at BASF gave a longer-term perspective on reorganizations, he said.

The savings program will help Kemira hold earnings steady this year, Buechele said, adding that he travels to one of the company’s sites each week to oversee the reorganization.

Any acquisitions will probably be limited to smaller deals of as much as 100 million euros ($127 million), he said.

Paper Industry

Paper chemicals remain a principal focus for Kemira, which is gaining market share and preparing a 25 million-euro plant in Nanjing, China, to start production in early 2013. Clariant AG (CLN), based in Muttenz, Switzerland, is seeking to get rid of its paper-chemical division, though Buechele has said Kemira has no interest in the unit.

Kemira won’t bid for the water business of Munich-based Siemens AG (SIE) because the bulk of the unit’s 1 billion euros in sales is from machinery and engineering, an area too removed from the Finnish company’s chemical heritage, he said.

A planned initial public offering of a titanium dioxide venture with Rockwood Holdings Inc. (ROC:US) is also on hold because of stock-market volatility and temporary overcapacity in the industry. Demand for TiO2, used as a whitener in coatings and toothpaste, is set to improve in 2013, and the two partners will reconsider the situation then, Buechele said.

Given overcapacity and markets, the current environment wouldn’t “foster a successful and value-generating IPO,” he said. “We have the time, and we will definitely try to generate as much value as we can.”

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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