BASF Is War-Gaming for Gas Rationing

BASF SE is planning for what was previously the unthinkable: the rationing of gas in Germany.

Given the company burns 4% of Germany’s total gas, BASF is very much in the frame if Russian supplies are cut off and the government has to divvy up what’s there. The shift into renewable energy is being accelerated and substituting in oil and tars are further levers. But there’s no skirting around the possibility that BASF may have to halt production of energy-intensive ammonia, Chief Executive Officer Martin Brudermüller said.

“These are the kind of things we are looking into,” the CEO added. “Ammonia is the largest consumer but on the other hand it’s a global commodity. You could think about buying-in ammonia and substituting home production.”

BASF has worked out how it could function with 50% of its usual supply. If its allocation from the government was significantly less than that, then the whole of the Ludwigshafen complex would have to shut down, with huge implications for nation’s industrial supply chain.

Germany accounts for as much as 45% of BASF’s global production with the flagship Ludwigshafen site guzzling 70% of its total gas usage in Europe. About half of that is used in electricity and steam production, followed by ammonia and acetylene for BDO production.

BASF is rushing to expand in offshore wind farms. It acquired a stake in Vattenfall’s Hollandse Kust Zuid wind farm and is now jointly bidding to develop another site with Vattenfall from scratch.

The competitiveness of Europe’s chemical industry has been challenged by energy crises at various points in the past but decoupling from Russia requires a longer-term approach on how to become more competitive, according to Dow CEO Jim Fitterling. There’s no easy fix such as shipping supplies from the US to fill the void. The infrastructure isn’t there.

Although rigs are shifting into natural gas, the market will continue to be constrained as increased production bangs up agains constrained LNG terminal capacity, Fitterling told investors. There’s not enough inventory in the channel.

“We’re pretty well maxed out on LNG export capability today,” the CEO said.

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