Economic growth continues apace, with market leadership shifting as the gas majors reshuffle their hands. High-tech electronics applications sit alongside petrochemical expenditure driving investment in this region. Ian Salusbury and Helen Carmichael take a closer look.
Although the focus of investment in the Pacific region is very much on China at present, investment and growth has been very much a feature of South Pacific Rim countries too, over the past 15 years. According to figures from Spiritus Consulting, gas revenues in the region increased by around 10% to reach $2.7bn in 2006.
The Linde Group is seeing its highest growth rates in Asia and the Pacific, with an 18.4% increase in sales in the region for the first half of 2007. Its acquisition of BOC means that the group is the market leader in the Philippines, Malaysia, Indonesia and Thailand, operating significant numbers of ASUs in the latter two countries in particular.
Dr Aldo Belloni, member of the Linde Executive Board, said that, “Asia will remain one of our major growth drivers. New investments in plant and industrial gas infrastructure are unavoidable.”
Air Liquide has said that it has enjoyed very strong growth in Asia in 2007 and that it sees the region as a key growth driver. Following the purchase of BOC by Linde, a number of realignments took place in the industry in the region which saw Air Liquide strengthening its position in the South Pacific, through the establishment of complete ownership of affiliates in Singapore (SOXAL), Thailand (Eastern Industrial Gases), Vietnam (Vietnam Industrial Gases) and Brunei Oxygen. The company achieved this by buying out its stakes in these companies from Linde for €275m.
Air Products interests in the region are limited to Singapore and Thailand. Praxair is also present in those countries, as well as Malaysia.
Worth around $860m and as the region’s largest market, Australia is growing at a steady 3%. Air Liquide and BOC have operations in Australia, with BOC holding the lion’s share among the gas majors. Linde’s Australian business was sold earlier this year to Australian conglomerate Wesfarmers for $500m, and has been renamed ‘Coregas’. The business produces oxygen, nitrogen argon and hydrogen at its Port Kembla facility, where it services the industrial, medical and speciality markets on the east coast. The company aims to become more involved in emerging applications such as environmental monitoring, gas packaging and food packaging in the longer term, while recent results were impacted by an economic slowdown in the New South Wales area of Australia. Coregas has nitrogen and acetylene expansions underway, due on-stream in late 2007 or early 2008.
BOC has just announced that it will be building and operating a helium plant in Darwin, Australia — the first in the Southern Hemisphere. The plant will be built for Darwin LNG, with construction starting in April 2008. “The new plant will produce enough helium to supply of all Australia’s needs, with additional capacity available for export to other world markets” said David Hatcher, BOC’s area general manager, Western Australia and Northern Territory. He explained, “There is significant growth in demand for helium around the world, particularly for medical, industrial and electronic use.”
Also in Australia, BOC recently announced a major redevelopment of its Dardenong facility in Victoria. The installment of a new nitrogen liquefier will enable the company to increase its supply of LNG to the local fleet-fuelling market. A large portion of the LNG produced at the plant had previously been dedicated to the nitrogen liquefaction process.
Witnessing a jump in gas revenues of 13% to almost $500m in 2006, Singapore has been driven by the burgeoning electronics, semiconductor, petrochemical and pharmaceutical industries.
Air Liquide subsidiary SOXAL, which holds the biggest share of the market, has recently announced a number of new contracts. Amongst these is a deal to supply Shell with oxygen and nitrogen for a new cracker and mono-ethylene glycol plant expected to be online by the third quarter of 2009. SOXAL is also providing a Total Gas and Chemical Management operation to Soitec, for a new 300-mm silicon-on-insulator fabrication plant and will next year start supplying carrier gases, including ultra-pure nitrogen, oxygen, argon, helium and hydrogen, to a US manufacturer of memory devices.
Air Products Singapore is another major player, along with National Oxygen (NOX), a subsidiary of Japan’s Taiyo Nippon Sanso.
Vietnamese gas revenues grew by an impressive 23% to reach almost $60m in 2006.
Messer’s interests in the region are located in Vietnam. The company plans to invest $20-30m in the next 2-4 years, and forecasts that annual revenue will grow from the current level of $2.5m to $10-15m. Tony Rivera, country manager for Messer Vietnam, said that in the south the company has installed a new cylinder filling plant capable of filling up to 200bar, to supply both industrial and speciality gases. He commented, “There is definitely pressure from competitors, especially in the south.... mostly from multinationals. However, with the growth rate of the country and the planned major investments, there should be enough demand to benefit all the present players in the market.” In addition to the multinationals, Rivera identified the state-owned Sovigas as being a key competitor.
Air Liquide’s Vietnam Industrial Gases is looking to capitalize on the country’s strengths in the electronics and metallurgy sectors. Air Liquide Electronics is also capturing business in the country, with the supply of carrier gases to a new back-end facility for semiconductor manufacturer.
As the fourth largest gas market in the region, local commentators note that the business environment in Malaysia “is becoming even more demanding”.
Malaysian Oxygen Berhad was formerly an Air Liquide and BOC joint venture, with around three quarters of the market. Following the Linde-BOC deal, Linde paid €61.2m for Air Liquide’s share in MOX, plus a further €249m for other investors’ stakes in the company, ensuring that Linde now holds a 98% stake in MOX. The company operates 18 plant sites, and supplies all industry sectors, including the high-tech pharmaceutical and wafer fabrication end of the market, in addition to heavy industry. The company commissioned a new air separation unit in Shah Alam this year to enhance supply efficiency to one of its oxygen customers in Malaysia.
“Malaysia continues to show positive growth from 5.2% in 2005 to 5.8% in 2006,” according to managing director Samuel Peterson. “The good growth resulted from an overall increase in nearly all sectors, especially in the manufacturing sector where growth was from 5.1% in 2005 to 7.3% in 2006, with a forecast of 6.8% in 2007.”
Air Products and Praxair also operate in Malaysia, leaving a relatively small slice of the market for local players, such as Bintulu Industrial Gas (BIG) Industries Berhad, which supplies 60% of industrial gases in the oil town of Sarawak in East Malaysia. Earlier this year Air Products acquired the remaining 30% of its Malaysian subsidiary Air Products STB Sdn Bhd from its joint venture partner Sitt Tatt Berhad. Air products’ sales in 2006 were $55m.
The Thai market is relatively small, although major players including Messer, BOC and Air Liquide are hoping to cash in on its future potential.
Murray Covello, president of Praxair Asia, is keeping a watching brief on the region. He said that the company’s most substantial operation is its CO2 supply business in Thailand. Covello stated, “We will look for opportunities to build the business in Thailand, while keeping abreast of investments by others in Singapore and Malaysia.” He described the logistical problems of developing a business in the Philippines, due to its geography, but noted that it was considered an emerging growth area. The entry of global industrial companies in Vietnam was also being monitored. At present Covello considered steel and petrochemical industries to be the biggest potential markets there, but said that he’s also seeing some electronics investments.
It seems that further infrastructure investments in the region are likely, as growth in investment shows no sign of slowing despite the increasing costs associated with rising oil prices.
Hard to ignore – LNG
In addition to BOC’s LNG operations in Australia, another development relating to LNG could have more global significance. Linde has just formed an alliance with Single Buoy Mooring Inc., for the development and marketing of floating production, storage and off-loading units. These units allow for the exploitation of small or remote offshore fields and Linde will contribute gas pre-treatment, C3+ fractionation and natural gas liquefaction based on its proprietary Multi-Stage-Mixed-Refrigerant process.
Dr Belloni said, “The importance of LNG in the global energy markets is continuously growing and The Linde Group is poised to play a major role along the entire value chain.”