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BASF: 50% cut in gas supply would shut down Ludwigshafen

March 31, 2022
Energy & Chemical Value Chain

A reduction in natural gas supply to BASF’s Ludwigshafen, Germany, complex to less than half of current demand would result in a complete cessation of operations at the site, the company says. “If production is significantly curtailed or discontinued, significant impacts on the basic supply of the population—not only in Germany—and thus on the community can be expected,” BASF says in an emailed statement.

The German government issued an “early warning” on Wednesday over possible gas supply disruption amid a payments dispute with Russia. The Russian government had demanded “unfriendly countries” pay for its gas in rubles from 31 March, but the EU, which pays mainly in euros, has rejected the proposal. Germany has urged consumers and companies to reduce gas consumption in anticipation of possible shortages. The country sources about half of its gas and a third of its oil from Russia. The EU said earlier this month that it would reduce its demand for Russian gas by two thirds before the end of 2022, following Russia’s invasion of Ukraine.

“A continuous supply of natural gas is essential for chemical production,” BASF says in the statement. In Europe, BASF uses about 60% of the natural gas it purchases to generate energy—steam and electricity—needed in production, the company says. The remaining 40% is used as a raw material to produce basic chemicals and, in the value chains that build on them, a wide range of products for almost all industrial sectors, BASF says.

“A shortage of natural gas would therefore have a double impact on chemical production,” BASF says. “On the one hand, there would no longer be enough energy available for the production processes, and on the other, natural gas would be missing as an important starting material for the manufacture of products.” Natural gas cannot be substituted in chemical production in the short term, as a raw material or as an energy source, the company says.

If the amount of natural gas supplied to BASF were to be significantly reduced, the company says it would have to cut back on the production of key basic chemicals and downstream products. The result would be that “all downstream customer industries would be affected and, in the processing industry, the production of many important substances for daily use would have to be reduced,” it says.

BASF’s statement cites ammonia as an example of a large-volume product the company makes directly from natural gas. “The material use of gas in the chemical industry significantly affects ammonia production,” the company says. “Ammonia is used, among other things, to produce fertilizers. If the production of ammonia were to be curbed, less fertilizer would be available to agriculture, which would lead to declining yields in food production. This would put additional pressure on an already extremely tight market.”

BASF notes that Russia is a major exporter of gas-based products such as ammonia and fertilizer and has threatened to cut its fertilizer exports. “A reduction in gas supplies in Germany would further exacerbate the shortage of fertilizers worldwide, reduce food production, and cause prices for basic foodstuffs to rise further.”

Acetylene is another “important and versatile chemical building block” that BASF says it makes from natural gas. “Among other things, acetylene is an important feedstock for many everyday products,” the company says. Examples include plastics, pharmaceuticals, solvents, electrochemicals, and highly elastic textile fibers. “If less acetylene can be produced, this will have a negative impact on BASF’s downstream customers in the automotive, pharmaceutical, construction, consumer goods, and textile industries,” the company says.

Severe bottlenecks in gas supply and resulting impairments or shutdowns in BASF’s production “can be expected to lead to serious interruptions in many value chains of our downstream customers. Almost all industries such as agriculture, food, automotive, cosmetics/hygiene, construction, [food] packaging, pharmaceuticals, and electronics would then be affected.”

The impacts of a halt in Russian gas supplies would become apparent only after a time lag, but they should not be underestimated, BASF says. “The disruption to supply chains caused by the COVID crisis has already made clear how fragile global trade networks are,” the company says.

by Ian Young


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