Dow Chemical's Latest Joint Ventures

Dow Izolan, a joint venture between Dow Chemical (DOW) and Izolan (Vladimir, Russia), has broken ground on a polyurethane [PU] systems plant at Vladimir. Dow says the plant will help meet demand from the “fast-growing” appliance, automotive, construction, consumer products, and furniture markets in Russia. The facility is due onstream in mid-2009.

Saudi Aramco and Dow's giant Ras Tanura petrochemical faces delays as the sheer size of the project complicates design, the Middle East Economic Survey [MEES] reported.

Dow's investment in the plant, estimated at $22 billion, will be the largest single foreign investment in Saudi Arabia's energy sector. The plant, due to begin production in 2012 had awarded KBR (KBR) the front-end engineering and design contract for the plant in July 2007, but that contract will be split and partly awarded to another company, MEES reported, citing industry sources.

"Around 2 million man hours of work, covering utilities and offsites and some aromatics units have been taken off KBR and will be given to another firm, leading to delays," the weekly MEES reported.

I'm not sure this really qualifies as a "delay" as the original time frame for the project was 2011-2012. I am guessing that the 2011 part of the equation isn't going to happen. Not really all that big a deal as they are still in the ballpark and a whole lot of time can be made up between now and 2011.

The Russian JV shows a ton of promise. It is also fraught with risk due to Putin. One has to consider the very real lesson Mr. Putin learned the past couple week watching his country's stock market and currency plunge after the Georgian actions. Far from politicians teaching him a lesson, the market will enact a far more severe cost to him. That being said, one can only hope the reality of the world he now lives in is sinking in.

The Russian JV is not a critical project like Ras Tanura but events in Russia will now bear a closer eye. One can only hope markets have taught Putin a lesson he needed to learn.

Disclosure: Long DOW

Comments

[epeon:]

Almost all of the engineering firms have their plates quite full. The US has been downsizing its engineering base for the last 25 years. Now, all of a sudden, the demand has gone through the roof. Companies like KBR just don't have the bodies to execute the work. It will take years for them to hire and train the workforce to do these projects. The same can be said for the vendors that the large companies depend upon (the large companies have been offloading engineering to their vendors as they downsized). So, frankly, I expect more delays.

2008 Sep 23 10:27 AM