Green renaissance is gathering pace

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1 VERSALIS STRATEGY Significant investment and a new strategic direction are expected to drive growth and secure the company s future Green renaissance is gathering pace Midway through its 2bn four-year transformation and Italian major is accelerating efforts to enhance competitiveness, improve efficiency and become greener ANDY BRICE LONDON, the chemical subsidiary of Eni, unveiled a bold new strategy in 2012 to radically overhaul the company and reverse its fortunes. By converting and optimising poorly performing sites and enhancing its product portfolio through an expansion into green chemistry, Italy s leading producer is laying the groundwork for a far more secure future. CEO Daniele Ferrari has been overseeing the dramatic turnaround and remains confident that the measures being taken now will propel the petrochemical producer back among the world s elite firms. With the aim of revitalising the business after the severe effects of an over-exposure to bulk chemicals and the lacklustre European market, Ferrari launched the 2bn ($2.7bn) programme and kickstarted the initiative with the company s rebranding. This also included a renewed focus on four key business units elastomers, styrenics, polyethylene (PE) and intermediates with added-value products, as well as a radical transformation of inefficient sites including Porto Torres, Priolo and Porto Marghera. Although Europe remains an extremely important market, European producers are making efforts to remain competitive on a global level, says Ferrari. To be competitive there are two key drivers of innovation: know-how and sustainability. And you must also consider the industry within its specific geographical context. In Europe, for instance, the industry has no option: innovation and technological leadership is the way to go. If no measures are taken to boost competitiveness, it is destined to fade away eventually and this is something that a large economy such as ours cannot afford. For some time, the EU chemical industry has seen the erosion of its capacity to compete with the strong players from the Middle and Far East. For this reason, it is now fully committed not only to restructuring or rationalising its traditional facilities but also to decisively taking onboard alternative production methods. The emphasis on the bioeconomy, he says, should go some way to alleviating the pressure resulting from growing price volatility of fossil-based feedstocks, concerns over their scarcity and greater restrictions on emissions. The cornerstone of new strategy is to concentrate on products and technologies where the company holds a leading position, while minimising exposure from other regions particularly relevant given the emergence of shale gas as a feedstock in the US. Editor Andy Brice Production Louise Murrell Copy editing Ethel Ong Design Tina Tian, Lin Ning Product director David Stanworth Sales John Hill, Tom Iredale Printed by Williams Press, UK Cover Getty Images ICIS, The Quadrant, Sutton, Surrey, SM2 5AS, UK by Reed Business Information. All rights reserved. No part of this publication may be reprinted, or reproduced or utilised in any form or by electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording or in any information storage and retrieval system without prior permission in writing from the publisher. 2 Supplement May 2014 VSU_260514_ indd :29

2 VERSALIS STRATEGY The company also pledged a focus on licensing and innovation, particularly in the field of green chemistry to create synergies between the renewable and petrochemical industries. GREEN VISION has always been pursuing technological leadership and, in the case of chemistry from renewables, this includes synergies with new partners, infrastructures, knowledge and skills, says Ferrari. Biotechnology and renewables are the company s main targets since flexibility and rationalisation are only short-term solutions and are not the magic answer to fixing the issues the industry is faced with, namely energy costs and aggressive competition. first foray into bio-based production started with its landmark 500m Matrica joint venture with Novamont in The conversion of the Porto Torres site in Sardinia into the largest green chemistry complex in the world is now well underway, with the first phase of the huge project completed in early 2014 (see box). Equally important partnerships have since been established with leading players such as Elevance, Yulex, Pirelli and Genomatica. Ferrari insists this new green philosophy is already starting to bear fruit and help ensure the company s longterm success. All of our green chemistry partnerships and inhouse R&D aim to Although Europe remains an extremely important market, European producers are making efforts to remain competitive on a global level DANIELE FERRARI, CEO enhance bio-based portfolio and will feed oil-based production chains with highperformance intermediates from renewable feedstocks, he says. Looking ahead, is hopeful of more far-sighted energy policies, which balance the importance and industrial needs of the chemical industry with environmental sustainability. is striving to find its way through initiatives that will secure competitiveness and long-term sustainability, adds Ferrari. Although bio-based chemicals still only account for a small share of global chemicals and polymers production, these greener feedstocks are finally beginning to challenge conventional fossil-based resources in the production of a range of chemical building blocks, he says. The trend is clearly positive and the timescale for boosting a decisive takeoff is in the range of a few years. The bio-based chemicals business is central, among our strategic targets, to new industrial and business approach. Critical to these new plans is increased investment a move that is already starting to pay dividends, insists Ferrari. Innovation is not an option for either and is an approach that we really cannot let slip away. We need to make the most of the knowledge we have accumulated over the past 50 years it helps us in situations where market growth may not be healthy or in geographical regions which are stagnant. With the opportunities posed by the burgeoning bio-economy, green chemistry is pivotal to the company s long-term prospects, he says. PLANT REGENERATION MATRICA MODEL MARKS A NEW ERA The Sardinian Porto Torres site is undergoing a radical overhaul THE COMPLETION of the first phase of the landmark Matrica project positions as a driving force in green chemistry. The centrepiece of bold new business strategy is the transformation of its ailing chemical site in Sardinia into a world-class biobased complex, utilising the latest technologies and setting a benchmark for green chemistry. The 500m ($695m) Matrica project occupying a 27 hectare (67 acre) site in Porto Torres is set to become one of the largest and most innovative industrial green chemistry complexes in the world. Construction started in 2012, with the project due for completion over a few years. Since partnering with Italy s Novamont in the 50:50 joint venture in June 2011, both companies have collaborated to regenerate the site and convert it from traditional fossil-based production into a biobased behemoth. Total investment for the initial phase of the project was around 170m, with the first two units the bio-monomer and bio-esterification plants encompassing three production lines and coming fully onstream in the second quarter of The bio-run industrial complex project will produce bio-plastics, bio-lubricants and bio-additives for elastomers sourced from renewable raw materials such as vegetable oils and agricultural waste. When the entire project is complete, the site will boast an overall capacity of around 350,000 tonnes/year of bio-products and provide a model that hopes to replicate across other sites and other regions. All of the Matrica products are obtained from renewable sources, in particular, biomass and the transformation of vegetable oils. The oil is then transformed into dicarboxylic acids, monocarboxylic acids and glycerol. These products will be the base for a wide range of applications from bio-plastics, in the cosmetic or pharmaceutical sectors for skin and hair treatments, in the field of phytosanitary products, and most importantly they will be used as a base product in bio-lubricants. The bio-lubricants based on pelargonic acid, for example, particularly suit applications requiring high performance. These will feed the automotive industry, marine sector, agriculture and many other segments and provide reduced energy consumption, fuel, as well as longer life for moving mechanical parts. A dedicated 700 square metre (sqm) research centre was opened in February 2012 to optimise the agricultural supply chain and develop innovative industrial technologies. This soon expanded in size fivefold to 3,500sqm, following the start-up of the pilot plant. To further steer future synergies and enhance the ongoing research programme, also signed a framework agreement with the Sardinia Region, the Italian National Research Council (CNR) and the Universities of Cagliari and Sassari. May 2014 Supplement 3 VSU_260514_ indd :29

3 VERSALIS RESEARCH AND DEVELOPMENT Innovation is key to unlock potential Building on its strong foundations as Italy s leading petrochemical producer, renewed focus on innovation and green chemistry provides opportunities for growth ANDY BRICE LONDON Getty Images I n the midst of the global economic crisis and faced with soaring energy and feedstock costs, faltering demand and intense pressure from the Middle East and Asia, it was clear that a fundamental shift in strategy and direction was needed for Italian major. Any kind of process which can differentiate a producer from its competitors gives you an advantage, says Sergio Lombardini, R&D and technology innovation director. The big advantage with developing chemistry from renewables right now is that any player is starting almost from scratch in this new field. We believe that if we raise our efforts to make it happen, we ll be able to make a full supply chain starting with the raw material that is not subject to financial fluctuations or raw materials pricing. green journey started with the foundation of the Matrica project in 2011 a 50:50 joint venture with Italy s Novamont that will see a bio-run complex built at the Porto Torres 4 Supplement May 2014 VSU_260514_ indd 4 site in Sardinia. Subsequent partnerships were formed with Genomatica to produce bio-based butadiene (BD), Yulex and Pirelli to make and research guayule-based natural rubber and bioresins, as well as Elevance Renewable Sciences to develop new bio-chemicals at the revitalised Porto Marghera complex. This is a big part of our strategy and I m quite sure it will be successful. This is not just an experiment in addition to our core business this will become just as important as all the other businesses we have, he insists. We want to become a leader in this field. Our new strategic direction means we ve been free to develop this area and focus on innovation with fewer constraints. As a result, the past few years have seen refocus and reorganise its business to make more relevant investments, while significantly increasing its innovation spending. Through the myriad of agreements, licensing and investment in pilot units, research and technology, by 2015 the company will have doubled the total R&D costs of two years ago to 80m ($111m). INVESTING IN THE FUTURE The economic situation is not healthy, but it has not affected our plans; the management and our parent company are supporting us and we believe that this has been an important investment in our future, says Lombardini :29

4 VERSALIS RESEARCH AND DEVELOPMENT He is confident that spending will continue to climb in the coming years, with more directed at the construction of pilot plants to trial new technologies. There are two pilot units currently under construction: a butane dehydrogenation plant in Ravenna using C4s to make BD, which is now close to start-up, and a new polystyrene (PS) process, continuous mass acrylonitrile butadiene styrene (ABS) in Mantova that is in its engineering phase. A further two pilot units will be on stream within the next year through partnership with Yulex for the development of a guayule plant in 2014, and with Genomatica in 2015, with whom it is developing bio-bd from sugars. MANY BENEFITS There are many tangible benefits from this investment, he points out. We have changed our engineering philosophy for these pilot units in order to squeeze the construction time. By changing how we assemble them in pieces by third parties we have reduced their construction time and this has saved us a matter of months. It has been an important move to help us cut costs, says Lombardini. It is important throughout the creative R&D process to harness the company s existing economic model and processes to drive development, he adds. From an early stage of the R&D projects, it was clear that the engineering platform the company had created should both assist and steer the entire process. has since established an engineering department completely dedicated to chemicals from renewables, located at another of its R&D centres in Mantova. The venture into green chemistry also fuelled another important change for the is investing in its assets ELASTOMERS GENOMATICA JV GUARANTEES BIO-BASED BD THE SHALE gas revolution and the dominance of ethane cracking, for all its opportunities, is not without its drawbacks. Among them is the lower yield of butadiene (BD), a key intermediate for elastomers business segment. These declining supplies and a lack of dedicated BD production, combined with the prospect of increased demand particularly from the automotive sector are expected to contribute to considerable pricing volatility moving forward. To alleviate this pressure and secure feedstock supply for the business, and US renewable chemicals firm Genomatica have established a joint venture to develop and license bio-based BD. As part of the agreement, signed in April 2013, the companies will combine efforts to develop an end-to-end process for the on-purpose production of BD from non-food biomass. This will subsequently be licensed across Europe, Asia and Africa. BIO-CHEMICALS ELEVANCE DEAL SEES REVAMP AT PORTO MARGHERA ENHANCING EXISTING operations by upgrading plants and infrastructure is central to the new business approach employed by and has already seen work start at several of its sites to focus on optimisation and efficiency improvements. Its plans will see the transformation of the uncompetitive chemical facility at Porto Marghera by bridging commodity chemicals production with renewable specialties. Central to the 200m ($278m) overhaul is an agreement with US-headquartered specialties firm Elevance Renewable Sciences that will not only see the partners develop new catalysts and eventually ramp up production to commercial scale, but will also result in Deal ensures a source of vital feedstock butadiene The combination of and Genomatica brings the industry closer to a BD source that will be more sustainable and deliver more stable production costs, says Christophe Schilling, CEO of Genomatica. Having seen successful commercial scale production of BDO using our process, this partnership further validates Johnson (left) and Ferrari the ability of our technology platform to bring additional chemicals to life. he says. will hold the majority interest in the joint venture and expects to be the first to license the process and build commercial plants. It also plans to invest over $20m ( 14m) to its partner to support the development of the process. the construction of the world s first ethylene metathesis-based unit using vegetable oils. Porto Marghera benefits from its close proximity to key markets in northern Europe and integration with other sites in nearby Mantova, Ferrara and Ravenna. Elevance and recently signed a Development Agreement in April to jointly develop and scale the metathesis technology. Production will be targeted at the personal care, detergents, bio-lubricants, solvents and oilfield chemicals sectors. The project combines experience in catalysis process development and engineering design and Elevance s knowledge in metathesis, and not only provides the firms with new manufacturing opportunities but the development of a new technology. This partnership with is a natural next step building on the commercially competitive demonstrations of molybdenum-catalysed metathesis of natural oils that we have achieved in our partnership with XIMO, said K Lynne Johnson, Elevance s CEO, at the time of the announcement. May 2014 Supplement 5 VSU_260514_ indd :29

5 VERSALIS RESEARCH AND DEVELOPMENT Expanding the knowledge base through recruitment and new relationships is essential company, with several key partnerships reliance on a mature European market and established to improve its knowledge base. With background steeped in petrochemicals, it was decided that more insight was required in the field of agricultural economics. Relationships were formed with leading consultants to improve its competencies, while a new department was created and a team of staff hired with PHDs in agronomy. To further its understanding of the sector, there has also been extensive collaboration with Universities. For a company so established in Europe, and specifically the Mediterranean, growing its global presence and gaining a greater footprint overseas is also an important part of its renewed strategy. Reducing the company s tapping into rapidly growing regions has become essential, he says. I don t think green chemistry in Asia will necessarily be our focus excluding possible cooperation with well-established players in this field but agronomically there s a lot of potential for green chemistry in Latin America, Africa, as well as Europe, notes Lombardini. From a green chemistry point of view, if you want to make a top integrated production chain you have to look at the microclimate as well as the availability of land for the crop you want to grow. These are the biggest constraints rather than the market itself because you cannot move biomass. Another challenge is the green premium, with bio-products perhaps promising higher performance than comparable fossil-based products, but currently costing more. Endusers do not want to face higher costs, he says, despite potential benefits from using a greener substitute. Carefully evaluating the direct and indirect costs of green chemistry is therefore essential to ensure success and Lombardini is adamant that bio-products will eventually come out on top. I believe that although bio-based chemistry has made very small steps up until now, the potential is very high especially in specific market segments where bio-based content is a benefit. It s very different from chemistry using fossil fuels and I m totally convinced that bio-products will win in such market segments. With this new direction, the future prospects for the company are far more positive. Its philosophy has long been the production of the main chemical building blocks from fossil fuels, but Lombardini and his team believe there is a real driver in the market for renewables. In the case of bio-bd, for example, it wants to win the race to be the first synthetic elastomer producer to make it. Among other green projects, it is worth noting the one with The Massachusetts Institute of Technology (MIT) for bio-isoprene. I believe that although bio-based chemistry has made very small steps up until now, the potential is very high SERGIO LOMBARDINI R&D and technology innovation director INNOVATION GREEN EMPHASIS MARKS NEW DAWN THE BIO-ECONOMY has been identified as a key growth market, with research at Novara facility integral to its green-focused future Since its inception over 70 years ago, the Donegani Institute at Novara, which lies 30 miles (48km) west of Milan in northwest Italy, has established itself as a leading site for innovation and advancements in catalysis, polymers and fine chemistry. Just like the industry it serves, the R&D centre has also been subject to significant change over the years. It underwent a shift in direction in 2007 to focus exclusively on renewables, and specifically the conversion of solar energy and the production of biofuels from non-food biomass, becoming known as the Research Centre for Non-Conventional Energy Istituto Eni Donegani. Then in January 2013, acquired part of the centre from its parent company Eni, setting up the Green Chemistry R&D Centre and embarking on a series of innovative green projects that form the core of its ambitious new strategy, says Gianni Girotti, manager of the green chemistry department. We realised when we started moving our operations, development and activities from traditional chemicals to renewables in 2011 that we would, sooner or later, have required a dedicated R&D centre, says Girotti. We then selected a portion of the Novara site and agreed with Eni to dedicate these laboratories to the biobased chemicals field through both the industrial bio and conventional catalysis sciences. Since then, the company has embarked on a series of innovative projects to tap into the promising bio-economy and establish itself as a major player in the field. The Matrica JV with Novamont is the most advanced, with the first phase of the project coming on stream from the second quarter of The JV makes use of innovative technology to produce, among other things, high oleic oil. The development programme was de- 6 Supplement May 2014 VSU_260514_ indd :29

6 VERSALIS RESEARCH AND DEVELOPMENT CROP SCIENCE EXPANDING INTO NATURAL RUBBER THE DEVELOPMENT of bio-rubber has been identified by as a key part of its strategy to ease concerns over the future supply of butadiene (BD) feedstock. It will also expand the elastomers portofolio with added-value products with renewable content, thus strengthening its positioning in the rubber business. Early last year, announced plans to produce guayulebased natural rubber in collaboration with US-headquartered bio-materials company Yulex Corporation. The partnership will leverage Yulex s experience in crop science and bio-rubber extraction and cover the entire manufacturing process from crop science to biorubber extraction. It will mean the construction of a new biomass power station and production facility in southern Europe. plans to spend over 200m ($278m) in the next five years on the new biorubber complex, including both agro and industrial segments. Guayule (Parthenium argentatum) a renewable, non-food crop that requires little water and no pesticides, and thrives in arid or semi-arid landscapes is an alternative source of natural rubber that has latex allergyfriendly properties. It is one of the few species that has been used to produce rubber on an industrial scale. The location was carefully selected to suit the growing conditions of the guayule crop and to ensure the close proximity of the feedstock source so the project could remain as energy efficient as possible. An extraction plant will soon be under construction and is expected to be on stream in early 2016, with the bio-mass plant starting up the following year. As part of the deal, has the exclusivity to the process technology for a defined territory. Research will also be carried out on possible industrial applications for the rubber, with other locations globally identified for additional production facilities. As part of its longer-term plans, is also embarking on a Guayule can be used to produce natural rubber on an industrial scale research project with Pirelli to develop new technologies for the tyre industry a major end-use market for guayule-based natural rubber. In March 2013, the two companies signed a memorandum of understanding (MoU) for a three-year joint research project using guayulebased natural rubber for the automotive sector. As part of the exclusive agreement, will supply the bio-based materials while Pirelli will be responsible for running the series of trials to test its performance for use in tyre production. Pirelli has always been dedicated to the development of innovative solutions that prioritise sustainability and this means safety and respect for the environment, said Maurizio Boiocchi, Pirelli s chief technical officer. In this regard, it is fundamental to emphasise research on renewable raw materials, an area where we hold industry leadership at the international level. The project for guayule-based natural rubber is one of our key activities that fully engages our team of researchers; it also underlines the strategic importance of long-standing partnerships like the one with. signed to minimise the time to market and ensure that the renewable products were of a comparable standard those made by conventional methods, says Girotti. Matrica will not only see the transformation of the loss-making Porto Torres site, he says, but will be one of the most advanced and largest facilities of its kind in the world when the project is completed in Girotti also points to other key strategic partnerships, notably an agreement with Genomatica, a global leader in sustainable chemicals, to produce bio-based butadiene (BD) through a mix of bio and conventional catalysis. Girotti notes that this is a vital step for a company so reliant on BD. He points out that about 30% of the resources at the Novara institute are currently dedicated to this project. Similarly, other projects such as working with Elevance to develop new technologies are equally important for continued recovery, says Girotti. Guayule-based natural rubber production is at the centre of the collaboration with US-based Yulex and will result in several dedicated facilities being built in the coming years. We have started with this experimental feedstock and are now approaching the end of the first year on the agro side. Everything is performing really well, and we are designing a very wide and multi product technology platform from guayule biomass, he says. This is the first time we have really looked at agricultural aggregation, he says. This process is an economic concept that considers not only what is being invested in the project, but looks towards the eventual outcome and effects. We are not only following metabolism of plant in terms of content of natural rubber as well as resins, but we are defining a customisable agricultural protocol that is suitable to be handed over to the farmers. These are important projects for us, says Girotti. May 2014 Supplement 7 VSU_260514_ indd :29