CIEC Catalysis -- Ethanoic Acid

Pleasant surprises began to accumulate for BP once construction began. The firm says that creative solutions by its engineers enabled it to cut 25% off the planned construction cost. Production has been relatively smooth from the start. Henley says the facility produced at 95% of capacity in 1999, the first full year of operation. The first year of operation was also profitable, enabling the partners to share a dividend.

However, the venture suffers from a frustrating logistical handicap: The railroad track from which Yaraco can ship its products to various parts of China sits about 50 miles away from the plant site. This is the one criteria that wasn't met on BP's list.

New infrastructure has also improved the lives of the three British chemical engineers who work at the Yaraco site. Pete Smith, for example, volunteered three years ago and left England for the Yaraco project, which he has found to be a fascinating experience. "I wouldn't have missed this for anything," he says. But at the plant site, he says, one is limited to walking or reading books for entertainment. "We get satellite TV, but without the sound," Smith says. A new highway has cut commuting time to the center of Chongqing from three hours to one hour though. The commute was occasionally taking up to 10 hours because of accidents blocking the flow of traffic.

BP is planning to double acetic acid capacity in Chongqing by early 2003. Using BP's proprietary Cativa catalyst, Yaraco will be able to achieve this increase in capacity simply by making a few plant modifications and adding a carbon monoxide plant to its complex. BP also is going ahead with a plan to start up early in 2002 an ethyl acetate and butyl acetate plant with an annual capacity of 80,000 metric tons that will create on-site demand for the acetic acid.

Henley is delighted with the success of the Yaraco venture. Pointing out that BP had not been exporting acetic acid into China, he says, "In 12 months, we went from nothing to market leaders in China. We have a 25% share of the open market." About 40% of shipments go to Shanghai and to Guangdong Province.

BP could face competition from Celanese in the future. Celanese is planning to expand annual capacity of Wujing, a Shanghai company, by 150,000 metric tons.

Tales of success such as that of Yaraco in Chongqing are still rare--so far. Chongqing remains an unenchanting backwater choking in industrial emissions. The cleanliness and relative sophistication of Shanghai appear a world away. There are only seven flights a week between Chongqing and Hong Kong, despite Hong Kong being the source of most of Chongqing's inbound foreign investment.

But it has only been two years since Beijing took direct control of the administration of Chongqing. And seeing the track record of Beijing in working with cities on the coast, one would be ill-advised to bet that Chongqing's economic development will be a failure.

Henley emphasizes that BP selected Chongqing before Beijing authorities began to provide incentives for foreign investors to go inland. BP found that natural gas is available in Sichuan, that Sichuan Vinylon is a capable partner, and that it is possible to integrate the infrastructure needs of the Yaraco venture into the existing facilities that are run by Sichuan Vinylon. Moreover, the local partner produces the raw material methanol. Overall, Henley says, Chongqing met nine of the 10 criteria that were most important to BP.

Plant	Location	Year	Increased throughput (%) or output of new plants
Sterling chemicals	Texas City, USA	1995	20 %
Samsung-BP	Ulsan, South Korea	1997	75%
BP chemicals	Hull,UK	1998	25%
Yaraco (Sichuan Vinylon and BP)	Chongqing, China	1998	200000 t per year
Sterling Chemicals	Texas City, USA	1999	25%
BP Petronas	Kertih, Malaysia	2000	Output 500,000 t per year
Yaraco	Chongqing, China	by 2003	Double the current output

BP has made what is to date its largest investment in China with its Yaraco acetic acid joint venture in Chongqing. It is performing above expectations. "Few joint ventures in China are as successful as this one. No one has challenged me on this point," Yaraco's Henley says. BP is implementing several expansions in Chongqing, including a doubling of the acetic acid production facility.

Yaraco is 51% owned by BP, 44% by Sichuan Vinylon Works, and 5% by the Chongqing government. The feasibility study was made in 1993-94. The venture was formed in 1995 and started production in the fourth quarter of 1998. The facility was initially expected to produce 150,000 metric tons of acetic acid per year, but this has been rerated to 200,000 metric tons because plant reliability has been higher than originally expected at the planning stage.


The only solution found was to use an existing pier on the river from which barges are loaded with the product and pulled to the railway network where the acetic acid is then loaded onto railcars. But the vast program of infrastructure improvement that Chongqing is experiencing eventually will bring the railway track to within a short distance of the Yaraco site.