Byproducts from ammonia production, for example, are piped through a 1,771-mile (2,850 km) network of pipelines from one end of the site to the other, where they are recycled to produce fertilizers, disinfectants, liquid diesel exhaust or carbon dioxide for carbonated beverages . The so-called verbund (composite) principle was the key to BASF’s 157-year rise from the ‘Baden Aniline and Soda Factory’ to the world’s largest chemical manufacturer. Now that Vladimir Putin has severely curtailed energy exports to Europe, this smart interconnectivity could be the undoing. The southwestern German site relies on natural gas as a raw material and energy source, consuming about as much annually as all of Switzerland, and BASF played an active role in ensuring that much of that gas was imported cheaply from Russia. Should the German state be forced to distribute gas for industrial use this winter, BASF says it can reduce its consumption to a degree by throttling individual plants or swapping gas for fuel oil at certain stages of production. It has already reduced its on-site production of ammonia, instead shipping the chemical from abroad. However, because the 125 production plants in Ludwigshafen are an interconnected value chain, there is a point where a drop in natural gas supplies would lead to a site-wide shutdown. “As soon as we can receive significantly and permanently less than 50% of our maximum demands, we will have to shut down the entire site,” says Daniela Rechenberger, a spokeswoman for the company. “This is something that has never happened in the history of BASF and something that nobody here would like to see happen. But we wouldn’t have much choice.” With German gas storage 87% full, there is growing optimism that a glut can be avoided this winter. But even then high gas prices could force companies like BASF to halt production. With large parts of the site operating around the clock since the 1960s, BASF says it is unclear whether production could simply resume afterwards or whether the drop in pressure would cause some machinery to break. The consequences of a shutdown in Ludwigshafen would be far-reaching, not only in Europe’s largest economy but across the continent. Buyers still associate the initials BASF with audio and video tapes, but it sold that business arm in the mid-90s and today its sales are mostly business-to-business. its products most invisible but also most necessary. The acetylene plant in Ludwigshafen. About 20 plants at the site use the chemical as a building block for many everyday products, including plastics and solvents. Photo: Andreas Pohlmann/BASF Chemicals produced by BASF are used to make everything from toothpaste to vitamins, from building insulation to diapers. It is one of the world’s largest manufacturers of painkillers ibuprofen and the automotive industry accounts for 80% of its sales, which means that the pipelines in Ludwigshafen will directly affect car manufacturing regions such as Emilia-Romagna, Catalunya or the Hauts-de- France. One of the few remaining end products still produced in Ludwigshafen is AdBlue, a liquid used to reduce air pollution from diesel engines. It’s a legal requirement for heavy goods vehicles, so a shortage could bring trucks across Europe to a standstill. Under German law, households will be excluded from gas distribution along with other “protected” customers such as care homes or hospitals. The brunt of the cuts will have to come from industry, which will account for about a third of the country’s demand. The federal grid regulator has required large industrial consumers to submit their requirements to a central database to be launched this fall to estimate where outages would have the most devastating effects. The chemical industry is expected to be first in line for exemptions. The question is, how fair is it for the government to bail BASF out of a dilemma it played a role in making and continues to profit from? One of the end products produced in Ludwigshafen is AdBlue, a liquid used to reduce air pollution from diesel engines. A shortage could bring trucks across Europe to a standstill. Photo: Andreas Pohlmann/BASF The chemical company’s ties to Russian state energy firm Gazprom date back to just after German reunification in 1990, when it sought to use new gas avenues from the east to break the monopoly of Germany’s own trader, Ruhrgas. Through its Wintershall subsidiary, it co-financed the construction of Nord Stream 1, the gas pipeline the Kremlin tried to hold the European Union to ransom this year, and Nord Stream 2, which was halted shortly before the invasion of Ukraine in February. The partnership has blossomed despite growing signs of Moscow’s aggression: in 2015, a year after Russia annexed Crimea, Wintershall handed Gazprom Western Europe’s largest gas storage tank at Rehden in exchange for stakes in gas fields in western Siberia. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. The swap was “politically desirable and politically supported” at the time, BASF says, and strategic gas reserves were not considered a priority by then-Chancellor Angela Merkel. However, the role BASF played in causing the current energy crisis may not be so easily overcome in the long run. Its chief executive, Martin Brudermüller, who in April spoke out against an embargo on Russian natural gas, came across as “an arsonist who first sets the house on fire and then claims that only he is able to put it out,” its editor wrote. Taz newspaper. recent comment. The chemical company’s lucrative connection with Gazprom continues to this day despite Russia’s war in Ukraine, which has prompted the EU to impose sanctions on several high-profile individuals linked to Gazprom, though not the company itself. BASF wound up its business operations in Russia and Belarus in July, but has created exemptions to support food production and retains its stake in Wintershall, now known as Wintershall Dea. The chemical company posted big profits in the first half of the year, mainly due to the subsidiary benefiting from high oil and gas prices. BASF owns two-thirds of Wintershall Dea with the rest held by Russian-Israeli oligarch Mikhail Fridman, who is subject to EU and UK sanctions. The energy company’s adjusted net income in the first half of this year was €1.3bn (£1.1bn), with pre-tax profits in Russia up fivefold compared to the same period in 2021. A steam cracker at BASF’s Ludwigshafen site, the largest individual unit at the facility. Photo: Detlef W Schmalow/BASF BASF says these profits come from natural gas produced by Gazprom being sold on the Russian market, not the EU. The company has tried to make up for lost time in recent months, starting to build a solar farm in Brandenburg and a large wind farm off the Dutch coast to ensure that renewables cover more of its energy needs. But keeping Ludwigshafen’s value chain intact without gas may be an insurmountable challenge. The essential centerpiece of the site are the two steam crackers, in which giant gas-fired furnaces “crack” crude oil derivatives into smaller components by rapidly heating them to 840C. A test site that uses electricity instead of gas to crack hydrocarbons was unveiled at BASF’s Rhine River facility in early September, but it won’t be a solution for the coming winter. “It’s not something you can do in two months,” says Nonnast. “It might be possible in five years, but only because we started looking at it five years ago.”
