Germany's chemical giant may close plant due to gas shortage – WSJ

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The Wall Street Journal reported Monday that German chemicals giant BASF - with nearly 40,000 employees -  may be forced to halt production at the world's largest chemicals plant in Ludwigshafen due to a lack of cheap and abundant Russian gas.

BASF has been using Russian natural gas for years to generate power and as a feedstock for products such as toothpaste, medicine, and automobiles, according to the report.

However, the company stated that dwindling Russian gas supplies are posing a threat to its vast manufacturing hub.

BASF senior economist Peter Westerheide stated, as quoted by the WSJ, that "cutting down production at this site will be a huge task." 

"We've never seen situations like this before. It's hard to imagine," he added.

The Ludwigshafen complex, spanning approximately ten square kilometers and 200 plants, accounts for approximately 4% of total gas demand in Germany. 

It is worth noting that approximately 60% of the fuel used at the plant is used to generate electricity, while the remaining 40% is used to produce chemical products such as ammonia and acetylene.

BASF estimates that operations could be resumed if the chemical complex continues to receive more than half of the maximum volume of gas. Otherwise, the complex's operations will be halted.

Earlier this month, Russian gas flows to Germany via the undersea Nord Stream pipeline were reduced by up to 60% due to technical issues caused by Western sanctions against Moscow. 

In response to the crisis, Germany's government has activated the second "alarm" phase of its three-tiered gas emergency plan. 

Last week, Germany said it would raise the alert level under its emergency gas plan to secure supply following the recent reduction of pipeline supplies from Russia.

"Gas is now a scarce commodity in Germany," Economy Minister Robert Habeck told reporters.

#Germany has declared it is moving to the “alert level” of its emergency gas plan. pic.twitter.com/K4sA9DwJFg

— Al Mayadeen English (@MayadeenEnglish) June 23, 2022

Triggering phase two brings Germany a step closer to the third and final stage that could see gas rationing in Europe's top economy.

Germany has mandated that gas storage facilities be filled to 90% ahead of the European winter this year to mitigate the risks from a supply cut. 

Currently, the country's stores stand just under 60% full.

Germany has reduced the share of its natural gas supplied by Russia from 55% before the war in Ukraine to around 35%.

Europe's largest economy has also sought new sources of supply and accelerated plans to import gas into the country by sea in the form of Liquefied Natural Gas (LNG).

Read more: Germany unable to heat homes next winter: Minister