THE cracker plant at Wilton is regarded as a cornerstone of the region’s chemical industry. Following a massive investment by owner Sabic, Business Editor Andy Richardson looks at what the future holds for the biggest chemistry set in the region.

IT might be one of the most recognisable sights on our industrial landscape, but the long term future of Sabic UK’s chemical cracker, and its sister facilities, have been in doubt.

Only last year, the business carried out the latest phase in a restructure programme which saw 110 staff lose their jobs and scores of contractors axed.

The chemicals industry across Europe has suffered during the recession. The downturn meant there was a significant drop in the demand for the sort of everyday items Sabic products go into, while competition intensified.

Sabic (Saudi Basic Industries Corporation) wasn’t alone in cutting costs as challengers in the US and Asia entered the market.

Announcing last April’s cuts, Mike Ducker, the site director, insisted the company was committed to Teesside even as he admitted it “is not a sustainable business model for Sabic UK Petrochemicals to remain as it is.”

Following last Thursday’s news that the firm was making an undisclosed, but “very significant” investment in the plant, backed by £9m from the Government’s Regional Growth Fund (RGF), Mr Ducker clearly relished the chance to be making a positive announcement.

“This is great news for Teesside,” he says. “We had to make savings to keep the place going and it felt like we were fighting against the tide for a while now. But there comes a point when you can’t continue cutting, otherwise you don’t have a viable business. This project is about protecting jobs. It will also help to create hundreds of construction jobs during the build phase,” Mr Ducker added.

Sabic UK employs more than 1,000 staff and contractors on Teesside and supports about 4,000 in the local supply chain.

The cracker, also known as Olefins 6, was built by ICI in 1979.

Sabic bought the facility from US firm Huntsman in 2006 along with other assets previously owned by ICI including an LDPE plant (low density polyethylene) – the biggest of its kind in the world – as well as an aromatics and logistics complex at North Tees, and a cross-country pipeline network

The site has been likened to a huge chemistry set.

The cracker takes feedstocks from oil refineries at one end and cracks apart their components under temperatures of about 1,000 degrees C and then cools them to below -180 degrees C to produce ethylene, propylene and butadiene.

These are some of the main basic building blocks for everything the chemical and plastics industry makes, from cups, food packaging and storage to shampoo and detergents.

To many people passing the Wilton site the two main images they see are the flare at the top of one of the tallest stacks, and it you are passing at night, the thousands of small lights attached to the structure.

The flare is effectively an essential safety device, letting off surplus gases in the event of a problem with the production process.

The lights are a health & safety necessity, illuminating the plant to ensure safe operation of work.

“The cracker is the cornerstone for the industry on Teesside, so we believe it is of wider significance for the region’s chemical industry,” says Mr Ducker. “There comes a time when you need to do something big and transformational.”

The switch to cheaper feedstock is the bold move that Sabic believes holds the key to its survival in the North-East.

The cracker will be converted to use ethane as a feedstock instead of the more costly naptha it uses now. It is also expected that due to the reduced amount of energy used to process ethane, Sabic's CO2 emissions will reduce.

It is not the only plant going down this route.

Ineos at Grangemouth in Scotland, and Borealis in Sweden have both signed deals to take ethane from the US.

All three plants will come on stream around the third quarter of 2016. Finding a way to tackle rising energy and raw material costs is one of the key challenges facing industries in all sectors right now.

The move to ethane should secure the Sabic site and hundreds of chemicals jobs on Teesside into the next decade.

The ethane will be shipped from the US where abundant supplies of competitively priced gas are now available as a result of the shale gas revolution. Sabic has signed a 10 year deal with its US supplier. It might have looked closer to home if the UK shale industry had progressed further than sinking a few boreholes, and generating a slew of negative publicity in the process.

At the North Tees plant at Port Clarence, work is under way on a new import terminal and tank to carry the ethane.

The tank is being designed by the team at Whessoe Engineering in Darlington, who boast decades of expertise in cryogenic storage.

“We are delighted to be working with Whessoe. It is a great story for the whole region, “noted Mr Ducker.

Middlesbrough-born Greg Clark, the Universities, Science and Cities Minister, said the allocation of taxpayers’ cash into the project demonstrated real confidence in Teesside.

He said: “It is a significant example of how we can use the RGF to support businesses to deliver their plans for growth. It also gives me particular pleasure as someone who grew up a stone’s throw away from Wilton.”

Regional spokesman Dr Stan Higgins, chief executive of NEPIC, the North East of England Process Industry Cluster, is a passionate advocate for the industry. He travels all over the world to attract inward investment, and understands the challenges faced by his members.

“Sabic’s announcement is a huge boost for the Teesside chemicals industry,” he said.

“It will create one of the most efficient facilities of its type in the world.

“But we have to bear in mind that this is an ageing industry. There are new players coming into the market all of the time. You either adapt or you go under.

“Job losses are inevitable as companies find ways of doing things cheaper and more efficiently. I don’t care if you make clothes, cars or chemicals. That is a simple fact of life.

“When I hear that one of our companies is restructuring – even if it sadly means there will be job losses – I jump for joy, because I know it is essential to ensure this industry survives in our region.

“The challenge now is to protect the older assets, such as the cracker, and attract as much new investment here as possible.

“The Government has to sit up and take notice that this industry makes an enormous contribution to GDP and it deserves all of the support it can get to ensure its long-term success.”