By Ulf Laessing
Kuwait Petroleum wants to reduce its portion of cost of petrochemicals venture with US company.
Kuwait wants to reduce its portion of the cost of a planned petrochemical joint venture with US firm Dow Chemical by as much as $2 billion, a Kuwaiti oil official said on Monday.
The total value of the deal to set up a firm to make chemicals used in products ranging from plastic bottles and compact disks to computers and agricultural compounds, would decline to $15 billion from an originally planned $19 billion, the official added.
Dow and Kuwait Petroleum Corp (KPC) said last week they were still in talks on the deal after Kuwait's state news agency, KUNA, quoted KPC chief executive Saad al-Shuwaib as saying the agreement was under review due to the global financial crisis.
"Kuwait is looking to pay about $7.5 billion for the JV," said the official, who declined to be identified.
Under the previous arrangement, KPC's Petrochemical Industries Co is supposed to pay Dow $9.5 billion to contribute five of the US company's units to the 50-50 joint venture.
Dow and other chemical makers around the globe face one of the worst slumps ever in chemical demand, with a looming recession in most developed countries and a sharp slowdown in emerging economies that have been the main drivers of revenue growth for the sector in recent quarters.
A KPC official declined to comment on the talks, saying only a deal was possible this week.
The deal, part of Dow's strategy to reduce its exposure to the cyclical nature of the commodity chemicals business, was announced in December 2007.
The deal with KPC is especially significant for Dow, as it plans to use the proceeds from it to repay a large part of the $13 billion in debt it will have to shoulder once its acquisition of Rohm and Haas closes in early 2009.
In July, Dow said it would acquire its rival Rohm and Haas for $15.3 billion in a move to broaden its speciality product offerings.
Analysts are concerned that a delay in the closing of the joint venture, or a reduction in the value of the deal would hurt Dow, especially given its increased debt burden following the close of the Rohm and Haas deal.
Earlier this month, Dow said it was likely to announce a restructuring of operations before the end of the year and warned that its current trend rate indicated that shipment volumes would be down 10 to 20 percent over the next few quarters. (Reuters)