EPS begins pipeline construction

EPS begins pipeline construction

Munich, September 14, 2007 – The first shovel of earth has been turned for the construction of the Ethylene Pipeline South (EPS). The start of excavation in Gaimersheim near Ingolstadt, Germany, marked the beginning of work on the first of 360 kilometers of pipeline in the EPS. Plans call for the pipeline to reach from Münchsmünster in Bavaria across Baden-Württemberg to Ludwigshafen in Rhineland-Palatinate. Once put into service – planned for September 2008 – the pipeline will connect ethylene producers and processors in southeastern Bavaria with the ethylene center in Northwest Europe.

The State of Bavaria is providing support amounting to about 30% of the 150 million europroject. For the chemical industry, a worldwide driver of growth and innovation, Bavaria is the second largest location in Germany, employing 60,000 people. Bavaria’s Minister of Economic Affairs Erwin Huber handled the shovel himself in Gaimersheim, underscoring the major significance of this project for the industrial infrastructure: “In connection with the construction of this pipeline, the EPS shareholders OMV, Basell, Borealis and Vinnolit have announced investments totaling more than one-and-a-half billion euros. This clearly sets the stage for a bright future for the Bavarian ethylene chemical industry.” The State of Bavaria will drive forward efforts to provide an adequate transportation infrastructure for the Bavarian chemical triangle, he said, and work to realize the expansion of the relevant railway segments and the A 94 autobahn in the economic zone of southeastern Bavaria.

Dr. Gerhard Roiss, Chairman of the EPS Advisory Board and OMV Deputy Chairman, believes that EPS will play a key strategic role: “It will move Bavaria off the island it now occupies and link it up with the Trans-European pipeline network – via Ludwigshafen and all the way to Rotterdam. EPS will open other doors as well, enabling the expansion of the European network across Austria and to the East, for example, as well as toward France.”

According to Dr. Josef Ertl, CEO of Vinnolit GmbH & Co. KG and a member of the EPS Advisory Board, the start of excavation work will bring closer two major benefits for chemical companies. “For one thing, the vital supply of ethylene will become more flexible, and we will be able to react better to fluctuations in the market and in capacity. At the same time, securing the supply of raw materials for the long-term will give the industry the planning security it needs for future investments.”

The work of laying the pipeline has been awarded to respected European companies, and the segment within Bavaria is scheduled to be completed by the end of 2007. If recultivation is possible in the spring, the topsoil will be returned and the original condition of the landrestored. “We have promised the affected farmers that we will do that,” said EPS General Manager Dr. Werner Döhler, “and we take that promise very seriously.”

A few days following the beginning of excavation in Bavaria, work will also start in Rhineland-Palatinate. The general contractor there is the Corporate Engineering unit of the EPS shareholder BASF.

“Our project is right on schedule,” noted EPS General Manager Hans-Detlef Dreeskornfeld. “We will meet our scheduling and financial targets. ”The EPS has already secured most of the necessary rights-of-way In Bavaria. “That’s why we are starting with construction now,” said Mr. Dreeskornfeld. “In securing these rights-of-way we take great care to find flexible and voluntary solutions that are fair for all sides. When necessary, we have adjusted the amounts foreseen for compensation. However, if despite all our efforts an amicable settlement cannot be reached with individual land owners, we will strongly encourage the political bodies of Bavaria to ensure that, in light of the significance of this infrastructure project for the common good, a legal basis for expropriation can be created.”

Background. Ethylene is produced in a refinery by cracking naphtha. In the petrochemical industry it is an important elementary compound for the production of many products used today in day-to-day life, including household appliances, films, bottles, window frames, pipes and flooring materials. The ethylene market is closely coupled with the demand for plastics, which in turn is dependent on the growth of gross domestic product. In coming years, growth of 2% is expected in Western Europe, with 5.5% forecast for Central and Eastern Europe.

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