A World without Oil Companies Prepare for a Fossil-Free Future
Part 3: Chemical Giant BASF Bets on Batteries
BASF, the world's largest chemical company, headquartered in the southwestern German city of Ludwigshafen, is more dependent on crude oil than almost any other German business. This is advantageous for BASF, which, thanks to its close business ties to Russian energy giant Gazprom, is benefiting from the record-high prices. But there is also a serious drawback to this dependency: Oil and its products, especially petroleum, are the key raw materials for chemical products like plastics and paints.
"The oil price is currently our biggest concern," concedes CEO Kurt Bock, while presenting an otherwise stellar bottom line. The company currently bases its financial planning on a price level of $110 a barrel. But that picture will change considerably if the price rise, warns Bock.
That's why Bock has recently begun investing in a field that has nothing at all to do with oil. BASF has entered the battery business in a big way and soon hopes to become a major player worldwide. To achieve its goal, BASF is spending several hundred million euros, buying up specialty businesses and hiring dozens of scientists. Many of them work in building M 100 at the northern end of the Ludwigshafen plant grounds. With its high ceilings and wide stone staircases, M 100 feels like an old school building. The building is hallowed ground for every chemist.
A century ago, Fritz Haber and Carl Bosch developed a process there to synthetically produce ammonia, the key prerequisite for the production of synthetic fertilizer, which was a revolution for global food production. Now Andreas Fischer, an electrochemist, is searching for a solution for another problem facing humanity: mobility in the post-fossil age.
Fischer, who has worked for the company since 1997, heads its battery research unit. For many years, electrochemistry tended to be sidelined at BASF, but that has now changed. More than 100 employees are hard at work trying to develop better components for lithium ion batteries. In this case, better means that the batteries must have a high energy density and cannot be subject to as much wear during charging and discharging. They also have to be lightweight, fireproof and affordable.
These are goals that all players in the highly competitive battery market are trying to reach. Everyone wants to be ready when the anticipated wave of electric cars hits the assembly lines. Fischer admits that the Asians are several years ahead when it comes to battery storage in consumer goods like mobile phones. But that is not the case in the business of the car of the future, where, as Fischer says, "the cards are now being reshuffled."
At the end of the year, BASF will begin mass production of cathode materials for batteries at its new plant in the US state of Ohio. But the question of when electromobility achieves its breakthrough and becomes profitable for BASF will not depend solely on the performance of his team, explains Fischer: "The price of gasoline is also a factor."
The higher the gas price, the more worthwhile the investment and the greater the prospects for selling battery technology. In this way, the rising price of oil accelerates structural change in the economy, a painful process for everyone who falls by the wayside. But it is also exceptionally advantageous for those companies that have figured out how to use scarce resources in particularly efficient ways.
More Out of Less
There are many such companies in Germany, such as makers of heat pumps, insulation material and condensing boiler heating systems. One reason they are so strong is that Germans are accustomed to a lack of natural resources. The growing importance of energy efficiency is evident in the fact that a leading trade fair devoted to environment technology, IndustrialGreenTec, will be held in the German city of Hanover for the first time in 2012.
Bosch will also be represented at the trade fair. The engineers at the German automotive parts supplier have made it their goal to use modern technology to reduce fuel consumption in a vehicle in the Volkswagen Golf category from 5.4 liters to 3.6 liters per 100 kilometers (from 44 to 65 miles per gallon). To achieve this, they are using such features as automatic start-stop technology and dispensing with the fourth cylinder.
"You don't notice anything when you're driving," says Bernd Bohr, the head of the vehicle technology division. Bohr and his colleagues are consumed with one question: How do you get more out of less? The answer will also shape Bosch's success as a business. "Resource efficiency is a key growth driver for our company," says Bohr.
The same applies to Mercedes, the world's largest truck maker. The Stuttgart-based company is currently introducing the new Actros, a large truck that will use 5 percent less fuel than the precursor model, partly as a result of a new generation of engine that employs a fuel injection pressure of 2,100 bar. As modest as a 5 percent reduction in fuel consumption sounds, it adds to significant amounts in a business in which energy makes up 35 to 40 percent of total costs.
Andreas Renschler, the head of Daimler's truck division, expects sales to grow as fuel prices go up. "It increases the pressure to replace old trucks, which use more gasoline, with new ones."
New business opportunities are emerging from the challenges faced by an economy that has to make do with less and less oil. In Germany, the decoupling of prosperity from energy has been happening for some time. Last year, the economy grew by 3 percent while consumption of oil, natural gas and coal declined by almost 5 percent.
But in most countries of the world, especially the emerging countries, economic growth and energy consumption still go hand in hand. A global change of course is overdue, according to the German Advisory Council on Global Change. "The carbon-based world economic model," say the scientists on the council, constitutes "a normatively unsustainable situation" and is as morally reprehensible as slavery or child labor.
With a view to the United Nations Conference on Sustainable Development in Rio de Janeiro in mid-June, the nine scientists on the council have prepared a master plan outlining the necessary changes. They include the expansion of renewable energy, as well as increasing the cost of fossil fuels.
Perhaps this will make the transition easier and delay the end of the age of oil a little longer -- by a few years, or perhaps even a decade. Whatever happens, the fossil finale is inevitable.
REPORTED BY DIETMAR HAWRANEK, ALEXANDER JUNG, ALEXANDER SMOLTCZYK AND FLORIAN ZERFASS
Translated from the German by Christopher Sultan
- Part 1: Companies Prepare for a Fossil-Free Future
- Part 2: Turning Adversity into a Virtue
- Part 3: Chemical Giant BASF Bets on Batteries