Thursday, 2 July 2009

Czech chemicals report highlights Reach issue

A report just out on the state of Czech Republic's chemical sector highlights the likely fallout from the president's decision last August not to comply with the EU chemical regulation Reach. Companies such as Unipetrol face a conundrum. Whilst they do not need to comply with Reach domestically, any exports will need to comply with the directive.

Should the country's biggest chemical group Unipetrol register as an exporter to the EU? How will it comply if there is no national authority with which it can register?

Here is an excerpt:

"In August 2008, President Václav Klaus over-ruled parliament and vetoed the European Commission regulation on the registration, evaluation, authorisation and restriction of chemical substances (REACH), claiming that there was no reason to toughen the regulatory system and that it undermined the competitiveness of the petrochemical industry. The lower hours of parliament can over-turn the President’s veto by a simple majority of sitting members. The current political environment is marked by uncertainty, with no coalition commanding an overall majority in parliament. Consequently, it is unclear whether Klaus’s veto will be upheld, although there is a probability that parliament will over-turn his decision as it had already approved REACH. The uncertainty is unlikely to cause a significant problem to the Czech Republic’s petrochemicals business environment as any potential investor is likely to conform to REACH."

The report also highlights the problem of the country's almost complete reliance on Russian oil for its refineries and chemicals industry. Supplies were cut last year forcing Unipetrol to import via a very circuitous route.

"The Czech Republic’s dependence on imported oil supplies was demonstrated in July 2008 when Russian oil supply to the Czech Republic was drastically cut, which Russia claimed was due to technical problems, an explanation Unipetrol appeared to accept. Although it would not be technically difficult to find an alternative to Russian oil, logistical costs of using alternative pipeline routes or overland would raise raw material prices and make the Czech petrochemical sector uncompetitive."

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