Maximising Commercial Relationships in the Chemicals Sector

Symbiosis... in the natural world

The Egyptian plover is not the Nile crocodile’s next meal. A relationship of mutual benefit provides the plover with food and rids the crocodile of harmful parasites. The gaping mouth also enables the crocodile to regulate its body temperature and provides the plover with a safe haven free from predators. Symbiosis in the natural world has many benefits and it can be the same in the commercial world.

Symbiosis... in the commercial world

In an increasingly competitive environment, one of the ways in which chemicals companies are seeking to maximise the benefits of upstream and/or downstream relationships and unlock value from their assets is by entering into integrated multi-aspect partnerships with trading partners (“Integrated Commercial Partnerships”). These normally involve the development of new plants, which are fully integrated with the existing plants and supply of utilities and other services, forming a symbiotic relationship, aiding the efficient provision of products and stability of supplies and sales.

Some of the symbiotic benefits of Integrated Commercial Partnerships

  • Long-term supply relationships
  • Transport and logistics costs reduced
  • Supplies can include feedstock, utilities and site services
  • Valuable contribution to fixed costs help to enhance the return on capital
  • Can assist with effective utilisation of minimum purchase obligations on existing energy or other supplies
  • Potential to assist with de-bottlenecking
  • Lease payments enhance return on assets
  • Can include equity interest and/or rights of first refusal or option to acquire the new plant
  • Cost and time savings when installing plant on existing site, utilising existing facilities, infrastructure, consents etc
  • Regulatory permits and consents (eg IPPC, COMAH, planning) less of a burden compared to a “start-up”
  • Can utilise the plant owner’s other site services and expertise
  • Reduced cost of running plant if taking other services from site owner
  • May be other local facilities (eg jetties) available
  • Plant could be near to downstream customers or can help to enter new markets
  • Relationship can extend to valuable by-products

Elements of a successful symbiotic relationship

Relationship agreements 

A project agreement sets out the respective obligations of the parties in relation to the development, construction and operation of the plant from design through planning permission, building, commissioning and the commencement of supplies. The project could be a joint venture in which both parties have an equity interest, and, if so, additional documents will address key issues including the parties’ contributions to the venture, management and decision making arrangements relating to the venture, disputes and exit. Care must be taken to structure the deal so as to avoid competition law risks, particularly an issue if the parties are competitors, and to avoid merger control filings (which can be triggered by certain joint venture/partnership structures).

Supply and services arrangements; enabling works

The supply of feedstock, utilities, site services (eg emergency response, security, administration and waste disposal) to the new plant can utilise existing site services making the sourcing and supply of these to the plant more efficient and costeffective. The site will also have an infrastructure of pipework and delivery access roads that can be used or extended as required.


Companies with available land on site can enhance the return on their land by leasing it to a partner thereby earning additional revenue. The lease could also include a right of first refusal in favour of the owner in the event that the partner wishes to sell its new plant.


The land to be occupied could be contaminated and agreement on the apportionment of environmental liabilities between the owner and the occupier is a critical issue. The parties may require a baseline environmental survey to be carried out in order to assess any existing contamination prior to commencement of development works.

Third party consents

Landlord’s consent will be required if the occupier only has a leasehold interest. Similarly there could be other site occupiers or suppliers or banks that need to consent to the proposals.

Building agreements and engagement of contractors

If a new site is developed a suite of construction agreements from appointment of contractors and consultants through to practical completion will be needed. It will also be necessary to provide access to the site to enable the lay-down of materials and undertaking of works. Other issues to be addressed include the provision of supplies during building (eg power, water and waste and services such as security and emergency response), health & safety considerations and the management of business interruption.

Regulatory licences and permits; planning consent

Existing licences and permits may extend to the new occupier’s activities, saving time and money as opposed to having to apply for new licences. Planning permission should also be considerably easier to obtain on an existing site than on a brownfield site.

Human Resources

A commercial partnership could have implications under the Transfer of Undertakings (Protection of Employment) Regulations if employees of the original occupier are seconded to, provide services to, or assist the partner in establishing and operating its plant.


Finally, if circumstances change and a once symbiotic relationship deteriorates into a parasitic one, our Commercial Dispute Resolution Team can assist you to find a solution. As the plover rids the crocodile of the last parasite it would do well to be mindful of this!