MENA Petrochemicals Special Report


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NewsBase special report on the petrochemical industry in the Middle East & North Africa

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MENA Petrochemicals Special Report

  1. 1. April 2012 NewsBase Special Report MENA Petchem Projects  News  Analysis  Intelligence –– Special Report –– Published by  NewsBaseOVERVIEW 2 IN THIS NEWSBASE SPECIAL REPORT… The Arab Spring and its impact on MENA downstream projects 2 Petchem promise While the Arab Spring brought upheaval to muchSAUDI ARABIA 3 of the MENA region, several major petrochemical projects are steaming forward, and will bring Sadara – changing the game 3 enormous increases in the region’s output capacity.QATAR 5  The largest of these is Sadara – Aramco-Dow’s 50:50 joint venture that is likely to cost around US$20 billion. (Page 3) Shell finally enters Qatar’s petrochemicals sector 5  Pearl GTL appears to have helped open the door for Shell in Qatar, as it follows up the project withUAE 7 a petrochemical venture in Ras Laffan. (Page 5 Borouge 3 expansion project  Abu Dhabi’s Borouge expansion is set to bring set for late 2013 start 7 together ADNOC’s competitively priced feedstocks with Borealis’ Borstar polyolefins.(Page 7)ALGERIA 8  Algeria is keen to retain the value of its natural resources by increasing its downstream Eyeing up Algeria’s Arzew 8 infrastructure, but progress has been slow at the flagship Arzew ethane cracker. (Page 8)EXPORT OUTLETS 10  These four are among a host of projects that will see the Middle East’s capacity rocket in the next Middle East export projects decade. A wide range of ventures are under way to key to expansion 10 open up export routes for their output. (Page 10)For analysis and commentary on these and other stories, plus the latest downstream developments, see inside… Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  2. 2. MENA Petchem Projects April 2012 page 2 OVERVIEWThe Arab Spring and its impacton MENA downstream projectsThe Arab Spring took a major toll on downstream activity across North Africa. However,as stability returns, the focus is beginning to turn back to delayed projects and potentialgrowthBy Ashok Dutta A number of plants in Libya and neighbouring countries were shut down because of feedstock shortages Downstream projects in Saudi Arabia saw little impact, remaining stable There remain challenges when investing in North Africa; however, appetite appears to be thereOn March 7, a senior energy analyst with per year ethane cracker at Ras Lanuf in patch in the GCC,” he said.Goldman Sachs, Jeffey Currie, set the Libya, which forced Egypt’s Oriental His views are shared by Sriharshatone for a leading oil and gas conference Petrochemicals Company (OPC) to run Pappu, a Dubai-based analyst at HSBCin Houston when he said: “History does its 160,000 tonne per year polypropylene Global Research, who commented thatnot repeat itself, but it does rhyme.” His (PP) plant at around 80% capacity. the overall impact on the Middle Eaststatement is open to several In Syria, which is the largest consumer petrochemical industry had beeninterpretations. of polyethylene (PE) and PP resins in the minimal, given there are major However, in the Middle East and North East Mediterranean region, a number of petrochemical complexes in the regionAfrica (MENA) – home to nearly 56% of converters have been running plants at mainly catering to the European andthe world’s proven reserves of crude oil rates of 30-50%. Asian markets.and natural gas – few will deny that Along with the dip in output, producers “The political unrest in MENA had anhistory was made with the Arab Spring have also faced logistical issues: land impact on trade flow, but the domesticof 2011, from both from a geopolitical transportation costs to Syria for PE and market is quite small,” he said in aand business perspective. PP resins have increased by an average research note. He added: “The While oil production remained US$5-20 per tonne since the unrest consequent spike in crude prices,undeterred in the six Gulf Co-operation began last spring. meanwhile, had a net positive effect onCouncil (GCC) states, the scenario was the business operations of majorquite different in Libya, with over 1.6 Lower Gulf petrochemical players within the GCC,million barrels per day of output being In the GCC states, a prime concern is the particularly Saudi Arabia, Qatar and thehamstrung for more than a month. On the demand/supply scenario in Asia. UAE. The bulk of the petrochemicalnatural gas front, production was affected “The GCC downstream sector is driven capacity is in the GCC.”in Egypt, besides Algeria, Libya and primarily by demand and prices,” Colin Looking ahead, the future seems to beTunisia, with supplies being curtailed McKenzie, a senior vice president in bright for GCC downstream producers.through the sub-Mediterranean pipelines Saudi Arabia with US engineering firm For its part, the Royal Commission forto consumers in Europe. Fluor Corporation, told NewsBase. Jubail and Yanbu (RCJ&Y) has recently The Arab Spring also impacted the “China’s growth forecast has just given the green signal for five majordownstream sector in MENA. dropped to 7.5% in 2012 from 8%, but ventures entailing an investment of “Demand for polymers weakened the marginal difference has not impacted around US$5.86 billion.significantly and some producers were project activity in the lower Gulf. [Saudi To the south, in December 2011 Qatarunable to book sales for several months,” Basic Industries Corp. (Sabic)] is firing Petroleum (QP) signed a heads ofa New York-based petrochemical on all cylinders and along with it the agreements (HoA) with super-majorproduct trader told NewsBase. “A private sector in the kingdom, as more Shell to build a steam cracker and anumber of chemical plants in Libya and feedstock gas will be available from mid- mono-ethylene glycol (MEG) plant withneighbouring countries were shut down, 2014 onwards when Saudi Aramco a capacity of 1.5 million tonnes per yearas there was a shortage of feedstock to brings on stream the Al-Arabiyah and and a 300,000 tonne per year linear alpharun polyolefin facilities,” he added. Shaybah facilities. The Arab Spring has olefins (LAO) unit. Top of the list was the 130,000 tonne had little impact on the downstream Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  3. 3. MENA Petchem Projects April 2012 page 3 OVERVIEW Also, QP recently signed an initial potential that exists. he added.agreement with fellow petrochemical Statistics from the Algerian Plastics Despite the challenges of investing inproducer Qapco to build a facility of Association – Plast Alger – show the lack petrochemicals in North Africa, a projectcapacity 1.4 million tonnes per year of of downstream domestic production in is moving forward for a Polyethyleneethylene, 850,000 tonnes per year of petrochemicals and highlight that with an Terephthalate (PET) resin plant in Egypthigh-density PE, 430,000 tonnes per year annual domestic plastic consumption of in a partnership with India’s Dhunseriof linear low-density PE, 760,000 tonnes around 1 million tonnes per year, 50% is Petrochem and Tea Limited.per year of PP and 83,000 tonnes per still imported from Asia and Europe. The foundation stone has been laid foryear of butadiene. “The Algerian plastics market has an the US$160 million project to be built “There is a resurgence of enormous potential,” Plast Alger said on near the Gulf of Egypt.petrochemical activity in the GCC and its website. With a nameplate capacity of 420,000we would expect this to grow further. QP According to Eckart Woertz, director tonnes per year, the plant is due to beis due to sign a deal with Total of France of economic studies at the Gulf Research commissioned by the end of 2012.for a world-scale cracker and the third Centre in Dubai, both Algeria and Libya As some form of stability is returningphase of expansion of Borouge [Abu stand to gain from investment in the to North Africa, companies have alreadyDhabi Polymers Company] will go petrochemical industry, as they have begun lining up to help the region tap itsahead,” McKenzie pointed out. available oil and gas resources. potential as a petrochemical producer, “There is room to expand,” he told and it can be expected that the area willNorth Africa NewsBase. “Egypt as well has plentiful begin to flourish into a major player inIn North Africa, the scenario is feedstocks that would give a competitive the sector.somewhat unclear despite the high advantage to petrochemical producers,” SAUDI ARABIASadara – changing the gameThe Beast is taking shape, and changing the playing field at the same timeBy Ian Simm Export credit agencies are backing the project, which is expected to cost around US$20 billion Sadara will use ethane and naphtha from the SATORP refinery in Jubail as feedstock First production will begin in the second half of 2015, with 45% of exports aimed at Asian marketsOf all the petrochemicals projects being Dammam City. to the project from their own countries.”built throughout the Middle East and Insurance and guarantees from export According to Project FinanceNorth Africa, Saudi Arabia’s Sadara is credit agencies (ECAs) from around the International (PFI), this list has sincethe biggest. A 50:50 joint venture world will bear the brunt of its financing, been cut down to seven – JBIC, Kexim,between Saudi Aramco and the US’ Dow to the tune of around US$13 billion. K-Sure, US Exim, the UK’s ECGD,Chemical, the Sadara Chemical Aramco and Dow will jointly fund the Hermes and Coface.Company will oversee the construction remaining US$7 billion of the US$20 PFI said that the project was expectedand operation of the largest chemicals billion that the mega-project is expected to look at tapping the 144a and localproduction complex ever constructed in a to cost. sukuk bond market in addition to thesingle phase. An initial public offering (IPO) is ECAs and the local and international Sadara, originally known as the Ras scheduled to be offered during 2013-14 commercial banks.Tanura Integrated Project (RTIP) – and to raise this equity. ECAs from Japan, North America,once termed ‘The Beast’ by bankers In late-November 2011, a source close France and Germany – as well as Saudiawed by the scheme’s size and expense – to proceedings told NewsBase that “the Arabia’s Public Investment Fund – arewas moved to Jubail Industrial City II nine ECAs backing Sadara had their also thought likely to back a financingbecause of escalating costs, and will now second meeting in early November – package to cover around 60-70% ofbe located around 100 km north of they have all committed to back exports Sadara’s capital costs. Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  4. 4. MENA Petchem Projects April 2012 page 4 SAUDI ARABIA The source said: “The capital costs of lined up to submit both technical andthe project are continuing to come down, commercial bids by May 31 to build awhich have been helped by the major tank farm facility for the storage ofcompetitiveness of the contract award petrochemical products from the facility.process, and will add to the cost savings Estimated to be worth US$500 million,made via the move from … Ras Tanura. the scope of works for the engineering,All of this will help with the financing procurement and construction (EPC)process.” contract includes building 37 storage He added that there was still no final tanks with a total capacity of 330,000capital figure for the Sadara scheme, but cubic metres. A handling unit will alsothat estimates of US$20 billion continued need to be constructed, as well as berthto be bandied about. facilities, substation, fire-fighting facilities and truck loading and unloadingInput and output facilities.Sadara will use ethane and naphtha Contract awards The tender is expected to be releasedderived from oil and natural gas liquids In early March, the JV announced that it by the end of April.(NGL) as feedstock, which will then be would award all major contracts for the NewsBase understands that thosecracked into propylene (P) and ethylene complex by the third quarter of 2012. interested in bidding are: Larsen and(E) at the cracker units. An official statement cited Sadara Toubro (L&T) and Punj Lloyd, both of It will be supplied from the Saudi CEO Ali Abuali as telling a Saudi India; Hanwha Engineering andAramco Total Refining and conference that 66% of the awards had Construction, Hyundai Engineering andPetrochemical Company’s (SATORP) already been made. Construction Company and SKJubail refinery, which is currently under All engineering, procurement and Engineering & Construction, all of Southconstruction. This unit is due to be fully construction (EPC) contracts were Korea; Petro-Steel of Singapore andoperational in late 2013. already expected to have been awarded China’s Sinopec. Chemicals Technology reported that by the current quarter, but no finalthe feedstock for the propylene oxide announcement has yet been made. Earlier awards(PO) unit would be supplied by a new In mid-February, US-based The second half of 2011 saw Sadarahydrogen peroxide plant to be conglomerate Foster Wheeler was bestow several contracts.constructed by a 50:50 joint venture granted an EPC contract for a PO project In July, it awarded a US$920.3 millionbetween Sadara and Solvay. to integrate Sadara. The contract was EPC contract for the project’s main Sadara will produce polyeurethanes, awarded by Saudi Aramco’s subsidiary mixed feed cracker to South Korea’sPO, propylene glycol (PG), elastomers, Aramco Overseas Co. and Dow Europe. Daelim. The flexible cracker will breaklinear low-density polyethylene The project is an extension of the the naphtha and ethane feedstock to(LLDPE), low-density polyethylene front-end engineering design (FEED) produce around 3 million tonnes per year(LDPE), glycol ethers and amines. First contract awarded to Foster Wheeler by of chemical products and plastics – partproduction units are anticipated to come Aramco and Dow in 2008. The PO of the overall 8 million tonnes per year ofon line in the second half of 2015, while project is scheduled to be on stream in specialised chemicals manufactured fromall units are expected to be up and the first quarter of 2015. the scheme, which will represent therunning in 2016. Foster Wheeler’s chief operating largest plastics and chemicals production officer, Umberto della Sala, said: “A key complex ever built in a single phase. It is factor in this win was the outstanding also indicative of Saudi Arabia’s moves Products Foster Wheeler performance delivered on to diversify its petrochemicals industry. Sadara will produce: ethylene previous work for Saudi Aramco and Daelim is also reported to be the (E); propylene (P); aromatics; Dow.” lowest bidder, against Samsung methylene diphenyl diisocyanate According to Arab News, the PO unit Engineering, for building parts of the (MDI); toluene diisocyanate will be managed by Foster Wheeler’s other production units at the Sadara (TDI); polyether polyols, Thai operation, following the completion complex. “The Koreans have done really propylene oxide (PO); propylene of a new PO facility in Thailand for the well, gaining some quite juicy contracts glycol (PG); elastomers; linear Dow-Siam Cement Group joint venture. by undercutting everything else by as low-density polyethylene In early April, technology group Linde much as 30-40%,” said the source. (LLDPE); low-density was awarded a long-term contract to Indeed in October, fellow Korean firm polyethylene (LDPE); glycol supply Sadara with carbon monoxide Daewoo Engineering & Construction ethers and amines. (CO), hydrogen and ammonia. was awarded two packages for tank Seven international companies have farms at Sadara. Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  5. 5. MENA Petchem Projects April 2012 page 5 SAUDI ARABIA The firm will carry out the EPC for the Early November saw the award of operation in 2011 set to contribute themain tank farm, as well as the specialist another key contract, when Jacobs most to the increase.cryogenic tanks at the facility. Daewoo’s Engineering was announced as the With the addition of Sadara, thiscombined bid was around US$300 winner of an EPCM contract for the upturn will continue skyward. Productionmillion, at least US$200 million less than Chemicals 1 Envelope. from the first Sadara units is due to beginwas estimated. Under the terms of the contact, Jacobs in the second half of 2015, and all units In August, US-based Fluor Corp. was is providing front-end engineering design should be up and running in 2016, afterawarded a US$2 billion engineering, (FEED) and detailed engineering which annual revenues of roughly US$10procurement and construction services, in addition to procurement, billion are anticipated within a few yearsmanagement (EPCM) contract for inspection and delivery of equipment and of operation, with around 45% of exportsdeveloping all the offsite work and bulk materials, as well as the overall targeted at Asia.utilities (O&Us) at the site. construction management. Amrita Sen, assistant vice president of The scope of work will include Commodities Research at Barclaysdevelopment of associated infrastructure Changing the game Capital the Middle East, told NewsBase:and pipework arrangements to allow the Another major milestone, the JV “the Middle East petchem expansion isconstruction of the complex. shareholders’ agreement for Sadara, was gaining pace and will continue to remain In mid-October, ABB was awarded the signed by Aramco and Dow in early a key pillar of global growth. Themain automation contract for the October 2011, bringing nearer to fruition region’s petchem demand is soaring, acomplex. As part of the contract, ABB a scheme that will be instrumental in function of growing population andwill build process automation and safety Saudi Arabia’s strategy to not only rising standards of living.”systems for the unit and also provide become a strategic chemicals and plastics As the largest oil producer in theproject management, project engineering producer but also a hub for future region, Saudi Arabia will play a majorand commissioning assistance services. downstream manufacturing. role in turning the Middle East into a Post-delivery site support, training the Saudi Arabia’s ethylene and propylene global petrochemicals hub, with Sadaratechnicians for maintenance and capacities are expected to rise by 2015, the jewel in the kingdom’s crown.operation are also part of the contract. with Saudi Kayan’s commercial QATARShell finally enters Qatar’spetrochemicals sectorQatar Petroleum’s new petrochemical venture with Shell indicates both are keen to makeup lost groundBy Ashok Dutta Shell has added to its Pearl GTL facility in Ras Laffan by signing a deal for a new mega petrochemical plant The move is the company’s first into the Qatari petchem sector as it looks to make up lost ground It is thought the project will help Qatar emerge as a mega producer of a new range of downstream productsAs one of the world’s largest oil and gas Petroleum Exporting Countries (OPEC) liquefied natural gas (LNG) a reality.countries with both deep-rooted upstream was perched on the North Field – the A similar story was repeated a decadeand downstream interests, Qatar will world’s single largest reserves of non- later, when Qatar General Petroleumhold a special place for the Royal associated natural gas. Corp. (now known as Qatar PetroleumDutch/Shell Group for various reasons. Yet despite that ‘revelation’, Shell was (QP)) launched its new series of gas- It was Shell who first hinted in the not part of the original team of based downstream ventures, with Shell1980s to Doha’s ruling Al-Thani family international oil companies (IOCs) that being left out of the loop once again.that the tiny Gulf Arab state and smallest kick-started Doha’s ambitious natural gasproducer in the Organisation of development programme and made Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  6. 6. MENA Petchem Projects April 2012 page 6 QATARLooking up In late December 2011, QP announced [engineering, procurement andBut it was not all doom and gloom for the signing of a deal with Shell to build a construction] tenders will be issued byShell, however. In between, the company world-class petrochemical plant. It will mid-2013.” More downstream projectwas successful in signing up with QP to be 80% owned by QP, with Shell activity is planned by Qatar’s second gas-to-liquids retaining the remaining 20% shares. “The Shell venture would not replace(GTL) plant – Pearl GTL – at Ras “Both parties plan to sign a final joint the one that ExxonMobil proposed twoLaffan, after South Africa’s Sasol took venture agreement [JVA] by the end of years ago, and we plan morethe plunge and constructed the Oryx 2012 or early 2013,” Qatar’s Energy and petrochemicals projects,” Al-Sada said.facility with an initial capacity of 34,000 Industry Minister Mohammed al-Sada Evidence was at hand in mid-February,barrels per day. told reporters soon after the signing when QP put pen to paper on yet another “Our relationship with Shell has been ceremony, adding that the project would HoA with Qapco to develop a new,one of missed opportunities since the be completed in 2017. The HoA sets the mega-petrochemical complex at Ras1980s,” Abdullah Hussain Sallatt, a scope and commercial principals for the Laffan. The complex will include aformer technical advisor at Qatar’s project, which will include a steam world-scale steam cracker and produceMinistry of Energy and Industry, told cracker and a mono-ethylene glycol 1.4 million tonnes per year of ethylene,NewsBase in an interview from Doha. (MEG) plant with a capacity of 1.5 850,000 tonnes per year of high-density“When we started our LNG programme, million tonnes per year. The complex polyethylene (HDPE), 430,000 tonnesit was the Japanese [Chubu Electric will be designed to produce 300,000 per year of linear low-densityPower Company, Marubeni and tonnes per year of linear alpha olefins as polyethylene (LLDPE), 760,000 tonnesMitsubishi Corporations] and the US’ well. “We have been holding discussions per year of polypropylene (PP) andExxonMobil who came to our aid. While for a long time with ExxonMobil, Total 83,000 tonnes per year of butadiene. Thethe former signed up as launch customers and Shell for the facility, as there is a project is scheduled for completion infor Qatargas [Qatar Liquefied Gas growing demand in Asia and the Far East 2018. QP will hold 80% equity interest inCompany], built our first fleet of LNG for such exotic products,” Sallatt said. the facility, with Qapco taking up thecarriers and also extended financial “The Shell project signals our entry remaining 20%, the latter assisted with the into the next generation of chemical “QP and Qapco have been workingtechnology to build the first gas products,” Sallatt added. together for the past few months to planliquefaction train. Shell was not there to The next stage in the project the development of the project, whichhelp us, as they were probably not implementation will be the completion of will contribute to meet the continuouslywilling to share the risk of developing a a pre-feasibility study and the launch of growing global demand for variousgrassroots LNG industry. We were tenders in early 2013 for the front-end petrochemical products. These productsdisappointed.” According to Sallatt, in engineering and design (FEED) package, will be marketed primarily in high-the late 1990s when QP was drawing up Jay Ibrahim, senior vice president of growth markets in Asia, Africa and Latinthe blueprint to set up its new business development with Australian America,” Al-Sada informed.petrochemical projects at Ras Laffan – engineering firm WorleyParsons in Abu With the ball now rolling with Shellthat would utilise the natural gas from the Dhabi, told NewsBase. and Qapco, at long last Qatar is set tomammoth North Field as feedstock – “The FEED contract will result in join the super-league of petrochemicalpreference was given to ExxonMobil and finalising plant output and also final cost producers in the Middle East and Asia.Total of France. estimation,” he said. “The main EPC “Sabic [Saudi Basic Industries “Total had helped in setting up the first Corporation] has already startedgeneration of petrochemical projects producing speciality chemicals. With the[Qatar Petrochemical Company (Qapco) Shell project, we too will emerge as aand Qatar Fertiliser Company] in the late mega producer of a new range of1970s at Mesaieed,” he hastened to add. downstream products,” Sallatt“We always said it was not too late for commented.Shell to jump onto the bus, but our first With a planned capital expenditure ofpreference had to go with those IOCs US$6.4 billion, for its part the Shellwho stood by us initially,” Sallatt noted. facility will also signify one of the largest potential investments made in Qatar’sBandwagon downstream business by IOCs in the pastThus, when Shell recently signed a heads few years. The last major investment wasof agreement (HoA) to develop a an estimated US$18-19 billion for thepetrochemicals plant at Ras Laffan at an Pearl GTL facility, which is also ownedestimated cost of US$6.4 billion, it came by Shell.as a surprise to some in the industry. Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  7. 7. MENA Petchem Projects April 2012 page 7 UAEBorouge 3 expansion projectset for late 2013 startAbu Dhabi’s Borouge expansion in Ruwais is set to come on line late next year, bringingtogether ADNOC’s competitively priced feedstocks with Borealis’s Borstar polyolefinsBy Martin Clark An additional 2.5 million tonnes will be introduced by mid-2014 to create the world’s largest PO plant Work is on schedule and around 60% has so far been completed Once engineering work is ready, further budgeting will take place for the project’s completionAbu Dhabi’s flagship Borouge 3 feedstocks with Borealis’s Borstar multi-billion dollar project remains wellexpansion project in Ruwais will extend polyolefins (PO) technology to provide a on track, a point echoed by Borougethe emirate’s reputation in advanced strong market advantage. CEO Abdulaziz Abdulla Alhajri himselfplastics for the infrastructure (pipe at the turn of the, and power and communication Marching on Bechtel is providing overallcables), automotive and advanced And recent years have seen steady management support for thepackaging markets. growth, which the Borouge 3 expansion implementation of the project. Abu Dhabi Polymers Company will build on. In 2010, the company In 2009, Tecnimont was awarded the(Borouge), a joint venture (JV) between tripled its annual production capacity in front-end engineering and design (FEED)Abu Dhabi National Oil Company Abu Dhabi to 2 million tonnes with the contracts for the entire Borouge 3(ADNOC) and Austria-based Borealis, is launch of the Borouge 2 project, which is venture, which it completed at the start ofalready a significant global player. now in full production. 2010. With joint bases in the United Arab An additional 2.5 million tonnes perEmirates (UAE) and Singapore, it year will be introduced by mid-2014 via Updateemploys around 1,600 people and serves the Borouge 3 project to create the Speaking at a conference on March 27,customers in more than 50 countries world’s largest integrated PO plant. Jasem Ali Al Sayegh, head of ADNOC’Sacross the Middle East, Asia-Pacific, the The intention is to take total annual refining division, said that work wasIndian sub-continent and Africa. capacity at the Ruwais site to 4.5 million “progressing on schedule with a 60% The JV has successfully brought tonnes by mid-2014. completion rate.”together ADNOC’s competitively priced According to project insiders, the The company is hoping that the added supply from Ruwais will more than cover current domestic demand, allowing it to export refined products. So far, it has not released figures for the volumes that it expects to be released on to the world market. In total, the expansion will be developed in eight packages, including crude distillation and sulphur recovery facilities, a residue fluidised catalytic cracker, offsites and utilities, storage tanks, infrastructure work, marine works, and two separate packages for the site preparation works. Tenders and contracts Borouge 3 includes an ethane cracker, two polyethylene (PE) units and two polypropylene (PP) units, as well as a low-density polyethylene (LDPE) unit. Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  8. 8. MENA Petchem Projects April 2012 page 8 UAE Tecnimont and Samsung Engineering the sub-contract for the IT Strategy built by Germany’s Linde Group at alanded two key contracts, collectively component of the project. The project is contract value of US$1.075 billion.worth US$1.65 billion, for the two well under way, and on schedule, though Other notable contracts in the earlyengineering, procurement and financing such a venture is an immense stages were awarded in order to clear theconstruction (EPC) lump sum turnkey task, requiring careful financial planning. way for full project implementation.contracts covering the multiple PO units “The status now is once these Abu Dhabi’s al-Asab Generalpackage – which includes two low/high- companies are done with their Transportations and Contractingdensity PE (LD/HD-PE) units and two engineering work and studies, Borouge Establishment was hired for thePP units – and the LDPE package. will work out the final cost and then go preparation of the Borouge 3 site, a 3.6- The LD/HD-PE units and PP units will for budget sanction,” an Abu Dhabi square km plot east of and adjacent to theutilise Borealis’s Borstar technology. engineering source close to the project existing facilities. Germany’s Alpine Bau The two plants will each have a told NewsBase. The total project has Deutschland also landed a US$111capacity of 540,000 tonnes per year, been estimated to cost in the region of million contract to construct the non-while the two PP plants will each have a US$4.5 billion, with the third-phase plant process buildings for the project. Whilemaximum capacity of 480,000 tonnes per completed by the end of 2013 and fully much of the larger tenders have nowyear. The LDPE unit will utilise the operational the following year. been issued for the expansion, Borouge 3Lyondellbasell LupoTech T process, With all systems go, and the project in will continue to generate futureassociated with Borealis’ LDPE W&C full swing, financing the remaining opportunities in Abu Dhabi’s(Wire and Cable) process, and will have elements of the expansion should not be downstream sector, as it evolves. Thea capacity of 350,000 tonnes per year. too complex a task for Borouge, though Borouge JV is developing an innovation South Korea’s Hyundai Engineering accountants will need to budget carefully centre in Abu Dhabi, to put the emirateand Construction also netted a contract to ensure no cost overruns. among the Gulf’s regional downstreamworth US$935 million for the offsite and Abu Dhabi’s deep pockets from the leaders going forward.utilities (O&U) facilities. rich oil sector ensure plenty of support In addition to the Ruwais 3 expansion, In October 2011, the JV awarded a for such landmark new energy projects. Borouge is also investing in facilities andcontract to Cyprus’ privately owned logistics hubs in its overseas markets,Hyperion Systems Engineering for the Project scope notably Asia, as it grows its downstreamBorouge 3 Information Technology The Borouge 3 project is immense in business. When the project sparks intoStrategy and Borouge 3 Information scale, effectively doubling output at the life at the tail end of 2013, and enters fullTechnology FEED to support the major Ruwais site. production mode during 2014, it willexpansion. Hyperion is executing the IT A new – and third for Borouge – massively enhance Abu Dhabi’sFEED project in collaboration with ethane cracker will produce 1.5 million emerging downstream profile around theIndia’s Infosys Corp., which undertook tonnes per year of ethylene and is being world. ALGERIAEyeing up Algeria’s ArzewAlgeria wants to retain the value of its natural resources by increasing its downstreaminfrastructure, but lack of clarity has slowed progress at the flagship Arzew ethane crackerBy Ed Reed Work on the ethane cracker has been driven by Total but there are a number of hurdles Feedstock supply and pricing is a cause for concern Algeria has proved to be a tough destination for investments and contract stability is essentialA desire to extract the most value from at Arzew, near Oran. According to petroleum gas (LPG) facilities, ammoniaits substantial gas reserves have led information from Sonatrach, projects and urea plants and an ethane cracker.Algeria to plan a number of downstream under way at the site include a liquefiedprojects, including the industrial cluster natural gas (LNG) plant, three liquid Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  9. 9. MENA Petchem Projects April 2012 page 9 ALGERIA The ethane cracker – where work is the project’s main market of Europe. Saudi Arabia’s Sabic, which had pitchedbeing masterminded by Total – Should the scheme move forward, PFC 55.12%.showcases the opportunities available in said, it is unlikely to be completed before The cracker will be able to handle 1.4Algeria, but also the difficulties of 2015, but should “delays persist and million tonnes per year and produceworking on such a large-scale project in continue to hamper the development of around 1.1 million tonnes per year ofcountry widely recognised as challenging the project, its cancellation is not to be ethylene. This will be processed intofor foreign investment. excluded.” 410,000 tonnes of monoethylene glycol The creation of an “integrated (MEG), 350,000 tonnes of high-densitypetrochemical industry” is one of Ethane excitement polyethylene (HDPE) and 450,000Algeria’s top priorities, said a person In mid-2007, Total announced it had tonnes of linear low-density polyethylenewith knowledge of the matter recently. been selected to build a petrochemical (LLDPE). Products are primarily Algeria is planning “two important plant at the site, in partnership with state- expected to be exported, with the Frenchdownstream projects – one is the ethane owned Sonatrach. The scheme covers the company saying output will go tocracker at Arzew with 1.4 million tonnes construction of an ethane cracker and Europe, North and South America, andper year of capacity,” he said. “We have three product lines. Asia.the raw materials and we will be able to Talks began on the project in 2005 and The size and integration of the project,provide intermediate products” to the Total signed a memorandum of coupled with cheap feedstock and lowworld. understanding (MOU) in mid-2007. It labour, should allow production to give it In a report provided to NewsBase, PFC reached a framework agreement on the an advantage over facilities in Europe.Energy flagged a number of potential plant in December of that year. The Total said its ethane crackersticking points for the Arzew facility. Total-Sonatrach joint venture was investment was in line with its strategy of The project has stalled on feedstock approved by the European Commission securing world-class facilities andshortages, which require an additional in August 2008. preferred access to feedstock. The Frenchgas pipeline to supply the plant, driving The Algerian company said at the time company declined to provide anyup costs, PFC said. Other problems cited that the contracts had been awarded information on the project to the consultancy include the corruption based on the amount of dividends thatscandal that engulfed Sonatrach in 2010- partners had agreed to pay Sonatrach Talking terms11 – leading to the removal of a number from the projects. Total agreed to pay a The plant was originally due to start upof high-level officials – and concerns on maximum rate of 70% from its ethane in 2013, but official estimates havethe outlook for petrochemical demand in cracker, exceeding the bid offered by pushed this back to 2014. A petrochemicals consultant, Aman Amanpour, told NewsBase that the date had been postponed because of insufficient feedstock supply. A note from Middle East-based investment bank Rasmala, in October 2011, estimated 550,000 tonnes of capacity would come on line in 2015, with another 550,000 tonnes starting up the following year. Rasmala implied the 2015-16 start-up was optimistic, given that the plant was still in “the early stages of planning.” One factor complicating negotiations on the plant is uncertainty over gas pricing, the bank said. Previous projects in the country have managed to lock in prices as low as US$0.6 per million British thermal units (US$16.6 per 1,000 cubic metres) but these are creeping up and have passed the US$2 per million Btu (US$55 per 1,000 cubic metre) mark. Feed gas is to be supplied by Sonatrach. Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  10. 10. MENA Petchem Projects April 2012 page 10 ALGERIA Gas for the cracker will be supplied significant changes to the framework Methanol in my madnessfrom fields in Algeria’s south. Total, in agreement. Therefore, [QPIC] is re- At the same time that Total was awarded2007, reckoned the plant would carry a evaluating its position in the project.” its ethane cracker work, Algeria alsoprice tag of around US$3 billion and The company said the project was worth assigned construction of a methanol plantthought it would be commissioned within US$700-800 million. to a consortium of companies: Kuwait’sfive years. In 2008, price estimates Sonatrach holds a 49% stake in the Qurain, Germany’s Lurgi, Trinidad’sclimbed to US$4 billion. ethane cracker, while the French super- PPSL, Japan’s Mitsui & Co. and a local Rasmala, though, predicted the price major took 51%, under the 2007 company, Sotraco.tag might reach US$7 billion. agreement. Subsequently, though, According to Sonatrach, the plant will Another project planned for Arzew, a Algeria decided to tighten its control of be able to produce 1 million tonnes permethanol plant being developed by the energy sector and required its foreign year of methanol and requires anAlmet, has also run into difficulties. It partners to settle for minority stakes. As investment of US$1 billion. The facilityhad been due to start in 2012 but this has such, Total reached a deal in August should be ready in the first quarter ofbeen deferred to 2014. Officially, the 2010, cutting its stake to 41%, 2013. Almet’s stake was also reduced todelay was intended to avoid the transferring 10% to Qatar Petroleum. 49%, with Sonatrach upping its interestanticipated glut of petrochemical Amanpour said the question of by 2%.products expected in 2012, but there has resource nationalism was less important Almet agreed to pay the state-ownedbeen talk that it has been caused by in the petrochemical industry than in the Algerian company 76.09% – seeing offAlgeria’s tough negotiating stance. upstream, noting that the government had bids of 68.01% from Middle Eastern- A presentation from Qurain a “vested interest” in adding value to the Japanese group and 73.51% offered byPetrochemical Industries Co. (QPIC) in resource, instead of exporting raw Man Ferrostaal.April 2011 said Sonatrach had “requested materials. EXPORT OUTLETSMiddle East export projectskey to expansionIran’s recent threat to close the Strait of Hormuz has highlighted the pinch point’svulnerabilities – but several new schemes will give exporters the option of bypassing thenarrow sea passageBy Ian Simm Saudi Arabia is intending to improve its infrastructure and export facilities on its Red Sea coast UAE and Oman are increasing export capacity with projects just outside the Strait Iraq is in the process of ramping out export capacity with 4 new floating terminalsRefining and petrochemical projects excellent example of just how the Avoiding the Straitthroughout the Middle East will see the perceived delicate balance between A combination of greater politicalregion’s capacity rocket in the next supply security and demand can alter stability and energy sector maturity hasdecade. With this in mind, a wide range global energy markets. Pipelines have made the lower Gulf the region’s exportof ventures is under way to open up provided long-term stability in terms of project hotbed. However, while much ofexport routes for their output. constant supply. However, as we have the lower Gulf remained relatively The recent spike in crude and seen repeatedly in Egypt’s Sinai untouched by the Arab Spring, thesepetroleum product prices, which can be Peninsula, for example, these too can be countries were made acutely aware ofstrongly attributed to Iran’s threats to difficult to protect and the impact of problems on their doorstep when Iranclose the Strait of Hormuz amid Western attacks can incur great costs for importer threatened to close the Strait, raisingsanctions and the European Union’s economies – in this case Israel and concerns about access to around 40% ofannouncement of an oil embargo, is an Jordan. the world’s oil supply. Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  11. 11. MENA Petchem Projects April 2012 page 11 EXPORT OUTLETS Saudi Arabia – which, according to the Other developments out of the grasp of He said that the IOTC had exportedUS Energy Information Agency (EIA), Hormuz tensions include Oman’s Sohar 900 million barrels of oil and 170 millionexports around 8.65 million net barrels Port – where a US$1.8 billion barrels of gas condensates in the lastper day of crude, most of it by sea – engineering, procurement and Iranian calendar year to March.already has several major ports. The construction (EPC) contract to expand Iran’s export potential was furthercountry’s Red Sea coast gives it the the capacity of the Sohar Refinery will be buoyed on April 17, when Iran’s Mehroption of bypassing the cluttered Hormuz floated before the end of the year-end – News Agency reported that the countrypinch point, and it is looking to improve and Duqm Port & Drydock. had procured a new oil tanker with alocal infrastructure to allow for greater The latter will host a planned US$6 capacity of 2.2 million barrels – one ofexport capability via the ports of Jeddah, billion refinery with a capacity of the world’s largest – to join its fleetYanbu and Jizan. 230,000 bpd. Oman Oil – which owns a within the next few days. The unit is a The ports are all sited “close to the 50% stake in the venture – recently floating storage and offloading (FSO)main east/west sea trade routes to announced it would soon appoint a vessel, valued at around US$300 million,Europe, the Far East and Arabian Gulf,” project manager to oversee the greenfield according to the Iranian Offshore Oilaccording to the Saudi Ports Authority. scheme. The refinery is due to be Company’s (IOOC) managing director In late April, ABV Rock’s local completed by the end of 2017. In mid- Mahmoud Zirakchianzadeh.operation was awarded a contract to April, the port received its first project The National Iranian Tanker port control facilities at Yanbu, cargo at its commercial quay. (NITC) is expanding its tanker fleet, withwhile Saudi Aramco said its Yanbu the first of 12 supertankers to beAramco Sinopec Refining (Yasref) Northern Gulf delivered from China in May.project would be ready to ship its first On the north side of the Gulf, activity has Each capable of carrying 2 millioncargo in the fourth quarter of 2014. been somewhat more sluggish. barrels of crude, the tankers add much- In the throat of the Gulf, Saudi However, on April 21, Iran’s Fars needed capacity to NITC’s fleet, whileArabia’s Jubail-based Sadara Chemical – News Agency quoted Iran Oil Terminals the number of maritime firms willing toa 50:50 joint venture between Saudi Company’s (IOTC) managing director transport Iranian crude has gone intoAramco and the US’ Dow Chemical – is Pirouz Moussavi as saying that the freefall amid the sanctions push.preparing to tender for the tank farm country’s terminal storage capacity In December 2011, Zirakchianzadehpackage to be built at Jubail Port by the would “soar” to 100 million barrels from announced that 21 new tankers would beend of April. (See: Sadara – changing the current 24 million barrels by 2015. added to the national fleet by the end ofthe game, page 3) He said that four storage facilities – 2013, taking Iran’s crude transportation To the east, the UAE is looking to with a total capacity of 1 million barrels capacity to 180 million tonnes per the Abu Dhabi Crude Oil Pipeline – were under construction on Kharg While the West continues to hit Iran in(ADCOP), running from the oilfields of Island. Moussavi was quoted by Oil the pocket, Tehran appears prepared toHabshan to the port of Fujairah, on the Ministry website Shana as saying that do whatever is necessary toGulf of Oman, just outside the mouth of facilities with a capacity of 10 million outmanoeuvre sanctions, recentlythe Strait. The pipeline, an initiative by barrels had also been planned for ordering NITC captains to disable theAbu Dhabi’s International Petroleum construction in the area around Bandar-e black box transponders used to monitorInvestment Company (IPIC), has Genaveh. vessel movements.suffered several setbacks despite havingbeen completed in March 2011 at a costof US$3.3 billion. It is now not expectedto be operational until summer 2012. Itwas designed to supply the refinery andoil export terminal in Fujairah. In early April, Gulf Petrochem Groupannounced that the emirate’s storageterminal – capable of storing 1.2 millioncubic metres of oil – was on the verge ofcompletion after previously supposingthat it would begin operations in Octoberthis year. At the time, Sanjeev Sisaudia, thefirm’s CEO, told Kaleej Times: “We areopen to signing contracts to lease ourcapacities.” Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  12. 12. MENA Petchem Projects April 2012 page 12 EXPORT OUTLETS These onboard vessel-tracking systems Falah Alamri, head of the country’s manoeuvre around Western-imposedare required by the International State Oil Marketing Organisation sanctions, it appears that Iraq is goingMaritime Organisation (IMO). These (SOMO), said that the exports had from strength to strength after having hadsystems are only allowed to be switched brought revenues of US$8.4 billion at its production slashed by war, and theoff for safety reasons, when granted US118 per barrel. country is anticipated to become thepermission by the ship’s flag state. He added that exports had been aided world’s biggest supplier of new oil It is thought that Iranian exports by a new floating export terminal, the production in the next few years.dropped from last year’s rate of 2.2 first of four being built by Australia’s It has become apparent that Iran willmillion bpd to 1.9 million bpd in March, Leighton Offshore, which was operating not attempt to close the Strait of Hormuz.based on calculations by the International at a capacity of 300,000 bpd. However, as is often the case, Tehran’sEnergy Agency (IEA), but Rostam On April 24, Reuters reported that Iraq sabre-rattling can set pulses racing andQasemi, the country’s oil minister, said had shipped its first cargo from its give the global energy markets cause forthat they had remained at around 2.2 second floating export terminal. concern.million bpd. Each of the Single Point Mooring The sheer volume of oil, gas and However, with most of the country’s (SPM) terminals will have a capacity of petroleum products that are shipped39 tankers off the radar, it is almost as 850,000 bpd when fully operational, and through the Strait every day makes ittough to judge accurately the levels these are expected to more than double very likely that swift action would bemoving through Kharg Island – the Iraq’s export capacity. taken on any country attempting to blockcountry’s main terminal, as it has become The media agency quoted an official buy and ship oil from Iran. from the state-run South Oil Co. (SOC) This being said, with Iran at odds with In early April, neighbouring Iraq as saying: “After bringing a second the West, there is always the chance ofannounced that its crude exports had export terminal on line, we are confident further instability in the region, but withrisen to their highest level since 2003 in that we’re ready to deal with exporting such major investments both ongoing andMarch, increasing to 2.317 million bpd more crude in the future.” planned, the Gulf’s riches clearlyfrom February’s 2.014 million bpd level. While Iran tries to find ways to continue to be worth the risk. Copyright © 2012 NewsBase Ltd. Edited by Ian Simm All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  13. 13. MENA Petchem Projects April 2012 Back Page NEWSBASE INFORMATION HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK CUSTOMERS INCLUDEOil and Gas SectorAfrOilAnadarko has been disappointed by wells offshore SierraLeone and Cote dIvoire.AsianOilSantos’ first-quarter revenue rose 50% year-on-year toUS$778 million.ChinaOilBeijing has approved Sinopec’s purchase of a 30% stakein Galp Energia’s Brazilian unit.FSU OGMGazprom intends to launch the second leg of the NordStream gas pipeline in October.GLNGPakistan is talking to Algeria to source affordable LNGsupplies.LatAmOilArgentina’s newly nationalised oil company YPF aims todrill 1,000 wells in 2012.MEOGSeven firms are bidding to expand Dolphin Energys RasLaffan gas compression facility in Qatar.NorthAmOilThe EU has postponed its vote on Canadas oil sands until2013.Unconventional OGMSeveral major energy companies have submitted bids fortwo shale gas fields in Ukraine. For further details on the stories above and NewsBase’s entire product range: tel: +44 (0) 131 478 7000 e-mail: Copyright © 2012 NewsBase Ltd.