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INDUSTRY BRIEFS | Elf gets worst of both worlds in two European takeover battles

09/22/1997

The Persian Gulf's petrochemical industry is proliferating Abdullah M. Aitani, Syed Halim Hamid King Fahd University of Petroleum & Minerals Dhahran, Saudi ArabiaThe Gulf Cooperation Council (GCC) ranks ninth among the world's basic petrochemicalsproducers. Producers in the region are increasing their capacities for propylene, aromatics,and butadiene­based petrochemicals.

In 1995, GCC methanol production accounted for 9.2% of global production, ethylene for4.1%, and aromatics for less than 1%. In 2000, methanol will account for 17%, ethylene 6%,and aromatics 4.3% of global production.

Saudi Basic Industries Corp. (Sabic) has been on a consistent expansion course and now isconsidered a global petrochemical producer. And, by the year 2000, Kuwait, the United ArabEmirates (U.A.E.), and Oman will have petrochemical industries to go along with their

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existing fertilizers industries.

The first article in this three­part series (OGJ, Sept. 15, 1997, p. 36) examined refinerycapacity, planned expansions, and projected product demand in the GCC. This secondarticle looks at the region's petrochemical industry. The final article will explore the outlookfor petrochemical feedstocks in GCC countries.

GCC petrochemicals

The GCC petrochemical industry started in early 1980s, primarily to add value to theregion's abundant hydrocarbon resources and to reduce the dependence of nationaleconomies on oil. Saudi Arabia, Qatar, and Bahrain have undertaken substantialpetrochemical investments; many petrochemical plants in these countries are among theworld's largest in their fields.

In 1981, Qatar Petrochemical Co. became the first GCC company to produce polyethylene.This plant was followed in 1983 by the building in Saudi Arabia of a methanol plant bySabic's affiliate Saudi Methanol Co. (ArRazi).

By the end of 1995, 35 petrochemical plants operated in GCC countries, producing basicchemicals, intermediates, and final goods. By far the bulk of petrochemicals production hasbeen in ammonia­based products (ammonia, urea), methanol­based products (methanol,methyl tertiary butyl ether), and ethylene­based products (ethylene, ethylene glycol,ethylene dichloride, polyvinyl chloride, and polyethylenes).

The GCC ranks ninth in the world in basic petrochemicals and is increasing its interests inpropylene, benzene/toluene/xylenes (BTX), and butadiene­based petrochemicals. Most ofthe petrochemical projects in the GCC are joint ventures with recognizable internationalcorporations.

Table 1 [42,980 bytes] presents current and expected production capacities of basicpetrochemicals in GCC countries in 1995 and 2000, as well as the region's share of globalproduction.

Processing capabilities

The GCC petrochemical industry has two advantages over other regions: Raw materials arecheaper than in major export markets, and utility costs (important in petrochemicals) arerelatively low.

Low­cost feedstocks afford the region considerable variable­cost advantage, with domestic

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light naphtha prices set below international trade levels. In Saudi Arabia, NGL prices arefixed at 30% less than export sales prices, while ethane prices have been maintained at$0.5/MMBTU, compared to prices in Europe of $2.5/MMBTU.

In addition to these advantages, the investment climate in the GCC encourages the growthof the petrochemical industry. Saudi Arabia, for instance, offers, among other things, a 10­year tax "holiday" on corporate profits and has no restrictions on foreign investors' capital. Inaddition, the country has a stable currency exchange rate.

The GCC petrochemical industry is often described as "feedstock­driven." In GCC countries,petrochemical feedstocks are primarily derived from associated gas, some 80% of whichwas flared previously. Throughout the last decade, however, the amount of flared gas hasbeen reduced substantially. At present, only 8.7% of the gross natural gas output in theGCC is flared.

The GCC petrochemical industry consumes associated gas equivalent to 55.5 million b/d ofcrude oil. A total of 24.5 million cu m/day of natural gas is consumed in the production ofpetrochemicals, which corresponds to 6.1% of total gas production in the region.Nonassociated gas is used increasingly to supplement the associated gas, primarily as afuel gas.

Because of cost advantages and small domestic markets, GCC petrochemical producershave adopted an export­oriented strategy. The GCC's location favors this strategy, given theease of access to markets in Europe and Asia. This orientation, however, renders thepetrochemical industry highly vulnerable to changes in international market conditions.

Southeast Asia is the GCC's most important future target market because of its size andgrowth rate. On the supply side, Saudi Arabia­specifically Sabic and its affiliates­isresponsible for about 92% of the GCC's total petrochemicals production and 89% of itsexports (Tables 1 and 2).

The GCC generally has improved profitability by moving products eastward because it hadno logistic or tariff disadvantages relative to the U.S. or Europe. As GCC supplies increase,however, and if Asian imports decline, more material will have to move westward.

The 80% export rate compares with about 25% globally. More than 90% of GCCpolyethylene and methanol output is exported, compared with 43% for both productsglobally. For ethylene glycol, the ratios are 97% for the GCC and 39% globally; and for

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styrene, 69% vs. 22% globally.

Large capital investments were needed to build GCC petrochemical plants, and productionrequired abundant natural gas, both as feedstock and as fuel. Investments were thereforesequenced to allow the smooth development of the infrastructure and industry.

Most of these investments came from governments or the public sector, and turned out tobe highly successful. As a result, today the GCC petrochemical industry is an importantplayer in international markets.

Many of the petrochemical projects were established as joint ventures between GCCgovernments and foreign firms. But there are growing signs of small­scale private sectorinvolvement in some GCC petrochemical facilities.

Total GCC petrochemical investment surpassed $19.0 billion in 1995. This translates to anaverage investment of about $600 million/plant, a figure that shows the capitalintensivecharacter of the petrochemical industry.

Saudi Arabia has experienced the greatest level of regional petrochemical investment; itspetrochemical sector accounts for 93% of regional capacity, while Qatar's accounts for4.2%, and Bahrain's for 2.2%. This picture will change by 2000, however, in light of projectsin the construction or study stages in Kuwait, U.A.E., and Oman. By then, overall GCCpetrochemical investment is expected to reach $33 billion (Table 3 [18,494 bytes]).

Saudi Arabia Sabic was established in 1976 as an umbrella organization to expand anddiversify Saudi Arabia's economy through industrialization. Sabic is 70% public and 30%privately owned. Today, more than 20 years after its founding, Sabic is one of the world'sprominent petrochemical companies, accounting for 5% of global petrochemicals output.

Sabic has reached a new stage as its affiliates move downstream from the basicpetrochemicals it has developed over the years. To produce these new products, additionalupstream capacity is required. Existing facilities also must be expanded to meet growingdomestic demand and to maintain exports.

Sabic operates 16 petrochemical, fertilizer, metal, and gas complexes in Jubail and Yanbu.These plants use state­of­the­art technologies and are supported by a worldscale marketingnetwork.

Sabic produced 16 million metric tons of petrochemicals and plastics in 1995 and is

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targeting an output of 20 million tons by 2000. The company exports about 18 petrochemicalproducts to more than 75 countries worldwide.

Table 4 [72,633 bytes] and Table 5 [58,543 bytes] show the production capacities of Sabicaffiliate plants and the feedstocks used. Most plants get their feedstocks from associatedgas produced by Saudi Arabian Oil Co. (Saudi Aramco) in the Eastern Province oil fields. Afew companies, however, receive some of their basic feedstock (benzene) from the Jubailrefinery or from other Sabic affiliates.

Ar­Razi is a joint venture of Sabic and a Japanese consortium led by Mitsubishi; it wasestablished in 1979 and came on stream in February 1983. ArRazi converts methane tochemical­grade methanol at its Jubail plant. The plant's two units have a combined capacityof about 1.2 million metric tons/year.

While the majority of ArRazi's output is purchased by the five Japanese chemicalcompanies that make up the consortium, some of the methanol is consumed in the methyltertiary butyl ether (MTBE) complex of Saudi European Petrochemical Co. (Ibn Zahr).

In 1995, Sabic signed an agreement with Mitsubishi Heavy Industries to build an 850,000metric ton/year (mty) methanol unit, to be completed in mid1997. Later, a third unit will boostthe company's methanol capacity to 2 million mty.

National Methanol Co. (Ibn Sina) is a joint venture of Sabic (50%), Hoechst Celanese Corp.(25%), and Panhandle Eastern Corp. (25%). Production began in 1985 at its Jubail plant.Feedstocks are methane and butane. All of Ibn Sina's output is exported, with Celanesemarketing half of the output.

A 700,000 mty MTBE plant was completed at the complex in 1994. And Ibn Sina plans todouble its methanol capacity.

Saudi Petrochemical Co. (Sadaf) is a joint venture of Sabic and Shell Oil Co. Its Jubailcomplex was the largest of Sabic's first­generation projects. It was designed to produceethylene, styrene, ethanol, ethylene dichloride (EDC), and caustic soda from Ghawar field'sassociated gas, plus benzene from Shell's Jubail refinery, and salt.

Sadaf will increase ethylene production as part of an expansion project that includes a700,000 mty MTBE/ETBE plant. This is the world's first large­capacity plant able to switchproduction between methyl and ethyl tertiary butyl ether, according to market requirements.

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Italy's Snamprogetti SpA licensed its fluidized­bed butane dehydrogenation technology toSabic for this project, which started production in January 1997.

Sadaf also is planning an aromatics complex that will use a UOP/BP LPG­aromatizationprocess called Cyclar to produce pxylene and lesser amounts of mixed xylenes and toluene.

Al­Jubail Petrochemical Co. (Kemya), a joint venture of Sabic and Exxon Corp., hasproduced linear low­density polyethylene (Lldpe) and high­density polyethylene (HDPE) atJubail since 1987. Ethylene feed for the plant comes from Sadaf.

Sabic has licensed Exxon's high­pressure tubular process for its planned low­densitypolyethylene (LDPE) plant at Jubail, which will have a capacity of 200,000 mty of LDPE.And Kemya is planning a 700,000 mty ethylene cracker for its captive use in producingpolyethylene.

Saudi Yanbu Petrochemical Co. (Yanpet) is a joint venture of Sabic and Mobil Corp. Yanpetproduces ethylene, polyethylene, and ethylene glycol from ethane at Yanbu. Constructionon the planned expansion, known as Yanpet­2 will start this year, with completion expectedin 2000. The project will double ethylene capacity and add polypropylene to Yanpet'sproduct slate.

The new project will increase ethylene capacity by 816,000 mty, propylene capacity by260,000 mty, polyethylene capacity by 544,000 mty, and ethylene glycol (EG) capacity by408,000 mty. The plant will use heavier feedstocks such as propane or light naphtha.

Arabian Petrochemical Co. (Petrokemya) is wholly owned by Sabic and operates under amanagement services and training contract with Union Carbide Corp. Initial productionbegan in Jubail in 1985, and additional chemicals were added to the product line in 1994.

The plant produces ethylene, butene­l, propylene, butadiene, benzene, and polystyreneusing ethane, propane, natural gasoline, and styrene as feedstocks. Petrokemya started upa second 50,000 mty butene­1 plant, which doubled its butene­1 capacity. In late 1996,Petrokemya debottlenecked its flexible­feedstock cracker to increase ethylene capacity by200,000 mty and propylene production by 70,000 mty.

National Plastic Co. (Ibn Hayyan), a joint venture of Sabic (71.5%), National IndustrializationCo. (10%), private investors (3.5%), and Lucky Goldstar International Corp. of Korea (15%),has been managed by Petrokemya since 1993. Ibn Hayyan's Jubail plant produces vinyl

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chloride monomer (VCM) and polyvinyl chloride (PVC). Ethylene feedstock is supplied byPetrokemya, and EDC feedstock is supplied by Sadaf.

Ibn Hayyan recently started up a 24,000 mty PVC paste plant­the first of its kind in theMiddle East. Earlier, Ibn Hayyan had increased production capacity for suspension­typePVC to 300,000 mty from 200,000 mty.

Eastern Petrochemical Co. (Sharq) is a joint venture of Sabic and a Mitsubishi­led Japaneseconsortium. Initial production at Sharq's Jubail plant began in 1985.

The plant converts ethylene supplied by Petrokemya to 730,000 mty of EG and 340,000 mtyof Lldpe. In 1998­99, EG capacity is expected to reach 1.3 million mty and Lldpe capacity,750,000 mty. Most of the output is exported to Asia, the Middle East, and Africa.

Ibn Zahr is owned by Sabic (70%), Italy's Ecofuel SpA (10%), Finland's Neste Oy (10%),and Arab Petroleum Investment Corp. (10%). Ibn Zahr started MTBE production in 1988,with a capacity of 500,000 mty. A 700,000 mty MTBE plant was completed in 1993.

Both plants process chemical­grade methanol, supplied by pipeline from Ibn Sina and Ar­Razi, and butane from Saudi Aramco. In 1993, a 200,000 mty polypropylene plant startedproduction; its propylene feedstock is supplied by Petrokemya. This was the first significantentry of Saudi Arabia into the polypropylene industry.

Arabian Industrial Fibers Co. (Ibn Rushd) was formed in 1993 to manage a proposedpolyester complex in Yanbu. It is owned by Sabic (51.7%), a group of Saudi companies(43.3%), and a Bahrain­based company (5%).

Ibn Rushd's $400­million polyester complex (Sabic's sixteenth manufacturing affiliate) wenton stream in 1995 producing 140,000 mty of polyester. Products include 48,000 mty ofstaple fiber, 32,000 mty of filament yarn, 40,000 mty of bottle resin, and 20,000 mty ofcarpet fiber. The complex's EG feed is produced by Yanpet.

Later this year, purified terephthalic acid (PTA)­a major feedstock for polyester production­will be produced using Technimont SpA technology. Capacity of the PTA plant is 350,000mty. Ibn Rushd also plans to start up a 730,000 mty aromatics plant later this year. Theplant will use the Cyclar process. Products will include 350,000 mty benzene, 300,000 mtyp­xylene, 45,000 mty o­xylene, and 35,000 mty m­xylene. The estimated plant cost is $400million.

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Ibn Rushd also plans to build a polyethylene terephthalate plant.

Saudi Arabian Fertilizer Co. (Safco), established in 1965, is 41% owned by Sabic; theremaining shares are owned by private investors and Safco employees. Its facilities inDammam and Jubail produce ammonia, urea, sulfuric acid, and melamine.

The company has steadily increased production over the years. In 1994, Safco acquired theNational Chemical Fertilizer Co. plant at Jubail, which produces urea, ammonia, nitrogen­phosphate­potassium, triple super phosphate, diammonium phosphate, and liquid fertilizer.

Another fertilizer manufacturer, Al­Jubail Fertilizer Co. (Samad), is a joint venture of Sabicand Taiwan Fertilizer Co. It began producing urea and ammonia at a Jubail plant in 1983.

The Samad partners also built a plant in Jubail to produce 150,000 mty of 2­ethylhexanol (2­EH) and 50,000 mty of dioctyl phthalate (DOP). The 2­EH plant­the first of its kind in theMiddle East­started production in 1995.

Samad uses Petrokemya's propylene to produce 2­EH and 140,000 mty of LDPE. The DOPunit was completed in August 1996 and uses the Mitsubishi Gas Chemical technology. Theunit uses 70­80% of the 2­EH production as feed and supplies plasticizers to the Saudiplastics industry.

Private­sector plants

Saudi private­sector plants produce a wide range of products, including solvents, butadiene,formaldehyde, polystyrene materials, polyester and epoxy resins, latex, and titaniumdioxide.

Arabian Chemical Co. is a joint venture between Al­Jaffa* and Dow Chemical Co. Theventure started production in 1995, with capacities of 5,000 mty styrene­butadiene (SB),3,000 mty SB latex for carpet, 3,000 mty SB latex for construction, and 7,500 mty acrylic forpaint. The company says 80% of its products are consumed domestically, and the rest inneighboring countries. The plant processes styrene and butadiene feedstock from Sabic'sJubail plants.

The Yanbu butadiene plant is a joint venture between Compagnie Polyisoprene Synthetique(a subsidiary of France's Michelin) and National Industrialization Co. Plant capacity is100,000 mty of butadiene and isoprene; both are utilized in the manufacture of synthetic

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rubber. They are produced from butane feedstock from the Saudi Aramco/Mobil refinery inYanbu, and from isopentane from Saudi Aramco.

Saudi Formaldehyde Chemical Co. produces 50,000 mty of formaldehyde and 56,000 mtyof formaldehyde derivatives at Jubail. The company is owned by seven Gulf investors. Theplant uses Haldor Tops e AS's process and was commissioned in 1991.

Planned private­sector petrochemical projects include a joint venture of Saudi VentureCapital Group (comprising 63 Saudi investors) and Chevron Chemical Co. The combine willbuild a petrochemical plant in Jubail that will produce 480,000 mty benzene and 220,000mty cyclohexane. The new company will be called Saudi Chevron Petrochemical Co.

Both products will be used as intermediates in other petrochemical ventures within andoutside the Kingdom. Construction is scheduled to be completed in mid­1999. Chevron'sproprietary Aromax process will be used to produce benzene from natural gasoline suppliedby Saudi Aramco, while Institut Fran?ais du P?trole technology will be used to manufacturecyclohexane from benzene.

Alujain Corp. and two foreign companies, Neste Oy and Ecofuel, have agreed to set up theNational Fuel Additives Co. (Tahseen) to produce 850,000 mty of MTBE at Yanbu. The twoforeign firms have each expressed an interest in acquiring as much as 15% equity inTahseen which will build, own, and operate the plant.

Xenel Industries Ltd. and Montell Polyolefins BV established the National PetrochemicalIndustries Co. (Teledene). A plant is planned at Yanbu for the production of 250,000 mtypropylene and 250,000 mty polypropylene. Total cost will be $450 million. The two projectswill be commissioned by mid­1999. Propane will be dehydrogenated to produce propylene.

Arab Industrial Development Co. (Nama) was established in 1992 to develop several plants.Three plants are planned for Jubail sites: a 50,000 mty prilled caustic soda plant, a 20,000mty epoxy resin plant, and a 50,000 mty sodium chlorate plant. Nama also is building a50,000 mty linear alkyl benzene (LAB) factory in Yanbu. Most of the plants are scheduled toenter production by the end of the year.

Additional projects are under way to produce propylene, polypropylene, p­xylene, soda ash,LAB, and maleic anhydride. Table 6 [64,221 bytes] presents a list of planned Saudi private­sector companies; total investment will be about $2 billion.

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Qatar

Qatar Petrochemical Co. (Qapco) is a joint venture between Qatar General Petroleum Corp.(QGPC), France's Elf Atochem SA, and Italy's Enichem SpA, for the production of LDPE.Qapco's Umm Said complex started production of 280,000 mty ethylene and 140,000 mtyLDPE in 1980. The complex processes a blend of gases (55% ethane, plus methane,carbonic acid, and hydrogen sulfide) from the Umm Said refinery.

In 1994, Qapco signed two contracts: one for $120 million with France's Technip for a newethylene plant and another for $100 million with Snamprogetti for a polyethylene expansionat Umm Said. The expansion will increase Qapco's production to 525,000 mty ethylene and360,000 mty LDPE. The company's new ethylene plant started production in late 1996,followed shortly with LDPE production.

Qatar Fuel Additives Co. (Qafac) is a proposed joint venture of QGPC and Asianpetrochemical companies for the production of methanol and MTBE. The partners­primarilyfrom Taiwan, China, and Malaysia­have expressed interest in the Qatari methanol project atUmm Said, which has a planned capacity of 660,000 mty methanol and 550,000 mty MTBE.The project will cost an estimated $450 million.

Qatar Clean Energy Co. (Qacenco), a QGPC subsidiary, has a 51% interest in a plannedmethanol/MTBE complex. Partners are Malaysia's Petroliam Nasional Bhd. (Petronas, 25%)and the U.K.'s Penspen Ltd. (24%). The complex was slated for a capacity of 825,000 mtymethanol and 500,000 mty MTBE, but Petronas has pulled out of the project, and itsdisposition is uncertain.

Qatar Vinyl Co. is a new joint venture of QGPC (25%), Qapco (32%), Norsk Hydro AS(30%), and Elf Atochem (13%). In its first phase, the complex will produce 338,000 mty ofEDC, 200,000 mty of VCM, and 260,000 mty caustic soda. A second phase to produce PVCis under study. Ethylene feedstock will be provided by Qapco from its expanded Umm Saidcracker. The complex is expected to start production in the first half of 2000.

Qatar Fertilizer Co. (Qafco) is a partnership between QGPC and Norsk Hydro. Production ofammonia and urea at two plants began in 1975. A third plant was added later. Most of theoutput from the plants is exported to Asia.

Qafco awarded Germany's Uhde GmbH a $411.7 million contract for the construction of afertilizer complex at Umm Said, yet to be completed. The complex will comprise ammoniaand urea plants, as well as urea storage, power, and desalination facilities. The bulk ofQafco's output is exported to Southeast Asia, Australia, and the U.S.

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Bahrain

Gulf Petrochemical Industries Corp. (GPIC) operates a $400 million ammonia/

methanol complex, which started production in July 1985. It is a joint venture betweenBahrain, Kuwait's Petrochemicals Industries Co. (PIC), and Sabic, all of which hold equalshares. A $20­million debottlenecking project was completed in 1989, increasing capacity by20%.

In 1995, production from the existing complex was 434,000 mty of ammonia and 427,000mty of methanol. More than 98% of the products are exported to Southeast Asia.

GPIC is building a 1,700 ton/day urea plant for an estimated $220 million. This plant'sfeedstock will include 80% of the ammonia produced by GPIC's ammonia/methanolcomplex. Construction of the plant is under way; it is expected to start up in the fourthquarter of this year.

National Chemical Industries Corp. (Nacic) is a joint venture between chemical companiesfrom Bahrain, Qatar, and Saudi Arabia for the production of sulfur derivatives. The plant islocated near Bapco's Sitra refinery, which provides its feedstock. Production capacityincludes 9,000 mty sodium sulfate and 6,000 mty metabisulfite.

Kuwait

In 1992, PIC, a wholly owned subsidiary of Kuwait Petroleum Corp., developed a plan tobuild a petrochemicals complex in Shuaiba. After several years of delay, and after formationin 1995 of Equate Petrochemical Co. (a joint venture of PIC and Union Carbide Corp.), workon the PIC complex began.

PIC and UCC each has a 45% interest in the project; a new public company, BubyianPetrochemicals Co., holds the other 10%. Construction began in 1996, and production isexpected to start in 1999.

Equate is developing an ethylene­based petrochemical complex that will consist of a650,000 mty ethylene plant, a 350,000 mty ethylene glycol unit, a 450,000 mty polyethyleneunit, a 100,000 mty polypropylene unit, and a 20,000 mty butene­1 unit. The polyethyleneand ethylene glycol units are based on Union Carbide technologies. Start­up is expectedthis month.

In parallel PIC, is developing an independent 100,000 mty polypropylene plant using

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propylene recovered from the FCC unit at the Mina Ahmadi refinery. The plant also willproduce copolymers using 6,000 mty of ethylene feedstock.

PIC is also discussing with U.S. and Japanese producers a $1­billion joint­venture aromaticscomplex at Shuaiba. PIC hopes to produce 500,000 mty of p­xylene and 100,000 mty ofbenzene to be used for the manufacture of synthetic fibers. The complex would processnaphtha produced at Kuwaiti refineries.

PIC now owns 100% of Kuwait Chemical Fertilizer Co. (KCFC) at Shuaiba. The facilityconsists of four plants. Comissioned in 1964, the plant was originally a joint venture withGulf Oil Corp. and BP.

KCFC produces urea, sulfuric acid, ammonia, ammonium sulfate, and liquid fertilizers. Mostof the urea production is exported to China and Asia; most of the ammonia goes to India,South Korea, Taiwan, Jordan, Tunisia, Spain, Turkey, and Greece.

PIC's chlorine and salt complex in Shuwaikh was expanded in 1984. The 28,000 mtychlorine plant was built by Japan's Tokuyama Soda Co. which supplied the processtechnology, engineering services, supervision, and commissioning.

PIC brought on line a third salt and chlorine plant in 1986. The plant brought PIC's totalcapacity to about 41,300 mty of chlorine, 70,800 mty of caustic soda, and 49,500 mty of salt.

Kuwait Melamine Co. was established in 1976 and came on stream in 1980 with a capacityof 15,000 mty. The company is not currently operating because of technical difficulties. Thefirm is owned by PIC (60%) and Kuwaiti shareholders (40%).

United Arab Emirates

Apart from a fertilizer plant built in Ruwais in the early 1980s, Abu Dhabi has not developeda petrochemicals industry. Abu Dhabi National Oil Co. (Adnoc), however, has identifiedinvestment opportunities in petrochemical projects worth nearly $1.78 billion. These projectsinclude an ethylene complex, a methanol plant, a polyethylene project, an ethylene oxideplant, a VCM project, and a formaldehyde plant.

The 300,000 mty ethylene complex is part of U.A.E.'s plans to expand its energy sector andtap its enormous gas reserves (around 5.7 trillion cu m), the fourth largest in the world. In1996, Adnoc signed a memo of understanding with the Denmark's Borealis AS to spend$1.5 billion to establish two companies to operate the planned ethylene complex. Abu Dhabi

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Gas Industries Co. (Gasco) will supply ethane­rich tail gas as feedstock. The plant will usethe technology of Porstar Co. and is expected to be completed in 2000.

Adnoc announced plans for a second petrochemical venture, the construction of anaromatics complex. A Japanese consortium led by Sumitomo Trading Co. plans toparticipate in the $1­billion joint venture.

The complex will produce 800,000 mty of p­xylene and 100,000 mty of benzene and willsupply products to Asia after 2001. Surplus naphtha feedstock will come from the secondcondensate­processing unit to be built under the Ruwais refinery expansion program (Part1, OGJ, Sept. 15, 1997, p. 00).

Ruwais Fertilizer Industries (Fertil) is a joint venture of Adnoc and France's Total. Thecompany started production in 1984 with a design capacity of 1,000 tons/day of ammoniaand 1,500 tons/day of urea. The plant now produces 350,000 mty of ammonia and 525,000mty of urea. All its output is exported to China, India, and Qatar.

The company is planning to increase ammonia capacity to 490,000 mty and build a 735,000mty urea plant at a cost of about $540 million. These expansions are prompted by a sharpincrease in prices over the past few years, rapid growth in local consumption, and increaseddemand in China and India.

National Chlorine Industries (NCI) is a wholly owned subsidiary of Adnoc. NCI operates aplant in Umm Al­Nar that produces salt, chlorine, caustic soda, hydrochloric acid, andsodium hypochlorite, mainly for use in the oil industry and water treatment.

Dubai Gas Co. (Dugas) and Scimitar Oil Ltd. of Canada constructed a 500,000 mty MTBEplant at the Dugas site at Jebel A* for an estimated $250 million. The plant startedproduction in the second quarter of 1995 using the technology of ABB Lummus Crest Inc.

Oman

Oman does not have a petrochemicals industry, but plans to establish methanol andpolyethylene/poly propylene plants. In December 1996, the Oman Sultanate governmentselected BP Chemicals Ltd. as a foreign partner for a worldscale petrochemical project atSohar, Northern Oman. The project includes a 450,000 mty ethylene cracker and a similarlysized polyethylene plant based on BP's Innovene polyethylene technology.

Oman Oil Co. and two Indian companies­Rahstriya Chemicals & Fertilizers and KrishakBharati Cooperative Ltd.­have agreed to form a joint venture to build an $800­million plant

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with a capacity of 1.4 million mty of urea and 315,000 mty of ammonia. The plant will belocated in Sur and production will start in late 1998.

Petrochemicals outlook

In 1995, about 52% of the GCC petrochemical slate consisted of basic products, 26.5%intermediate products, and the remaining 21.5% final products. The GCC's petrochemicalportfolio and production capacity (basic commodities) is still small compared to thetraditional producing nations.

Table 2 [8,184 bytes] and Table 7 [13,043 bytes] show production and export data forseveral petrochemicals produced in the region. In 1995, more than 80% of production wasexported to Asia, Europe, the Americas, the Middle East, and Africa. The growth rates ofthese products are much higher compared to the global averages, however, and it isexpected that the GCC countries will maintain those high rates.

In addition to the basic petrochemicals listed in Table 1, the GCC region produces a numberof intermediate and final commodity petrochemicals which are traded globally. The GCCcapacities of the commodities listed in Table 6 represent about 5% of world production andmore than 8% of global exports. Other commodities such as methanol, MTBE, and EGrepresent more than 10% of global production. About one third of total petrochemical outputis consumed by the GCC domestic market and the remainder is exported.

GCC methanol capacity is 2.8 million mty. Regional methanol output is expected to reach4.4 million mty by 2000, which equates to an annual growth rate of 9.5%.

GCC ethylene capacity is 3.4 million mty. About 85% of the ethylene output is derived fromethane, and the remainder from light naphtha. (By comparison, the global ethylene industryis about 50% naphtha­based, 30% ethane­based and 10% propane­based, with the balancebeing shared by butane, gas oil, and other feeds.)

Regional production capacity is expected to grow at about 11.7%, reaching 6.4 million mtyin 2000. Table 1 shows the GCC's projected increase in ethylene capacity through the year2000.

More than 90% of ethylene produced in the region is used by three Sabic companies:Petrokemya and Sadaf in Jubail, and Yanpet in Yanbu. These companies have expansionplans that will increase the ethylene capacity to more than 4.0 million mty by the year 2000.

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Kuwait's Equate is a 650,000 mty ethylene plant which is scheduled for startup this month.Oman and the U.A.E. are in the process of establishing ethylene­based petrochemicalsindustries.

Current GCC capacity for all types of polyethylene is 1.5 million mty. Capacity is expected toincrease some 17%/year and reach 3.3 million mty by 2000.

Current production of ethylene glycol in the GCC is about 1.1 million mty. EG output willreach 1.9 million mty in 2000 if the expected growth of 11.9%/year takes place.

About 45% of the 2.1 million ton of EG traded globally in 1995 came from the GCC. Thisproportion will rise to 53% of the world's 2.7­million­ton EG trade in 2000.

GCC MTBE capacity is about 2.0 million mty, and is expected to reach 5.2 million mty by2000 (an annual growth rate of 21%). Additional units, including ETBE, are planned or underconstruction, to supply exports and to satisfy regional demand, which is moving toward lead­free gasoline.

There is no production of BTX in the GCC region, except for benzene extracted via naphthareforming at the Saudi Aramco/Shell refinery in Jubail, and benzene coproduced byPetrokemya's flexible ethylene cracker. Sabic's Ibn Rushd is building a 730,000 mtyaromatics plant at its Yanbu polyester complex. It will be the world's first plant using theUOP/BP Cyclar process.

Other planned aromatics plants include the Chevron's Aromax joint venture with the Saudiprivate sector for the production of 482,000 mty benzene using natural gasoline from SaudiAramco as feedstock. Kuwait and U.A.E. are planning aromatics plants using refinerynaphtha and condensates, respectively.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.

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