Growth in Kuwait's petrochemicals output dependent on Chinese consumption

Growth in Kuwait’s petrochemicals output will depend on Chinese consumption, but the country will lose its ability to take full advantage of its plentiful feedstock supplies while nationalist and Islamist politicians have the power to scupper foreign investment, according to Companies and Markets. The Chinese polymer resins market is set to expand by an average of around 6.5-7.0% in 2009-14. However, with domestic demand likely to continue to outstrip supply, China will remain a net polymers importer over the medium-term and the largest importer in the world. In 2009, China depended on imports for at least a third of polymer demand. Most of the increase in demand will be covered by both Chinese and Middle Eastern supply from new petrochemicals plants due to come onstream in coming years. This will directly benefit Kuwait’s expanding petrochemicals industry, both domestically and with its investments in China. In the meantime, PE and EG sales from the Greater Equate project are expected to continue to benefit from strong Asian demand. Equate’s slim portfolio, while not that sophisticated, does include the most frequently used plastic in the world. However, Petrochemical Industries Company (PIC)’s expansion is at a lower rate than its regional peers, due in part to domestic opposition which has already prevented the planned merger between Dow Chemical and PIC. As a result, the Kuwaiti petrochemicals industry is faced with some structural constraints that undermined by reliance on imported ethane feedstock with Kuwait set to see net imports of 10bcm of gas by 2013. On the upside, the opposition’s campaigns against corruption and in favour of democracy have improved accountability and transparency in governance, which will foster improved investor sentiment in the long term. Levels of olefins and polyolefins capacities are unlikely to be increased before 2015 with the main expansion projects completed in 2009. The most recent development was the beginning of commercial operations of Kuwait Paraxylene Production Company's (KPPC) aromatics complex in December 2009. With capacities of 822,000 tpa paraxylene (PX) and 370,000 tpa benzene, KPPC’s US$2 bln complex is located in the Shuaiba Industrial Area. PX output will be used both domestically and exported, while benzene will be used locally for the production of styrene monomer by The Kuwait Styrene Company (TKSC). KPPC is wholly owned subsidiary of Kuwait Aromatics Company (KARO), which is a joint venture (JV) between PIC and KNPC with each holding 40%, while Qurain Petrochemical Industries Company (QPIC) holds the remaining 20%. By end-2009, Kuwait had ethylene capacity of 1.7 mln tpa feeding downstream units that included 825,000 tpa linear low-density polyethylene (LLDPE). It also has 370,000 tpa benzene, 822,000 tpa xylenes, 1 mln tpa ethylene glycol (EG), 765,000 tpa ethylene oxide (EO) and 145,000 tpa of polypropylene (PP) capacity. In the fertilizer sector, Kuwait has capacities of 1.04mn tpa urea and 885,000 tpa ammonia.