After several delays, as the last of the expansion projects of the Middle East draws to an end, the Middle East petrochem majors are looking to transcend borders with overseas mergers & acquisitions as per ICIS. By mid 2010- around 8.5 mln tpa of cracking capacity is expected to be brought on stream during the 2008-2010 period. Though work on the next round of investment has started a few years ago, progress has been slow as feedstock availability was an issue in a few countries as ethane supplies had already been allocated to existing projects. Further, these countries have seen a rise in the cost of construction and scarcity of engineering resources and skilled labor, especially during the economic boom years of 2005-2008. This was followed by the global economic crisis that raised doubts on whether funds would be available to finance mega projects.
However, a recovery in economic conditions over the past few months has revitalized the projects environment. For countries with significant cost advantages and adequate funding and/or continuing high demand, like Saudi Arabia, India and China, continued investment in major petrochemical projects at improved construction costs is likely to continue. Rationalization is also likely as new global players from the East become stronger. The balance is expected to continue to shift to the East and strengthen GCC [Gulf Cooperation Council] positions locally and with partners in attractive higher growth markets, especially China and India.
Clearly, the GCC members are attracted towards China. SABIC will see its US$2.7 bln (€1.8 bln) cracker JV with Chinese state-operated energy and chemical giant Sinopec in Tianjin, China, start operations in Q1-2010. Kuwait Petroleum Corp. (KPC) has formed a JV with Sinopec for a refinery and petrochemical complex at Zhanjiang, China, for start-up in 2013. Qatar Petroleum International (QPI) is partnering with Anglo-Dutch energy and chemical major Shell for a feasibility study on a 20 mln tpa refinery and 1.2 mln tpa cracker at Taizhou, China.
International Petroleum Investment Co. (IPIC), the investment arm of the Abu Dhabi government, has said that it would like to be a global petrochemical leader in the next five years. With stakes in Borealis (Austria), OMV (Austria) and CEPSA (Spain), and full ownership of NOVA Chemicals (Canada), IPIC wants more assets and has said it expects to buy a major European petrochemical company by the first quarter of 2010. QPI recently extended its reach by setting up a JV with Shell that would own 50% of Petrochemical Corp. of Singapore (PCS) and 30% of The Polyolefins Co. (TPC) - also based in Singapore.
Borouge has awarded contracts for its third cracker and derivatives project at Ruwais, while Abu Dhabi National Chemicals (ChemaWEyaat), a JV between the Abu Dhabi Investment Council, IPIC, and Abu Dhabi National Oil Co. (Adnoc), has started preliminary work on a US$10 bln olefins, aromatics and ammonia complex - the first of many projects that it has planned for the long term. It is unlikely to face problems implementing them, given the backing of its sponsors and majority owner IPIC's move to acquire companies with a strong technology portfolio.
In Saudi Arabia, activity at Ras Tanura, where state energy firm Saudi Aramco and US-based Dow Chemical have planned a mega US$20 bln investment, has picked up in recent months. The engineering and design phase is due to be completed in 2010 with start-up planned for 2015 - a delay from the original schedule of 2012-2014. Aramco's JV with Japan's Sumitomo Chemical, Petro Rabigh, has also started work on a second phase, which will see it move into production of a wider range of derivatives, including specialty chemicals.