UAE's total polyolefin capacity to rise to 4.5 mln tpa by end-2013

Abu Dhabi Polymers Company (Borouge) is pressing ahead with its plans of a third phase of development that should boost the emirate's total polyolefin production capacity to 4.5 mln tpa by end-2013, making it one of the world's top 10 polyolefins producers. By then, the report by BMI anticipates that the Asian market will have recovered enough to absorb the massive increase in capacity. The UAE has a strong and growing petrochemicals sector, which utilises methane, ethane and gas liquid feedstock in its petrochemicals units. In 2009, the UAE had ethylene capacity of 600,000 tpa feeding downstream units that included 600,000 tpa linear low-density polyethylene (LLDPE). By 2015, ethylene capacity should be boosted to 2 mln tpa ethylene, 800,000 tpa propylene, 2.57 mln tpa PE and 1.7 mln tpa PP. UAE benefits from low-cost, accessible oil and gas reserves, although its feedstock availability is less than some of its neighbours in the region. Feedstock is available at reduced rates under a government measure designed to promote the non-oil sector, providing producers with a cost advantage for export markets. On the downside, this has caused problems with trade partners citing subsidised feedstock supplies as giving an unfair advantage. Abu Dhabi is keen to develop a petrochemical sector and wants to encourage investment in special economic zones. The focus of petrochemicals investment is the Borouge complex, which is being developed in three phases. Borouge 1, a US$1.2 bln complex with a 600,000 tpa cracker and a 450,000 tpa PE unit, was brought onstream in December 2001 at Ruwais, Abu Dhabi. It is a 60:40 JV between Austria's Borealis and Adnoc. The multi-billion dollar Borouge 2 project is due for completion in 2010. It will raise polyolefin production capacity to 2 mln tpa, including one 540,000 tpa Borstar technology enhanced PE unit and two 400,000 tpa Borstar PP units. This will be followed in 2013 by a third stage, Borouge 3, which will have capacities of 1.43 mln tpa PE and 900,000 tpa PP. Abu Dhabi is also preparing to develop Chemaweyaat, which it hopes will be the world's largest petrochemical complex, located in Khalifa Industrial Zone at Taweelah. It will include an olefins plant, an aromatics complex, and a range of downstream polymer and chemical units and is due to start production in 2015. The naphtha cracker will have capacity of 1.5 mln tpa, but the exact details of the capacities of downstream units are unclear. At the same time as Borouge's cracker is due to come online in 2010, growth in Asian markets is expected to be far weaker than before the financial crisis of September 2008, despite an expected recovery due to set in by 2010. Trends in UAE petrochemical production will remain closely tied to its key export markets, notably Asia's economic powerhouse, China. There are concerns about the sustainability of the recovery in the Chinese market, which is the key market for UAE petrochemicals exports, at a time when Chinese capacities are rising and imports diminish. it is believed China will remain an exporter of plastic products beyond the global economic crisis, and capacity additions will not be large enough to cope with domestic demand. We forecast that the country will be dependent on imports of PE and PP over the next five years, with the UAE becoming a key supplier. China is also set to remain a net ethylene importer over the next five years, despite an additional 11.95 mln tpa of new production capacity coming online, but imports will decline throughout the rest of the forecast period as the rate of capacity expansion outstrips the rate of demand, with the deficit falling to 8.89 mln tons by 2013. By then, China's cracker capacity should have reached 22.11 mln tpa.