MENA Petchem Projects Special Report Focuses on Major Projects Impacting Region's Capacity

April 2012

NewsBase Special Report
MENA Petchem Projects  News
 Analysis
 Intelligence
–– Special Report –– Published by
 NewsBase
OVERVIEW 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 much
SAUDI 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 with
UAE 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.
www.newsbase.com 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

MENA Petchem Projects April 2012 page 2

OVERVIEW

The Arab Spring and its impact
on MENA downstream projects
The 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 potential
growth
By 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 there
On 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 Sriharsha
tone for a leading oil and gas conference Petrochemicals Company (OPC) to run Pappu, a Dubai-based analyst at HSBC
in Houston when he said: “History does its 160,000 tonne per year polypropylene Global Research, who commented that
not repeat itself, but it does rhyme.” His (PP) plant at around 80% capacity. the overall impact on the Middle East
statement is open to several In Syria, which is the largest consumer petrochemical industry had been
interpretations. 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 region
Africa (MENA) – home to nearly 56% of converters have been running plants at mainly catering to the European and
the 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 an
history was made with the Arab Spring have also faced logistical issues: land impact on trade flow, but the domestic
of 2011, from both from a geopolitical transportation costs to Syria for PE and market is quite small,” he said in a
and 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 on
Council (GCC) states, the scenario was the business operations of major
quite 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 the
hamstrung for more than a month. On the demand/supply scenario in Asia. UAE. The bulk of the petrochemical
natural 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 be
Tunisia, 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 for
to 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 major
downstream 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 Qatar
unable to book sales for several months,” Basic Industries Corp. (Sabic)] is firing Petroleum (QP) signed a heads of
a New York-based petrochemical on all cylinders and along with it the agreements (HoA) with super-major
product trader told NewsBase. “A private sector in the kingdom, as more Shell to build a steam cracker and a
number of chemical plants in Libya and feedstock gas will be available from mid- mono-ethylene glycol (MEG) plant with
neighbouring countries were shut down, 2014 onwards when Saudi Aramco a capacity of 1.5 million tonnes per year
as there was a shortage of feedstock to brings on stream the Al-Arabiyah and and a 300,000 tonne per year linear alpha
run 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



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 in
producer Qapco to build a facility of Association – Plast Alger – show the lack petrochemicals in North Africa, a project
capacity 1.4 million tonnes per year of of downstream domestic production in is moving forward for a Polyethylene
ethylene, 850,000 tonnes per year of petrochemicals and highlight that with an Terephthalate (PET) resin plant in Egypt
high-density PE, 430,000 tonnes per year annual domestic plastic consumption of in a partnership with India’s Dhunseri
of 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 for
year 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 420,000
we would expect this to grow further. QP According to Eckart Woertz, director tonnes per year, the plant is due to be
is 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 returning
phase of expansion of Borouge [Abu stand to gain from investment in the to North Africa, companies have already
Dhabi Polymers Company] will go petrochemical industry, as they have begun lining up to help the region tap its
ahead,” 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 will
North Africa NewsBase. “Egypt as well has plentiful begin to flourish into a major player in
In North Africa, the scenario is feedstocks that would give a competitive the sector.
somewhat unclear despite the high advantage to petrochemical producers,”

SAUDI ARABIA

Sadara – changing the game
The Beast is taking shape, and changing the playing field at the same time
By 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 markets
Of 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 Finance
North Africa, Saudi Arabia’s Sadara is credit agencies (ECAs) from around the International (PFI), this list has since
the 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 expected
and operation of the largest chemicals billion that the mega-project is expected to look at tapping the 144a and local
production complex ever constructed in a to cost. sukuk bond market in addition to the
single 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 Saudi
awed by the scheme’s size and expense – to proceedings told NewsBase that “the Arabia’s Public Investment Fund – are
was moved to Jubail Industrial City II nine ECAs backing Sadara had their also thought likely to back a financing
because of escalating costs, and will now second meeting in early November – package to cover around 60-70% of
be located around 100 km north of they have all committed to back exports Sadara’s capital costs.



SAUDI ARABIA
The source said: “The capital costs of lined up to submit both technical and
the project are continuing to come down, commercial bids by May 31 to build a
which have been helped by the major tank farm facility for the storage of
competitiveness 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 330,000
capital figure for the Sadara scheme, but cubic metres. A handling unit will also
that estimates of US$20 billion continued need to be constructed, as well as berth
to be bandied about. facilities, substation, fire-fighting
facilities and truck loading and unloading
Input and output facilities.
Sadara will use ethane and naphtha Contract awards The tender is expected to be released
derived 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 those
cracked 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 and
Aramco Total Refining and conference that 66% of the awards had Construction, Hyundai Engineering and
Petrochemical Company’s (SATORP) already been made. Construction Company and SK
Jubail refinery, which is currently under All engineering, procurement and Engineering & Construction, all of South
construction. This unit is due to be fully construction (EPC) contracts were Korea; Petro-Steel of Singapore and
operational in late 2013. already expected to have been awarded China’s Sinopec.
Chemicals Technology reported that by the current quarter, but no final
the 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 Sadara
hydrogen 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 million
between 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’s
PO, propylene glycol (PG), elastomers, Aramco Overseas Co. and Dow Europe. Daelim. The flexible cracker will break
linear 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 – part
production units are anticipated to come Aramco and Dow in 2008. The PO of the overall 8 million tonnes per year of
on line in the second half of 2015, while project is scheduled to be on stream in specialised chemicals manufactured from
all units are expected to be up and the first quarter of 2015. the scheme, which will represent the
running 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.



SAUDI ARABIA
The firm will carry out the EPC for the Early November saw the award of operation in 2011 set to contribute the
main 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, this
combined bid was around US$300 winner of an EPCM contract for the upturn will continue skyward. Production
million, at least US$200 million less than Chemicals 1 Envelope. from the first Sadara units is due to begin
was 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, after
awarded a US$2 billion engineering, (FEED) and detailed engineering which annual revenues of roughly US$10
procurement and construction services, in addition to procurement, billion are anticipated within a few years
management (EPCM) contract for inspection and delivery of equipment and of operation, with around 45% of exports
developing 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 Barclays
development 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 is
construction 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. The
main automation contract for the October 2011, bringing nearer to fruition region’s petchem demand is soaring, a
complex. As part of the contract, ABB a scheme that will be instrumental in function of growing population and
will 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 the
project management, project engineering producer but also a hub for future region, Saudi Arabia will play a major
and 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 Sadara
technicians 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

QATAR

Shell finally enters Qatar’s
petrochemicals sector
Qatar Petroleum’s new petrochemical venture with Shell indicates both are keen to make
up lost ground
By 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 products
As 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 decade
and downstream interests, Qatar will world’s single largest reserves of non- later, when Qatar General Petroleum
hold a special place for the Royal associated natural gas. Corp. (now known as Qatar Petroleum
Dutch/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 Shell
1980s 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 gas
producer in the Organisation of development programme and made



QATAR
Looking up In late December 2011, QP announced [engineering, procurement and
But it was not all doom and gloom for the signing of a deal with Shell to build a construction] tenders will be issued by
Shell, however. In between, the company world-class petrochemical plant. It will mid-2013.” More downstream project
was successful in signing up with QP to be 80% owned by QP, with Shell activity is planned by QP.
build 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 two
Laffan, after South Africa’s Sasol took venture agreement [JVA] by the end of years ago, and we plan more
the 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 Ras
1980s,” Abdullah Hussain Sallatt, a scope and commercial principals for the Laffan. The complex will include a
former technical advisor at Qatar’s project, which will include a steam world-scale steam cracker and produce
Ministry 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 tonnes
it was the Japanese [Chubu Electric will be designed to produce 300,000 per year of linear low-density
Power Company, Marubeni and tonnes per year of linear alpha olefins as polyethylene (LLDPE), 760,000 tonnes
Mitsubishi Corporations] and the US’ well. “We have been holding discussions per year of polypropylene (PP) and
ExxonMobil who came to our aid. While for a long time with ExxonMobil, Total 83,000 tonnes per year of butadiene. The
the former signed up as launch customers and Shell for the facility, as there is a project is scheduled for completion in
for Qatargas [Qatar Liquefied Gas growing demand in Asia and the Far East 2018. QP will hold 80% equity interest in
Company], built our first fleet of LNG for such exotic products,” Sallatt said. the facility, with Qapco taking up the
carriers and also extended financial “The Shell project signals our entry remaining 20% stake.
credit, the latter assisted with the into the next generation of chemical “QP and Qapco have been working
technology to build the first gas products,” Sallatt added. together for the past few months to plan
liquefaction train. Shell was not there to The next stage in the project the development of the project, which
help us, as they were probably not implementation will be the completion of will contribute to meet the continuously
willing to share the risk of developing a a pre-feasibility study and the launch of growing global demand for various
grassroots LNG industry. We were tenders in early 2013 for the front-end petrochemical products. These products
disappointed.” 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 Latin
the 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 Shell
that would utilise the natural gas from the Dhabi, told NewsBase. and Qapco, at long last Qatar is set to
mammoth North Field as feedstock – “The FEED contract will result in join the super-league of petrochemical
preference 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 started
generation of petrochemical projects producing speciality chemicals. With the
[Qatar Petrochemical Company (Qapco) Shell project, we too will emerge as a
and Qatar Fertiliser Company] in the late mega producer of a new range of
1970s 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 of
preference had to go with those IOCs US$6.4 billion, for its part the Shell
who stood by us initially,” Sallatt noted. facility will also signify one of the largest
potential investments made in Qatar’s
Bandwagon downstream business by IOCs in the past
Thus, when Shell recently signed a heads few years. The last major investment was
of agreement (HoA) to develop a an estimated US$18-19 billion for the
petrochemicals plant at Ras Laffan at an Pearl GTL facility, which is also owned
estimated cost of US$6.4 billion, it came by Shell.
as a surprise to some in the industry.



UAE

Borouge 3 expansion project
set for late 2013 start
Abu Dhabi’s Borouge expansion in Ruwais is set to come on line late next year, bringing
together ADNOC’s competitively priced feedstocks with Borealis’s Borstar polyolefins
By 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 completion
Abu Dhabi’s flagship Borouge 3 feedstocks with Borealis’s Borstar multi-billion dollar project remains well
expansion project in Ruwais will extend polyolefins (PO) technology to provide a on track, a point echoed by Borouge
the emirate’s reputation in advanced strong market advantage. CEO Abdulaziz Abdulla Alhajri himself
plastics for the infrastructure (pipe at the turn of the year.
systems, and power and communication Marching on Bechtel is providing overall
cables), automotive and advanced And recent years have seen steady management support for the
packaging 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 of
already a significant global player. now in full production. 2010.
With joint bases in the United Arab An additional 2.5 million tonnes per
Emirates (UAE) and Singapore, it year will be introduced by mid-2014 via Update
employs 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’S
across the Middle East, Asia-Pacific, the The intention is to take total annual refining division, said that work was
Indian 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.



UAE
Tecnimont and Samsung Engineering the sub-contract for the IT Strategy built by Germany’s Linde Group at a
landed 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 early
engineering, procurement and financing such a venture is an immense stages were awarded in order to clear the
construction (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 General
package – which includes two low/high- companies are done with their Transportations and Contracting
density PE (LD/HD-PE) units and two engineering work and studies, Borouge Establishment was hired for the
PP 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 the
utilise 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$111
capacity 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. While
maximum capacity of 480,000 tonnes per completed by the end of 2013 and fully much of the larger tenders have now
year. The LDPE unit will utilise the operational the following year. been issued for the expansion, Borouge 3
Lyondellbasell LupoTech T process, With all systems go, and the project in will continue to generate future
associated 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. The
a 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 emirate
and Construction also netted a contract to ensure no cost overruns. among the Gulf’s regional downstream
worth 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 and
contract to Cyprus’ privately owned logistics hubs in its overseas markets,
Hyperion Systems Engineering for the Project scope notably Asia, as it grows its downstream
Borouge 3 Information Technology The Borouge 3 project is immense in business. When the project sparks into
Strategy and Borouge 3 Information scale, effectively doubling output at the life at the tail end of 2013, and enters full
Technology FEED to support the major Ruwais site. production mode during 2014, it will
expansion. Hyperion is executing the IT A new – and third for Borouge – massively enhance Abu Dhabi’s
FEED project in collaboration with ethane cracker will produce 1.5 million emerging downstream profile around the
India’s Infosys Corp., which undertook tonnes per year of ethylene and is being world.

ALGERIA

Eyeing up Algeria’s Arzew
Algeria wants to retain the value of its natural resources by increasing its downstream
infrastructure, but lack of clarity has slowed progress at the flagship Arzew ethane cracker
By 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 essential
A desire to extract the most value from at Arzew, near Oran. According to petroleum gas (LPG) facilities, ammonia
its 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 liquefied
projects, including the industrial cluster natural gas (LNG) plant, three liquid



ALGERIA
The ethane cracker – where work is the project’s main market of Europe. Saudi Arabia’s Sabic, which had pitched
being 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 1.4
Algeria, but also the difficulties of 2015, but should “delays persist and million tonnes per year and produce
working on such a large-scale project in continue to hamper the development of around 1.1 million tonnes per year of
country widely recognised as challenging the project, its cancellation is not to be ethylene. This will be processed into
for foreign investment. excluded.” 410,000 tonnes of monoethylene glycol
The creation of an “integrated (MEG), 350,000 tonnes of high-density
petrochemical industry” is one of Ethane excitement polyethylene (HDPE) and 450,000
Algeria’s top priorities, said a person In mid-2007, Total announced it had tonnes of linear low-density polyethylene
with 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 French
downstream projects – one is the ethane owned Sonatrach. The scheme covers the company saying output will go to
cracker at Arzew with 1.4 million tonnes construction of an ethane cracker and Europe, North and South America, and
per 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 low
world. 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 cracker
sticking 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 and
shortages, which require an additional in August 2008. preferred access to feedstock. The French
gas pipeline to supply the plant, driving The Algerian company said at the time company declined to provide any
up costs, PFC said. Other problems cited that the contracts had been awarded information on the project to NewsBase.
by the consultancy include the corruption based on the amount of dividends that
scandal that engulfed Sonatrach in 2010- partners had agreed to pay Sonatrach Talking terms
11 – leading to the removal of a number from the projects. Total agreed to pay a The plant was originally due to start up
of high-level officials – and concerns on maximum rate of 70% from its ethane in 2013, but official estimates have
the 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.



ALGERIA
Gas for the cracker will be supplied significant changes to the framework Methanol in my madness
from fields in Algeria’s south. Total, in agreement. Therefore, [QPIC] is re- At the same time that Total was awarded
2007, reckoned the plant would carry a evaluating its position in the project.” its ethane cracker work, Algeria also
price tag of around US$3 billion and The company said the project was worth assigned construction of a methanol plant
thought it would be commissioned within US$700-800 million. to a consortium of companies: Kuwait’s
five years. In 2008, price estimates Sonatrach holds a 49% stake in the Qurain, Germany’s Lurgi, Trinidad’s
climbed 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 per
methanol plant being developed by the energy sector and required its foreign year of methanol and requires an
Almet, has also run into difficulties. It partners to settle for minority stakes. As investment of US$1 billion. The facility
had been due to start in 2012 but this has such, Total reached a deal in August should be ready in the first quarter of
been deferred to 2014. Officially, the 2010, cutting its stake to 41%, 2013. Almet’s stake was also reduced to
delay was intended to avoid the transferring 10% to Qatar Petroleum. 49%, with Sonatrach upping its interest
anticipated 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-owned
been talk that it has been caused by in the petrochemical industry than in the Algerian company 76.09% – seeing off
Algeria’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 by
Petrochemical Industries Co. (QPIC) in resource, instead of exporting raw Man Ferrostaal.
April 2011 said Sonatrach had “requested materials.

EXPORT OUTLETS

Middle East export projects
key to expansion
Iran’s recent threat to close the Strait of Hormuz has highlighted the pinch point’s
vulnerabilities – but several new schemes will give exporters the option of bypassing the
narrow sea passage
By 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 terminals
Refining and petrochemical projects excellent example of just how the Avoiding the Strait
throughout the Middle East will see the perceived delicate balance between A combination of greater political
region’s capacity rocket in the next supply security and demand can alter stability and energy sector maturity has
decade. With this in mind, a wide range global energy markets. Pipelines have made the lower Gulf the region’s export
of ventures is under way to open up provided long-term stability in terms of project hotbed. However, while much of
export 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, these
petroleum product prices, which can be Peninsula, for example, these too can be countries were made acutely aware of
strongly attributed to Iran’s threats to difficult to protect and the impact of problems on their doorstep when Iran
close the Strait of Hormuz amid Western attacks can incur great costs for importer threatened to close the Strait, raising
sanctions and the European Union’s economies – in this case Israel and concerns about access to around 40% of
announcement of an oil embargo, is an Jordan. the world’s oil supply.



EXPORT OUTLETS
Saudi Arabia – which, according to the Other developments out of the grasp of He said that the IOTC had exported
US Energy Information Agency (EIA), Hormuz tensions include Oman’s Sohar 900 million barrels of oil and 170 million
exports around 8.65 million net barrels Port – where a US$1.8 billion barrels of gas condensates in the last
per 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 further
country’s Red Sea coast gives it the the capacity of the Sohar Refinery will be buoyed on April 17, when Iran’s Mehr
option of bypassing the cluttered Hormuz floated before the end of the year-end – News Agency reported that the country
pinch point, and it is looking to improve and Duqm Port & Drydock. had procured a new oil tanker with a
local infrastructure to allow for greater The latter will host a planned US$6 capacity of 2.2 million barrels – one of
export capability via the ports of Jeddah, billion refinery with a capacity of the world’s largest – to join its fleet
Yanbu 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 Oil
according 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 Co.
build port control facilities at Yanbu, cargo at its commercial quay. (NITC) is expanding its tanker fleet, with
while Saudi Aramco said its Yanbu the first of 12 supertankers to be
Aramco 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 million
cargo 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, while
Arabia’s Jubail-based Sadara Chemical – News Agency quoted Iran Oil Terminals the number of maritime firms willing to
a 50:50 joint venture between Saudi Company’s (IOTC) managing director transport Iranian crude has gone into
Aramco 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, Zirakchianzadeh
package to be built at Jubail Port by the would “soar” to 100 million barrels from announced that 21 new tankers would be
end of April. (See: Sadara – changing the current 24 million barrels by 2015. added to the national fleet by the end of
the 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 year.
build 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 to
Habshan to the port of Fujairah, on the Ministry website Shana as saying that do whatever is necessary to
Gulf of Oman, just outside the mouth of facilities with a capacity of 10 million outmanoeuvre sanctions, recently
the Strait. The pipeline, an initiative by barrels had also been planned for ordering NITC captains to disable the
Abu Dhabi’s International Petroleum construction in the area around Bandar-e black box transponders used to monitor
Investment Company (IPIC), has Genaveh. vessel movements.
suffered several setbacks despite having
been completed in March 2011 at a cost
of US$3.3 billion. It is now not expected
to be operational until summer 2012. It
was designed to supply the refinery and
oil export terminal in Fujairah.
In early April, Gulf Petrochem Group
announced that the emirate’s storage
terminal – capable of storing 1.2 million
cubic metres of oil – was on the verge of
completion after previously supposing
that it would begin operations in October
this year.
At the time, Sanjeev Sisaudia, the
firm’s CEO, told Kaleej Times: “We are
open to signing contracts to lease our
capacities.”



EXPORT OUTLETS
These onboard vessel-tracking systems Falah Alamri, head of the country’s manoeuvre around Western-imposed
are required by the International State Oil Marketing Organisation sanctions, it appears that Iraq is going
Maritime Organisation (IMO). These (SOMO), said that the exports had from strength to strength after having had
systems are only allowed to be switched brought revenues of US$8.4 billion at its production slashed by war, and the
off for safety reasons, when granted US118 per barrel. country is anticipated to become the
permission 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 will
million 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’s
Energy Agency (IEA), but Rostam On April 24, Reuters reported that Iraq sabre-rattling can set pulses racing and
Qasemi, the country’s oil minister, said had shipped its first cargo from its give the global energy markets cause for
that 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 shipped
39 tankers off the radar, it is almost as 850,000 bpd when fully operational, and through the Strait every day makes it
tough to judge accurately the levels these are expected to more than double very likely that swift action would be
moving through Kharg Island – the Iraq’s export capacity. taken on any country attempting to block
country’s main terminal, as it has become The media agency quoted an official it.
to 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 of
announced that its crude exports had export terminal on line, we are confident further instability in the region, but with
risen to their highest level since 2003 in that we’re ready to deal with exporting such major investments both ongoing and
March, increasing to 2.317 million bpd more crude in the future.” planned, the Gulf’s riches clearly
from February’s 2.014 million bpd level. While Iran tries to find ways to continue to be worth the risk.


MENA Petchem Projects April 2012 Back Page

NEWSBASE INFORMATION
HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK CUSTOMERS INCLUDE

Oil and Gas Sector

AfrOil
Anadarko has been disappointed by wells offshore Sierra
Leone and Cote d'Ivoire.

AsianOil
Santos’ first-quarter revenue rose 50% year-on-year to
US$778 million.

ChinaOil
Beijing has approved Sinopec’s purchase of a 30% stake
in Galp Energia’s Brazilian unit.

FSU OGM
Gazprom intends to launch the second leg of the Nord
Stream gas pipeline in October.

GLNG
Pakistan is talking to Algeria to source affordable LNG
supplies.

LatAmOil
Argentina’s newly nationalised oil company YPF aims to
drill 1,000 wells in 2012.

MEOG
Seven firms are bidding to expand Dolphin Energy's Ras
Laffan gas compression facility in Qatar.

NorthAmOil
The EU has postponed its vote on Canada's oil sands until
2013.

Unconventional OGM
Several major energy companies have submitted bids for
two 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: news@newsbase.com
www.newsbase.com

MENA Petchem Projects Special Report Focuses on Major Projects Impacting Region's Capacity

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