GPCA Connecting the Gulf - Members Directory 2014-2015 by wesam issa

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GPCA Connecting the Gulf Members Directory 2014-2015

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Connecting the Gulf: Members Directory 2014 | Contents

GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

Contents

5 Welcome letter

41 Gulf trade flows

By GPCA Secretary-General, Dr Abdulwahab Al-Sadoun

Chemicals produced in the GCC region are going global

7 Sponsor listing

44 Plastic projects to satisfy demand

The GPCA members helping to support this year’s Directory

GCC region to get a supply boost as commodity petrochemical capacities come onstream

8 GPCA member privileges Member beneﬁts: networking, proﬁling and best practice sharing

50 China coal drives domestic capacity

9 Membership growth

55 Full member profiles

GPCA membership remains strong and supportive

GPCA Members Directory: List of full members

10 GCC players assess the feedstock effect

89 Small and International producers profiles

The global shift in feedstock patterns is having an impact

GPCA Members Directory: List of Small Gulf Producers and International Petrochemicals Producers

China is using coal to improve its competitiveness in polymers

16 Polymer producers expand portfolios Engineering plastics pose plenty of opportunities

100 Service companies profiles GPCA Members Directory: List of Service Company members

22 Research and development climbs up the agenda Attention is turning to improvements in technology

120 Business partners profiles GPCA Members’ Directory: List of Business Partner members

26 Improving efficiency through better integration Industrial complexes are vitally important to GCC countries

143 Product listings

34 Outsourcing gathers pace

List of main chemical products manufactured by GPCA members

Special distribution and logistics services continue to gather momentum and help the development of higher-value chemicals

This Directory is a publication of the Gulf Petrochemicals and Chemicals Association Gulf Petrochemicals and Chemicals Association PO Box 123055, 705/706 Aspect Tower, Business Bay, Dubai, United Arab Emirates T: +971 4 451 0666 F: +971 4 451 0777 www.gpca.org.ae

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The Seventh Edition (Volume VII) is co-produced by: ICIS Quadrant House, Sutton, Surrey SM2 5AS, UK T: +44 20 8652 3187 www.icis.com

Editor John Baker Global Editor ICIS Custom Publishing +44 20 8652 3153 john.baker@icis.com

Printing Atlas Printing Press Dubai United Arab Emirates +971 4 3409895 www.atlasgroupme.com

Contributors Elaine Burridge, Muhamad Fadhil, Anna Jagger, Sean Milmo, Jeffrey Ong, Jo Pitches, Matt Tudball, Amy Yu, Stefano Zehnder

©2014 by GPCA. All rights reserved. No part of this publication may be reprinted, or reproduced or utilized in any form or by electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording or in any information storage and retrieval system without prior permission in writing from the publisher.

Design and production Louise Murrell, Rachel Warner, Lauren Mills, Steve Gale and Fiona Rutherford

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• 19 automated quay cranes and 50 automated rail-mounted gantry cranes • Quay length of 1860 metres, 70 hectare storage yard and 17 metres depth

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Connecting the Gulf: Members Directory 2014 | Welcome

GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

Welcome from the Secretary-General

The Gulf Petrochemicals and Chemicals Association (GPCA) is proud to bring you the seventh edition of its Gulf petrochemicals directory, entitled “GPCA – Connecting the Gulf 2014-2015”. We trust you will find it both interesting and useful throughout 2015, as a ready source of information on suppliers of products and services across the Gulf Cooperation Council (GCC) region. This year, we have presented the directory in the GPCA’s fresh new design, which is being adopted across all our publications and reports. We feel this approach not only enhances the brand of the association but will also make our products more attractive and accessible – meeting one of our core aims of effective communication. The listings in this directory are by member type starting with our full members, which each have a full page detailing their activities and products. These profiles are followed by separate listings of our various associate member types. All give full contact details, key personnel names and a brief description of the company, and list the main products and services provided by each member. We have also again included a “product finder” listing at the end of the directory to allow users to identify sources for the more than-350 chemicals supplied by GPCA members.

range of topics that are at the forefront of petrochemical debate at the present moment. Thus we have several articles addressing technology licensing and the move downstream to value-added engineering polymers; feedstocks shifts and polymer markets; the developing chemical distribution sector in the GCC area; and the development and beneﬁts of chemical clusters and transport infrastructure. As this directory is also being produced in an online Chinese-language version, we have included editorial on the development of polymer supply and demand in China, which represents a major market for many of our GCC members. As with last year’s directory, GPCA is making the content available electronically in the form of a dedicated website and as an online publication. I would like to thank ICIS for its efforts in compiling the editorial content of this publication. I would also like to extend my best wishes to members of the GPCA. I look forward to your continuing support and cooperation for the year 2015 and beyond.

Dr Abdulwahab Al-Sadoun Secretary-General Gulf Petrochemicals and Chemicals Association

But the directory is more than a mere listing. To add value we have included an extensive section of feature articles on a

“

This approach not only enhances the brand of the association but will also make our products more attractive and accessible 5

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Connecting the Gulf: Members Directory 2014 | Sponsors

GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

Member support GPCA is grateful to the following companies for their support of this “Connecting the Gulf” publication through their advertising presence. Without them this directory, now in its seventh edition, would not have been possible.

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Connecting the Gulf: Members Directory 2014 | Membership

GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

Member benefits GPCA offers attractive membership benefits

The steady rise of GPCA membership (see page 9) is due to the attractive beneﬁts on offer for member companies. GPCA has built a package of offerings for members, all of which are ﬁrmly related to the association’s three strategic pillars: networking; thought leadership; and advocacy.

Profiling

Some of the beneﬁts of being a GPCA member include:

Resource centre

Networking platform GPCA enables its members to establish contact with industry executives, potential customers and inﬂuential decisionmakers in various parts of the Arabian Gulf and throughout the world.

Best practice sharing Membership of GPCA gives your company access to a wide range of organised workshops and seminars that address key issues in the petrochemicals and chemicals industry.

Member companies are able to reach a global industry audience through listings on the GPCA website, the quarterly GPCA Insight newsletter and through the GPCA Members’ Directory.

GPCA members have access to the GPCA database and the many studies and publications that it contains. These include valuable white papers, detailed case studies and in-depth special reports.

Operational excellence through Responsible Care GPCA can help member companies share and implement international best practices in the areas of environment, health, safety and security within their manufacturing facilities or product supply chain through the SQAS programme.

Special member-only rates Global access

GPCA member companies are able to take advantage of preferential rates when attending GPCA events, seminars and workshops.

Rex Features

As a member of GPCA and its committees, your company has the unique opportunity to participate in events and programmes sponsored by international organisations.

GPCA membership brings preferential rates to numerous networking events

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Connecting the Gulf: Members Directory 2014 | Membership

GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

Member growth GPCA membership continues to grow

Over the nine years of its existence, GPCA has consistently expanded the membership of the Association. Launched in 2006 with just over 60 members in all, it now boasts 34 full members – companies that have a signiﬁcant manufacturing footprint in the Gulf Cooperation Council (GCC) states. In addition, it has 206 associate members, which are international in extent. These associate members cover smaller Gulf producers, international producers, service providers and business partners.

Rapid growth As of the end of 2014, total membership of GPCA stands at 240, with two-thirds of the members being based in the Middle East (see pie chart). This represents tremendous growth over the years – albeit one that has slowed slightly in 2014. Growth from 2012 to 2013, for instance, was a strong 15%, building on a 13% increase in 2012. All of this has been achieved at a time when global markets and economies have been sluggish – especially currently in Europe and South America – indicating that GPCA membership is seen as an attractive and useful proposition. It indicates that producers within and outside the GCC region see it as an important market in which to do business, and one where belonging to an effective association can pay dividends. The growth and geographic spread of members is shown in the accompanying two charts. GPCA MEMBERS COME FROM ACROSS THE GLOBE

GPCA MEMBERSHIP HAS GROWN CONSISTENTLY FOR NINE YEARS Number of members

Bahrain 4

250

Oman 6 Iran 4 Africa 4 North America 17

Qatar 13 Kuwait 8

200

Saudi Arabia 54

150

Total 240

100

50 Asia 20

2006

SOURCE: GPCA

2007

2008

2009

2010

2011

2012

2013

2014

UAE 77 SOURCE: GPCA

Europe 33

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Connecting the Gulf: Members Directory 2014 | Features

GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

Adapting to the feedstock shift

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Faced with significant changes to the global feedstock slate, Middle East producers are making plans for the future and looking at new opportunities

STEFANO ZEHNDER MILAN

Excluding methanol and the fertilizers chain, the global petrochemical industry is traditionally reliant on feedstock derived from refineries and from natural gas. Naphtha, liquefied petroleum gas (LPG) and refinery gases are sourced from refinery operations. Ethane, LPG and naphtha (in the form of natural gasoline) are the light natural gas liquids (NGLs) available from fractionation of liquids harnessed from natural gas processing. About 60% of world’s ethylene production is reliant on NGLs feedstocks, primarily in the form of ethane and LPGs (gaseous feedstocks), with most of the remaining output based on naphtha from refining operations (liquid feedstock). Additional “on purpose” propylene and benzene, toluene and mixed xylenes (BTX) production are strongly dependent on refinery gases and on refinery naphtha. The degree of access to natural gas resources and to NGLs has traditionally shaped the ethylene feedstock slate in the key producing regions, with a consequent impact on co-produced propylene and BTX. Gaseous feedstocks to ethylene would tend to produce marginal quantities of co-products. By contrast, heavier liquid feedstocks such as naphtha would have an important co-production of propylene (>50% of ethylene) and BTX (25-30%). As a consequence, the amount of liquid feedstocks necessary to produce 1 tonne of ethylene is considerably larger than that of gaseous feedstocks.

Ethane advantage Based on what was a surplus gas, mainly produced in association with crude oil output, the GCC ethylene industry grew rapidly on competitively priced ethane. The size of regional ethylene capacity has expanded threefold in the past 10 years, and is expected to average 27m tonnes/year in 2014. Two-thirds of ethylene production this year will be based on ethane, with ethane demand growing at same pace as ethylene. While the size of the GCC ethylene industry has approached that of North America, which has a similar access to large amounts of ethane and NGLs, a relatively minor reﬁnery/petrochemical integration has prevented a similar development in terms of propylene and BTX. This is even more evident when

the GCC petrochemical production is compared with the largest and naphtha-based Asian industry. In contrast to North America and the Arab Gulf region, Asia does not have access to large gas resources, while a larger use of naphtha and other refinery liquids provides for a major co-production of propylene and BTX. Supported by a large refining industry and a rapidly expanding demand, Asia is also a major producer of propylene and BTX from integrated operations. These traditional industry patterns are expected to undergo a structural and major change in the future, a factor particularly evident in terms of incremental petrochemical production to the year 2020, with the GCC, North America and Asia accounting for a combined 88% of it. Three key factors will be at play. First, a rapid demand growth and a tight gas market have recently generated concern about ethane availability in the Arabian Gulf region. By contrast, shale-related developments in North America are expected to provide large incremental amounts of ethane and light NGLs. Finally, a major effort for diversification from the traditionally imported naphtha feedstock is taking place in Asia. In the Gulf region, by now, basically all available ethane in the regional gas has been harnessed. Beyond announced projects in the shorter term, incremental ethane will require incremental gas production. As the cost of producing incremental gas is poised to increase, the availability of ethane at “legacy prices” is questioned. This trend is reflected in the scheme of the new ethylene projects expected on stream by 2020. The upcoming Borouge cracker and the two larger Iranian plants are planned on ethane, but their effective full operation will depend on critical upstream developments and timely access to incremental natural gas production. The next projects in Saudi Arabia and Qatar – recently placed on hold – will also depend on new gas plants, with ethane only a portion of the feedstock slate. A heavier feedstock slate is synergistic with the desire to diversify from ethylene derivatives into a more sophisticated

11 11

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“

In the Middle East, by now, basically all available ethane in the regional gas has been harnessed

and higher-value chain of downstream products, and also supports more labour-intensive associated chemical parks. As naphtha and LPG are primarily addressed to export, they tend to be priced at market values. This implies that in mixed feed steam-crackers, a valuable portion of the feedstock advantage provided by lower-cost ethane is not available. Looking at ethylene only, it does not appear that the role of ethane will change until 2020. Despite growing amounts of LPG and naphtha addressed to ethylene, the dominant share of production from ethane is basically unchanged from the last decade, and this share is forecast to only marginally decline until 2020. Longer term, the picture is less clear, but some of the projects under consideration call for the use of naphtha feedstock from integrated refinery operations. Examples include projects in the United Arab Emirates, again in Qatar and Oman. While access to incremental ethane is an issue, these trends also indicate the oil producers’ strategy towards substituting crude exports with higher-values products via integrated refining and petrochemicals. To fully appreciate the changing structure in regional petrochemical feedstocks, the discussion needs to expand beyond ethylene. In terms of light NGLs, GCC producers have already started diversification from ethane. GCC East producers have accordingly developed a number of projects to capture the opportunities beyond ethylene production, broadening the use of light NGLs beyond ethane. These include propane to propylene and light naphtha to aromatics. To date, this trend is concentrated on Saudi Arabia, as INCREMENTAL FEEDSTOCK TO PETROCHEMICALS 2013-2020 m/tonnes

Middle East

North America

14 Ethane 12

LPG ex NGLs

Refinery gas

Refinery naphtha

10 8 6

domestic NGLs are provided at advantageous pricing conditions, even if linked to international quotes. Once the use of LPG for propylene and methyl tertiary butyl ether (MTBE) is added to the one for ethylene, the growing contribution of this feedstock is more apparent. Also, more LPG than ethane is necessary for the same amount of ethylene production. While LPG to propylene has increased in recent years, consumption by steam-crackers accounts for 85% of total uses to petrochemicals. GCC petrochemical producers are increasingly looking at refining complexes for product diversification. Basically, all new refineries built in the region have important integrations with petrochemicals. Propylene from cat-cracking gases and BTX (benzene and paraxylene are the key products) from naphtha are the main routes. Abu Dhabi and Saudi Arabia are the main developers before 2020, but additional projects are under consideration in Oman and Qatar. Overall, the Arabian Gulf region is diversifying its petrochemical feedstock sourcing, with the role of refineries increasing. By 2020, about 35% of the incremental feedstock for petrochemical production will be derived from refining operations. Within refinery streams, naphtha will account for the largest feedstock demand, primarily for aromatics production. Natural gas via NGLs, however, will continue to provide the majority of incremental feedstock to 2020, with ethane remaining at centre stage. The regional ethylene feed slate will not change substantially, but the call on incremental LPG from NGLs and naphtha from refineries will be significant. If GCC feedstock developments are compared with those in North America, major differences are evident. In North America, the natural gas balance is shifting to surplus. In 2013, gas from shale formations ensured that US production remained above that of the total GCC. Exports via LNG are expected to take place in the next few years, against a tight GCC market.

4 2 0 -2

Ethylene

Propylene

Aromatics

SOURCE: ICIS consulting global supply & demand database

Ethylene

Propylene

Aromatics

Large NGLs yields from shale-derived gas and oil have resulted in a surplus of both ethane and LPG, with a large amount of new ethylene and propylene capacity announced to exploit advantaged feedstock pricing. By 2020, ICIS estimates that

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11m tonnes/year of incremental ethane will be addressed to a rapidly expanding North American ethylene industry. With ethane expected to remain in surplus, ethane will be exported deep sea. Initial destinations include Northwest European crackers, and recently India. Incremental LPG volumes from NGLs operations in the Gulf region are primarily addressed to ethylene, while propylene via propane dehydro is the main North American target. The GCC region is exploiting new refining capacity to support incremental propylene and aromatics production. The role of refinery streams in incremental petrochemical production is negligible in North America, as a minor increase in naphtha to aromatics is compensated for by declining demand for ethylene. By contrast, 2.6m tonnes/year of incremental naphtha is forecast in GCC ethylene plants. Under this scenario, the GCC feed slate will be incrementally heavier than in North America. The GCC will also leverage its refineries for a much larger aromatics production. The Asian picture is also drastically changing. While naphtha accounts for about 80% of ethylene production, only 35% of the projected increase will be based on naphtha. Production from methanol in China is expected to be the most important factor, even if a large amount of the announced projects is not considered in the forecast. The scenario assumed by ICIS consulting includes almost 4m tonnes/year of new methanol-based ethylene capacity by 2020, while excluding or delaying at least a third of the announced projects to come on stream by then.

Key petrochemical projects in the Gulf region Start up

Product

Country

Project

Capacity

Feedstock

2014

Ethylene

Abu Dhabi

Borouge

1500

Ethane

2014

Ethylene

Iran

Gachsaran

1100

Ethane

2014

Ethylene

Iran

Ilam PC

490

Ethane

2014

Ethylene

Iran

Kavian PC

1000

Ethane

2016

Ethylene

Saudi Arabia

Sadara CC

1500

Mix feed

2018

Ethylene

Qatar (on hold)

Al Sejeel

1400

Mix feed

2014

Propylene

Abu Dhabi

Adorc

920

propane/ ref gas

2014

Propylene

Iran

Ilam PC

co-product

2016

Propylene

Saudi Arabia

Sadara CC

400

co-product

2017

Propylene

Iran

Mehr Petrk

450

Propane

2018

Propylene

Iran

Niordc

200

Ref gas

2018

Propylene

Qatar (on hold)

Al Sejeel

705

co-product

2014

BTX

Saudi Arabia

Satorp

1100

naphtha

2015

BTX

Saudi Arabia

Ibn Rushd

500

naphtha

2015

BTX

Saudi Arabia

Rabigh 2

2030

naphtha

2015

BTX

Saudi Arabia

Yasref

140

naphtha

2016

BTX

Saudi Arabia

Sadara

250

co-product

2017

BTX

Saudi Arabia

Jazan

1200

naptha

Source: ICIS consulting

half of incremental naphtha demand will be for BTX production. Another important diversification from naphtha is expected to take place in the form of refinery gases. Incremental exploitation of heavy feeds is expected to be paralleled by incremental use of LPGs at existing naphtha crackers. Export of light NGLs from the US will be sourced, including an important volume of ethane and larger flows of propane to new dehydrogenation units for propylene production. Notably, the coal to olefins option represents a more profound petrochemical feedstock diversification from naphtha, as another 6m tonnes of propylene will be based on methanol. One of the implications of these developments is that almost one

While the Gulf region’s ethylene industry is not expected to remain short of feedstock in the near future, the region will face growing competition from North America, and from Asia. On an incremental basis, the GCC competitive advantage in ethylene is getting narrower. Diversifying feedstock sourcing towards reﬁneries will allow higher-value addition to crude oil production, and access to a larger product portfolio. This, in turn, will require exploitation of technological advantages to move to a more sophisticated and higher-value petrochemical industry. ■

Qatar Fuel Additives Company limited, popularly known as QAFAC, is an outcome of the Nationâ&#x20AC;&#x2122;s farsighted strategic plan to diversify its petrochemical base and expand its downstream industries. The company aims to optimize the utilization of the countryâ&#x20AC;&#x2122;s vast hydrocarbon resources through producing and exporting Methanol and MTBE. QAFAC was established in 1991 and commenced operations in 1999, QAFAC is a joint venture between industries Qatar, OPIC Middle East Corporation, International Octane L.L.C and LCY Middle East Corporation.

P.O.Box 22700, Doha, Qatar Telephone: +974 - 44773400 Fax: +974 - 44773555 Website: www.qafac.com.qa Email: Info@qafac.com.qa Address: Bay Tower 2, 13th Floor, The Gate Mail, West Bay

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Polymer producers expand portfolios

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GCC producers are looking to engineering plastics to derive added value from liquid feedstocks and meet demand from a growing domestic manufacturing base

Sean S Sea n Milmo London

The Arabian Gulf region is entering a new phase in the development of its indigenous petrochemicals industry with a move into engineering plastics and other higher value products. But on international markets, it does not have the same competitive advantage with these premium products as it does with commodity polymers, mainly polyolefins. These benefit considerably from the domestic availability of cheap ethane-based feedstocks. Engineering plastics and other upper-end polymers depend on naphtha and aromatic raw materials which, although being produced mostly by local integrated refinery-petrochemical complexes, have to be costed on the basis of international prices. Unlike bulk polymers, the planning of engineering plastics plants has to be done much more cautiously because the profit margins on products exported outside the Gulf area can be much narrower. On the other hand, premium plastics are not just being produced for target export markets, such as those in Asia. They are also being seen by planners in the Gulf Cooperation Council (GCC) region, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE), as playing a key role in creating a thriving downstream manufacturing sector in the area. In Saudi Arabia and the UAE, the objective is to at least double manufacturing’s share of GDP to around 20% by early in the next decade. A major driver behind this downstream industrialisation will be plentiful supplies of petrochemical-derived raw materials and also domestically produced steel and aluminium. Over the next four years, GCC petrochemical producers will be increasing their capacity by 45% to just under 200m tonnes/year, according to estimates by the Gulf Petrochemicals and Chemicals Association (GPCA). A rising proportion of that capacity, although relatively low in volume terms, will consist of engineering and other higher-value polymers. An important impetus behind the expansion of engineering polymers production will be the thriving and growing numbers of GCCbased plastics converters. There are now more than 1,000 sites carrying out primary processing of plastics in the GCC, according to a recent study by Nexant, a London-based consultancy.

“Major areas of future development (in conversion) will include engineering polymer processing,” says the report. This will stem from the output from GCC-located plants making higher-value polymers such as polyamide (PA) 6, PA 6,6, polyacetal or polyoxymethylene (POM), polycarbonate, acrylonitrile-butadiene-styrene (ABS) and polymethyl methacrylate (PMMA). Plans for downstream manufacturing sectors such as automobiles, household appliances and renewable energy equipment, with needs for high technology components, are an impetus behind local investment in production capacity in the engineering plastics supply chain. Saudi Arabia, which already accounts for around 70% of the GCC’s petrochemicals capacity, will be building the largest proportion of its engineering polymers capacity. Much of the rest will be built in the UAE. The state-controlled Saudi Basic Industries Corporation (Sabic) and the state energy company Saudi Aramco, which have been the leading investors in the region’s massive move into petrochemicals, will also be the main backers of the growth in engineering plastics production. Sabic has the advantage of having acquired General Electric’s GE Plastics business for $11.6bn seven years ago. The longestablished engineering plastics business now comprises much of Sabic’s Innovative Plastics segment. The takeover made Sabic a leading global player in high performance plastics, particularly in polymers such as polycarbonate, in which GE Plastics was one of the world’s biggest players. Saudi Kayan, an afﬁliate of Sabic, runs the Middle East’s ﬁrst polycarbonate plant, a 260,000 tonne/year unit, at Al-Jubail industrial city. There it also operates a 240,000 tonne/year unit making the PC intermediate bisphenol A. Petrokemya, a Sabic subsidiary, is due to bring on stream a 140,000 tonne/year ABS facility at Al-Jubail this year. Other engineering plastics projects of Sabic in Saudi Arabia include the construction, also at Al-Jubail, of a 50,000 tonne/year POM plant in a $400m joint venture (jv) with Celanese of the US, which is due to come on stream in 2016.

For us, it's about the big picture.

www.methanex.com

Responsible Care® is a registered trademark of the Canadian Chemical Producers’ Association, used under license by Methanex

Methanex, the world’s largest supplier of methanol, is a Responsible Care® company committed to environmental protection, sustainability and the health and safety of our employees and the communities where we operate. This global industry standard shapes all of our operating values and the code of conduct by which we do business. Responsible Care is an integral part of Methanex’s culture and a signiﬁcant contributor to our leadership position in the industry.

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“

The oil-to-chemicals complex will set a new competitive standard and establish Saudi Arabia as a technology leader in the petrochemical industry Mohamed al-Mady, vice chairman and CEO, SABIC

Like other engineering plastic schemes in the GCC, some of Sabic’s projects in higher-value polymers in the region have been subject to delays because of problems with agreements on technology, but also due to the competitiveness of global markets for the products, particularly those with overcapacity. Sabic and Mitsubishi Rayon Company (MRC) signed in June this year a joint venture contract to build in Al-Jubail a 250,000 tonne/ year methyl methacrylate (MMA) plant, the world’s largest, and a 40,000 tonne/year PMMA facility. However, the project, which is due to be completed in 2017, has taken five years to reach this stage following the signing of a letter of intent on the scheme in 2009. Much of the delay, which has put back the planned opening of the plants by three years, has been due to prolonged negotiations over the use of MRC’s latest Alpha technology and efforts to bring down its total costs. By far the biggest contribution by Sabic to downstream diversification in the country is likely to come from a $30bn giant oil-to-chemicals (OTC) project, on which it confirmed this summer it is carrying out preliminary studies. The scheme will help to realise the company’s Sabic 2025 strategy of being a leading provider of speciality solutions in transportation, construction, electronics and packaging. The scheme would comprise a 200,000 bbl/day crude oil refinery, which will supply only petrochemical feedstocks. Three steam crackers, one of which will process natural gas liquids and liquid petroleum gas, another naphtha and a third fuel oil, will make ethylene, propylene, butadiene, benzene, toluene and xylene as base chemicals for manufacturing engineering plastics and other speciality petrochemical derivatives. The OTC technology has been developed by Saudi Aramco scientists to enable the “conversion of crude oil to petrochemicals products at the highest ever achieved conversion rate,” Mohamed Al-Mady, Sabic’s vice chairman and CEO, told a recent Saudi innovation conference. “The OTC complex will set a new competitive standard and establish Saudi Arabia as a technology leader in the petrochemical industry,” he added. Saudi Aramco, which started to participate in petrochemical projects around the turn of the century, has embarked on a

downstream strategy based on closely integrated refinery and petrochemical complexes or even clusters. Khalid Al-Falih, the company’s president and chief executive, describes it as a downstream model supported by “new platforms for downstream business success, which I strongly believe represents the new model and way forward for this sector of our industry”. The first of these major integrated refining and chemical facilities is centred on two Saudi Aramco jvs – Sadara Chemical, a petrochemicals partnership with Dow Chemical, and SATORP, a refining venture with Total, both in Al-Jubail. SATORP, which came on stream late last year, is a $14bn 400,000 bbl/day refinery that processes heavy crude from the offshore Manifa field into fuels and naphtha and other petrochemical feedstocks such as paraxylene, benzene and high-purity propylene. These feedstocks will be piped to the adjacent $20bn Sadara site, which is due to produce from next year the first of 3m tonnes/ year of petrochemicals. These will include high performance and engineering plastics, including isocyanates and polyols for making the country’s first polyurethanes. Some of the output from Sadara will be delivered to PlasChem, a downstream park next door, to make plastic materials and chemicals for manufacturing household products, speciality films, construction components and furniture. Saudi Aramco has also been planning to include production of thermoplastic olefins (TPOs), PMMA and polyamides in an expansion of the PetroRabigh refinery petrochemicals complex, a jv with Japan’s Sumitomo Chemical. This involves the building of a second plastics conversion park close to the site. In another Saudi integrated plastic conversion project, Petrochemical Conversion Co (PCC), a 50:50 jv between Saudi Industrial Investment Group (SIIG) and Arabian Chevron Phillips Petrochemicals Co (PCC), is establishing a conversion park at Al-Jubail with a 50,000 tonne/year PA 6,6 facility. The converters on the site will be using as raw materials not just PA but other polymers such as high-performance polyethylene (PE). Outside Saudi Arabia, a similar model of petrochemical plants producing higher value polymers to support downstream manufacturers is also being applied, although not on

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the same scale.In Abu Dhabi, the state-owned Abu Dhabi Basic Industries Corp. (ADBIC) has set up the Abu Dhabi Polymers Park for conversion businesses using raw material from the adjacent Borouge petrochemicals complex.

In Oman, Oman Reﬁneries and Petroleum Industries Co (Orpic) is planning feedstock capacity such as paraxylene and benzene for making polyethylene terephthalate (PET) and polyester materials at its reﬁnery at Sohar. ■

Major GCC downstream petrochemical projects Product

Company

Location

SAUDI ARABIA Butyl rubber

Al-Jubail Petrochemical Co (Kemya)

Carbon black EPDM

Capacity ‘000 tonnes/year

Onstream date

Status

Al Jubail

2015

Planned

Al-Jubail Petrochemical Co (Kemya)

Al Jubail

2015

Planned

Al-Jubail Petrochemical Co (Kemya)

Al Jubail

2015

Planned

Polybutadiene

Al-Jubail Petrochemical Co (Kemya)

Al Jubail

2015

Planned

Styrene-butadiene rubber

Al-Jubail Petrochemical Co (Kemya)

Al Jubail

2015

Planned

Polyethylene terephthalate

Arabian Industrial Fibers Co (Ibn Rushd)

Yanbu

420,000

Q3 2014

Construction underway

Acrylonitrile-butadiene-styrene copolymer

Arabian Petrochemical Co (Petrokemya)

Jubail

140,000

Q4 2014

Study

Nylon 6,6

Saudi Industrial Investment Group (SIIG)/ Arabian Chevron Phillips Petrochemical Co

Al Jubail

50,000

Planned

Acrylic acid

Dammam 7 Petrochemical (Dammam 7)

Jubail

120,000

Epoxy resins

Jubail Chemical Industries Co (Jana)

Jubail,

120,000

2017

Planned

Polymethyl methacrylate

Mitsubishi Rayon Co (MRC)/SABIC

Al Jubail

40,000

2017

approved

Methyl methacrylate

Mitsubishi Rayon Co (MRC)/SABIC

Al Jubail

250,000

2017

approved

50,000

Q2 2016

Construction underway

H1 2016

Study

80,000

H1 2016

Study

Planned

Polyacetal

National Methanol Co (Ibn Sina)

Al Jubail

Polymethyl methacrylate

Rabigh Reﬁning and Petrochemical Co (PetroRabigh)

Rabigh

Ethylene-vinyl acetate copolymer

Rabigh Reﬁning and Petrochemical Co (PetroRabigh)

Rabigh

Methyl methacrylate

Rabigh Reﬁning and Petrochemical Co (PetroRabigh)

Rabigh

90,000

H1 2016

Study

Ethylene-propylene rubber

Rabigh Reﬁning and Petrochemical Co (PetroRabigh)

Rabigh

100,000

H1 2016

Study

Acrylic acid

Rabigh Reﬁning and Petrochemical Co (PetroRabigh)

Rabigh

100,000

H1 2016

Study

Nylon 6

Rabigh Reﬁning and Petrochemical Co (PetroRabigh)

Rabigh

100,000

H1 2016

Study

Acrylic fibres

Saudi Basic Industries Corp (SABIC)

Jubail

50,000

Mid-2013

Study

Polyvinyl acetate

Saudi International Petrochemical Co (Sipchem)

Jubail

125,000

Mid-2013

Study

Polybutylene terephthalate

Saudi International Petrochemical Co (Sipchem)

Jubail Industrial City

63,000

Q4 2014

Butyl acrylate

Tasnee Sahara Oleﬁns Co (TSOC)

Al Jubail

160,000

Jul-13

Polybutadiene rubber

Qatar Petroleum/Zeon Corp/Mitsui & Co

Ras Laffan

2018

Study

Styrene-butadiene rubber

Qatar Petroleum/Zeon Corp/Mitsui & Co

Ras Laffan

2018

Study

QATAR

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R&D ramps up

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Technology now has a more strategic role for GCC producers as they focus on higher-value products and position themselves for a more competitive future

Anna Jagger London

Access to technology is becoming increasingly important for chemical producers in the Gulf region as they continue to shift their focus to downstream investments. Whereas traditionally, companies in the region have tended to license-in technologies for their investments, now some of the major players are developing their own capabilities through acquisitions and investment in research and development (R&D). “As the industry in the GCC (Gulf Cooperation Council) moves down the value chain, the importance of technology will be increasing,” says Andrew Spiers, a consultant with Nexant. “As such companies get larger, to be depending on licensed technologies may be seen as a strategic threat.” Chemical producers based in the Gulf region are shifting their product portfolios to more value-added products – such as compounded polyolefins, polyurethanes (PUs), engineering plastics, performance polymers and synthetic rubbers – to regain competitiveness and create more jobs. They are also responding to a dramatically changing landscape in terms of regional shortages of natural gas and increased competition from North American players as a result of growing supplies of shale gas. Companies taking steps to develop their own technology capabilities include Saudi Basic Industries Corporation (Sabic) and Saudi Aramco. Sabic has developed technologies both through acquisition and direct investment. The company acquired GE Plastics in 2007, which brought technology and skilled personnel. This deal followed the purchase in 2003 of a 50% stake in Scientific Design, the leading licensor of ethylene oxide (EO) and ethylene glycol (EG) technology. Sud-Chemie, which is now owned by Clariant, owns the other 50%. Sabic makes significant investments in R&D around the world and has developed two technologies: an acetic acid process; and a linear alpha-olefins (LAO) process. The company developed the acetic acid process, which is based on ethane feedstock, from scratch, says Spiers. Using ethane, which is priced at $0.75 per million British thermal units (BTUs) in Saudi Arabia, is more competitive than using

the traditional feedstock for acetic acid production, methanol. However, the size of Sabic’s acetic acid plant, located in Yanbu in Saudi Arabia, is relatively small, he notes. The LAO process, named Alpha Sablin, was developed jointly with Linde. The companies operate a 150,000 tonnes/year LAO plant in Jubail, Saudi Arabia. Sabic is also following the more traditional route of developing technology-led joint venture (jv) projects with Western or Asian partners. Projects include a methyl methacrylate (MMA)/polymethylmethacrylate (PMMA) project in Jubail with Mitsubishi Rayon Co (MRC), which will use the ethylene-based Alpha MMA technology MMA developed by MRC subsidiary Lucite International. Celanese has partnered with Sabic to build a polyacetal (POM) plant. Located in Jubail, the 50,000 tonne/year POM project will be implemented by the companies’ existing jv, Ibn Sina National Methanol, which produces methanol, a key feedstock for POM. In addition, Sabic has created a joint venture (jv) with SK Global Chemical to manufacture a range of high performance PE products using SK’s Nexlene solution technology. The ﬁrst production plant is located at SK Global’s complex in Ulsan, South Korea, and the jv is planning to build a second production base in Saudi Arabia. Sadaf, Sabic’s jv with Shell Chemicals Arabia, has also licensed toluene di-isocyanate (TDI) and methyl di-p-phenylene isocyanate (MDI) technology from Mitsui Chemicals for its PU project in Jubail. Also in Jubail, Kemya, a jv between Sabic and ExxonMobil, has started building an elastomers facility based on ExxonMobil technologies for products including ethylene propylene diene monomer (EPDM) rubbers, thermoplastic elastomers (TPE) and halobutyl rubber. The project is scheduled to start up in 2015. Saudi Aramco has also been ramping up its R&D investments and has an ambitious target of 100 patent applications per year. The company is increasing its focus on chemicals innovation through its Sadara jv with Dow Chemical, which is under construction in Jubail and will produce performance, value-added chemicals and

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“

As the industry in the GCC moves down the value chain, the importance of technology will be increasing Andrew Spiers, consultant, Nexant

plastics. Saudi Aramco is also expanding its PetroRabigh petrochemicals jv with Sumitomo in Rabigh, Saudi Arabia. Outside Saudi Arabia, Oman Oil Co (OOC) has expanded its technology capabilities through the acquisition of oxo-alcohols producer Oxea. OOC is also planning an acetic acid project with BP based on BP technology in Duqm, Oman – the location of its reﬁnery and petrochemicals jv project with Abu Dhabi government-owned International Petroleum Investment Company (IPIC). Another company developing technology-led jv projects with western or Asian partners is Qatar Petroleum, which is investing in a cracker, monoethylene glycol (MEG) and LAO project with Shell, plus a butadiene and elastomer project with Japanese ﬁrms Zeon Corp and Mitsui & Co. Both pro-

jects are located in Ras Laffan, Qatar. As GCC companies increase their focus on innovation and invest in value-added products, the trend towards self-sufﬁciency will continue to gain ground. Full self-sufﬁciency, however, is likely to be challenging. A company’s decision whether to develop its own technologies or to license them is the classic “make or buy” decision, says Spiers. Internal technology development is more likely to be successful when focused on a particular feedstock, for example – as was the logic behind Sabic’s acetic acid technology, he says. “But where product technologies are very mature it is perfectly reasonable to license-in and save those R&D dollars for areas where advantage can be leveraged,” he adds. ■

Sabic is licensing technology for MMA production in a joint venture with Mitsubishi Rayon

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Making the link for efficiency

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Industrial complexes are important elements in the economies of the GCC countries, but they need to be better integrated with transport and logistics systems

Seam Milmo London

Economic diversification in the Gulf Cooperation Council (GCC) countries through growth of downstream manufacturing using locally produced petrochemicals, metals and other raw materials depends on the efficiency of the region’s industrial sites. The vast majority of the industrial capacity of the six GCC states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) is located in a variety of dedicated areas, ranging from integrated refinery and petrochemical complexes through to aluminium and steel sites and industrial parks and free trade zones (FTZs). Much of the total output of these sites is oriented to the big export markets outside the GCC, in particular those in Asia. As the GCC petrochemicals sector shifts to more higher-margin products, the determination to boost international exports will be even greater. However, another objective of petrochemical producers will be to bolster the diversification of the GCC economies by forging closer trading links between their industrial sites. This means increasing intra-regional trade, which for a group of neighbouring countries with some of the world’s fastest economic growth rates, is relatively low. One of the biggest barriers to increased intra-regional trade among all GCC countries is the lack of proper road, rail and air links, both nationally and between member states. Improved logistics are required to connect the myriad of different industrial sites so that the whole region can become more economically diversified. Unless the industrial concentrations become more tightly knitted together, the GCC is unlikely to fully gain the competitive advantages it can bring the region in global markets. This is particularly the case when the region and its producers are being confronted with a US petrochemicals industry that is becoming a much more powerful force internationally because of the advantages of cheap shale-based feedstocks. Industrial site operators in the GCC can reduce investment costs by providing transport infrastructure and utilities. They can also help with technology transfers and, above all, with innovation through ties with technical centres, universities and

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“

One of the biggest barriers to increased intra-regional trade among all GCC countries is the lack of proper road, rail and air links

research institutes. They can also act as a one-stop shop, especially for SMEs and start-ups, by giving assistance with regulations compliance, production licences, import and export duty exemptions, funding and training.

The scheme will aim to create directly and indirectly around 100,000 jobs through the production of chemicals for the downstream manufacture of products in sectors such as transportation, construction, electronics and packaging.

The country with the biggest industrial sites is Saudi Arabia, which accounts for more than three-quarters of the GCC’s petrochemicals output. Its industrial sector is dominated by the two 40-year-old industrial cities of Jubail, on the country’s eastern coast, and Yanbu, on its western Red Sea coast. Both cities, which are run by the Royal Commission for Jubail & Yanbu (RCJK), have so far attracted total investment of SR900bn ($240bn).

Saudi Aramco is planning an expansion at a jv with Japan’s Sumitomo Chemical, around 200km south of Yanbu. This would involve the building of a second adjacent plastics conversion park. The state oil company has already invested more than $15bn in the development of an industrial city at Jizan in a relatively underdeveloped area in the southwest of the country near the Yemen border. The city will have a worldscale reﬁnery integrated with petrochemical facilities.

The biggest integrated refinery-petrochemicals project in Jubail involves two joint ventures (jvs) of Saudi Aramco, the state oil company, with the aim of supporting the country’s economic diversification. One, a jv 400,000 bbl/day refinery with Total, which opened last year, will be supplying feedstocks to the adjacent Sadara Chemical complex, a petrochemicals partnership with Dow Chemical. This will begin to produce in 2015 the first of 3m tonnes/year of petrochemicals, including engineering plastics and other high performance polymers.

Outside Saudi Arabia, one of the largest refinery-petrochemical complexes integrated with downstream manufacturing in the GCC is at Ruwais in Abu Dhabi. The Abu Dhabi National Oil Co (Adnoc) is expanding the refinery to 415,000 bbl/day, while it is also enlarging Borouge, an olefins-polyolefins site run in partnership with Austria-based Borealis, to an annual capacity of 4.5m tonnes/year. Some of the output from the complex is delivered to the adjacent Abu Dhabi Polymers Park for plastic conversion businesses as well as other downstream manufacturing operations in the emirate.

Part of Sadara’s output will be transferred to PlasChem, a neighbouring industrial park making plastics and chemicals for manufacturing automotive parts and accessories, construction products, speciality ﬁlms, construction materials, consumer products, pharmaceuticals and water treatment products.

In Kuwait, plans have been revived for the Oleﬁn III joint project between Equate and Petrochemical Industries Co (PIC) at Al Zour, where it would be linked to a new Kuwait Petroleum Corp (KPC) reﬁnery. This could boost the country’s downstream sector, which in terms of plastics processing capacity lags well behind Saudi Arabia and the UAE.

Yanbu, on Saudi Arabia’s western Red Sea coast, is the world’s third largest global refining hub with more than 1m bbl/day refining capacity, providing feedstocks to several large petrochemicals plants. By mid-2014, Yanbu had more than 100 industrial entities operating in more than 3,000 hectares, representing SR207bn of public and private investment. The industrial city has 420 square kilometres for expansion, double its existing area. Among the projects likely to take advantage of this additional land is a massive $30bn giant oil-to-chemicals project of state-controlled Saudi Basic Industries Corporation (Sabic), for which it confirmed this summer it is carrying out preliminary studies.

In Oman, which aims to increase its non-oil sector’s share of GDP from 50% to more than 80% by 2020, Oman Refinery and Petroleum Industries Com (Orpic) has been close to completing the design and engineering phase of its $3.6bn Liwa Plastics project. This will integrate its refinery at Sohar with a petrochemicals complex with an 800,000 tonne/year ethylene cracker and three polyethylene (PE) plants to provide the basis for an expanding downstream manufacturing sector. An important driving force behind economic diversification throughout the region is the industrial sites, which tend not to be backward integrated into petrochemicals or other raw mate-

Growing Value. Growing Together. PIC is committed to growth. Growing the value and service we deliver to our customers. Growing globally with our partners. Growing our commitment to sustainability. Growing opportunity for Kuwait. We have begun the next half-century of our history and we see a bright future, a future of unlimited possibilities.

ϙ ϡ ε ΔϳϟϭέΗΑϟ΍ ΕΎϳϭΎϣϳϛϟ΍ ΔϋΎϧλ Δϛέη PETROCHEMICAL INDUSTRIES COMPANY K.S.C. ΔϳΗϳϭϛϟ΍ ϝϭέΗΑϟ΍ Δγγ΅ϣ ΕΎϛέη ϯΩΣ· A Subsidiary of Kuwait Petroleum Corporation

Possibilities without limit

www.pic.com.kw

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The industry needs advanced national and regional infrastructure if we are to succeed Mohammad Husain, Chairman, GCPA Supply Chain Committee/CEO, Equate

rials and instead comprise a mix of different industrial sectors. In Saudi Arabia, the development of industrial cities, which are smaller than the country’s large petrochemicals-based sites but nonetheless well supported with infrastructure and services, is a major task of the 13-year-old Saudi Industrial Property Authority (Modon). The authority has set up around 3,000 ready-built factories in around 30 sites employing 300,000 people. It has a target of 40 industrial cities by 2018 on a total of 160m square metres of developed land. Some of the sites are relatively large ones located in major cities such as Damman, Jeddah and Riyadh but others are in smaller locations in peripheral areas where there is little industry.

Rail infrastructure is needed to link GCC industrial sites neighbours to increase its intra-regional trade.

The fastest expanding industrial parks and free trade zones in the GCC are on the eastern fringes of the region. These offer low or no taxes, import duties or foreign exchange restrictions; repatriations of profits; and other benefits as well as excellent infrastructure and communications. Their big advantage is their ease and speed of access to Asian markets. Jebel Ali Free Zone (Jafza) in Dubai is one of the world’s biggest free zones with 7,500 companies – 17% in IT and electronics, 15% in construction materials, 12% in chemicals and petroleum products, 12% in machinery and 9% in automotive. The free trade zone of Ras al-Khaimah (RAK), another eastern UAE emirate, accommodates more than 7,500 companies from more than 100 countries representing more than 50 industry sectors. It is already showing its potential as an outlet for GCC-produced advanced polymers because of the number of manufacturers making high tech products in its free zone. Among the GCC states, Bahrain probably has the most experience in running successful industrial parks and clusters because it was one of the first to diversify away from oil revenues. The opening in 1971 of the Aluminium Bahrain (Alba) smelter, now with an annual capacity of 912,000 tonnes, prompted the creation of an aluminium downstream cluster that has served as an example for the later establishment in the GCC of similar ones for petrochemical products. However, as with other GCC countries, Bahrain needs better infrastructure links with its

Although Saudi Arabia buys almost a third of its exports, its main transport connection with its neighbour is a 25km causeway, which can take more than two hours to transit because of customs and immigration delays. Now the governments have agreed to build a second causeway with a possible rail link. All GCC countries are embarking on big logistics investment programmes to increase their road, rail and air travel capacities. In particular, they are pouring money into rail projects, with Saudi Arabia, Qatar and the UAE spending a combined total of more than $100bn on their railways. The most important scheme – particularly for the petrochemicals sector — is the planned GCC Railway, which will extend to 2,117km by connecting the rail networks of all six GCC countries. “One train is the equivalent of 600 trucks, which can result in savings of 70% for fuel and greenhouse gas emissions,” says Mohammad Husain, chairman of the GPCA supply chain committee and chief executive of Equate. “The industry needs advanced national and regional infrastructure if we are to succeed.” An efﬁcient transport infrastructure linking the region’s industrial sites can help the petrochemicals sector make its full contribution to the downstream diversiﬁcation of the GCC economies. ■

QATAR CHEMICAL COMPANY LTD. (Q-Chem) Q-CHEM PROFILE Qatar Chemical Company Ltd. (Q-Chem) is a Qatari company owned by Mesaieed Petrochemical Holding Company Q.S.C (MPHC) 49 percent, Chevron Phillips Chemical International Qatar Holdings LLC (Chevron Phillips Chemical Qatar) 49 percent, and Qatar Petroleum (QP) 2 percent. MPHC is majority owned by QP. The Q-Chem facility is a world-class integrated petrochemical plant producing high-density and medium-density polyethylene (HDPE & MDPE), 1-hexene and other products, using state-of-the-art technology provided by Chevron Phillips Chemical, a major integrated producer of chemicals and plastics. Over US $1 billion was invested to engineer, construct and commission the Q-Chem facility, which began commercial operations in 2004. Located in Mesaieed Industrial City, the Q-Chem complex has a production capacity of 453,000 metric tons per annum (MTA) of polyethylene and a 1-hexene unit with a production capacity 47,000 MTA. The complex also consists of sulfur recovery and solidification plant, a water treatment plant, seawater cooling system, dock facilities and administrative buildings.

QATAR CHEMICAL COMPANY II LTD. (Q-CHEM II) Following the outstanding performance of the first Q-Chem plant production, profitability, and safety, our far-sighted founders embarked on a new 2 billion USD project called Q-Chem II. Constructed adjacent to the Q-Chem plant in Mesaieed Industrial City, the Q-Chem II facility takes advantage of economies of scale to produce 350,000 MTA of HDPE, and introduced the first full range Normal Alpha Olefins (NAO) unit with a production capacity 350,000 MTA. Q-Chem II is a joint venture between MPHC 49 percent, Chevron Phillips Chemical Qatar 49 percent, and QP 2 percent. The plant began commercial operations in 2010 and has raised the Q-Chem HDPE production capacity by 77 percent from 453,000 MTA to 803,000 MTA to meet the increasing demand of customers in Asia, Europe and Africa. Similarly the NAO plant produces full range of alpha olefins including butane, hexane, octane, decene, and higher molecular weight olefins. Both HDPE and NAO plants utilize Chevron Phillips Chemicalâ&#x20AC;&#x2122;s proprietary loop-slurry process for high-density polyethylene, which offers several advantages over competing gas-phase and solution-phase polyethylene processes.

RAS LAFFAN OLEFINS COMPANY LTD (RLOC) Ras Laffan Olefins Company Ltd (RLOC) is a Qatari company, 53.31 percent-owned by Q-Chem II and 45.69 percentowned by Qatofin Company Limited (Q.S.C.) (Qatofin) and Qatar Petroleum 1 percent. RLOC constructed a worldclass 1.3 million MTA ethylene cracker unit which was inaugurated in 2010. The cracker is operated by Q-Chem II on behalf of RLOC partners. Ethylene produced by RLOC is transported from Ras Laffan to Q-Chem II and Qatofin derivatives units in Mesaieed via a 135km pipeline. In Mesaieed, 700,000 MTA of ethylene is allocated to Q-Chem II and 600,000 MTA is allocated to Qatofin.

MARKET AND DISTRIBUTION CHANNELS Q-Chem and Q-Chem II products are paDkaged and sold under the well-established MarlexÂŽ Polyethylene and AlphaPlusÂŽ Normal Alpha Olefins brands through extensive marketing and distribution channels. Products in liquid and pallet form are distributed to customers around the world, where they are further processed into end products for domestic and industrial use.

ISO 14001:2004 ISO 9001:2008 CERTIFIED COMPANY

HIGH DENSITY POLYETHYLENE (HDPE) HDPE Marlex速 is widely used throughout the packaging industry where excellent barrier properties, strenght and flexibility make it the preferred material for an extensive range of application such as blow molding, film and pipe extrusion. Our range of products is one of the most chemically resistant commercial plastics available. The ability to maitain its structural integrity and excellent flow characteristics makeT it well suited for products with complex shapes or critical tolerances, such as chemical drums, pipe and geomembrance applications. PRODUCT APPLICATIONS & PROPERTIES FILM GRADES RESIN

APPLICATIONS

HLMI

DENSITY

HHM TR-344

Industrial liners, grocery sacks, bags and packaging films

0.19

0.946

HHM TR-131

Industrial liners, bags and packaging films

0.20

0.938

BLOW MOLDING GRADES HHM 5502BN

Containers for packaging food, household chemicals (bleaches, detergents, etc). Pharmaceuticals and other thin walled parts

0.35

0.955

HHM 5202BN

Containers for packaging food, household chemicals (bleachers, detergents, etc) and pharmaceuticals

0.35

0.952

HHM 50100

Shipping containers (up to 210l), large blow model parts, sheet

0.06

0.949

HXM TR-571

LG, part below modeling drums - industrial tanks

2.5

0.953

EHM 6007

Dairy bottles, liquid food packaging

0.7

0.964

0.20

0.937

GEOMEMBRANE SHEET AND PIPE EXTRUSION GRADES HHM 3802

PE 80 pressure pipe and fittings

K307

Pond liners gas and chemical tank containment liners and landfill liners

0.937

HHM TR-400

Smooth and textured geomembrane, pressured pipe

0.938

NORMAL ALPHA OLEFINS (NAO) NAO AlphaPlus速 are linear hydrocarbons having highly accessible terminal double bonds. This property makes them ideal materials for manufacturing numerous products. NAO or their derivatives are used extensively as polyethylene comononers, plasticizers, synthetic motor oils, lubricants, automotive additives, surfactants, paper sizing agents, and in a wide range of specialty applications. As major petrochemical building blocks, their use in the development of new chemical products is virtually unlimited. NAO FRACTIONS C4

Comonomer PE, PP, Butylene Oxide

C6, C8

Comonomer PE, Plasticizers, Silanes, Silicones

C12, C14

Synthetic Lubricants, Detergents, Surfactants, Alcohol Ethoxylates, Linear Alkyl Benzene (LAB), Mercaptans

C16, C18

Alkenyl Succinic Anhydride (ASA), Functional Drilling Fluids, Food Additivies, Leather Tanning Agents, Sulphonates

C20 - 24

Petroleum Additive Industry, Sulfonate Based Detergents, Alkylated Phenols

C24 - 28

Pour Point Depressant, Wood Treating

C30+

PVC Lubes, Fertilizer Coating, Oriented Strand Board

AlphaPlus速 and Marlex速 are trademarks of Chevron Phillips Chemical Company LP and are used under license by Qatar Chemical Company Ltd (Q-Chem)

FURTHER INQUIRES : Salam Tower, First Floor

Al-Corniche Street P.O. Box 24646 Doha, Qatar Tel: +974 44847110 | Fax: +974 44838741

Email: marketing@qchem.com.qa www.qchem.com.qa

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Outsourcing gathers pace

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The region’s increasing development of higher value chemicals is creating rising demand for specialist distribution and logistics services

Elaine Burridge London

The countries of the Gulf Cooperation Council (GCC) region are diversifying into the production of specialty chemicals, a trend that is opening up opportunities in the region for distribution and logistics companies. Demand for their experience and expertise in handling more complex chemicals will grow in tandem with the region’s rising development of products outside its traditional base of oil and commodity petrochemicals/plastics production. Although loaded with future potential, the chemical distribution market in the GCC is still young and in the early stages of development. Leading distributor Brenntag, which has been trading for decades in the GCC as an export market, opened its first sales office in the Jebel Ali Free Zone (JAFZA) in Dubai some two years ago, mainly to study the local market and understand the opportunities that may exist. Brenntag CEO Steve Holland says: “We would hope to see either a merger, acquisition or joint venture within the next 12 months.” He says Brenntag wants to gain critical mass in the region and is considering opening additional offices as well as new facilities for Multisol, the specialty lubricants company it purchased in December 2011. Brenntag is watching the GCC’s rising development of markets such as personal care and water treatment to support a growing young population. Growth of these new markets and applications, and the complexity they will bring to the supply chain in terms of handling and logistics, will provide opportunities for distributors that can offer the necessary services and expertise. A joint venture (jv) with Saudi Arabia’s EA Juffali & Brothers has given major distribution company Univar critical access to markets across the Arabian Gulf region. Headquartered in the country’s Eastern province, Univar says it will benefit from Jaffali’s local infrastructure and knowledge of the business and government environment. However, as the concept of distribution is still relatively new in the region, the majority of GCC trade remains dominated by the multinationals, which tend to handle their own logistics and supply chain. Abboud Smadi, CEO of Reda Chemicals, says the total size of the GCC market is modest when com-

pared with European countries such as Spain and he believes the opportunities for distributors have been overestimated. “European distributors looking for growth see the GCC as one of the places to go, but it has its own limitations. There are different metrics in the GCC,” Smadi says. Reda Chemicals, which operates in all six countries of the GCC, has continued to build up its facilities and services in the past two years. Investments include a new ofﬁce in Bahrain; laboratories for drilling chemicals in Dammam, Saudi Arabia; and personal care in Dubai, as well as warehouses and storage across the region. Smadi says the next step is to develop and grow its technical expertise in a variety of end uses such as coatings and personal care. “We are always looking to employ more experts to help our customers develop their own products,” he says,

Specialty shift benefits The shift to liquids and more hazardous goods is also benefiting logistics operators. UK-headquartered transport and logistics company Suttons International, which has been trading in the Gulf region for the past five years, has grown its business in the region significantly. An approach by Arabian Chemical Terminals (ACT) in 2011 to form a logistics business in Saudi Arabia led to the formation of a joint venture (jv), Suttons Arabia, a year later. Contracts have been secured in the past two years from a number of producers. The contracts cover the provision of trucking services and the supply of specialised assets for niche applications. Simon Bury, Suttons’ regional director, Middle East & India, says the company has invested more than $6m in equipment to service its recent contract wins in Saudi Arabia. Further investments are proposed to add logistics and warehousing facilities (see page 43). German logistics firm Talke is investing in the region on a country-by-country basis. In Saudi Arabia and Oman, jvs have been formed with local partners. Present in Saudi Arabia since 2003, Talke set up NewPort Saudi Arabia in July 2013 to support the region’s expanding petrochemical industry. It has more than 13,000 overseas tank containers in service worldwide. SA Talke, a jv with the Saudi Sisco and Al-Jabr groups, han-

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“

There is no question that the intention, willingness and energy are there to make the region easier to do business in Steve Holland, CEO, Brenntag

dles and transports plastic granules and chemical liquids. The company announced last June that it was expanding its onsite logistics operations for Sabic afﬁliate Saudi Kayan to manage the supply chain of the newly built natural detergent alcohol plant at Al Jubail. In Oman, the group established Aljabr-Talke in 2005, also for handling plastic granules, while in Dubai 50:50 jv RSA Talke was founded with RSA Logistics in May 2013 to service the Gulf region (see page 43). In Qatar, however, Talke has been operating with a wholly owned company since 2008. Richard Heath, Talke’s director for Middle East and Asia, says the company’s investments in the region have been made to strengthen its customer base and develop a local position with

Leading Middle East and African chemical distributors by regional sales in 2013, $m

manufacturers. “We are recognised by chemical manufacturers as a much bigger player now,” he says. The region’s development of specialty chemicals is well suited to Talke and “provides us with a window of opportunity”, says Heath. As well as its jv with Saudi’s Aldrees Petroleum & Transport Services (see page 43), Swiss logistics operator Bertschi is also active in Dubai with its agent and partner Wilhelmsen Ship Services. An office was opened there in November 2012 to oversee Bertschi’s deepsea tank container transport activities in the Middle East and India. Nils Thater, Bertschi’s general manager for Middle East and India, says the two are developing this business in all countries in the GCC region. Thater says Bertschi is seeing rising demand for transportation in ISO tanks as well as onsite or local logistics in close proximity to actual production. The company is building up its ISO tank fleet, and the “significant” investment is on a global rather than regional basis, explains Thater. “Our immediate target is to operate a global fleet of 5,000 units by the end of 2014 at the latest and we are well on the way to meeting it.”

Petrochem Middle East

593

Protea Chemicals

508

ICC Chemicals

426

Developing regional challenges

Reda Chemicals

397

Solvochem Holland

347

Orkila

330

Helm

234

Manuchar

210

While the opportunities are evident, the emerging nature of the region poses some challenges too. These include tedious and lengthy customs procedures, port congestion, inconsistencies on tariffs, lack of regulation, licence issues and long payment cycles, to name a few.

IMCD Group

152

Shamrock Shipping & Trading

Campi y Jove

Jebsen & Jessen Group

Quimidroga

Omya

Biesterfeld

Venus Chemicals Group

ECEM European Chemicals Marketing

Bodo Moller Chemie

Kale Kimya Group

Arpadis

Source: ICIS

These issues, however, should be seen as not unusual for a developing economy, says Brenntag’s Holland. “There is no question that the intention, willingness and energy are there to make the region easier to do business in. It is a challenging environment to do that speedily.” Working capital needs are much higher in the region, says Smadi of Reda Chemicals, because of the long supply chains and large inventories required to service local customers. Improvements to the region’s infrastructure are making progress but still lack investment. Thater, referring to road, rail and ports, says that not all the GCC countries have the infrastructure in place to cope with existing and projected chemical volumes in particular.

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“

There will be a real pinch point when Sadara starts up and output begins to build Simon Bury, vice president, Middle East and Asia, Suttons International

Looming on the horizon is the completion of the huge Sadara complex in Jubail Industrial City, Saudi Arabia. The complex, comprising 26 manufacturing units and producing more than 3m tonnes/year of chemicals and plastics, will have a profound impact on logistics activities in the Eastern Province when it starts up next year, says Bury, who believes that logistics resources will be tight on the supply side. “There will be a real pinch point when Sadara starts up and output begins to build.” There is no doubt that the GCC has attractive prospects. There is a clear need in the region for higher standards of operation and petrochemical producers are seeking a different skill set focused on handling liquids and hazardous goods.

The Gulf Petrochemicals and Chemicals Association (GPCA) has launched a three-year assessment programme across the GCC region to promote supply chain efficiency, flexibility and transparency. The Gulf Sustainability and Quality Assessment System (SQAS) is a uniform, independent and standardised programme that will enable companies to track and monitor progress in their environment, health, safety, security and quality processes. The region’s developments in diversifying downstream and its rising confidence in outsourcing are aligned with Western companies’ strengths in specialised services. Market growth is good and so are profits. But patience will be a virtue, as it will take time to resolve the hurdles hampering business in the region. ■

Logistics and infrastructure projects steam ahead Investments by logistics companies have gathered pace in the past couple of years. Western firms have formed alliances with regional partners to develop and grow their services. RSA-Talke has opened a warehouse for hazardous and non-hazardous chemicals in Dubai World Central (DWC), a purpose-built complex with the Al Maktoum International airport at its core. The storage facility offers 19,000 pallet spaces for dangerous goods and comprises seven independent chambers, four of which are temperature controlled A second project for a container terminal with dangerous goods capability is planned for the Jebel Ali Free Trade Zone (JAFZA). The facility will be designed specially for handling liquid chemicals in ISO tank containers and will have a capacity of 1,800 TEU (20-foot equivalent units). Aldrees Bertschi Chemical Logistics Services has invested in a terminal in the Jubail area that went into operation earlier this year. This facility will be the base for its operations in the country and will be continuously expanded to offer more complex and sophisticated solutions. Suttons has plans to develop a large logistics park in Saudi Arabia. Suttons Arabia is applying for a plot of land in

Jubail Industrial City 2. It hopes an allocation of land will be secured by the end of the year. In the first phase, the facility will comprise a tank cleaning station, a bunded area for storing tanks and maintenance and repair services. Suttons Arabia is also considering a new warehouse in Dammam for hazardous packed goods. Investment in infrastructure is progressing, with a strong focus on developing the regional rail network. This will have a positive effect on the petrochemical industry by enhancing intraregional transport and improving safety and efficiency. GCC Rail, the ambitious regional rail project linking all the states, will transform logistics across the region, stimulating trade and boosting economies. Completion is scheduled for 2018. Port facilities are also being upgraded and new ones built. In the UAE, Abu Dhabi is upgrading its deepwater port at Khalifa, which opened in September 2012, while in Dubai, a third terminal was completed this summer at Jebel Ali. Qatar is investing around $6bn in a deepwater seaport north of Mesaieed, with the first phase to start operations by the end of this year. Kuwait is also spending large sums of money to improve its infrastructure, including upgrading port facilities in Shuaiba to address congestion problems.

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GCC trade flow charts global business routes John Baker London

The GCC countries play a considerable role in global petrochemicals trade, being major producers and exporters of basic petrochemicals, most notably polyethylene (PE), polypropylene (PP) and monoethylene glycol (MEG). The region has long been seen as a major supplier of these materials to Asia and especially China, which has a substantial need to import polyolefins to meet the shortfall in domestic production. But increasingly Europe has become an important destination as well, with trade through northwest Europe and via Turkey and the southeast region. The trade flow maps on the next two pages show the extent of PE, PP and MEG trade last year, and the table also indicates the much smaller volumes of olefins that are shipped from the GCC region. On PE, for example, GCC producers’ exports to China last year topped 3m tonnes, across high density, low density

and linear low density grades. Europe was not so far behind, importing some 2.24m tonnes. India and southeast Asia represent other key markets for GCC material.

Polyester in China The picture is similar for PP, but for MEG, used in polyester fibre and resin production, China is by far the biggest market – taking in close to 4.4m tonnes , well above another other export destination. This reflects its status as a leading producer of polyester textiles and clothing In the two articles following the trade charts overleaf, we look closely at developments in the GCC and Chinese markets for polymers and MEG. In the GCC, investment in new capacity continues strongly, but so too does the build-up in the domestic market, as initiatives to promote polymer conversion and downstream industries gathers pace. In China, we analyse the build-up of domestic capacity in polyolefins and MEG using coal to olefins technology and on-purpose propylene as feedstocks. Both trends have the potential in the long term to influence what have now become well established export flows.

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GCC trade flows GCC MEG exports, 2013 Europe Russia Other NEA

North America

GCC

China India

Brazil

South Africa

Other Asia Pacific

Total 2013 exports: 7m tonnes

Olefins and polyolefins trade flows from the GCC countries, 2013 Region 000 tonnes

Ethylene

Propylene

MEG

Imports

Export

Imports

Export

Imports

Export

Imports

0.0

0.1

0.0

292.0

Other North America

0.0

Brazil

0.0

Other Latin America

0.0

Europe

0.0

144.9

0.0

Russia

0.0

Former USSR

0.0

South Africa

0.0

Other Africa

0.0

40.0

0.0

Other Midde East

0.0

China

0.0

11.6

Other Northeast Asia

0.0

India

0.0

Other Southeast Asia Total

Export

Imports

Export

26.1

8.1

0.7

0.0

29.5

0.0

0.1

5.3

0.0

69.8

1.7

29.2

0.7

0.1

83.7

0.0

20.7

0.2

502.3

64.9

2243.3

32.6

1079.7

0.0

34.7

0.0

91.7

0.0

10.0

0.0

53.4

0.0

32.7

0.0

48.4

0.0

94.5

0.2

1.3

0.0

3.8

0.9

484.7

0.0

611.9

0.0

1.5

0.2

245.7

240.3

2.4

93.4

0.0

45.9

0.1

4294.0

6.0

3013.3

0.4

1184.4

92.0

0.0

661.3

25.6

192.2

21.7

102.1

24.7

0.0

0.3

661.1

5.4

804.3

1.3

257.9

0.0

392.1

0.0

131.0

0.1

500.7

30.1

1487.9

3.1

879.1

705

177

7004

405

8897

4303

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GCC PE exports, 2013 Europe

CIS Other Middle East Other NEA

North America

China

GCC India

South Africa

Other Asia Pacific

Brazil

Total 2013 exports: 8.9m tonnes

GCC PP exports, 2013 Europe

CIS Other Middle East Other NEA

North America

China

GCC India

South Africa Brazil

Other Asia Pacific

Total 2013 exports: 4.3m tonnes Source: ICIS Consulting

Plastic projects to satisfy demand

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New polymer capacities will boost supply as the GCC region builds up to host two major world events in coming years

Muhamad Fadhil Dubai

New projects in the Gulf Cooperation Council (GCC) countries will significantly boost supply in the region, boding well for the plastics industry as a whole. Multiple new projects will come to the Middle East from now to 2020 as new polymer plants will be built. According to the Gulf Petrochemicals and Chemicals Association (GPCA), Saudi Arabia is the largest polymer producer in the GCC, while the UAE is demonstrating a remarkable growth rate. UAE and Saudi Arabia will be at the forefront of polymer growth in this region. In Saudi Arabia, Sadara Chemical is on track to bring its 1.5m tonne/year mixed feed cracker in Jubail on stream in 2015. Sadara is a joint venture (jv) between Dow Chemical and Saudi Aramco. The petrochemical complex will consist of 26 world-scale manufacturing units and it will be the first in the Arabian Gulf region to use refinery liquids as feedstock. As well as the cracker, the complex will include production units for polyurethanes (isocyanates and polyether polyols), propylene oxide (PO), propylene glycol (PG), elastomers, linear low density polyethylene (LLDPE), low density polyethylene (LDPE), glycol ethers and amines.

Getty

In the UAE, Borouge is expected to have commercial volumes available from its new 1.5m tonne/year ethane cracker and derivative plants in Abu Dhabi by the end of this year or by early 2015. Everyone is watching developments in Borouge closely as the new supply is a significant increase to existing output. Borouge, which is a jv between Austria’s Borealis and the Abu Dhabi National Oil Co (Adnoc), built the cracker and derivatives plants as the third phase (Borouge 3) of its petrochemical project at the site. The complex includes Borstar polyethylene (PE) units with a combined capacity of 1.08m tonnes/year; two Borstar polypropylene (PP) units with a combined capacity of 960,000 tonnes/year; and a 350,000 tonne/year LDPE unit. Borouge 3 will raise the company’s olefins and polyolefins capacity to around 4.5m tonnes/year from 2m tonnes/year.

The GPCA estimates that over a five-year period the GCC region will add 54m tonnes/year to its 2012 annual chemicals production capacity to reach 183.6m tonnes/year, with average growth estimated at 7.3%/year. Other GCC economies such as Qatar and Oman are set to welcome their own production capacities in the coming years. All this combined new capacity will boost supply. Oman Refineries and Petroleum Industries Co (Orpic) is working on the front-end engineering design (FEED) of its $3.6bn integrated plastics project in Sohar that is due to be completed in 2018. The project comprises an 800,000 tonne/ year steam cracker, which will use a mix of feeds including condensates and liquefied petroleum gas (LPG); an 838,000 tonne/year linear LLDPE/high density PE (HDPE) swing plant; a 215,000 tonne/year PP plant; and a 46,000 tonne/year benzene unit. Upcoming petrochemical initiatives in Qatar include the Al Sejeel petrochemical project, scheduled to start up in 2018 in the industrial town of Ras Laffan. It will feature a 760,000 tonne/year PP plant and a 430,000 tonne/year LLDPE unit. Concerns about oversupply remain, but downstream demand is set to grow alongside the growth in polymer output. Supply may outstrip demand in the short term, but there are a lot of new developments coming up that will boost demand in the Gulf region. Two major events in the region are expected to absorb a significant chunk of the new capacity. The World Expo, a trade exhibition, will be held in Dubai, UAE, in 2020, while the FIFA World Cup, a major sporting event, will be hosted by Qatar in 2022. Qatar is ready to spend $140bn (€109bn) to build infrastructure, including stadiums, according to global auditing firm Deloitte. This massive planned spending is expected to translate to robust demand for petrochemicals. The expected surge in demand was also behind the government’s plan to pump in $25bn to beef up Qatar’s petrochemical capacity to 23m tonnes/year by 2020 from about 16.8m tonnes/year in 2012.

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Plastic Pails

Reprocessed Resins

BOPP Films

Geomembrane Liner

Plastic Sheets

PLASTIC GROUP

PE 100 & Corrugated Pipes

Seeking Distributors in Export Market

Plastic Pallets

Green House Films

www.rowadplastic.com

Water Recycling Units

LV DQ DI多OLDWH RI

P.O. Box 29452, Riyadh - 11457, Saudi Arabia | Tel: +966 11 2651966 | Fax: +966 11 2651973 | marketing@rowadplastic.com

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“

Multiple new projects will come to the Middle East from now to 2020. This is good news for everyone involved in plastics

Population growth boosts demand Downstream sectors in the GCC, such as packaging and healthcare, are also expected to produce strong demand in the coming years. These two sectors are expected to be the biggest demand drivers, and there will be a huge spurt in demand from them over the next few years. Global demand for plastic resins in the healthcare sector is estimated to grow from 4m tonnes in 2012 to 6m tonnes in 2018. Modern healthcare applications require more plastic than in earlier times, pushing up resin demand. The food packaging industry in the Gulf region will also see stronger demand year-on-year as the population grows in the region. The GCC’s population is expected to increase to 50m by 2020, a rise from 41.7m in 2010, according to the Economic Intelligence Unit. As regional population increases, food consumption will grow and so will the demand for packaged goods in the Arabian Gulf region. According to a report by investment bank Alpen Capital, increasing urbanisation and hectic lifestyles will “increase the popularity of high-value processed foods”. The continued development of the local conversion industry will also help to spur plastic’s growth. Governments in the GCC are keen to grow the conversion industry as well to help create jobs. An industrial park for plastic converters, located next to Sadara Chemical’s upcoming petrochemical complex, is set to boost growth in downstream sectors. The close proximity between the Plaschem Park and the Sadara complex will create value-chain opportunities and help enhance a multiplier effect for plastic converters as more ﬁnished products are made. With higher demand for plastics, converters will be increasingly keen to enter the GCC market. This will lead to better competition and options for all stakeholders. ■

High prices and restricted supply slow African buying Jo Pitches London

African polyethylene (PE) and polypropylene (PP) markets saw limited buying in the first half of 2014, with customers taking a cautious approach to business. The main reasons for this have been relatively high prices, credit availability issues in much of Africa, and expectations of prices softening in the second half of the year - hopes that, as of August, had not materialised. Following increases early in the year, then a few months of stability, African PE and PP prices rose again in late spring/early summer as a result of tight supply for some grades. Both planned and unplanned maintenance at various plants in the Middle East and Asia resulted in limited supplies for Africa. Furthermore, climbing prices in China’s PE and PP markets were far more attractive to Middle East producers than those achievable in Africa. Overall, the combined effect of high prices and limited supplies caused months of hand-to-mouth buying by African customers. The resulting low inventories meant that from June to August those in urgent need of volumes had little option but to accept Middle East producers’ price hikes. However, by the beginning of September, improved supply of several grades, lower prices in the European markets and softer feedstock costs suggested that the upward trend of African prices could have run out of steam. Much of the market was expecting stable to softer prices for September. The primary uses for PE and PP in Africa are in the packaging and agricultural industries. Plastic bottles, water pouches, carrier bags, jerry cans and woven bags for grain storage are the key products.

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Caution weighs on Turkey polymers Matt Tudball London

This year has been an uncertain one for the Turkish polypropylene (PP) and polyethylene (PE) markets, with several factors affecting demand and prices fluctuating in the first half. This uncertainty looks likely to continue to the end of the year. Buyers have maintained a cautious attitude towards purchasing throughout most of the year, and this does not appear to be changing. The Turkish lira fell to a record low of 2.33 against the US dollar in January and has not really recovered, leaving smaller and medium-sized buyers reluctant to make large purchases.

There is some hope that demand levels will pick up during the fourth quarter, as this is traditionally a strong period of demand in the country, but it waits to be seen if 2014 will be as strong as previous years. Furthermore, buyers will eventually need to replenish stock levels regardless of limited demand, especially as some Middle Eastern producers have stopped selling spot cargoes from bonded warehouses in the country. Looking further ahead, Turkish polymer markets face yet another unknown factor – the upcoming general election

And if the lira does return to something like the November 2013 levels of 2.007, there is still the issue of weak demand post-Ramadan. Demand did not improve as expected following the end of Ramadan and the Eid al-Fitr holiday in late July, again because of a cautious buying sentiment amid the highest prices seen since 2011. Several players in Turkey are lamenting the loss of key export markets Iraq and Syria, especially for PP fibre. Recent military action in northern Iraq has seen exports of finished goods to that region drop significantly, and manufacturers in Turkey are waiting for signs of a resolution to the issues across the border before discussing demand levels for the coming months. The problems in Ukraine and Russia are also having an impact on Turkish exports to those regions too and are likely to continue while conflict remains. The obstacles for the Turkish polymers market persist at home as well as abroad. Due to the weak lira, cash flow is becoming a problem for many traders and buyers in Turkey, with no signs of an immediate let-up. Buyers are not able to pay their suppliers because of weak end-use market demand. Subsequently, traders have to slash prices to make sales and free up working capital, which in turn is causing buyers to hold off making purchases on the expectation of further price drops.

to be held before July 2015. This will mark a hat-trick of elections in Turkey that started with regional elections on 30 March 2014 and the presidential elections on 10 August. If trading activity in the country mirrors that of the run-up to the March elections, the polymers market will see a significant slowdown. PE and PP prices started to drop from mid-January on the back of the weakening lira caused by economic and political uncertainty around the outcome of the elections. It could be fair to say that any repeat of the caution displayed in the PE and PP markets at the beginning of 2014 would only be amplified in the run-up to next year’s national election.

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GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

China coal drives domestic capacity

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China is using coal as a feedstock to improve the competitiveness of its polymer production. Investment will affect polymer import demands in coming years

China’s self-sufficiency in polyethylene (PE) and polypropylene (PP) resins has risen significantly over recent years after a programme of rapid capacity expansion. This will continue over the next two years. As of the end of 2013, China’s rates of self-sufficiency in PE and PP were estimated at 57.7% and 74.2% respectively. Total PE capacity is predicted to reach 16.29m tonnes/year by the end of 2015, up by 26.4% from 2013, while total PP capacity is estimated to rise to 18.80m tonnes/year, up by 43.5% from 2013. Most of the capacity additions between 2013 and 2015 are based on coal and methanol, with fewer naphtha-based plants due onstream. The start-ups of these new capacities are expected to drive significant changes in the domestic market, and affect the GCC and other exporters to China. Chinese PE and PP producers suffered a severe squeeze on margins in 2014 because most of their plants are naphtha-based and are therefore susceptible to the volatility of international crude oil prices. Amid soaring oil prices and rising olefin feedstock spot prices in Asia, some less efficient PE and PP plants were forced to cut output or shut down. For example, Liaoning Huajin Chemical has shut its 130,000 tonne/year high density PE (HDPE) plant since 13 June to curb losses. As the uncompetitive nature of naphtha-based PE and PP plants in China is exposed, local coal-based plants are increasingly seen as a viable alternative. There will be 10 coal/ methanol-based PE plants in China by the end of 2015, with a combined capacity of 2.70m tonnes/year, and 14 coal/methanol-based PP plants with a total capacity of 3.55m tonnes/year. The competitive advantage of coal-based PE and PP plants is gaining attention against a backdrop of volatile international oil prices. However, increasing public scrutiny of the environmental impact of coal-based plants and the capital intensive nature of these facilities have raised scepticism about how many projects will eventually be implemented.

Feedstock diversification Rapid development of the shale gas-based petrochemical industry in the USA is driving Chinese producers to seek alternative feedstocks that will enable them to remain competitive. Hence, besides coal-based plants, new investments have been poured into developing propane dehydrogenation (PDH) units that use propane as feedstock. It is estimated that of the PP capacity to be added in 2014-2015, 750,000 tonnes/year will be linked to PDH plants, accounting for 13.2% of the total capacity addition during this period. Some of the PDH units scheduled to come onstream in 20142015 are not integrated with downstream PP plants, so their output will boost the supply of propylene in China. Some market players are concerned that this additional supply will be pushed on to the market and, as the liquid feedstock is not easy to store, it will push domestic propylene prices lower. However, with a fall in China’s propylene spot prices, many of the country’s powdered PP resin plants would be able to resume production and improve supply. Powdered PP resins plants in China are extremely cost-sensitive and production is quite often dictated by propylene feedstock costs.

GCC’S role in China As its domestic capacity increases, much attention is focused on how China’s role as a key PE and PP resin importer will change, and what implications that may have on the Gulf Cooperation Council (GCC) countries, which account for the bulk of China’s imports. The global economic outlook may be uncertain as different challenges hinder the recovery of major economies in the West. In addition, PE and PP producers from all parts of the world are trying to gain a share of the Chinese market. Given their signiﬁcant feedstock advantage, producers from the GCC have established a strong foothold in China as their exports to this market have increased consistently over the years. China imported 5.52m tonnes of PE in the ﬁrst seven months of this year, up by 14.60% year on year. Its PP imports totalled 2.98m tonnes during the same period, up by 7.68% year on year.

Rex Features

Amy Yu Shanghai

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Government anti-graft policies and measures aimed at preventing the Chinese economy from overheating have taken a toll on domestic consumer consumption

According to data from China customs, China imported 3.01m tonnes of PE from the GCC countries in 2013, which accounted for 34% of the country’s total PE imports that year. China imported 1.18m tonnes of PP in 2013, with GCC material accounting for 24%. More PE and PP volumes are expected to flow from the GCC to China going forward in view of the new plants scheduled to come on stream in the region in 2014-2015. These include the Borouge 3 complex, which will include 960,000 tonnes/year of PP capacity, a 1.08m tonne/year linear low density PE/high density PE (LLDPE/HDPE) swing plant and a 350,000 tonne/ year low density PE (LDPE) plant. In line with the economic recovery in the US and Europe, China’s exports of finished plastics goods improved in the first half of 2014. According to China customs data, China exported 4.51m tonnes, which was up by 5.6% year on year, and above the growth of 4.9% registered for the same period in 2013. Some manufacturers of plastic finished goods say export prices have been quite stable because most of the orders were priced

GCC region’s PE, PP export to China 2008-2013 M tonnes 10 PE (GCC sources)

PE (other sources)

PP (GCC sources)

PP (other sources)

on a quarterly basis, or longer. The steady appreciation of the US dollar against the Chinese yuan also meant higher returns for Chinese exporters. For instance, if prices of plastics ﬁnished goods had not changed between January and July this year, the appreciation of the US dollar over that period would have meant an 0.82% increase in China’s export earnings. But government anti-graft policies and measures aimed at preventing the Chinese economy from overheating have taken a toll on domestic consumer consumption, which has reduced demand for PE and PP resins. The market will take longer to absorb all the additional PE and PP capacities due to come onstream this year and next. Plastics packaging is a key application sector for PE and PP resins in China, mainly driven by the food industry. Recent food scandals in China have raised public awareness and demand for food safety, and thus demand for durable and light packaging material. Demand for PE and PP from packaging applications is estimated to grow by around 6%/year over the next two to three years. Interest is growing rapidly in the compounding sector and compounded specialty plastics resins stole the limelight at the annual ChinaPlas plastics resins and machinery exhibition held in Shanghai earlier this year. Applications for compounded PP resins have increased over the years in cars, home appliances, machinery, electronics, food packaging, home decoration, and medical and water treatment equipment.

The China Automobile Industry Association estimated that in the next ﬁve to 10 years, China’s automotive production and sales will grow by 8-10%/year. As locally produced PP resins are widely used by original equipment manufacturers of automotive components, PP demand into this sector is estimated to grow by around 10-12% in 2014.

2008

SOURCE: China Customs

2009

2010

2011

2012

2013

China’s property sector is expected to remain sluggish this year because of government measures aimed at curbing the generation of asset bubbles. But ongoing government spending on subsidised housing and infrastructure is expected to continue to drive demand for resins used in gas and water pipe applications in 2014-2015. ■

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GULF PETROCHEMICALS & CHEMICALS ASSOCIATION

Tough times for MEG and polyester Jeffrey Ong Singapore

Demand in China for monoethylene glycol (MEG) comes mainly from the polyester and PET bottle resins markets. China will remain a net exporter of polyester as supply will continue to outstrip domestic demand.

as feedstock. The start-up of this plant could mean stiffer competition in the Indian market for MEG cargoes originating from the Arabian Gulf. Sellers who cannot offload their cargoes in India would naturally turn their attention to China, industry participants indicate.

Quality problems for DMO route Polyester supply in 2014 is expected to expand to 5.5m tonnes/year and more capacity is slated to come online in 2015. However, much of 2014 has proven to be a tough year for polyester makers in China. Overall operating rates of polyester filament yarn (PFY) plants in the first half of 2014 stood at 73%, according to data from ICIS China. With slim profit margins, Chinese polyester and PET companies have either delayed their capacity expansion plans or run newly started plants at relatively low operating rates. Purchasing patterns by buyers have bucked previous seasonal trends with little significant change in demand during peak or lull periods. With some polyester companies exiting the market in 2014, market sources feel that more departures could be possible in the following year unless a significant uptick in the market is seen in late 2014 and early 2015. Capacity expansions in polyester and PET would likely see more delays in 2015 amid the ample supply situation. In 2015, global demand for polyester and PET is expected to rise by 4.5-6.0%. Although China’s economy is slowing, MEG supply from the GCC and Canada will continue to find an outlet in the Chinese market. India could have greater demand for MEG, but market sources indicate that imports would be limited by the tank capacities that are available in the country. In 2014, MEG exports from the GCC to Europe and South America declined, resulting in a constant flow to China even with supply disturbances, market sources say. In 2015, India could reach self-sufficiency for MEG when a major domestic producer starts up a new plant that uses refinery off-gas

By 2014, MEG capacity using the dimethyl oxalate (DMO) route was about 1.1m tonnes/year, with another 3m tonnes/ year estimated to be added in the coming years. However, the quality of MEG via this route has not reached the level required for the manufacture of polyester. At this time, coal-based MEG is suitable only for antifreeze applications or for mixing with conventional MEG to reach the standards required for polyester production. Consequently, these coal-based plants have lower operating rates. Even as the quality of the MEG improves, these producers will have to grapple with the logistical difficulty of bringing cargoes to their consumers, as such plants are located away from the main polyester production regions in Zhejiang and Jiangsu. Recently, coal-based MEG from a plant in China’s Xinjiang province using technology from Japan’s Ube Industries has shown much promise and some polyester plants have started to source cargoes. Most industry participants feel that demand from the downstream polyester sector has been sluggish for most of 2014. Amid this climate of weaker demand, supply has remained ample even with plant turnarounds in northeast Asia and in the Middle East. Although some MEG expansions were announced in northeast Asia in late 2014 and early 2015, market participants feel that production capacity in 2015 will not see a significant increase. Some market sources indicate that major turnarounds at MEG plants in the Middle East in 2015 might not result in any supply issues if demand remains at existing levels.