Asia re­mains a key driver of growth for Qatar's petro­chem­i­cals sec­tor, with de­mand from the re­gion fu­elling in­vest­ment and ex­pan­sion projects. How­ever, the long-term out­look is less cer­tain after the can­cel­la­tion of the QR21.84 bil­lion ($6 bil­lion) Al Sej

Qatar Today - - INSIDE THIS ISSUE -

Qatar's petro­chem­i­cals in­dus­try has em­barked on a long-term ex­pan­sion plan based on the as­sump­tion that de­mand from emerg­ing mar­kets such as China and In­dia will con­tinue to grow.

Qatar, the world's largest liq­ue­fied nat­u­ral gas pro­ducer, is di­ver­si­fy­ing its ex­ports away from the oil and gas sec­tor and is al­ready the sec­ond largest ex­porter of chem­i­cals in the Gulf, rep­re­sent­ing 17% of to­tal Gulf Co­op­er­a­tion Coun­cil's (GCC) chem­i­cal ex­ports, ac­cord­ing to the Gulf Petro­chem­i­cals & Chem­i­cals As­so­ci­a­tion. Coun­tries such as Qatar are us­ing their sup­plies of en­ergy to widen their in­dus­trial bases and boost ex­ports of non-en­ergy goods such as chem­i­cals, with petro­chem­i­cals and re­fin­ing ac­tiv­ity mak­ing up 40% of man­u­fac­tur­ing out­put, ac­cord­ing to the Min­istry of De­vel­op­ment Plan­ning and Statis­tics.

Plans are afoot to invest QR91 bil­lion ($25 bil­lion) in petro­chem­i­cal ca­pac­ity to pro­duce 23 mil­lion tonnes by 2020 – from 16.8 mil­lion tonnes in 2012 – ac­cord­ing to the sta­te­owned en­ergy distrib­u­tor Mun­ta­jat, which holds the rights to mar­ket, sell and dis­trib­ute Qatar's chem­i­cal and poly­mer prod­ucts glob­ally. As well as rais­ing pro­duc­tion ca­pac­ity, in­vest­ments are aimed at broad­en­ing the range of petro­chem­i­cal prod­ucts on of­fer.

How­ever, In­dus­tries Qatar (IQ), the state-con­trolled petro­chem­i­cals and steel pro­ducer, re­vealed in Septem­ber that it was putting on hold the Al Se­jeel plant, con­struc­tion of which was due to start by early next year. The ven­ture, be­tween QAPCO and state en­ergy company Qatar Pe­tro­leum, was one of two petro­chem­i­cal plants sched­uled to be con­structed be­fore the end of the decad≠e.

IQ said it was study­ing “a new down­stream petro­chem­i­cal project that is ex­pected to yield bet­ter eco­nomic re­turns.” Ac­cord­ing to MEED, the petro­chem­i­cal com­plex was one of sev­eral high-pro­file projects to be signed this year, to make up con­tracts worth an es­ti­mated QR145.6 bil­lion ($40 bil­lion).

Ex­pan­sion process

Qatar's petro­chem­i­cals in­dus­try has em­barked on a long-term ex­pan­sion plan based on the as­sump­tion that de­mand from China and other emerg­ing mar­kets such as In­dia will con­tinue to grow, ac­cord­ing to a re­cent re­port by cor­po­rate con­sul­tants Dun & Brad­street.

The sec­ond ma­jor ex­pan­sion process is the QR23.66 bil­lion ($6.5 bil­lion) Al Karaana plant, an 80:20 joint ven­ture be­tween sta­te­owned Qatar Pe­tro­leum and Shell due to come on line in 2018. The fa­cil­ity will have a 2 mil­lion tonne pro­duc­tion ca­pac­ity, which will add 25% to Qatar's petro­chem­i­cals out­put. Of­fi­cials have said the bulk of this new pro­duc­tion is likely to be di­rected to­ward the Asian mar­ket.

Off­shore pro­duc­tion is seen as another route for ex­pan­sion. Qatar Pe­tro­leum In­ter­na­tional (QPI), a sub­sidiary of Qatar Pe­tro­leum, has struck a se­ries of agree­ments over the past few years to de­velop petro­chem­i­cals pro­duc­tion projects in Viet­nam and Sin­ga­pore, among oth­ers. Th­ese projects will see Qatar pro­vide feed­stock for other off­shore de­vel­op­ments and help the coun­try ex­pand its pro­file along the Asian sup­ply chain.


Pos­i­tive out­look

Khalid Al Subaey, chief co­or­di­na­tor for Me­saieed Petro­chem­i­cal Hold­ing Company (MPHC), a sub­sidiary of Qatar Pe­tro­leum, says prospects for petro­chem­i­cals pro­duc­ers are pos­i­tive in the medium term, helped by ris­ing de­mand and the slow pace of new ca­pac­ity be­ing brought on line in North Amer­ica.

“The rise in de­mand for high-den­sity poly­eth­yl­ene, the most com­monly-used plas­tic in pack­ag­ing and bot­tles, has been con­sis­tently above global GDP growth for some time, a trend that is ex­pected to con­tinue,” Al Subaey told OBG.

“The strong­est de­mand growth is from Asia, and in par­tic­u­lar, China,” he said. “While China's high-den­sity poly­eth­yl­ene de­mand growth rate is ex­pected to slow some­what over the next five years, it is still ex­pected to be above 6%. China's con­tin­ued growth cou­pled with rel­a­tively few new ca­pac­ity ad­di­tions is ex­pected to drive in­creas­ing ex­ports, es­pe­cially from the Mid­dle East.”

As part of the push into Asia, Mun­ta­jat an­nounced in mid- Oc­to­ber the open­ing of of­fices in eight Asian hubs, along with an of­fice in Morocco to serve the North African mar­ket. Two of the new Asian of­fices will be in China – lo­cated in the in­dus­trial cen­tres of Guangzhou and Shang­hai – and one in In­dia's Mumbai. The oth­ers will be in Thai­land, Sri Lanka, Philip­pines, In­done­sia, and Pak­istan

BY OLIVER CORNOCK The au­thor is the Re­gional Ed­i­tor of Ox­ford Business Group.

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