IT has been a long time coming, but action is expected soon in Abu Dhabi. By early May, the Supreme Petroleum Council (SPC) is due to select a foreign partner for the Ruwais petrochemical project, dramatically raising the downstream profile of Abu Dhabi National Oil Company (ADNOC) and launching the UAE into the intemational petrochemical market.
ADNOC first considered the feasibility of creating a petrochemical complex at Ruwais in the 1980s, but held fire on a decision until January 1995. By then the five-year programme to expand upstream handling capacity was nearly complete and the shape of the project had become clear. In common with Abu Dhabi’s approach to developing its upstream oil assets the project will be a joint venture with a foreign partner.
Abu Dhabi has always admitted strong intemational involvement in its oil business.
Royal/Dutch Shell, The British Petroleum Company (BP) and France’s Total are all shareholders in the emirate’s upstream operating companies. Their participation has guaranteed access to the latest technology and marketing expertise, while a degree of political protection is also implicit in their presence.
ADNOC approached about 15 major international petrochemical companies in its effort to identify a partner for Ruwais. This has gradually been whittled down to four prospective candidates: BP Chemicals of the UK, Canada’s Novacor, the US’ Phillips Petroleum and Borealis, the joint venture of Finland’s Neste and Norway’s Statoil. Evaluation of the technical proposals was completed in March and the ADNOC report was handed to the SPC for a final decision.
The outcome of the selection process was still unknown in early April. ‘At the SPC level, political factors will inevitably come into the equation and no-one can predict what the result will be,’ says a source close to one of the bidding groups. But there was little doubt about the fierce contest among the bidders.
‘The competition has been intense, but it has also been understandable,’ says the source. ‘It is the first of several petrochemical projects in the market and people want to be involved from the beginning. It is also one of the few remaining big ticket opportunities left in the region.’ The project makes sound commercial sense, even in the notoriously volatile petrochemical market. Analysts are convinced that the abundant supply of low-cost gas feedstock, coupled with the very latest technology, will ensure that the Ruwais plant will make money even when petrochemical prices sink to their periodic lows.
ADNOC’s plans centre on the construction of a 450,000 tonne-a-year ethylene cracker to produce both high and low density polyethylene. Ethane-rich tail gas will be supplied by Abu Dhabi Gas Industries Company (Gasco) as feedstock. Two separate companies will be set up to implement the $800 million-900 million scheme. One will oversee the construction and management of the plant; the other will be responsible for marketing the products. The prime target markets are the fast-growing economies of the Far East and to a lesser extent, Europe.
It is probable that the same foreign company will be involved in both ventures, taking a 40 per cent share in each, leaving ADNOC with a 60 per cent stake. However, the exact shareholding configuration has still to be determined and could yet change: none of the four prospective joint venture partners can deliver tried and tested process technologies for all the units that are planned for the plant. This opens up the possibility that another international company which has a single technology license could be brought into the shareholding structure.
The approach to the choice of technology says much about ADNOC’s attitude and helps to explain why the scheme has suffered from some delays. ADNOC, like the emirate of Abu Dhabi itself, is conservative in culture and is averse to major risks. At Ruwais it is moving into petrochemicals for the first time and is proceeding with characteristic caution. And, it is determined to settle on the most efficient technology with an established record for reliability.
‘ADNOC entertains no thoughts whatsoever of using a technology that has not been proven on a project of the same size as the one planned at Ruwais,’ says the source. ‘It doesn’t want to be a guinea pig.’ Once the foreign partner has been chosen, the sides will sit down to finalise the project details. ADNOC wants to have the project completed by 2000, a timetable which will require a fast-track approach to implementation. The basic and process designs will require six-nine months work. The construction period will be a minimum of 2 years, leaving little time to lose if ADNOC hopes to meet its target date.
Deliberations over the polyethylene project have tended to overshadow developments on ADNOC’s second petrochemical venture, the construction of an aromatics complex, also at Ruwais. Since the SPC approved the estimated $1,000 million scheme, there has been substantial progress: a feasibility study has been launched with the help of the Japan Industrial Development Organisation (Jaido) and negotiations have begun with Japan’s Sumitomo Corporation about possible participation, primarily as a marketing partner. Industry sources say that the talks are likely to end with an agreement by June.
The proposed aromatics complex will have a capacity of 800,000 t/y of paraxylene and 100,000 t/y of benzene and be aimed at supplying products to the Far East from 2001. Naphtha feedstock will come from the second condensate processing unit to be built under the $1,800 million Ruwais refinery expansion programme.
Abu Dhabi may be a latecomer to the petrochemical market, but there is little doubt that it is all set to become a major player in the sector by the turn of the century. There is more to come. In addition to the polyethylene and aromatics projects, there are already several other downstream schemes under consideration, including an ethylene dichloride plant. With substantial gas and cash reserves, and no shortage of prospective foreign partners, ADNOC is in an ideal position to make more out of its upstream assets through the downstream expansion and diversification into petrochemicals.