AFTER less than a month in his new post as chairman and managing director of Petrochemical Industries Company (PIC), Khaled Bouhamra has announced another major step in the development of the country’s petrochemicals industry. Construction of the Shuaiba petrochemicals complex is due to begin on schedule in the autumn, and completion is expected during 1997. Now, inspired by the complex’s successful joint-venture formula and an apparently insatiable world market, PIC is planning to revive plans to develop an aromatics capacity for Kuwait.

Plans for a major integrated petrochemicals complex in the country were first hatched in the mid-1980s, but were put on hold by the Iraqi invasion of 1990. Expecting a fall in urea and ammonia prices, PIC saw the development of petrochemicals as a means of diversification, creating opportunities for employment and economic development.

Priorities after liberation were focused on repair of the existing fertiliser complex, which before the invasion produced 3,000 tonnes a year (t/y) of urea and 2,400 t/y of ammonia. The refurbishment was finished in 1993, after which PIC’s attention returned to petrochemicals. The market conditions which inspired PIC in the 1980s were projected to continue through the 1990s. PIC studies predicted that demand for ethylene-based petrochemicals would match, or even exceed by up to 70 per cent, the growth in world gross domestic product (GDP) for the remainder of the decade, despite the world economic slowdown.

However, what had changed was Kuwait’s ability to finance such a major project. Huge expenditure on post-invasion reconstruction, accompanied by a slump in the world oil price left Kuwait with few resources to fund such an ambitious scheme. These new realities prompted a re-evaluation of the scope and funding of the planned Shuaiba complex.

PIC’s initial plans centred around a 750,000-t/y ethane cracker using ethane-rich gas from the Mina al-Ahmadi refinery as feedstock. Of the total, 250,000 t/y was to be exported, and the remainder used in downstream units, including two polyethylene plants, an ethylene glycol plant, and an aromatics complex. But, new plans cut the cracker capacity to 650,000 t/y and shelved the aromatics complex, leaving a scheme with an estimated value of $2,000 million.

The joint-venture approach was also new. In June 1993, PIC signed a memorandum of understanding with the US’ Union Carbide Corporation (UCC) as its international partner. The advantages for PIC are both technical and financial. The plant has access to UCC licensing technology, management techniques and marketing skills. In addition, PIC has gained a partner which is providing 45 per cent of the $800 million-900 million equity costs of a new joint- venture company, known as Equate, which has been set up to execute the scheme. The venture is also in a better position to access export credit guarantees and international commercial loans. The US Fluor Daniel was appointed project manager for the complex in July 1994.

The corporate structure of the deal has provided a blueprint for future industrial schemes. PIC and Union Carbide are each to provide 45 per cent of the equity, with a further 10 per cent being raised through the flotation of a new company on the local stock exchange, called the Bubiyan Petrochemicals Company. The share subscription was due to begin on 23 April (see Kuwait).

The tender process for the three main units of the scheme is well advanced. The US’ Brown & Root was expected to sign the estimated $450 contract for the ethylene unit by the end of April. The company has already been selected to provide the licensing for the scheme. The US’ International Bechtel and Stone & Webster Engineering Corporation are the frontrunners in the bidding for the 350,000-t/y ethylene glycol plant. An award for the $150 million-170 million contract could be made as early as April. Bids for the 450,000-t/y polyethylene plant are expected to be submitted by 1 June. The bidders for the work include Toyo Engineering Corporation, which in January was appointed to build PIC’s own 100,000-t/y polypropylene plant, also at Shuaiba. Italy’s Snamprogetti is also a contender, industry sources say.

What remains to be concluded are arrangements for the estimated $1,100 million financing costs of the scheme. Equate’s financial advisers – National Bank of Kuwait, JP Morgan & Company, and Chemical Bank – are in negotiation with the Export-Import Bank of the US, Germany’s Hermes, and SACE of Italy about providing an estimated 90 per cent of the finance. Around $100 million will come from a syndicated loan expected to go to the market by mid-year.

The revival of the aromatics complex is a testimony to the smooth progress of the olefins scheme. Few details have emerged as yet. However PIC officials put the cost of the complex, which will also be at Shuaiba, at $1,000 million. The complex will produce aromatics including benzene, xylene, and paraxylene using naphtha feedstock from Kuwait’s domestic refineries. Aromatics are used in the manufacture of synthetic textiles such as acrylic fibre, and provide the potential for developing such industries in Kuwait. Construction is scheduled to begin in 1996 and take two and a half years.

In the context of weak world crude oil prices, diversification has become a watchword in Kuwait. A wave of petrochemicals complexes, producing both olefins and aromatics, are under way in Asia, the Middle East and North America, but the industry is confident that these are no more than the market demands. Besides, with a ready and secure source of feedstocks, Kuwait is well placed to fight off competition at a world level. And, with the success of the UCC joint venture behind it, PIC will have little trouble in attracting an international partner.