Opportunities ahead for petrochemicals contractors

29 December 2013

While 2014 is likely to be relatively quiet, there are some major petrochemicals projects in the pipeline

The petrochemicals industry is one of the Middle East’s largest and most important sectors and has enjoyed investments worth tens of billions of dollars over the past half decade.

Petrochemicals production is the preferred method of lengthening the hydrocarbons value chain for many major oil producers. It also offers the region the opportunity to create jobs by establishing conversion industries that can manufacture products made from intermediate chemicals.

Future prospects

Middle East projects tracker MEED Projects states that there are more than $77.5bn-worth of petrochemicals projects in the various pre-execution phases in the Middle East and North Africa (Mena) region. This indicates that, despite the massive capital investment in the sector in recent times, there are still some superb opportunities available for contractors.

However, there are some caveats to the data that need to be considered. The vast majority of the schemes are in the study phase. There is a big difference between carrying out a feasibility study and releasing construction tenders to contractors.

Large-scale petrochemicals production does not come cheap, and it does not create thousands of jobs at the initial level of turning oil and gas into chemicals. The estimated cost per job is $10m.

Securing finance in some countries is also extremely difficult at present. Persuading banks to finance a $20bn project in Saudi Arabia would in all likelihood be much easier than getting lenders to fund a $500m scheme in Egypt or Libya.

There is also a definite trend developing in the region’s petrochemicals projects market that suggests a move away from gas to liquid feedstock derived from refined products such as naphtha. This trend started with the $20bn Sadara Chemical Company complex, which is under construction in Saudi Arabia, but is being emulated elsewhere in the kingdom as well as in Qatar, Oman and the UAE.

This is not unusual as Saudi Arabia has traditionally been the dominant force in the petrochemicals industry and projects such as Sadara are some of the largest facilities ever to be built in the region.

The kingdom plans to invest heavily in small conversion industries in the short to medium term, as opposed to building more vast facilities with millions of tonnes of capacity. However, it still has about $9bn-worth of schemes in the pre-execution phases.

The projects to watch out for in 2014 include phase 2 of the Saudi Aramco Total Refining and Petrochemical Company (Satorp) complex at Jubail in the kingdom’s Eastern Province.

The 400,000-barrel-a-day refinery is almost fully operational and the joint venture partners behind the scheme, Saudi Aramco and France’s Total, are now looking to add petrochemicals production to the site.

The project is at the study phase, but a front-end engineering and design (feed) tender is expected to be issued in early 2014. The budget has been conservatively estimated at about $5bn.

Jizan plant

Another major project will be the local Farabi Petrochemicals Company’s proposed $800m-$1bn plant at Jizan in the southwest of Saudi Arabia. The US’ Foster Wheeler is carrying out a pre-feed for the scheme, which will produce about 24 grades of surfactant and allied business chemicals, including detergents, wetting agents, emulsifiers, foaming agents and dispersants. A feed tender is anticipated in the second quarter of 2014, subject to a final investment decision by Farabi.

In neighbouring Qatar, two massive schemes are at a far more advanced stage and could both release engineering, procurement and construction (EPC) tenders during 2014.

MEED reported in August that the $6.4bn Al-Karaana Petrochemicals Complex, a joint venture between Qatar Petroleum (QP) and the UK/Dutch Shell Group, will release the EPC packages in early 2014.  

The complex is being built at a new greenfield site in Ras Laffan in the north of Qatar. The construction phase will be split into two packages, the first covering the steam cracker and offsites and utilities, and the second comprising a linear alpha olefins unit, a monoethylene glycol unit and an oxo-alcohols unit.

Due to the size of the scheme and the fact that only two packages are available, prequalified contractors have formed bidding consortiums. Awards should be made before the end of 2014.

Another similar-sized scheme is due to be constructed adjacent to Al-Karaana in Ras Laffan. 

The $7.4bn Al-Sejeel petrochemicals complex is a joint venture between QP and Qatar Petrochemical Company (Qapco). The US’ Bechtel was awarded the project management consultancy (PMC) deal in June and the feed tenders are set to be awarded in early 2014.

The EPC tenders are expected to be released in early 2015, but some sources believe they could be brought forward to late 2014. The Al-Sejeel project is a world-scale complex that will produce more than 3 million tonnes a year (t/y) of chemicals when completed.

Across the rest of the GCC, several schemes are planned that should accelerate in 2014.

MEED reported in September that Abu Dhabi National Chemicals Company (Chemaweyaat) had resurrected its Tacaamol project, planned for Ruwais in the Western Region of Abu Dhabi.

The initial budget for the scheme was $20bn, but this has been scaled back considerably. The feed work was awarded to US engineering group CH2M Hill in the third quarter of 2013 and involves the design of an aromatics complex capable of converting 3 million t/y of heavy and medium naphtha, supplied by Abu Dhabi Oil Refining Company’s (Takreer’s) refinery in Ruwais. The timeline for EPC bids has not been set as yet, but there is a chance of a tender release in late 2014.

Plastics project

A feed tender is due to be released by Oman Refineries & Petroleum Industries Company (Orpic) in early 2014 for its $3.6bn Liwa plastics project at Sohar. The scheme will use both natural gas and products from Orpic’s Sohar refinery to produce high-density polyethylene, linear low-density polyethylene and polypropylene.

The scheme will be the largest petrochemicals project ever executed in Oman and will house the sultanate’s first steam cracker for the production of polyethylene.

Also in Sohar, state-owned industrial investment vehicle Takamul Investment Company is planning a purified isophthalic acid plant with a capacity of 100,000 t/y.

If the plant progresses according to Takamul’s schedule, the EPC tenders will be issued in mid-2014, with awards made by the end of the year.

The plant will complement a purified terephthalic acid and polyethylene terephthalate project also being planned by Takamul and expected to be constructed at the same time. The combined budget for the two schemes is estimated to be more than $1bn. Completion is scheduled for 2018.

The North African petrochemicals market is dominated by Egypt, but the continued political instability in the country has led to many schemes remaining stuck in the study phase.

According to MEED Projects, more than $22.6bn of petrochemicals projects are planned for Egypt. However, most of these schemes are extremely unlikely to make any progress in 2014.

The largest is the long-delayed $17bn Kafr el-Sheikh integrated refinery and petrochemicals complex. The scheme is the key project planned for Egypt’s petrochemicals sector, but as of late 2013 there was still no sign of any progress being made.

With no real prospect of securing finance for such an ambitious project, it is likely that it will remain in limbo for at least another 12 months.

The only scheme that has any chance of moving forwards in 2014 is the Tahrir Petrochemicals complex in the north of Egypt. MEED reported in November that the US’ GE would provide the technology and some equity financing for the project.

Giant cracker

The complex is being billed by the local Carbon Holdings as the world’s largest naphtha liquid cracker, with a capacity of 3.5 million t/y. It will produce 1.36 million t/y of ethylene and polyethylene, as well as significant quantities of propylene, benzene, butadiene and linear alpha olefins.

It will also include an integrated 300MW power plant, along with a water treatment plant and a 3,800-cubic-metre-an-hour desalination plant. The $4bn-plus scheme is dependent on securing financing and there is a good chance that this might happen in 2014.

In Iraq, there has been some movement in future petrochemicals schemes, but all of them are mid-to-long term developments.

Shell is set to carry out a feasibility study that could see the development of an $11bn petrochemicals complex in Basra, which would use ethane as a feedstock.

Baghdad is keen to diversify away from purely producing oil for export, but this scheme is unlikely to move ahead significantly in the next two years.

It is likely that 2014 will not be as buoyant as recent years for petrochemicals schemes, but the region’s hydrocarbons projects market is cyclical. A spate of upstream projects will kick-start refinery schemes, which in turn could prompt chemicals facilities to be built.

Despite the next 12 months looking more subdued, there are still some exciting projects, particularly in GCC states such as Qatar and Oman, which offer billions of dollars of work for international contractors.


There are more than $77.5bn-worth of petrochemicals projects in the pre-execution phases in the Mena region

Source: MEED Projects

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