It has now been over a decade since the UAE started producing commodity plastics at its refining and petrochemicals hub, Ruwais, 240 kilometres west of Abu Dhabi city. Abu Dhabi Polymers Company (Borouge), the country’s major petrochemicals producer, brought its first phase on stream in 2001 and is currently undergoing its largest expansion yet, known as Borouge 3.

Driven by the availability of cheap ethane feedstock and the UAE’s proximity to emerging markets in Asia, petrochemicals has been one of the major success stories in government attempts to diversify industry and decrease its reliance on oil revenues.

Borouge 3 will increase the company’s petrochemicals capacity to 4.5 million tonnes a year (t/y) from the present 2.5 million t/y by 2014. Borouge split the engineering, procurement and construction (EPC) awards into seven packages with a total value of $4.5bn, which were awarded during 2009 and 2010.

Borouge expansion

A consortium of South Korea’s Samsung Engineering and Italy’s Tecnimont was awarded a $1.25bn contract to build the project’s polyolefins unit in May 2010. This followed the $1.5bn award for the ethane cracker to Germany’s Linde and Athens-based Consolidated Contractors Company (CCC).

“Our Borouge 3 project at Ruwais is progressing well and safely, and we had already completed 69 per cent of the construction works by July 2012,” says Abdulaziz al-Hajri, Borouge’s chief executive officer (CEO). “We are on track to start up at the end of 2013 and be operational by mid-2014.”

Borouge is a 60:40 joint venture of Abu Dhabi National Oil Company (Adnoc) and European plastics maker Borealis. Abu Dhabi’s International Petroleum Investment Company (Ipic) holds a 64 per cent stake in Borealis. It also holds a 19.2 per cent stake in Austrian oil firm OMV, which controls the remaining 36 per cent of Borealis. The acquisition of Borealis’ assets has given the Abu Dhabi company ownership of the patented Borstar technology, which allows it to produce a range of polyethylene and polypropylene for different end uses.

The Borouge 3 project is progressing well … We completed 69 per cent of construction works by July 2012

Abdulaziz al-Hajri, Borouge

As well as increasing total capacity, the company has diversified its portfolio with each new expansion. The Ruwais complex started with two polyethylene units in 2001. In 2010, the Borouge 2 expansion introduced a third polyethylene unit and two plants for the production of polypropylene. “The Borouge 3 project will increase polypropylene and polyethylene manufacturing capacity and also add low-density polyethylene (LDPE) and cross-linkable polyethylene (XLPE) production capacity to the plant’s production slate, enabling Borouge to service the global wire and cable markets,” says Al-Hajri.

Abu Dhabi is pushing to diversify its petrochemicals industry as part of its Economic Vision 2030 strategy, which aims to cut the emirate’s reliance on oil to 36 per cent of gross domestic product (GDP) by 2030 from about 53 per cent today. 

Feedstock challenges for the UAE

The key challenge to industry diversification in the UAE and the wider GCC is to decrease reliance on the region’s key competitive advantage: the availability of cheap ethane feedstock to produce polyolefins. The ethane price in Abu Dhabi is estimated at about $1.5 a million BTU compared with $0.75 in Saudi Arabia, $1 in Kuwait and $1.5 in Qatar. Although the UAE has no edge over other GCC members, the price of feedstock is significantly lower than that available to competitors in the major petrochemicals hubs of the US, Europe and eastern Asia.

Innovation holds the key to the success and sustainability of the Gulf’s petrochemicals industry

Abdulaziz al-Hajri, Borouge

While Borouge has been allocated enough ethane feedstock to operate the third phase of its expansion, the UAE’s growing gas deficit could make the opportunity for future expansion more limited. Despite the UAE having the world’s seventh largest gas reserves, the country became a net importer of gas in 2008. In 2011, it consumed 62.9 billion cubic metres but only produced 51.7 billion cubic metres, according to the UK’s BP.

Without significant investment in the upstream oil and gas sector, Abu Dhabi will be unable to expand ethane-based petrochemicals industries, as all available ethane capacity is already committed to power plants and existing Borouge projects. This is the key consideration for the prospective fourth stage of expansion at the Ruwais complex.

“Borouge 4 is a possibility,” a company spokesman told MEED in February 2010. “There is space for it, but a new plant would be built on the basis of feedstock availability.”

Two and a half years later, no decision has been made for further expansion in Abu Dhabi. “We don’t have any specific plans [for Borouge 4] at this stage right now. We are focusing on the implementation of our Borouge 3 project,” says Al-Hajri.

Al-Hajri did not elaborate on whether Borouge may have to use heavier feedstocks such as naphtha to further expand its operations.

“We are part of an integrated olefins/polyolefins complex and we consider our feedstock consistent with this total integrated management approach. As part of Adnoc, we have reliable access to feedstock,” says Al-Hajri.

Using naphtha in the UAE

Abu Dhabi has chosen to diversify its petrochemicals industry using naphtha feedstock to produce aromatics chemicals and their derivatives. Abu Dhabi National Chemicals Company’s (Chemaweyaat) Tacaamol aromatics project has been planned to convert more than 3 million t/y of naphtha supplied via a pipeline from Abu Dhabi Oil Refining Company’s (Takreer) refinery in Ruwais.

Chemaweyaat, a joint venture between the UAE’s Ipic, Adnoc and Abu Dhabi Investment Council (Adic), plans to convert the naphtha to produce paraxylene, mixed xylenes and benzene. The scope of the project also covers supporting infrastructure, including an export tank farm, jetty and loading berths. The Tacaamol project, which was initially expected to be completed in 2014, has hit several hurdles since its conception more than four years ago. The aromatics complex was planned as part of a larger $11bn complex including polyolefins, polystyrene, polycarbonate plants and several other plants.

However, the appointment of US-based Foster Wheeler as project management consultant (PMC) in May was a positive sign for the progress of Chemaweyaat’s scheme. Industry sources indicate that the front-end engineering design (feed) is likely to be tendered during the fourth quarter of this year.

Although regional petrochemicals producers are now competing on a more even footing with the US and Europe in terms of production and sales volumes, they still lag behind their rivals in terms of the implementation of new technologies. Al-Hajri believes GCC petrochemicals producers must focus more on innovation, both to compete with overseas producers and to contribute more to society in the region. It could also help attract plastics converters to provide jobs for the growing number of unemployed young people in the GCC.

“Innovation holds the key to the success and sustainability of the Gulf region’s petrochemicals industry,” says Al-Hajri. “We have to focus on plastics that provide sustainable added-value solutions for society such as access to safe, clean drinking water and sanitation, climate and food protection, energy conservation, reliable communication networks and advanced healthcare.”

Borouge is in the process of constructing an innovation centre in Abu Dhabi, which will see it work with converters to design products for the infrastructure, automotive and advanced packaging markets. “Investment in state-of-the-art research and development, and innovation, as well as competence development, is a key enabler for the development of the downstream plastics conversion industry in the region,” says Al-Hajri. “GCC governments are developing attractive regulatory environments for investments, developing infrastructure to support industry and export, and encouraging the development of competence in polymer sciences and engineering, which are critical in fostering and delivering innovation in our business.”

Asia expansion

China and other fast-growing Asian economies have provided the demand to drive the expansion of the UAE’s petrochemicals sector. Since Borouge’s first plastics production, China has experienced between 8 and 14 per cent annual economic growth.

“We see increasing demand for our differentiated polyolefins in Asia due to the growth of urbanisation, creation of mega-cities and overall positive economic development,” says Al-Hajri.

“China, for example, continues to grow at approximately 8 per cent a year and we are confident of its long-term growth, as well as that of the rapidly developing countries of South East Asia.”

While internal demand from the GCC is growing, it is being outpaced by production, with Saudi Arabia largely driving both the supply and the demand for commodity plastics. Annual production in the GCC is expected to increase to 25 million tonnes by 2015, up from 15 million tonnes this year. At the same time, plastics consumption is forecast to grow from 3 million tonnes from 5 million tonnes.

“As more urban expansion projects are implemented [in the Middle East] with significant investments in infrastructure, there will be greater demand for materials such as water and gas pipe systems and wires and power cables, as well as advanced packaging,” says Al-Hajri.

“We expect demand for polypropylene and polyethylene to grow in the next five years with an annual increase of approximately 7 per cent, mainly due to the higher GDP growth rates in our region and the increasing polyolefin consumption per capita.”

Borouge is investing directly in Asia with a $60m compound resins plant in Shanghai, China, whose capacity is being expanded to 90,000 t/y from 50,000 t/y. The firm also expects to open a 105,000 t/y plant in Guangzhou by the end of the year.