IT was 10 years in the making. It weathered the potentially devastating withdrawal of a key foreign shareholder, just as it was about to award the main plant contract. And it had to come to terms with confirmation, a matter of months after commercial production had begun, that California, the world's largest consumer of its core product, planned to phase out the use of methyl tertiary butyl ether (MTBE) in unleaded gasoline production on health grounds.

No one can accuse Qatar Fuel Additives Company (Qafac) of having had an easy ride. But on 25 June last year, all its efforts were rewarded when the first drop of methanol was produced at its $680 million facility in the Mesaieed industrial area. A week later, it was the turn of the MTBE plant to roll into action, signalling the start-up of Qatar's first petrochemicals project for two decades.

Few companies have experienced so many highs and lows as Qafac. Plans for establishing a dual MTBE/methanol plant were first unveiled in the late 1980s to take advantage of Qatar's low-cost gas reserves and to meet the projected surge in demand for MTBE. In early 1991, Qatar General Petroleum Corporation (QGPC) and Dubai-headquartered International Octane (IOL) signed a joint venture agreement and contracted Fluor Daniel (Canada) to draw up basic designs, the US' UOP to supply its MTBE technology and the UK's Humphreys & Glasgow, now Jacobs ICI, to provide its methanol technology. A year later, France's Total entered Qafac's shareholding acquiring a 25 per cent stake.

For the next two years, however, the project went into limbo and only resurfaced in early 1995, when two more companies, Chinese Petroleum Corporation (CPC) and Lee Chang Yung Chemical Industry Corporation (LCYCIC), both of Taiwan, joined Qafac as shareholders. The following September, the plant's engineering, procurement and construction tender was issued for bid.

All seemed set fair. That was until March 1996, when following a change in management at Total, the French company informed Qafac that it was pulling out of the venture as part of a global shift away from petrochemicals and into exploration and production. Undeterred by the news, Qafac's three remaining foreign shareholders agreed to increase their stakes in the project to cover Total's withdrawal. On 9 June 1996, a new joint venture agreement was signed and Japan's Chiyoda Corporation was issued with a letter of intent, worth an estimated $430 million, to build the 610,000- tonne-a-year (t/y) MTBE and 825,000-t/y methanol plant. The final piece in the implementation jigsaw came 18 months later when a $350 million loan package was finalised with a group of 29 banks.

The Taiwanese involvement has been critical in the project's fruition. State-owned CPC, Taiwan's largest manufacturing enterprise, brought its experience to bear from managing several petrochemical and refining projects at home to act as project manager throughout Qafac's construction phase. It has also assumed responsibility for operating and maintaining the plant. On the financing side, the presence of both CPC and LCYCIC ensured that Taiwanese banks played a leading role in the loan arrangements.

But it is on product marketing that the Taiwanese factor is set to have the biggest impact. Financing was arranged on the basis of Qafac shareholders providing a 100 per cent offtake guarantee. In addition, it was agreed among shareholders that the three foreign partners would lift QGPC's share in the first three years of production. IOL opted to place its offtake commitment with Vitol, a Swiss-based trader that has extensive experience of marketing MTBE and methanol in Europe and the US, under a back-to-back agreement for the initial period.

The remaining product is being handled by the two Taiwanese companies. CPC has its own MTBE requirements, while LCYCIC needs about 120,000 t/y of methanol for its 150,000-t/y formaldehyde plant and 8,000-t/y demethyl ether unit. Methanol demand is expected to rise at LCYCIC, given that it is planning to develop acetic acid and methacrylate production in the future.

Qafac's strong presence in Taiwan and the wider Far East market may well turn out to be its saving grace, now that California has decided to phase out MTBE use from 2002, a move that is expected to be followed across the US. Company officials contend that market growth in Europe and Asia for MTBE will offset whatever it loses in the US, which at present is taking just under 50 per cent of Qafac's output.

'Our unique position is that CPC and LCYCIC are the dominant powers in a part of the world where MTBE demand is rising strongly. Europe is also planning to reduce aromatics use, which may allow MTBE to fill the octane gap there,' says a spokesman. Regionally, demand is also on the increase. Qafac has already shipped cargoes to Kuwait and Iran.

The company also believes that it could inadvertently benefit from the Californian decision. 'Given that many MTBE producers in North America will probably convert to alternative production such as alkalytes, that could leave a gap in the market, especially as no more MTBE plants are expected to come on line,' the spokesman adds.

The clear danger for the global MTBE market is that the rest of the world will follow the US lead in replacing the product in gasoline. As a result, Qafac is taking some precautionary steps. The company says that it has looked at alternative production to MTBE. Two studies have been completed for the venture, which show that parallel products can be manufactured with minimum modifications to the existing plant.

Since production began last summer, Qafac has been concentrating on its plant operations. By the end of January, it had shipped some 224,000 tonnes of methanol and 80,000 tonnes of MTBE. Nameplate capacity on the 810,000- t/y methanol plant was reached at the end of August and on the MTBE complex in December. The expectation is that the methanol line will be able to run at 5-10 per cent above design, while MTBE production may eventually climb to about 15 per cent beyond nameplate.

Qafac holds the notable distinction of building the world's first integrated MTBE/methanol plant. It could also turn out to be the last, in view of growing US worries over MTBE. But having overcome adversity in the past, it is not about to let uncertainty in the US ruin its day. Access to low- cost feedstock, its strong Asian roots and its ability to produce methanol as well as MTBE will be Qafac's trump cards in what has become, even by the standards of the petrochemicals industry, a highly volatile business.

Angus Hindley