ON the same day that Qatar Petrochemical Company (Qapco) disclosed a 50 per cent slump in profits for last year, the mind of the chairman was already on other matters. Undaunted by profits of less than QR 300 million ($82 million) in 1998, Energy & Industry Minister Abdulla Bin Hamad al- Attiya was busy signing an outline agreement with Italy's Enichem for Qatar's latest downstream petrochemical venture. 'The time is ripe for undertaking expansion projects, although the economic cycle is at a low point. The recession will not last for ever. It will have disappeared by the time the project is operational,' Al-Attiya said after the signing ceremony on 28 February.

Confidence

Al-Attiya's confidence is based on the conviction that the world petrochemicals market will be hauling itself out of the doldrums by next year on the back of increased demand from Asia. He is also aware that new-build costs are falling as contractors battle to fill their order books from a shrinking market. In addition, he can take comfort from the fact that Qatar is one of the world's cheapest locations for petrochemical production. Rock bottom international prices and a slight reduction in ethylene output may have slashed Qapco's profits last year, but the results were still much better than those of most of its international rivals - they do not enjoy the formidable price advantage provided by the North field gas reservoir.

The minister is not alone in arguing that now is as good a time as any to invest in Qatari petrochemicals. A handful of foreign companies are voting with their feet by pushing ahead with grassroots plants. The local/European joint venture of Qatar Vinyl Company (QVC) is on target to commission its $650 million ethylene dichloride (EDC) complex in mid-2001, having completed in early April syndication of its $470 million loan. A year later, the local/US Qatar Chemical Complex (Q-Chem) is expected to begin production at its estimated $850 million ethylene, polyethylene and hexene- 1 facility at Mesaieed.

Q-Chem is now attracting considerable attention from both contractors and bankers. In early April, the venture was close to selecting a contractor to build the complex. A group comprising the US' Kellogg Brown & Root and France's Technip is the clear favourite to take the estimated $800 million engineering, procurement and construction contract, having submitted a low bid that was more than 10 per cent cheaper than its nearest rival. Once the selection has been made, the focus will shift to financing. Shortlisted banks are expected to be invited to bid in the second half of April for the mandate to arrange a $550 million-600 million loan to part-finance the project.

Bankers anticipate few difficulties in Q-Chem securing the borrowing. Despite a temporary bottleneck last autumn, Qatari project financing is back on track. QVC has set a benchmark for the pricing of petrochemical loans and Qatar General Petroleum Corporation (QGPC) has received a favourable response for its most recent foray into the market, the $400 million loan for the NGL-4 project. The new natural gas liquids (NGL) facility, Qatar's fourth, will supply most of its feedstock to the Q-Chem petrochemical plant.

QVC is notable as Qatar's first downstream petrochemicals project. Its ethylene feedstock is to come from the nearby Qapco cracker and its salt requirements will be imported initially from India, Algeria and Australia. However, plans are afoot to set up a local salt refinery. The Energy & Industry Ministry has recently issued a permit to the Arab Company for Transforming Industries to build a plant with capacity of 500,000 tonnes a year (t/y) of industrial salt, which will meet QVC's needs.

Further downstream ventures are planned, as the ministry develops its aim of creating an integrated petrochemical industry. The Enichem project for a 100,000-t/y toluene di-isocyanate (TDI) plant will draw heavily on products and expertise already available in the market. Under the plan for the scheme - for which QGPC and Enichem have begun a pre-feasibility study - QGPC will supply gas, QVC chlorine and Qatar Fertiliser Company (Qafco) ammonia to the $250 million plant. At the same time, Enichem, an existing shareholder in Qapco, will provide its own TDI technology.

With petrochemical capacity on the rise at Mesaieed, an upgrade of existing infrastructure is becoming necessary. In early March, the ministry announced plans to invest $110 million over the next five years to expand the industrial area, with the main focus on building over 700 houses. The programme will be financed by existing and new tenants.

On 1 June, a further chapter will open in the local petrochemicals sector, when a third facility - the $600 million methanol and methyl tertiary butyl ether (MTBE) plant owned by Qatar Fuel Additives Company (Qafac) - begins producing methane at Mesaieed. The start-up of production will mark nine years of hard work by the company's original shareholders - QGPC and Canada's International Octane. It will also be Qatar's first grassroots petrochemical plant in more than 20 years.

There will be a shorter wait for Doha's next petrochemicals producers, with both QVC and Q-Chem set to come on stream over the coming three years. The advance of these two projects is a welcome antidote for the current doom and gloom in the worldwide petrochemicals industry and a clear signal of Qatar's growing stature as a major producer.