Qatar Petrochemical Company (Qapco) occupies a central position in Doha’s latest bid to diversify its petrochemicals production base. Established in 1974 and one of Qatar’s oldest companies, Qapco was initially set up to use both associated and non-associated ethane gas from the state’s petroleum production. It has since experienced unprecedented growth, with net profits hitting a high of $300m in 2007. Ethylene output is expected to break the 725,000-tonne-a-year (t/y) barrier for the first time this year, with polyethylene production passing the 400,000-t/y mark.

Structure

Like many energy initiatives in Qatar, Qapco has a share in an array of related petrochemicals projects in addition to its own core activities. Ownership of the core Qapco company is split between the state-run Industries Qatar, the country’s largest firm by market value, which holds 80 per cent, and France’s Total, which owns the remaining 20 per cent.

Besides its own project commitments, Qapco holds the controlling 63 per cent share in Qatofin, set up in 2003 to develop a plant in Mesaieed with a capacity of 450,000 t/y of linear low-density polyethylene (LLDPE), along with Total, with a 36 per cent stake, and state energy giant Qatar Petroleum (QP), with 1 per cent.

Through a shareholding in Qatofin, Qapco holds a stake in the Ras Laffan Olefins Company, a joint venture of Q-Chem II (53.85 per cent), Qatofin (45.15 per cent) and QP (1 per cent).

The firm also has a 31.9 per cent shareholding in Qatar Vinyl Company (QVC), the state’s first downstream petrochemicals project, which produces 290,000 t/y of caustic soda, 175,000 t/y of ethylene dichloride and 230,000 t/y of vinyl chloride monomer. Other major shareholders in QVC are QP (25.5 per cent), Norway’s Norsk Hydro (29.7 per cent) and Arkema (12.9 per cent).

Finally, Qapco holds a one-third stake in Qatar Plastic Products in conjunction with Qatar Industrial Manufacturing Company (Qimco) and Italian firm Febo.

Operations

Qapco’s operational facilities consist of an ethy_lene plant producing 720,000 t/y along with two low-density polyethylene (LDPE) plants with total capacity of 385,000 t/y, and a sulphur plant with capacity of 70,000 t/y. Much of the firm’s attention last year focused on the ethy_lene expansion project, known as EP2, where capacity was boosted to 720,000 t/y from 525,000 t/y.

Mohammed al-Mulla, Qapco’s general manager, controls the company’s own operations but works closely with QP to ensure its strategy mirrors the wider ambitions of the state’s energy sector. Qapco has also steadily built up its marketing and sales network to include 15 offices and two regional warehouses, with a China office expected to open shortly.

It is also unifying its high-density polyethylene output with Q-Chem and QVC as part of a joint marketing arrangement.

Ambitions

Qapco plans to develop an LDPE plant, LDPE III, at its Mesaieed complex by 2011, with production of 250,000 t/y, expandable to 300,000 t/y. Ethylene feedstock for the facility will come from Qapco’s EP2 project at Mesaieed, which came on stream last year, and from Qatofin’s share of ethylene with the Ras Laffan Olefins Company. The LDPE output from the plant will primarily be destined for the Asian and European markets.

Pre-qualification bids from the prospective engineering, procurement and construction (EPC) contractors have been shortlisted by The Netherlands-based Basell, the technology provider for the plant, with invitations to bid to be issued to qualified bidders in June. The front-end engineering design of the plant is already being carried out by Germany’s Uhde and is due to be completed soon. Meanwhile, Qatofin expects to complete its 450,000-t/y LLDPE plant at Mesaieed, adjacent to the existing Qapco plant, by the end of 2008. Production will be expandable to 600,000 t/y and will be exported to Asia and Europe.

Qapco is guarded about its ambitions heading into the next decade, mostly because of the sensitivity around fresh ethane allocations from state gas producer QP.

MEED Assessment

With energy prices at an all-time high, Qapco is well positioned to take advantage of the surge in demand for downstream products. It is investing nearly $2bn in petrochemical projects that will almost triple its polyethylene capacity to 1.3 million t/y. Qapco is in a privileged position as one of the world’s most envied low-cost producers.

With oil prices exceeding $130 a barrel, the economics of the petrochemicals projects remain sound for Qapco. Product prices are buoyant and feedstock costs are still cheaper than in most countries outside the Middle East.

As elsewhere in the region, Doha’s petrochemicals sector has suffered a sharp rise in construction costs over the past few years, due in part to contractor capacity being squeezed by the high volume of work on offer. Despite construction cost pressure, Qapco’s enterprises are so profitable that it can afford to invest more than expected in its facitilities.

The firm predicts ethylene prices, which are currently about $1,200 a tonne, will stay in excess of $1,000 a tonne in 2009. Even if prices plunge, Qapco receives such cheap feedstock, at about $1-2 a million BTUs compared with more than $10 a million BTUs on the world market, that it would still be in good shape.

Ethane has been the feedstock of choice so far in Qatar’s petrochemicals industry, but a shift to mixed feedstock production combining ethane with liquified natural gas is likely heading into the next decade. This potentially offers a further path downstream for Qapco should it favour diversification.

With a good track record of rising profitability, Qapco remains in a strong position to keep driving the state’s emergence as a major petrochemicals producer.