QP and Shell cancel $6bn Al-Karaana

14 January 2015

Joint venture partners decide against building world-scale petrochemicals plant at Ras Laffan

Qatar’s planned petrochemicals expansion has taken another major blow after the joint venture partners behind the $6.4bn Al-Karaana complex in Qatar decided to axe plans to build the facility.

The 80:20 joint venture of Qatar Petroleum (QP) and the UK/Dutch Shell Group has cited commercial unfeasibility as the reason for halting the scheme at Ras Laffan in northern Qatar.

Qatar ethylene producers
NameLocation Capacity (tonnes a year)Status
Qatar Chemical Co (Q-Chem)Mesaieed500,000Operational
Qatar Petrochemical Co (Qapco)Mesaieed720,000Operational 
Ras Laffan Olefins Co (RLOC)Ras Laffan1,300,000Operational
QP/QapcoRas Laffan1,400,000Cancelled 
Al-KaraanaRas Laffan1,300,000Cancelled 
Source: MEED Insight

The project was at the main contractor bid phase and the news will disappoint international engineering, procurement and construction (EPC) contractors looking to win work.

QP has said the ethane allocation that had been set aside for Al-Karaana would now be distributed to existing producers in Qatar. These include Qatar Petrochemical Company (Qapco), Qatar Chemical Company (Q-Chem), Qatar Vinyl Company (QVC) and Ras Laffan Olefins Company (RLOC).

All these companies have been told they can expand their current operations to utilise the ethane that is available.

The scope of works for the project included a mixed-feed steam cracker supplied with ethane and propane feedstock. The cracker was to have a capacity of 1.1 million tonnes a year (t/y) of ethylene and 170,000 t/y of propylene.

Qatar’s exports
SectorValue ($bn)
Petchemicals, fertilisers and other chemicals9.53
Source: QSA

This would then be fed into downstream units that would produce monoethylene glycol, linear alpha olefins and oxo-alcohols units.

Despite the positive announcement from QP regarding the reallocation of the feedstock for Al-Karaana, the news of its cancellation leaves Doha’s plans to massively ramp up its petrochemicals production in tatters.

In September 2014, QP and Industries Qatar announced that the  $7.4bn Al-Sejeel, a petrochemicals complex nearly identical to Al-Karaana, was going to be shelved.  At the time it was stated that a project that offered a better return on investment would be sought.

The Al-Sejeel scheme was planned to be a world-scale complex producing more than 3 million t/y of chemicals when completed in 2018.

In 2012, Oil Minister Mohammed al-Sada announced an ambitious strategy to increase Qatar’s petrochemicals production from 9 million t/y to 23 million t/y by 2020. The plan was aimed at diversifying the country’s economy, which is overly reliant on the export of liquefied natural gas (LNG).

The Gulf state is the world’s largest exporter of LNG, with 77 million t/y of capacity, and it has the world’s third-biggest reserves of gas, which provide it with the feedstock needed to fuel the expansion of its petrochemicals industry.

Doha has allotted 16 per cent of gas production to be used domestically for petrochemicals production, as well as power generation and other industrial uses.

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