A new star will appear in the Gulf petrochemicals firmament in late 2001. In December of that year, the 600,000-tonne-a-year (t/y) cracker, owned by Abu Dhabi Polymers Company (Borouge), is scheduled to enter production. It will then be followed in a matter of days by two 225,000-t/y polyethylene units, in a step that will mark the UAE's entry into the world of polyolefins manufacturing.

Implementation of the $1,200 million Ruwais polyethylene project is now in full swing. The two lump sum turnkey contractors, the German/US Linde Bechtel Alliance and Italy's Tecnimont, are hard at work on their respective ethylene and polyethylene contracts. The Borouge production company, a 60:40 joint venture between Abu Dhabi National Oil Company (ADNOC) and Copenhagen-based Borealis, is actively recruiting personnel to run the grassroots installation. And the 50:50 Borouge marketing company, headquartered in Singapore, has begun pre-marketing material from Borealis plants elsewhere to allow customers to test the bi-modal product that will eventually be produced at Ruwais.

The level of activity underlines Borouge's determination to meet its targets. 'We have to deliver the project on time and in budget,' says Borouge's chief executive Joost Schrevens. 'We then have to prove in 2002 that we have a good plant and establish the platform from which we can grow.'

Much is riding on the project's success. For ADNOC, the Ruwais development is its first foray into the polymers business. For Borealis, it is a first step in significantly expanding its production activities outside its core European market. And for the contractors, it is an ideal opportunity to secure strong Abu Dhabi and Borealis references. 'The strength of this project is that it is strategic for everyone involved - the shareholders, the contractors and the suppliers. It makes my life easier. We will either win all together or lose all together,' Schrevens says.

With responsibility for the plant's construction squarely on the shoulders of the lump sum turnkey contractors, Borouge has been able to turn its attention to staffing its new operations. The key managers are in place, having been provided by the two shareholders. The search is now on to fill the less senior positions.

'The main focus is to find the right people. Recruiting those with the right cultural and technical skills is always difficult, but it is the key to a project's success. One of my biggest challenges is to make a team out of people with very heterogeneous backgrounds,' says the chief executive.

The production company's full complement is expected to reach 480 people. The vast majority will have to be hired by the first quarter of 2001 to allow the new recruits to go through a nine-month intensive training programme, before production starts.

Borouge is also working on finalising its financing needs. The total project cost of $1,200 million will be covered from three separate sources: shareholders' equity, which has been set at $360 million; a shareholders' loan; and a commercial borrowing. The size of the shareholders loan has still to be fixed. Once it is, Borouge will be in a position to set its commercial borrowing requirement. At present, it is estimated to be in the range of $200 million-500 million.

At the same time, a decision has to be taken by Borouge's board on whether to source the commercial borrowing from the local or international markets. 'We do not need the commercial borrowing until the last quarter of 2000,' says Schrevens. 'And as of today, I do not know from where it will be sourced. But we are in a competitive business and we therefore have to get the most competitive financing. If we can get it locally and at a competitive price, we will take it.'

One other question that has still to be answered is what ADNOC intends to do with the 150,000 t/y of surplus ethylene it is contracted to purchase from the Borouge cracker. Originally, it was earmarked as feedstock for a neighbouring ethylene dichloride (EDC) complex to be built by the state- owned oil and gas company on its own. However, in late October the estimated $500 million project was cancelled, raising the possibility of the surplus ethylene being sold onto the international spot market. If the spot route is taken, ADNOC will have to build additional ethylene storage and loading facilities at Ruwais.

Schrevens maintains that the cancellation of the EDC project does not affect the economics of the polyethylene project in any way. 'We are contracted to sell it [the 150,000 t/y of ethylene] to ADNOC and it is up to ADNOC to decide what to do with it,' he says. Nevertheless, he stresses that should there be no other alternative for the ethylene volumes, building a third polyethylene unit at the Borouge plant is a definite option. 'If we put a third unit in, we would approach what Sabic has inSaudi Arabia. To go to 750,000 t/y of polyethylene means that you really become world-scale and achieve better economies of scale,' Schrevens says. 'The most difficult aspect about a third line would be to secure a market. Marketing polyethylene is not like selling crude.'

Borouge has already made some preparations for expanding its Ruwais complex. The layout of the 600,000-t/y cracker has been designed so that a 300,000- t/y expansion can be easily accommodated, provided there is sufficient ethane-rich gas available. An alternative expansion option would be to maximise the first-phase infrastructure by debottlenecking.

All current efforts are going into making sure that the first-phase production begins on time and that its range of products is up to scratch. 'To go from zero to 450,000 t/y of polyethylene is a big step. In the first two- three months of production, we will probably not be making all the grades of polyethylene. In 2002, our target output is 310,000-320,000 t/y,' he says. If the forecasts prove right, the start of production at Borouge will coincide with an upturn in the world petrochemicals market.

The plant's commissioning will open up a new array of potential investment opportunities in the emirate, ranging from downstream petrochemicals to plastic conversion plants, such as pipe production. Borouge itself will not be involved in the downstream arena. Instead, its task will be to ensure that the foundations it is laying are strong enough to support both its own and the UAE's wider petrochemicals ambitions.