Year ahead promises to be quieter for petrochemicals sector

04 February 2013

The large-scale projects awarded in 2012 will be replaced by smaller, speciality chemicals schemes

Over the past 12 months, several massive petrochemicals projects have progressed to the execution stage, with engineering, procurement and construction (EPC) contracts awarded for schemes such as Saudi Arabia’s $20bn Sadara development, $3.4bn elastomers project at Jubail and $5.6bn PetroRabigh phase 2 project.

After a boom in activity, 2013 promises to be a calmer year for the sector. There are about $9.9bn-worth of chemicals projects currently at the design, front-end engineering and tender phase in the Middle East and North Africa region, according to Middle East projects tracker MEED Projects.

By comparison, this is less than half the value of one project that began construction in 2012: the $20bn Sadara Chemical Company joint venture between Saudi Aramco and the US’ Dow Chemical.

Project pipeline

Some interesting projects are coming up for tender in 2013, but the opportunities will be limited for most EPC contractors. The largest is the $6.4bn Ras Laffan olefins plant, which is being planned by Qatar Petroleum and the UK/Dutch Shell Group. Several major packages will be made available, including the offsites and utilities, which may be tendered on an EPC management basis due to the complexity of the work. This should attract major international engineering consultancies such as the US’ KBR, Fluor, Jacobs and Foster Wheeler, as well as Australia’s WorleyParsons.

A steam cracker with a capacity of about 1.1 million tonnes a year (t/y) of ethylene and 170,000 t/y of propylene is being planned, and contractors will also be invited to bid on a monoethylene glycol unit, a linear alpha olefins unit and an oxo-alcohols unit.

Industry sources say all the EPC packages for the scheme should be released in the third quarter of 2013.

It is clear that the trend towards industrial diversification in Saudi Arabia is being realised as none of the major schemes mooted for 2012 suffered any significant delays in the award process. The kingdom has identified petrochemicals production as one of the main anchors of its industrial diversification plans and 2012 will be recognised as one of the sector’s busiest periods.

Many new projects [in Saudi Arabia] will be much lower in budget value than the recent megaprojects

While 2013 is unlikely to see much consolidation, there are some speciality chemicals schemes in the pipeline that will offer work. The kingdom is now looking to cluster much smaller-scale conversion industries around the major facilities under construction. This means many of the new projects will have much smaller budgets than the recent megaprojects that have dominated the market.

There are about $2bn-worth of projects at the design, front-end engineering and tender phase in Saudi Arabia, a tiny figure compared to the past two years. Saudi Basic Industries Corporation (Sabic) and Japan’s Mitsubishi Rayon Company awarded Spain’s Tecnicas Reunidas the front-end engineering and design (feed) for two new petrochemicals plants worth about $500m at Jubail in 2012. The work is expected to be completed in early 2013.

The two plants will produce 250,000 t/y of methyl methacrylate, making this facility the largest of its type in the world, and 40,000 t/y of polymethylmethacrylate.

Not included in the MEED Projects figures are two schemes related to refinery rehabilitations.

The scope of works at the $3bn Ras Tanura refinery project, the country’s largest with a capacity of 550,000 barrels a day, will involve a major upgrade. Most of this work will be related to the refinery itself, but an aromatics cracker is also being planned by Saudi Aramco, the project owner. The US’ Jacobs Engineering is carrying out the feed and a tender is expected to be released for the EPC contract in March.

The upgrade work at the Yanbu refinery is also expected to include an aromatics cracker. The scheme is interesting for the fact it represents a rare joint venture involving Saudi Aramco and Sabic. There has been no real indication as to when tenders will be released, but very late 2013 is probably the earliest time to expect any form of bid stage.

Duqm feed

In Oman, Muscat is still pinning its hopes on the $6bn Duqm Refinery and petrochemicals development, just as it did in 2011 and 2012. The scheme is moving slowly and there are hopes that a feed tender will be released in 2013. Despite the Oman Oil Company’s best intentions to get this project started, a lack of gas feedstock remains an issue. With a gas pipeline to Duqm being planned, the outlook could improve dramatically for this project in the next 12 months.

Abu Dhabi is in a similar position to Oman in that it is focusing on one huge project that it hopes will propel its petrochemicals industry forward: the Abu Dhabi National Chemicals Company’s (Chemaweyaat) $20bn Tacaamol scheme in the Western Region.

The initial feed phase is set to be tendered shortly, but this is believed to only be for the first package, an aromatics complex. This in turn will lead to more packages being released. EPC packages are not likely to be issued for the aromatics complex until early 2014. Foster Wheeler is carrying out the project management consultancy for the scheme.

Despite a downturn in activity in its heavy industrial sectors, Egypt has a petrochemicals project that should be tendered on an EPC basis in 2013. The Egyptian Styrenics Production Company is planning to construct a $250m ethyl benzene and styrene monomer plant at the El-Dekila port site in Alexandria.

After decades of inactivity, two small projects are being planned in Iraq. While unlikely to herald a full recovery in the country’s petrochemicals sector, they are a start. A $150m fertiliser plant in Khor al-Zubair in the south of the country and a $30m acid plant in Baghdad should be tendered in 2013.

Across the rest of the Mena region there are no major petrochemicals schemes currently at the feed or EPC tender phase. Reasons for this include the recent political turmoil in countries such as Libya, Yemen and Syria, along with a lack of capital and feedstock.

Switching focus

Dozens of projects in Saudi Arabia with an average budget of about $150m will not offer the kind of turnover many international EPC contractors have come to expect, and they may look to other regions of the world. The industry will also be affected globally as the US begins to plan large-scale petrochemicals production in a bid to kickstart its flagging economy and exploit its abundant supplies of shale gas feedstock.

This would result in several sizeable flagship schemes becoming available for tender, and many EPC contractors could decide to focus on that growing market instead.

However, the Middle East has always worked in cycles and now that the petrochemicals sector is moving into a consolidation phase, opportunities in other oil and gas sectors will begin to present themselves.

If the region can produce more gas from both conventional and unconventional sources, then it will not take long for the Middle East’s major petrochemical players to want to add additional value to that resource.

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