Abstract
Kuwait is pressing ahead with its rapid expansion of petrochemicals in 2009
with the recent election of a
more moderate parliament likely to improve
the chances of the approval of the massive Al-Zour refinery
project,
according to BMI’s latest Kuwait Petrochemicals Report. A number of new
projects are coming
online as part of the expansion of the Equate joint
venture between the state-owned Petrochemical
Industries Company, Dow
Chemical and Boubyan Petrochemical Company. In June, Equate
Petrochemical
started up a new HDPE/LLDPE unit which raised its total PE capacity to
825,000tpa. A
large proportion of its output will be exported to China.
The amount of capacity brought online and
Equate’s competitive
advantage in feedstock costs has prompted some traders and analysts to warn
that it
will put pressure on petrochemicals margins across Asia and could
lead to cuts in cracker utilisation rates.
Equate’s Kuwait
Paraxylene Production Company (KPPC) plans to bring its planned 822,000tpa
PX
and 370,000tpa benzene plants at the Shuaiba Industrial Area online by
Q309. They will be operated by
Equate, with 560,000tpa of by-products also
to be produced at the site. The associated 450,000tpa
ethylbenzene-styrene
unit, operated by Equate affiliate Kuwait Styrene Company, was already
running
by Q209. The projects form part of the expansion of Equate’s
facilities, which also include cracker
capacity of 1.7mn tpa of ethylene,
1.15mn tpa of EG and 110,000tpa of PP.
Confusion continues to surround
plans to build the Al-Zour refinery in Kuwait amid allegations of
corruption in the award of contracts rules out a potential source of naphtha.
In June 2009, the Kuwait
National Petroleum Company (KNPC) re-submitted
the refinery for approval by the Supreme
Petroleum Council with cheaper
costs and a more transparent tendering process. Without Al-Zour and
with
non-associated gas production dedicated to power generation, there is little
scope for significant
capacity additions beyond those currently planned by
Equate.
Kuwait’s petrochemicals score has fallen 4.5 points to 51.8
points to seventh place in BMI’s Middle East
Petrochemicals Business
Environment Rankings. Kuwait’s score has deteriorated due to rising
uncertainty over the future of the Al-Zour refinery, which has attracted
considerable controversy over its
tendering process. This put it 4.6
points ahead of Kuwait and 1.5 points behind South Africa. Kuwait’s
score has come under pressure due to deterioration in country risk caused by
the economic downturn,
coupled with a declining investment environment
after the cancellation of KPC’s planned JV with Dow.
In the short
term, PE and EG sales from the Greater Equate project are expected to continue
to benefit
from strong Asian demand. Equate’s slim portfolio, while
not that sophisticated, does include the most
frequently used plastic in
the world. China is the key driver of this demand. According to BASF
estimates, by 2015, the Asia Pacific region is expected to account for about
34% of global petrochemicals
demand, with China the single largest
contributor. However, much of the feedstock for additional
capacity in
2009 is likely to be imported, with Kuwait set to see net imports of 10bcm of
gas by 2013.
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