Abstract
The overwhelming optimism over the rapid growth of Qatar’s
petrochemicals industry has dissipated
somewhat in the face of the global
financial crisis and the downturn in Chinese demand, but BMI’s
latest
Qatar Petrochemicals Report argues that the country’s
competitive advantage will ensure current projects
go ahead, albeit with
delays of one to two years.
Trends in Qatari petrochemical production are
closely tied to its key export markets, notably Asia’s
economic
powerhouse China. A deterioration in Chinese economic conditions has put
pressure on
demand both in China and other Asian markets. BMI believes
that demand for petrochemicals will have
improved in H209 following some
difficult months which have seen a sharp slowdown in construction
activity. This will be supported by the government’s economic stimulus
programme. Although H209 will
be an improvement on the poor performance
seen in H208, levels of demand growth are not forecast to
return to 2007
levels until 2010 at the earliest. However, there are fears that the Chinese
government’s
stimulus plan for petrochemicals, which is set to
involve investment in new refineries to speed up their
construction, could
create a problem of short-term over-supply in Qatar’s export markets in
Asia. Much
will depend on the strength of the recovery in the automotive
and home appliance sectors, which are
expected to recover before the
construction sector.
Qatar’s strength lies in its cheap feedstock,
the size of its units and the high level of integration, which
make it
more economical and competitive. Nevertheless, the addition of large amounts
of capacity at a
time of economic downturn in key markets such as China
could mean that Qatari facilities run at lower
rates than operators hoped.
Some figures put excess olefins capacity at up to 30mn tpa, which is five
times more than during previous downturns. Despite the threat this poses to
Qatari profit margins and
planned projects, BMI still believes Qatar is
better placed than most other petrochemical-exporting
countries.
Doubts are emerging over planned projects after a decision by QP and Honam
Petrochemicals to delay
their US$2.6bn plant by one year. Previously, BMI
reported that the project would be delayed until 2012,
due to problems
securing finance. Reports have now emerged that the project will be delayed
until early
2013. There were concerns that it may not go ahead at all
after the partners said they were putting the
plans on ‘indefinite
hold’. The cornerstone of the complex was to be a cracker with capacity
of 1mn tpa
of ethylene using mixed feedstock, with other capacities
including 900,000tpa of propylene, 700,000tpa
of PP and 220,000tpa of PS.
The partners have declared they are still planning to complete the project,
but
BMI is highly cautious and mindful of Honam Petrochemical’s own
problems with rising losses,
although it has little or no debt.
Meanwhile, a number of other projects have overrun their target start dates.
Others are still under
discussion, but the tightening credit market,
threat of over-capacity in the global petrochemicals markets
and concerns
that Qatar will not have enough feedstock to justify such megaprojects have
dampened the
previously positive prospects for the Qatari petrochemical
industry. The Qatofin/Q-Chem 1.3mn tpa
ethylene cracker at Ras Laffan has
been pushed forward to the latter half of 2009, with resulting knock-on
effects for other projects. The Q-Chem II PE complex, which was expected to be
onstream in H208 with
capacities of 350,000tpa HDPE, 345,000tpa normal
alpha olefins and 1.3mn tpa ethylene, may only start
in H209.
Qatofin’s PE complex, with 450,000tpa LLDPE capacity, missed its
scheduled Q109 start-up
and now looks unlikely to come onstream before
Q309. The Qapco PE plant, with 250,000-300,000tpa of
LDPE, is also
unlikely to be completed before 2011, a year behind schedule. Discussions of
further
petrochemical development projects, still in the discussion stage,
have slowed and could be abandoned.
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