Petrochemicals ME - Dec 2009

NEWS, DATA AND ANALYSIS FOR THE REFINING AND PETROCHEMICAL INDUSTRIES DECEMBER 2009

Face to face with the Middle East’s most powerful petrochemical players

GCC NEWS 06 | NEWS INTERVIEW 10 | FLOW METERING 22 | PROJECT UPDATE 29 | DATA 30 | FACE TO FACE 32

PETRO RABIGHTHE REGION’S FIRST INTEGRATED PROJECT IS OPERATIONAL

REFINERY INTEGRATION

ACCELERATED TRENDS TOWARD DIVERSIFICATION

An ITP Business Publication

Face to face with the Middle East’s most powerful petrochemical players

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4 EDITOR’S LETTERIf Chinese opportunities dry up, what are the alternative options?

6 REGIONAL NEWS$5.2bn Ruwais deals won, SABIC JV to start up in 2010, QPI to buy Singapore JVs, Samsung bags $1.2bn deal.

10 NEWS INTERVIEWDr Abdulaziz Al-Bati, general manager sup-ply chain at Tasnee Petrochemical Complex.

12 MAJOR INTERVIEWSAn overview of the exclusive face-to-face interviews published in PME during 2009.

22 FLOW METERINGAs the production process requires the transportation of materials from one site to another, fl ow measurement is vital.

24 REFINERY INTEGRATIONSome fi rms are trending towards integra-tion despite the increasing challenges.

27 BUSINESS BRIEFINGMost of the top 10 polyolefi ns producers worldwide operate one or more of LyondellBasell’s process technologies.

29 PROJECT REPORTJubail Polysilicon Plant goes under a Con-tax project manager’s microscope.

30 DOWNSTREAM DATAThe most important petrochemical product and share prices from the Middle East’s leading listed companies.

32 FACE TO FACE Meet Alan Yeap, head of polymers section at Singapore-based CJP International PTE.

December2009In Print

16 PETRO RABIGH UNVEILED Zaid Al-Labban, CEO, explains how this major project was completed just in 30 months.

06

24

The offi cial inauguration of Petro Rabigh was in November.

32

27

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Petrochemicals Middle East December 2009www.arabianoilandgas.com

Online2

Petrochemicals Middle East December 2009 www.arabianoilandgas.com

TAKREER has awarded three contracts for the Ruwais refi nery project, worth $4.4bn to South Korean contractors.

arabianoilandgas.com

NOVEMBER EVENTS ROUNDUPONLINE GALLERY

The online home of:

OUNDUUUUUPPPPP

1 ADNOC subsidiary awards $4.4bn Ruwais contracts

2 EPC resource challenge still evident

3 Noster issues Dragon Oil statement

4 Technip scoops $408 million Gasco contract.

5 Qatar looks to build two petrochem plants in Asia

The Centre of Waste Management in Abu Dhabi has fi nalised a draft resolution to ban the use of plastic bags.


Saudi Aramco, Sinopec and Exxon Mobil have started the commercial operation of the Fujian refi nery, which has a capacity of 12mn t/y.


Oman Aromatic Company (OAL) has started the commercial production of paraxylene and benzene.


EDITOR’S CHOICE

EXCLUSIVE INTERVIEWExclusive: Interview with Dr Shokri Ghanem, Libyan energy minister arabianoilandgas.com

WEB FORUM

Behind the scenes ArabianOilandGas.com picture gallery takes you behind the scenes of Rabigh Refi ning and Petrochemicals Company in Rabigh, Saudi Arabia. Including pictures of the different plants.


BREAKING NEWS AND VIEWS FIRST

MOST POPULAR NEWS

OAL STARTS BENZENE PRODUCTION

FUJIAN REFINERY STARTS UP

ABU DHABI BANS PLASTIC BAGS

TAKREER AWARDS $4.4BN CONTRACTS

Event newsroundArabianOilandGas.com reporters made a full sweep of November’s biggest industry events including The World National Oil Company Downstream Congress in London.


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Chinese opportunities could dry up

The hopes of Middle East Petrochemicals producers hinge on the demand from Asia, and in particular the Chinese markets. When speaking to industry members, everybody is saying the same thing – our main

market is the Chinese sector.Additionally, companies such as Petro Rabigh, Yansab and Kayan, which

are listed fi rms, describe China as one of the main destinations of their product. They also report that outlook for the future is bright and demand from the region is expected to hold steady, if not increase.

Petrochemicals consultancy fi rms are singing from the same hymn sheet, highlighting the increase in Chinese demand for petrochemical products.

However, while demand is growing, so will China’s production capacity. In order to boost the self-suffi ciency of the country, China is naturally planning some major projects.

The new Tianjin project between SABIC and Sinopec is expected to produce 3.2m tonnes/year of chemical products.

The huge Chinese demand for petrochemicals will partly be met by this project, which will go on stream in 2010.

Polymer players expect competition in the domestic market to intensify as a direct result of the Tianjin facility starting up. These companies will have to focus on the re-export segment

of their customer base in order to counter this. Producers in the Middle East would be best advised not to put all of their eggs in one basket. Other markets are out

there, despite the fact that the Chinese one looks so appealing. And with massive Chinese projects coming online, it may not be the case for long.

Abdelghani Henni, editor e-mail: [email protected]

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Comment4


$5.2bn Ruwais deals wonADNOC’s refinery is all set to start production by the end of 2013

ADNOC subsidiary TAKREER has awarded the fi rst contracts for the Ruwais refi nery project, which will boost its crude oil processing ca-pacity by 417 000 barrels per day.

The two contracts are worth a total of US$5.2 billion and have been won by Korean fi rms SK En-gineering and GS Engineering.

SK Engineering was awarded the crude distillation unit and as-sociated downstream units con-tract for a total value of US$2.1 billion. GS Engineering and Con-struction Corp won a deal worth $3.1bn for the residue fl uid cata-lytic cracking unit and associated refi ning units.

SK Engineering has announced that it is hoping to deliver the dis-tillation unit for the beginning of the year 2014.

KBR bags Saudi contract QPI to buy Singapore JVsSaudi Kayan Petrochemical Company (Saudi Kayan) has awarded a contract to US fi rm KBR, to develop and implement an operator training simulator (OTS) for its grassroots phenol plant, located in Saudi Arabia.

KBR, which is also the tech-nology licensor for the phenol plant, will develop a customised, high-fi delity simulator to be used for the initial training of Saudi Kayan phenol plant oper-ators and for continual refresher training after plant start-up.

The system will consist of custom dynamic models devel-oped by KBR that will accurately mimic the behaviour of the phe-nol plant. The models will be connected to dedicated control system hardware and operator consoles that will allow plant operators to train in a realistic

environment without disrupting normal plant operations.

“KBR is pleased to continue building on our strong relation-ship with Saudi Kayan for this OTS system implementation,” said Tim Challand, president, KBR Technology. “The award ex-emplifi es the diversity of services KBR offers clients and allows us the opportunity to showcase our expertise in advanced chemical engineering applications.”

Qatar Petroleum International and Shell Eastern Petroleum (Pte) Ltd (Shell) have signed a series of agreements, which will see Qatar Petroleum Interna-tional take a stake in two Shell Chemicals joint ventures located in Singapore.

The agreements were signed by Abdulla bin Hamad Al-Atti-yah, deputy prime minister and minister of energy and industry, and Peter Voser, who is the chief executive offi cer of Royal Dutch Shell Group.

The agreements mark the fi rst downstream acquisition by Qatar Petroleum International abroad. Qatar Petroleum International and Shell entered into a strategic partnership in 2007 which was aimed at identifying and devel-oping international projects of mutual interest to both compa-

nies throughout the energy sec-tor value chain.

Under the agreements, Shell will sell its existing sharehold-ings in two companies to a new joint venture called QPI and Shell Petrochemicals (Singa-pore) Pte Ltd (QSPS). Through the new venture, Qatar Petro-leum International and Shell will then effectively hold 50% of the Petrochemical Corporation of Singapore (Pte) Ltd (PCS) and 30% of The Polyolefi n Company (Singapore) Pte Ltd (TPC).

The other shareholders in PCS and TPC are JSPC and NSPC re-spectively, both Japanese con-sortia led by Sumitomo Chemical Company Limited.

The transaction is expected to be completed at some point dur-ing December this year, accord-ing to reports.

Eight companies competed for these two contracts. The other contracts comprises offsite and utilities, tankage and associated interconnecting piping, marine

facilities and also non-process buildings at the refi nery.

The new refi nery will double ADNOC’s export surplus of naph-tha by 2013.

Kuwait cuts off naphtha contractsKuwait has ceased its naphtha contracts for December and No-vember 2009 with Japanese buy-ers after diffi cult negotiations. The move has left end-users in Japan with no short-term supply from the Middle East producer for the fi rst time in a year.

The customers — which in-clude Mitsubishi Chemical Corp., Mitsui Chemicals, Idemitsu Ko-san and Maruzen Petrochemical, along with traders Marubeni and Petro-Diamond - held a total of at least 575 000 tonnes of full-range naphtha.

Kuwait Petroleum Corp. (KPC) had already terminated its con-tracts with Marubeni and Petro-Diamond, owned by Mitsubishi Corp, over the past two weeks, traders said. Japanese petro-chemical makers had been hold-ing out for better prices.

Contracts for the Ruwais refinery project have been awarded, with more expected shortly.

The simulator will help training at the plant.

News 6


Fujian JV refinery begins full operationsThe Fujian refi nery, a Saudi Aramco, Sinopec and Exxon Mo-bil JV, has started commercial operation, marking the fi rst Sino-

foreign JV combining refi ning and petrochemical operations.

The facility, located in Quan-zhou in southeast China’s Fujian

Province, will triple Fujian’s an-nual oil refi ning capacity to 12 million tonnes from the previous 4 million tonnes. The upgraded refi nery primarily refi nes and processes sour Arabian crude.

The complex includes an 800,000-tonne-per-year eth-ylene cracking facility, an 800,000-tonne-per-year poly-ethylene unit, a 400,000-tonne-per-year polypropylene unit and a 700,000-tonne-per-year paraxy-lene/aromatic hydrocarbon unit.

The refi nery’s sales revenues are estimated to exceed US$8.8 billion per year now that the re-fi nery is fully operational, the company has revealed.

Iran’s exports of polyethylene (PE) and polypropylene (PP) to Pakistan are set to double year-on-year in 2009 to 64,000 tonnes, and surge 17% to 75,000 tonnes in 2010, industry sources said on Tuesday. The estimates were based on Pakistan customs department data for the January-September 2009 and full year 2008.

Oman Aromatic Company has started the commercial production of paraxylene and benzene from its plant located in Sohar on north east coast of Sultanate of Oman. The commercial production of the 198,000 t/y of benzene started on November 6th, while it started the commercial production of the 819,000 t/y of paraxylene on November 9th, after successfully completing the trial production.

Rabigh Refi ning and Petrochemical Company (Petro Rabigh) is considering teaming with new partners to produce synthetic fi bre and other products as part of the second phase of development of a complex in western Saudi Arabia.

Egypt Sidi Krir Petrochemicals Company has posted US$86.14million profi ts during the fi rst nine months of 2009 a 43% declined compared to $150.83m during the same period of 2008.

BriefsSABIC JV to launch in 2010The SABIC and Sinopec joint venture project in the Tianjin petrochemical complex is ex-pected to start commercial pro-duction during the second half of 2010, according to Wang Tianpu, president of Sinopec.

The US$2.66bn project is currently under construction in Tianjin, China.

The complex’s production ca-pacity is rated at approximately 3.2m tonnes of various petro-chemical products, including 1.2m tonnes of ethylene and oth-er downstream products.

SABIC revealed last July that it had received an offi cial approval from the Chinese National Devel-opment and Reform Commission

Joint venture with Sinopec to have a total capacity of 3.2mn tonnes

to participate jointly with China Petroleum & Chemical Corpora-tion (Sinopec).

Meanwhile, Sinopec has said it will buy around 1 million bar-rels per day of crude from Saudi Arabia next year, a volume nearly 30% above the current rate, to feed expanding capacities.

The Asian refi ner aims to pro-cess 205 million tonnes of crude

in 2010, its president Wang Tianpu said, a target 14 percent higher than the average rate of 3.59 million bpd for the fi rst three quarters of 2009.

The expansion comes following news that demand in the world’s second-largest oil user is set to maintain robust growth after re-bounding from sharp slowdowns in late 2008 and early 2009.

Fujian refinery is a joint venture between Saudi Aramco, Sinopec and Exxon-Mobil.

The SABIC and Sinopec JV will be located in the Tianjin petrochemical complex.

3.2 milliont/y - the production

capacity of the project

7News


Snapshot

Albemarle inks SABIC JV

Fertil has awarded Korean fi rm Samsung Engineering a lump-sum turnkey contract worth US$1.2 billion, to construct am-monia and urea plants at its fer-tiliser complex in Ruwais, about 250km west of Abu Dhabi.

The Fertil-2 project will expand the fertiliser com-plex production capacity from 650,000t/y to 2 million t/y. The project is slated for comple-tion by Q1 2013. The new single stream ammonia plant will have a capacity of 2,000 metric tonnes per day and the single stream urea plant will have a capacity of 3,500 MTPD of granulated urea. The total capacity of the fertiliser complex will increase to 3,300 MTPD of ammonia and 5,800 MTPD of urea by the fi rst quarter of 2013.

The ammonia and granulation technologies are under license from Udhe in Germany, while the urea technology is from Stami-carbon in Holland. In addition to installing associated utilities and offsite units, Samsung Engineer-ing will also construct bulk stor-age with a capacity of 100,000 tonnes, including a 1,000 tonnes per hour reclaimer unit.

“This signifi cant investment at our fertiliser complex in Abu Dhabi confi rms our commitment

Aramco eyes Qingdao stakeSaudi Aramco is in talks with Sinopec to take a stake in the company’s Qingdao refi nery in China, according to Khalid Al-Falih, chief executive offi -cer of Saudi Aramco.

“We have been in talks with Sinopec to take a part of the Qingdao refi nery, and we are continuing those discussions with Sinopec at the moment,” Al-Falih remarked.

The executive indicated that Aramco remains com-mitted to the Ras Tanura re-fi nery complex and has made no plans to delay its comple-tion of the project. “We have not made a decision to delay the project,” he said. “We have started a study to carry out the engineering studies to determine the fi nal cost of the project,” Al-Falih revealed on the sidelines of the Petro Rab-igh inauguration event.

Saudi opts for liquid feedstockFuture petrochemicals proj-ects in Saudi Arabia are to be based on liquid feedstock rather than cheap ethane feedstock, Saudi oil minister Ali Al-Nuaimi said.

“We will be using liquid feedstock in our petrochemi-cals projects,” said Al-Nuaimi during the inauguration of the Petro Rabigh complex in Saudi Arabia.

Al-Nuaimi added that the country is determined to go ahead with the integrated complex, which includes a refi ning and petrochemi-cal complex operating at the same time.

The Albemarle Corporation has announced that it is to form a 50/50 joint venture with an af-fi liate of Saudi Basic Industries Corporation (SABIC) to build a world-scale organometallics pro-duction facility at Jubail.

The US-based company has said that it will join forces with Ibn Hayyan Plastic Products Company (TAYF) to form the Saudi Organometallic Chemicals Company (SOCC).

The new facility will have the capacity to produce 6,000 met-

Samsung bags $1.2bn deal Japan firm is awarded huge Fertil-2 contract as capacity increases

to being an important player within the industry,” revealed Fertil’s general manager, Mo-hamed Al Rashid.

“We look forward to the syn-ergies that these new plants will bring to our existing operations and to benefi ting from the con-siderable experience of Sam-sung Engineering, in realising the completion of this project,” Yeon-Joo Jung, president and CEO of Samsung Engineering told reporters.

ric tonnes per annum of tri-ethyl aluminium equivalents.

Tri-ethyl aluminium is used primarily as a co-catalyst in Ziegler-Natta type systems for olefi n polymerisations.

“This new world-scale produc-tion unit will help us safely and effi ciently serve our customers while also providing a founda-tion for Albemarle to capitalise on other opportunities emerging in the Middle East region,” Mark Rohr, chairman and CEO of Al-bemarle said.

Fertil’s general manager, Mohamed R Al Rashid.

2 milliont/y - the new capacity of

Fertil complex, to be completed by 2013.

Events17- 20 Jan 2010Saudi Petrochem 2010. Trade show. Riyadh, Kingdom of Saudi Arabia

9- 11 FebruaryGlobal Petrochemicals Conference 2010. 9 February 2010. Vienna, Austria

4-5 March Annual European Petrochemical Markets, Conference. Amsterdam, Netherlands.

News 8


Saudi Petrochem 2010, held on January 17 to 20 at the Riyadh International Exhibition Center, is expected to attract top indus-try players to gather under one roof, whether service provider, producer or consumer.

Saudi Petrochem is the re-gion’s premier petrochemicals technology exhibition, especially given the country’s newfound prominence as a hub of the glob-al petrochemicals industry.

At Saudi Petrochem 2010, a wealth of investment opportuni-ties are expected to be offered to petrochemicals-related equip-ment distributors, manufactur-ers, agents and suppliers as pro-ducers will be at the event.

“Saudi Petrochem 2010 is go-ing to offer industry players top

Saudi Petrochem to kick off new year

business advancing opportuni-ties,” said Kamil Al Jawhari, the project manager at Riyadh Exhi-

17% The rise in Iran’s exports

of polyethylene (PE) and polypropylene (PP) to Pakistan in 2010 to

75 000 tonnes.

8% The rise in Pakistan’s

imports of Saudi Arabian PE and PP in

2009 to 168 000 tonnes.

Global digest: News in numbers

Saudi Petrochem 2010 says it will offer industry players top business advancing opportunities

200 kThe expected number of standard 20 foot shipping containers that will transport Petro Rabigh products each year.

50The number of local and international tenants planned for the Rabigh Plastic Conversion Park.

The cost of fertilisers Pakistan will be importing from SABIC.

bitions Company, organisers of the show. The event will show-case chemical and petrochemi-

German fi rm Linde’s profi ts during the third quarter of 2009, representing a 4.7%

decline.

$268m $100m

cal processing and handling equipment, instruments, labs and control equipment.

To maximise the number of exhibitors, trade buyers and, ultimately, business develop-ment opportunities for all par-ticipants, Saudi Petrochem 2010 will be held concurrently with Saudi Oil and Gas 2010, which gives an impression how impor-tant the petrochemical industry has become in the region.

Organisers of the Saudi Pet-rochem 2010 exhibition are predicting a record attendance. Fully-equipped to accommodate the record-breaking numbers of Saudi Petrochem participants and visitors is the new the inter-nationally-renowned Riyadh In-ternational Exhibition Center.

1.38m t/yThe fertiliser capacity of the proposed Qafco 6 expansion.

Saudi Petrochem 2010 will run alongside Saudi Oil and Gas 2010.

9News


The supply chain for petro-chemicals companies in the region is facing a number of issues.

“We face challenges with re-gards to qualifi ed service provid-ers, infrastructure, government regulations, border and customs regulations, route of shipping lines, IT support in data informa-tion and tracing shipments,” ob-serves Dr Al-Bati.

Shipping petrochemicals prod-ucts by container is now widely practiced, not only in the Middle East but worldwide. “Shipments of polymers, either palletised, in loose bags or in bulk, use contain-ers and are loaded in the vessel. It is considered the most innovative

method in shipping products,” notes Dr Al-Bati. “It is in the wide use of containers in the shipping of products that supply chain is fac-ing a challenge and this includes container shippers, the trucking

sector and port authorities. For example container

shortages for ship-pers and the

handling of container loads in the dock is causing port bottlenecks,” he explains.

An increase in production out-put now and in the years to come will not only create a balance in the availability of shipping containers but may also have an impact on the transport industry, traffi c conges-tions as well as bottlenecks in the port. “Government infrastructures should include this area in their fu-ture projects,” Dr Al-Bati urges.

Change management and rec-ognising supply management as a strategy is one of the solutions that Dr Al-Bati thinks should be applied. “Stakeholders of any supply chain who wish to improve

industry performance in terms of cost, process enabler, must in-vest in the supply chain optimisa-tion,” he notes. “Improvement in the process does not stop when a company has structured and implemented its supply chain but

Container shortage in KSA is causing export bottlenecksDr Abdulaziz Al-Bati general manager of supply chain at Tasnee Petrochemical Complex discusses the logistical challenges of Gulf export operations

Supply chain in the petrochemi-cals industry is a very important factor of success, as maintaining a feedstock advantage requires a re-liable and cheap way to transport the product to end users.

“Supply chain is the essence of how it delivers value to the stakeholders and the custom-ers,” says Dr Abdulaziz Al-Bati general manager of supply chain at Tasnee Petrochemi-cal Complex and

also chairman of the GPCA sup-ply chain committee.

“In the Middle East, the supply chain is still in its infancy and it may take a while for it to reach the requested maturity,” says Dr Al-Bati. “The changing situations in the market and the impact of the current fi nancial crisis will be the new driving forces for the supply chain executives to accelerate the

advancement of supply chain in the Middle East,”

he adds.

“IN THE MIDDLE EAST, THE SUPPLY CHAIN IS STILL IN ITS INFANCY AND IT MAY TAKE A WHILE FOR IT TO REACH ITS REQUESTED MATURITY” DR AL-BATI GENERAL MANAGER, SUPPLY CHAIN, TASNEE

The number of ports in the GCC including 7 ports in KSA and 13 ports in the UAE.

35 Dr Al-Bati, general manager, supply

chain, TASNEE petrochemical complex.

News Interview10


function and management of sup-ply chain into the executive level,” adds Al-Bati.

continues based on customer’s changing expectations.

“Policy, procedures and safety regulations need to be up to date and relevant with the changing environment of supply chain,” Dr Al-Bati observes.

The supply chain process re-quires integration throughout an organisation and beyond with suppliers and customers. “This will prevent gaps and blind spots in the supply chain that signifi -cantly hinder results. Industries who have achieved supply chain optimisation use collaboration with key supply chain partici-pants to provide additional focus and resources to the total supply chain,” he says. “Companies gear-ing toward optimising the supply chain should consider shifting the

Local supply chain service pro-viders need to work hard to reach international levels as competition

to meet international standards is fi erce. “Most of the third party logistic service providers (3PL) in supply chain from overseas have already met relevant international standards and a few have already gained certifi cation in the ISO 28000 series, dealing in security management,” explains Dr Al-Ba-ti. “Local 3PLs are gearing towards enhancing their services to com-pete with their counterparts over-seas,” he reveals.

Dr Albati urges local fi rms to seek joint ventures with logistic service providers in Europe to gain experience and enhance their capabilities. “Business ventures with these players and the trans-fer of technical know-how will strengthen the supply chain in the Middle East,” he concludes.

Dr Al-Bati says local supply chain companies should look to partner with European firms.

11News Interview


12


Top interviews 20091212

QAPCO has achieved its plan to provide several million tonnes of throughput every year.

13Top interviews 2009

www.arabianoilandgas.com Petrochemicals Middle East December 2009

PME has secured many exclusive interviews with ministers, CEO and GMs of companies across the Middle East and North Africa region during 2009

13

INTERVIEWDR MOHAMMED YOUSEF AL-MULLA, QAPCO GM

By bringing you exclusive interviews from the most important industry experts across the region, Petrochemicals Middle East

provides an exclusive insight into the mindsets of the sector’s top professionals. These interviews unlock many aspects of the industry, including the feedstock situation, fi nancing, project progress and much, much more. All over the region, high-profi le players agree that that the downstream sector is moving here in force.

TOP

Despite the downturn, the general manager of Qapco was in a buoyant mood during March, and took the opportunity to share his thoughts with PME.

The April issue of Petrochemicals Middle East magazine carried an exclusive interview with Dr Mohammed Yousef Al-Mulla, managing director of Qatar Petrochemicals Company (Qapco). The interview tackled several aspects of the industry in Qatar. “Qatar Petroleum has the responsibility for distributing feed gas to various consumers in Qatar, of which we are one,” said Dr Al-Mulla. “The ethane feedstock for Qapco is currently sourced from onshore oil fi elds, offshore fi elds and also from the giant north gas fi eld through three NGL plants, NGL-1,2 and NGL4,” he added.

The availability of the ethane feedstock in the region is the main driver for local ethylene producers. “The Middle East industry is still the most economical producer of ethylene and polyethylene in the world, due to the huge benefi ts available to it as a result of our feed gas cost advantage. However, this massive advantage is shrinking day by day as a result of declining naphtha prices,” Al-Mulla explained.

“However, ethane-based producers will continue to have the upper hand over naphtha producers due to the independence from crude oil prices. Even in the worst case scenario, they have the capacity to survive,” Dr Al-Mulla observed.

The company has no intention of diversifying its product portfolio to focus on ethylene derivative products. “We are a producer of ethylene and polyethylene, and

will start the production of linear low-density polyethylene (LLDPE) via a joint venture with Qatofi n,” he says. “Polystyrene and polypropylene is not on our agenda for the time being,” he added.

The fi nancial crisis hit the company in the same way as other fi rms around the globe. “Nobody was immune from it, but when it hit the petrochemical sector we were already planning for it,” said Dr Al-Mulla. “We have a fi ve-year strategy plan for the company, and we know how to manage and adapt to the situation,” he indicated.

While reviving companies in Saudi Arabia and the UAE are busy acquiring fi rms in the Americas and Europe, Qapco clearly remains committed to the local market. “We are a subsidiary of Qatar Petroleum (QP), and, as such, all major investments decisions are based on the guidance from QP,” he reveals. “For the time being, Qapco has no investments abroad, and is mostly focused on local development. We are also encouraging and supporting the private sector to invest in small, and medium-sized downstream petrochemical projects,” the Qapco managing director explained.

APRILISSUE



“OF COURSE, WE WOULD NOT BE CONSIDERING A FURTHER EXPANSION WITHOUT A LONG TERM FEEDSTOCK SUPPLY”

14

Our May issue included an interview with the chief executive of Abu Dhabi Polymers Company (Borouge) - the petrochemical arm of ADNOC - Abdulaziz Alhajri. The company is emerging as one the major players in the local market especially due to the revamping of its production capacity to 4.5m t/y by the end of 2013. “Borouge aims to be the clear market leader in the Middle

East and Asia in the infrastructure market sector, specifi cally in pipe systems and wire and

cable applications, and a strong player in the automotive and advanced packaging plastics businesses,” Alhajri explained.

Besides the Borouge 2 expansion, which will increase capacity to 2 million t/y and includes the production of polypropylene, the company has started its third expansion project, Borouge 3. “Recently, we announced the successful

completion of a feasibility study and the decision to enter the FEED (front-end engineering and design) stage of the Borouge 3 project, a further commitment to our customers and evidence of the expansion of our operations to meet their growing demands in the next decade,” the Borouge CEO indicated.

Though the majority of gas in Abu Dhabi has a high sour content, making extraction and processing an expensive business, Alhajri is confi dent that his company will have suffi cient gas allocations for its projects. “Of course, we would not be considering a further expansion without a long term feedstock supply,” he said.

ABDUL RAHMAN JAWAHERY, CEO OF GPICAbdul Rahman Jawahery, CEO of Bahrain-based GPIC, stated that his company has strong aims to increase its production capacity

PME’s interview with GPIC - one of the region’s most symbolic companies, due to the fact that its owners are Saudi Arabia’s SABIC, PIC from Kuwait and the Bahrain government - took place in February issue. GPIC focuses on the production of fertiliser, mainly urea, ammonia and methanol, and is aiming to increase its production capacity. “We certainly have an expansion plan; any organisation with our success record is going to want to build on that, and our shareholders remain ambitious about the company,” said CEO Abdul Rahman Jawahery. “We have a strong capability to fi nance ourselves, or if it exceeds that, then GPIC is a very strong proposition for banks looking for low risk fi nancing,” he observed.

“We are debt-free and cash-rich, so it’s a tough period, but we are very well placed to deal with the current situation,” said Jawahery.

The fertiliser business makes the GPIC CEO confi dent that harvests that have been depleted because of accessibility to credit will prompt a

coordinated action to remedy the situation, and that fi nance will shortly be forthcoming.

“The fertiliser sector has a different cycle to the other petrochemical products. People can, and will, reduce their consumption of consumer goods for a period without suffering. Furniture, clothing and packaging, all of which rely on petrochemical products, can from time to time suffer from abstention or reduced consumption, but food is constant necessity,” explained the senior executive.

Despite the much-discussed turmoil in the global fi nancial markets, GPIC managed to sustain its investment plans throughout the course of 2008, and Jawahery indicated his belief the fi rm is in the best condition in its 27-year history. “Looking to the future, GPIC will be concentrating on the products we already have in our production family,” he added. “But the fertiliser and methanol sectors will certainly remain our core.”

FEBRUARY

ISSUE

ABDULAZIZ ALHAJRI, CEO OF BOROUGEAbdulaziz Alhajri, CEO of Borouge, says that now is the time for his company to grow

MAYISSUE


www.arabianoilandgas.com

“IF YOU LOOK AT OUR OWNERS, YOU HAVE PIC AND THEN DOW CHEMICAL COMPANY, OBVIOUSLY AS SYMBOLIC AS IT CAN GET FOR A WESTERN GLOBAL PRIVATE COMPANY”

A lot of talk and hype erupted after the cancellation of the JV between Kuwait’s PIC and US giant Dow. But few are aware of the existence of a successful JV between the two partners, MEGlobal, which celebrated its fi fth anniversary in August. “MEGlobal is an interesting fi rm as it brings together some contradictory trends. If you look at our owners, you have PIC, which is the petrochemical arm of the state-owned Kuwait Petroleum Company (KPC) and then you have the Dow Chemical Company which obviously is a symbolic as it can get for a Western

global private company,” explained Roth.MEGlobal produces a range of intermediate products. “We produce one

million metric tonnes of Mono Ethylene Glycol (MEG) and Diethyl Glycol and short Ethylene Glycol. These products are generally not very well known,

but they are the most important building blocks for other

products,” Roth stated. As the feedstock is the key factor of the industry, the fi rm

sees that countries offering cheap feedstock prices are targets of MEGlobal. “The North African market, particularly Libya and Algeria, has an abundance of natural gas. Wherever a petrochemical sector forms, glycol will be part of the product mix,” Roth said.

Cost of production is a key factor for producers; for MEG producers, the cost is around US$200 per tonne where feedstock naturally determines the cost of production. “Whether you are sitting above the hydrocarbon well or whether you import part of your hydrocarbon molecules, one of the reasons of the rapid expansion of the downstream sector here is the tremendous cost advantage,” Roth explained.

HENRY ROTH, PRESIDENT AND CEO OF MEGLOBALRoth says public-private joint ventures can fl ourish in the Middle East environment

AUGUST

ISSUE

MOHAMMED MEZIANE, CEO OF SONATRACHThe Sonatrach CEO and president takes a look at low feedstock prices, the location, and upcoming investment in the key Algerian market

In July, PME spoke with the CEO and president of the Algerian state energy fi rm Sonatrach, Mohammed Meziane. In a recent statement, Algerian energy minister Chakib Khalil said that his country is planning an investment of US$28 billion in its petrochemicals industry over the next fi ve years. The number is higher for the entire energy sector. “We aim to invest US$65bn in the energy sector including petrochemicals in the next fi ve years,” indicated Meziane.

The country benefi ts from different advantages, such as its geographical location, along with the abundance of ethane feedstock at competitive prices of around one dollar per million btu. “I don’t have the exact fi gure as it is calculated according to the internal market, but the price is around one dollar. There is a specifi c formula we use to calculate the prices,” said Meziane. But sources close to the methanol project told PME that the cost of the ethane is less than one dollar. “It is an incredible price,” said the source on the sidelines of Petchem Arabia conference held in Abu Dhabi.

While others are struggling to secure loans to fi nance their projects, Sonatrach uses its own cash and rarely resorts to local banks. “The decision on projects is taken according to our fi nancial situation. On the national level, we fi nance our projects using our cashfl ow or through Algerian banks, whereas for international projects, we also use our cashfl ow or banks, but generally we look case by case and we mainly use our own resources to fi nance our projects,” explained the Sonatrach CEO.

Though the majority of companies around the world felt the pinch of the credit crunch, and some of them were obliged to review their projects, Sonatrach is determined not to delay or freeze any of its plans. “We are making every effort to maintain the progress of our investments. I have said many times that our budgets, projections and plans are on track and still in place; but execution has been impacted by diffi culties with the availability of engineers and the capability of equipment production,” Meziane stated.

JULYISSUE

Petrochemicals Middle East December 2009


17Top interviews 2009


SHOKRI GHANEM, LIBYA’S OIL MINISTER

In October, we spoke to the president of the petrochemical complex of Saudi National Industrialisation Company (Tasnee), the fi rst Saudi joint-stock company wholly owned by the private sector. Tasnee receives feedstock from Aramco, but the Saudi government is set to increase the price of allocations by 2011, which would be a blow for competitiveness and a particular concern to private operators. “This would certainly have an impact, but we have to remember that this is a very strategic move for the Kingdom. Creating heavy industries is

something the government is really working on,” explained Al-Nazha. “It was proven to the European Commission that this is not a subsidy but a discount, due to the local usage of the material. That has really put us ahead of other producers and we hope that nothing will happen to that discount.”

Recently, the company achieved a major operational milestone when it started cracking ethylene from its subsidiary, Saudi Ethylene and Polyethylene Co. (SEPC). “Starting up a cracker in less than 36 months has never happened here, and we did it in 34 months,” he explained. And with regard to its US$1bn joint venture with Dow, Tasnee expects to award the contracts early next year. “We anticipate awarding the contracts between January and February 2010,” he added.

Tasnee also wants to invest in refi neries, and has shown interest in KSA’s Jizan site.

Dr Shokri Ghanem, the Libyan oil minister, opposes giving subsidies to companies

In the November issue, PME conducted a world-exclusive interview with Dr Shokri Ghanem, the Libyan oil minister. For the fi rst time, Ghanem discussed the

downstream scene in Libya, including feedstock, fi nancing and projects.

Though feedstock is available, as Libya produces 1.5 million

barrels per day of oil and 14bn cubic metres of gas per year,

Libya’s oil minister is against providing discounted

feedstock for petrochemical producers. “I am a man

who is against subsidies, but unfortunately in Libya and most of the oil-producing countries, the market is distorted because of subsidies and the low price of oil products. That is why our consumption is going to be very high, but the fall-out means that member countries will suffer real income losses,” Ghanem explained. Speaking about the investment budget for the energy sector, Ghanem revealed that his country allocated $42bn for investment in the next fi ve years by taking the JV route. “We decided to go for JVs with foreign fi rms, and are revamping Ras Lanuf and Zaway,” Ghanem said.Due to government control, it’s not hard to fi nance projects in Libya. “We have a large investment fund that offers project fi nancing. Since the projects [in Libya] are really attractive and economical, I think many banks and fi nancial institutions will be very willing to fi nance them,” Ghanem indicated.The Libyan oil chief also referred to the Ras Lanuf project. “We are in the fi nal stages and we haven’t signed it yet, but we have agreed on almost everything almost 95%. Our main market is Europe and we also export to America and to the Far East,” he added.

NOVEMBER

ISSUE

SALEH AL-NAZHA, PRESIDENT OF TASNEEThe Tasnee chief says KSA business is poised to boom again

OCTOBER

ISSUE

“IF WE LOST THE COMPETITIVE ADVANTAGE OF FEEDSTOCK, IT WOULD CERTAINLY HAVE AN IMPACT, BUT WE HAVE TO REMEMBER THAT THIS IS A VERY STRATEGIC MOVE FOR THE KINGDOM”

“WE HAVE A LARGE INVESTMENT FUND THAT GIVES PROJECT FINANCING, SINCE THE PROJECTS [IN LIBYA] ARE BOTH ATTRACTIVE AND ECONOMICAL”

18


Petro Rabigh18

PETRO RABIGH UNVEILED

Petro Rabigh, the US$10.3bn petrochemical integrated complex, is set to make the city of Rabigh a new industrial hub in Saudi Arabia. PME attended the inauguration of the complex

The idea of establishing a mega integrated petrochemicals project in Saudi Arabia goes back to the 1990s,

but low oil prices have adjourned plans to upgrade the existing refi neries and build integrated complexes. The plan to integrate refi neries aimed to maintain the existing crude throughput of the refi nery, reduce the production of heavy fuel oil and upgrade refi neries to produce higher value products, as well as providing feedstock for the downstream units.

The huge windfall generated by high oil prices in 2003 helped Aramco revive its dream to establish an integrated petrochemical complex. The fi rm then started looking for a partner fi rm that could place the joint venture back on track and make the project a real possibility.

provides the proprietary petrochemical technology and marketing base for the petrochemical products.

The project is now a real benchmark in the petrochemical industry. “In terms of pure size, Petro Rabigh is among the 15 largest refi neries in the world based on crude distillation capacity and in the top eight largest refi nery peer groups,” reveals Zaid Al-Labban, president and chief executive offi cer of Petro Rabigh.

“The construction of the project was completed within 30 months,” says Al-Labban. “It is a world record to construct such a big project in a single phase in 30 months only,” he adds. “Generally with most projects like this one, it takes up to 15 years to complete such a mega project on this scale,” Al-Labban observes.

Petro Rabigh was inaugurated in November.

The search for the partner didn’t take long as Aramco settled on Sumitomo chemicals from Japan reasonably quickly. “Our business strategy and competitive strengths best matched the Rabigh project,” said Hiromasa Yonekura, CEO of Sumitomo Chemicals during the inauguration ceremony of the complex.

The fi rst contact between the two partners was during the third quarter of 2003. In August 2005, Aramco and Sumitomo inked the joint venture agreement. “It was a special day as it was the same day the Saudi King assumed offi ce in the Kingdom,” said Khalid Al-Falih, Saudi Aramco CEO and president. Aramco supplies the project with crude oil, ethane and butane feedstock, and will also market the refi ned output of the Petro Rabigh complex. Sumitomo, meanwhile,

19Petro Rabigh


REFINED AND PETROCHEMICAL PRODUCT SLATE PRODUCTION (TPA)

Product Current production Future production Change

Refi ned Product

Liquefi ed Petroleum Gasoline 78,000 54 - 77.946

Naphtha 2,900,000 2,900,000

Gasoline 2,438,000 2,438,000

Jet Fuel 2,400,000 2,127,000 - 273,000

Diesel 4,870,000 4,782,000 - 88,000

Fuel Oil 7,700,000 4,928,000 - 2,772,000

Petrochemicals*

Polyethylene 900,000 900,000

Polypropylene 700,000 700,000

Mono Ethylene Glycol 600,000 600,000

Propylene Oxide 200,000 200,000

Source: Petro Rabigh *There will also be small amounts of ethylene and propylene

19

Refinery to integrationThe original idea for the integrated complex was a simple refi nery ‘topping’ facility, that recovers the products by distillation without any conversion to lighter, higher value products. Currently the refi nery has a crude processing capacity of 400,000 b/d and accounts for 19% of Saudi Arabia’s refi ning capacity. “The addition of new refi ning units, specifi cally the high olefi n fl uid catalytic cracking (HOFCC) unit, which is the largest in the world, is a logical expansion of the processing capability to upgrade low value heavy oils to valuable lighter products,” says Ayman Guezaz, HOFCC section head at Petro Rabigh.

“The integration with the ethane cracker for the production of ethylene and derivative petrochemical units for polymers production is a further logical extension of the upgrading process to valuable products,” observes Guezaz. “The proposed processes are generally based upon proven operations and have already been used in combination in other plants around the world,” he adds. “However, some of Rabigh’s process units represent major and signifi cant capacity increases in terms of unit size, and the overall project requires a very high degree of integration between the process units,” Guezaz remarks.

The complex comprises proprietary licensed units and non-licensed units, which are confi gured to process the feedstock and produce high value-added refi ned and petrochemical products.

The project also includes new core facilities, including a variety of processing units designed to process the atmospheric residue from the existing crude distillation unit (CDU) to higher value products to process the ethane feedstock to ethylene and fi eld butanes for alkylation.

The project marks Aramco’s fi rst entry into the petrochemicals sector and is the fi rst of several downstream investments designed to keep as much value as possible inside Saudi Arabia from domestic oil output, while trying to create jobs for a young and rapidly growing population. The project is expected to produce a total of 2.4 million t/y of petrochemical products. “The product will be shipped to different markets around the world using approximately 200,000 containers,” says Al-Labban.

Sumitomo Chemicals will take advantage of its strong marketing networks, especially in Asia, to handle the sales of most petrochemicals products through Sumitomo Chemical Asia, using its base in Singapore to target the growing Asian markets.

Petro Rabigh can tap into existing infrastructure at Rabigh, including port facilities and tanks. “It has access to new utilities plant built under the adjacent independent water, steam and power project (IWSPP),” explains Guezaz. The IWSPP was constructed by Rabigh Arabian Water and Electricity Company (Rawec), a consortium of Japan’s Marubeni, JGC Corporation and Istochu with ACWA Power of Saudi Arabia. A 25-year supply agreement has been signed with Rawec for 380MW of electricity, 7405 tonne/hr of water and 1655 tonne/hr of steam, according to Sumitomo.

Target MarketsThe location of the complex, on the Red Sea coast of Saudi Arabia, gives the company a

The project is a new benchmark in the petrochemicals industry due to its huge size and short construction time.

“PETRO RABIGH IS AMONG THE 15 LARGEST REFINERIES IN THE WORLD BASED ON CRUDE DISTILLATION CAPACITY” ZAID AL-LABBAN, PETRO RABIGH

20


Petro Rabigh

AL MAZROUI ENGINEERING.CO .LLCAL MAZROUI ENGINEERING.CO .LLC

Since its inception back in 1986, the trademark of Al Mazroui Engineering is its approach to problem

solving. The company's strategic approach yields solutions that integrate client n ee ds with long term

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base from which to develop the European market and strengthen the existing Asian sector. “We have plans to go into the European market during the fi rst quarter of 2010,” says Al-Labban.

Around 80% of chemical exports will go to Asia, while the rest is shipped to North Africa and the Arabian Gulf. Of the refi ned products, about 80% will stay in the Kingdom, including gasoline, diesel, fuel oil, and 50% of the jet fuel output.

The plant now exports all its naphtha, but that may change if Petro Rabigh opts for a phase two expansion. Engineering work on

the expansion is being carried out by JGC in Japan and should be wrapped up by October 2010. The two partners are expected to make a fi nal investment decision on the expansion plan by that time.

“Phase two is something that we have plans to carry out. The question is over the size and the range of products,” Al-Labban said. “We will spend the money if we see the opportunity to make a profi t.”

The two partners are also considering bringing in outside investors for the second phase. “Shareholders are looking at scenarios under which Petro Rabigh would

RAPID PROGRESS

• Q3 2003: Proposal made• May 2004: Aramco and Sumitomo sign

MoU• August 2005: JV agreement• September 2005: Petro Rabigh founded• March 2006: Project fi nancing agreement

signed• 19 March 2006: The groundbreaking

ceremony is held in Rabigh• November 2007: Company listed in the

stock market• September 2008: Operation and

maintenance services transferred to Petro Rabigh from Aramco

• 8 April 2009: Ethane cracker is started up• 20 April 2009: Aramco and Sumitomo

sign MoU for phase 2• 23 June 2009: JGC conducts feasibility

study for phase 2• 8 November 2009: Offi cial inauguaration

offer land and guaranteed feedstock streams and investors would manufacture the end product,” says Al-Labban.

“It is a matter of sitting down and negotiating and seeing what deals come out. If they are economically attractive, those deals will happen.”

As a part of its ambitious plan, an adjacent industrial conversion park was completed in late 2008, which will be a base for new processing companies - mainly plastic processing - and the fi rm hopes to attract 50 companies to the facility, both from this region and internationally.

The Rabigh Conversion Industrial Park, adjacent to Petro Rabigh, will attract around 50 local and international convertors.

22


Flow metering


22


GO WITH THE FLOW As the production process requires the transportation of material from one site to another, flow measurement is vital

From gas-to-liquid, or from liquid-to-gas, petrochemicals plants use different aspects of various materials

in order to produce a fi nal product. Whether during the cracking of ethane gas into ethylene, or whether transforming olefi ns into polyolefi ns, money being spent during the different phases of the production process needs to be calculated in order to help producers know exactly how much they

are investing in their plants.To measure the fl ow of material

transferred during the production process, companies use

instruments such as fl ow meters, which have a

number of additional applications. “In the petrochemicals industry, there are a number of

applications for which people measure fl ow. Among other issues, they want to measure how much money they are spending and how much material is travelling through the system,” says Keven Dunphy, business director of the fl ow division at Emerson Process Management.

Flow meter instruments are used not only to measure fl ow but also to assist with process control. “The right fl ow meter lets me know how I run my plant, how much I am using in terms of inventories and utilities, and how much process gas I am using,” explains Dunphy.

Assessing plant effi ciency is another way in which fl ow meters can assist the petrochemicals sector, says Dr Georgina Porro, export manager at C&G Depuazione Industrial. “Plant managers need to be sure that their plants are running well, and meters can help with that,” she adds.

Keven Dunphy, business director of the fl ow division at Emerson Process Management.

Borealis produced polyethelyne is used as an external anti-corrosive pipe coating material.

23Flow metering


23


Flow meters are also applicable in the fi eld of health, safety and environment (HSE) standards. “These products help the manager to control the different factors that may affect the HSE standards in the plant by providing details of the exact nature of the exchangeable gases or liquids,” says Dunphy.

“We provide fl ow measurement solutions for trucks, wagons, ship-loading and off-loading, which are based on various

principles and which depend on the application required,” says Hans Noorlander, sales manager at Honeywell Enraf.

Whether it is for gas or liquid measurements, fl ow meter specifi cations are the same. “There is no specifi c or even a general rule as the application determines the type of fl ow meter that would be used,” says Noorlander. “Depending on the construction details, many of the fl ow meter principles can be used for both gas and liquids,” he adds.

Although the specifi cation is not crucial, the process technology used is important. “The technologies that you would select to measure the gas or liquid fl ows are very different in the ways they meet customer needs,” says Emerson’s Dunphy.

“For instance, on the liquid side, you would typically use a magnetic fl ow meter, which depends on the conductive nature of the process fl uid itself to make the measurement,” he explains. “But this technology approach can’t work for gas, because gas has no connectivity, so the

make-up of the process fl uid drives the type of technology that is deployed.” All this presents a challenge to customers, the Emerson executive points out.

Standards to classify fl ow meters are crucial as they help customers identify the type of device they need in their plant. “The main international standards for fl ow measurement are the API manual of petroleum measurement standards (MPMS) and the various OIML (Organisation International de Mesure Legale) recommendations. With regard to custody transfer measurement, the most well-known standard is the European Measurement Instruments Directive (MID), as well as ISO standards and the WELMEC guides,” says Honeywell Enraf’s Noorlander.

These standards are generally divided into two main areas: prospective and descriptive. “The prospective standards dictate that you use a specifi c module or product to provide the required performance, so it clearly stipulates the detail that you are going to need,” indicates Dunphy.

“PROSPECTIVE STANDARDS DICTATE THAT YOU USE A SPECIFIC MODULE TO PROVIDE THE REQUIRED PERFORMANCE, SO THEY STIPULATE THE DETAIL THAT THE CLIENT NEEDS”

www.arabianwww.arabianoilandgasoilandgas.com.com

On the other hand, descriptive standards are able to dictate the necessary technology - rather than the product - required for a fl ow meter. “Descriptive standards give an indication of the level of performance if a particular technology is used in a certain way,” Dunphy explains.

Clients tend to use prescriptive standards, according to Dunphy. “Every customer in the world wants to use prescriptive standards, as it makes it easier just to order the specifi c module from the supplier,” Dunphy says.

On the other hand, manufacturers prefer descriptive standards. “For us, it offers maximum fl exibility to improve our product, introduce new technologies and drive the overall offering. In truth, without a descriptive and prospective approach, you aren’t going to satisfy the client, as the industry needs both,” he observes.

Over time, the petrochemicals industry in this region has seen a new trend in the types of fl ow meters used in local plants. “Over the last 10 years, the petrochemical industry has witnessed a major shift towards fl ow meters that measure mass directly, such as Coriolis fl ow meters,” says Noorlander. “In addition, the non-obstructive measurement principles are being much more widely used than the obstructive type,” he explains.

The cost of spending on fl ow meters in a petrochemicals plant represents a tiny portion of the total spend. “Typically, around 10% of the project’s capital is spend for the instrumentation, with spending on the fl ow metering coming in at about 2.5% of this 10%. So we’re talking about a very small portion overall, and the cost is the fi rst factor that companies take into consideration,” Dunphy concludes. An Ultrasonic fl ow meter model.

An example of a corrosion resistant fl ow meter.

24


Refi nery Integration24

Despite the many complexities and challenges that refinery integration presents, the benefits of diversification are making it a popular option for the regional industryDespite the many complexities and challenges that refinery integration presents, the benefits of diversification are making it a popular option for the regional industry

ADDING VALUE TO OILT

he trend of integrating refi neries and petrochemicals projects has increased across the region, with a particular emphasis in Saudi Arabia. Among the

main factors behind this trend are the reliability of feedstock supply with lower transport costs, plus a signifi cant reduction in shared utilities systems, which adds up to a lower variable cost.

“This region wants to invest in refi neries because it has a lot of crude oil, and it wants to invest in petrochemicals because of the high availability of gas and liquids gas,” says Dr Philip Leighton, the senior director of studies and industrial research at Abu Dhabi National Chemicals Co. (Chemaweyaat).

The general consensus between experts is that refi ning and petrochemicals are two entirely separate businesses. “Simply put, the business in the refi nery is different from

running throughout, carrying streams of fl uids between large chemical processing units. The refi ned products market is a 3 200 million tonnes per annum market with gasoline diesel/gasoil and fuel oil being the largest products by volume. Asia is expected to grow in importance in the world oil markets, with a 34% share of the global refi ned product demand by 2020.

The global refi ned products market, in miilions of tonnes per annum, with gasoline, diesel, gasoil and oil being the largest products by volume.

3200

Petro Rabigh in Saudi Arabia is an integrated refi nery.


the business of the petrochemicals. Refi neries take the oil, refi ne it, and then transport it onto a ship,” says Mag Fuad, vice president, process technology, Fluor.

“Meanwhile, the petrochemicals sector needs to market its product, so it requires a marketing organisation and a sales team to sell its product,” adds Fuad. “There is also a requirement to keep on the top of the price because the margins in the chemicals and petrochemicals market are extremely low.”

Generally, an oil refi nery is a process plant where crude oil is processed and refi ned into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene and liquefi ed petroleum gas. “The refi nery is typically upstream and acts as a feedstock provider,” observes Dr Leighton. Oil refi neries are large sprawling industrial complexes with extensive piping

25Refi nery Integration

www.arabianoilandgas.com Petrochemicals Middle East December 2009

25

Meanwhile, the main unit in the petrochemicals plant is the steam cracker, which produces ethylene, the building block for many other petrochemicals products such as polyethylene, mono ethylene glycol and many other derivatives. North America is the largest consumer of ethylene followed by Europe. The majority of ethylene is for captive use, as most producers are integrated downstream. “Olefi ns (ethylene and

propylene) require onward integration to polyolefi ns, or other olefi n derivatives, as olefi ns are not readily transportable,” explains Dr Leighton.

In practice, most refi neries and petrochemicals operations operate differently and independently. Integrating the two businesses poses a number of diffi culties and challenges. “The fi rst diffi culty is trying to develop a culture where the refi nery and petrochemicals producer at see themselves as being aligned, so they can share the same objective,” indicates Fuad.

As refi neries and petrochemicals plants generally use the same utilities and offsite equipment, including tankage, truck loading facilities,

marine and terminal facilities, integrating the two businesses will help owners reduce their operational costs. “How to share common infrastructure and common utilities, and common processes is the main challenge for integrations,” says Dr Leighton.

Besides sharing the same infrastructure, the option to exchange feedstock between the two units exists in both directions. “A refi nery can provide naptha and dry gas to a steam cracker, which can in turn provide hydrogen to the refi nery,” explains Dr Leighton. “Made-for-purpose hydrogen, which is a feedstock for ammonia, is extremly expensive to create.”

But the relationship isn’t entirely equal. The majoriy of feedstock provided by a steam cracker is, unfortunately, of little use to a refi nery. “In contrast, the petrochemicals sector needs a large amount of refi nery feedstock,” says Maurice Bannayan, SVP for process and technology at Reliance Industries.

Even by aligning the objectives of the refi nery and the petrochemical plant, another major challenge is related to the size of the project. Other potential pitfalls relate to the project management, especially as the amount of work being undertaken increases. “There are many things that people need to take it into consideration, including how to manage the project, and how many engineering contractors are required to help get the job done,” says Fuad.

Furthermore, the complexity of these integrated projects adds an extra burden on the owners. “If two owners don’t have the right staff who are able to execute this project then they will need the right consultant to carry out effective

management. In some cases, this can amount to as many as 500

people to carry out this work,” explains Fuad.

In addition, the EPC complexity of these integrated projects also reduces the number of contractors able to construct the project.

Major challenges are

“THERE ARE MANY THINGS TO TAKE INTO CONSIDERATION INCLUDING PROJECT MANAGEMENT”MAG FUAD, VICE PRESIDENT, PROCESS TECHNOLOGY, FLUOR

Mag Fuad, vice president, process technology, Fluor.

The Ras Tanura Refi ning and Petrochemical Project is expected to include 35 process units. Together they will produce 8 million tonnes of refi ned and petrochemical products per year.

Refi nery Integration26

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also related to the management of technologies used in the integrated complex. “When you are looking to combine petrochemicals and refi nery operations, you are usually dealing with between 20 to 30 products that are being produced,” states Dr Leighton. “This means around 20 to 30 technologies, and it also means an additional 20 to 30 technology licensors that you have to deal with,” he adds.

Managing the project development cycle is another issue that should be taken into consideration, particularly as the work needs to be executed in different phases. “You have to organise the complex development into packages that you can then release it to EPC contractors,” says Fuad. In addition, the basis on which the contract has been awarded is vital, as this is linked to the overall cost of the project. “Your study has to include the basis of the contract award,” he explains.

In this case, companies have three options to choose from when awarding the contracts: whether to go for a lump sum turnkey (LSTK) basis, the reimbursable option or an open-book lump sum. “Every option has a different approach price. Generally speaking, if I have the right people to manage the whole programme, I would go for the free or cost-effective option by asking for open-book conversion or reimbursable cost basis, because I don’t have to pay for the risk that the contractor has taken,” says Fuad. “If I take the LSTK option, there’s still a risk element.”

Even with all these challenges, many companies around the globe have opted for to integrate their refi neries. “Reliance in Jamnagar, India, Petro Rabigh in Rabigh and Formosa Plastics in Mai Liao [Taiwan] are recent examples of purpose-designed integrated complexes,” observes Reliance’s Bannayan.

Saudi Arabia is expected to upgrade several other refi neries beside the Petro Rabigh plant - including Ras Laffan and Yanbu. This move is an excellent move in terms of diversifi cation and has the extra incentive of adding extra value to their oil output.

LyondellBasell Industries and its predecessor companies have been present in the AFMEI markets for many years, actively participating in the region’s polyolefins industry.

In addition to Saudi Polyolefins Company (SPC), the global polyolefins leader has established two new joint ventures located in Al-Jubail Industrial City: Saudi Ethylene and Polyethylene Company (SEPC) and Al-Waha Petrochemical Company.

Based on the company’s industry-defining technologies, SEPC and Al-Waha operate plants which are the largest of their kind in the world.

Approximately two million tonnes of innovative polypropylene and polyethylene resins will be marketed from LyondellBasell‘s three joint ventures in the Middle East, which reinforce our dedication to a region that offers significant potential.

Discover the opportunities LyondellBasell offers the Middle East. The company’s AFMEI regional headquarters is located in Dubai, U.A.E.

For more information, please contact our Africa, Middle East and Indian Subcontinent regional office at Tel. +971 4 2045 970 or via email at [email protected].

Committed to the Middle East

Dr Philip Leighton, senior director of studies and industrial research,at Chemaweyaat..

27Interview


Leveraging licensed tech

BUSINESS BRIEFING:

LyondellBasell says licensed petrochemicals technology can deliver optimum cost effectiveness for Mid East producers

To be successful in the petrochemicals industry, producers should have competitive feedstock terms. But with no technology to process these feedstocks, it is like having a meal without being able to chew it.

One of the biggest technology licensors in the world is LyondellBasell. It provides process technologies for the production of polymers to the majority of the top petrochemicals producers. As well as being a technology provider, it is also one of the world’s largest petrochemicals companies.

“We produce more than 8 million t/y of polypropylene and more than 5 million t/y of polyethylene,” says Martijn Vogelzang, divisional director business development, new ventures, at LyondellBasell Industries. “We are the world’s largest producer of polyolefi ns,” he adds.

The company provides a wide range of technologies for different product applications. “LyondellBasell is the only licensor offering process technologies for the world-scale production of all polypropylene (PP) and polyethylene (PE) product families, as well as a diversifi ed portfolio of chemical technologies,” says Vogelzang. “Our technologies are among the most reliable, effi cient and cost-effective in the world,” Vogelzang adds.

“Our technology business commercialises the know-how of LyondellBasell’s proprietary process technologies and polyolefi n catalysts by selling licences and services to investors - enabling them to construct and operate new production lines and to sell their respective products globally,” explains Vogelzang.

The company is a leader in providing polyolefi n technologies. “Most of the world’s top ten PE and PP producers operate one or more LyondellBasell-licensed process technologies,” says Vogelzang.

All polyolefi n technologies are available for open licence. These include: Spherizone, Spheripol and Metocene for polypropylene processing, and Lupotech, Spherilene and Hostalen for polyethylene.

A large array of chemical technologies are available for open licence. “LyondellBasell’s propylene oxide and metathesis technologies are only licensed in joint venture partnerships,” reveals Vogelzang.

Most of the crackers that are currently coming on stream are based on gas or LPG feedstock. “This results in propylene yield

Fingertip FactsCompany: LyondellBasellNumber of employee: 15,000Annual revenue: US$50bnManufacturing sites: 50 in 19 countries

that is lower than conventional liquid crackers and has subsequently led to a series of investments in purpose-built propylene plants through the propane dehydrogenation (PDH) process,” he says.

Both PDH as well as polypropylene plants have to be on a par with global standards so as to arrive at optimum cost effectiveness. “Our polypropylene capacities are designed for such capacities,” Vogelang indicates, with some confi dence.

“In order to stand out from the crowd, it is necessary to have competitive feedstock, access to market, a good partner and the right technology,” Vogelzang concludes.

LyondellBasell in the news

• Al Waha starts commissioning PP plant in the KSA

• LyondellBasell to idle LDPE units

• LyondellBasell’s New Purell Resin Expands the Boundaries of LDPE Properties

• LyondellBasell Launches New PP Compound Used in Pipe Coating for Flexible Off-shore Pipelines

e news

oningnng

Fingertip FactsCompan L ondellBasell

On ArabianOilandGas.com

29Project Report


Contax Partners Project Snapshot:

Kathlen Bury, Contax project manager, looks at the progress of the Jubail Polysilicon Plant

Al-Jubail Polysilicon Plant

GCC ContextDespite the current economic climate, the total planned GCC energy capex landscape for 2009 to 2011 continues to show promise with around US$349bn worth of investments on the table. The dominant sectors continue to include the refi ning and petrochemical sectors, with about $63bn and $52bn respectively already planned for award by the end of 2011.

Contax Partners’ regular analysis of the ‘Impact of the Financial Situation on GCC Energy Project Workload’ indicates that the project postponement trend seen over the past few years has resulted in a considerable amount of award and execution schedule slippages. One of the projects that is expected to help Saudi Arabia achieve its diversifi cation goals is the First Energy Bank – Jubail Polysilicon Plant project (FEBJP).

Background and Strategic Importance First Energy Bank, a Bahrain-based Islamic investment bank whose shareholders include regionally based individuals and companies with interests in the energy sector, such as Abu Dhabi Water and Electricity Authority (ADWEA) and the Libyan Investment Authority, is planning to build the largest polysilicon plant regionally in Jubail Industrial City 2, Saudi Arabia. The project will be managed and developed by a subsidiary of First Energy Bank, Cosmos Industrial Investment Corporation and the Saudi Arabia-based industrial group, Project Management and Development Company (PMD). The project is expected to require an investment of between $1-1.2bn and produce a total output of c.7 500 tonnes per annum of

high quality polysilicon product. Given the region’s drive to develop solar power as an alternative energy source, and thus reduce its consumption of oil, it is anticipated that the majority of this product will be supplied to the regional market.

The project is expected to be awarded in Q2 2010 with completion and production anticipated in Q2/Q3 2013.

The development of the FEBJP project looks to set to satisfy a number of key strategic objectives: 1. Supports the Saudi Government’s economic diversifi cation strategy through the promotion of alternative energy related solutions. 2. Supports the Saudi Government’s industrial base expansion plans with the anticipated development of the downstream sector of the solar energy chain.

3. Enables the creation of employment opportunities within Saudi Arabia thus helping the country achieve one of its key aims, unemployment rate reduction.

Challenges Current economic and market dynamics are questioning the validity and schedules of many of the energy projects within the GCC. With the recession in buyer econo-mies, and the desire for project owners to take advantage of perceived lower critical input costs and drive down EPC bid prices and project fi nancing issues, key projects are being postponed and cancelled on a weekly basis. Contax Partners’ continuous analysis of the impact of the current market dynamics on GCC Energy Project Workload provides cli-ents with clarity around which projects have a greater than 70%, between 40-70% and less than 40% probability of proceeding within the current climate and thus which sectors and countries present great opportunities.

Following this analysis and the fact that a number of key project milestones have been reached: the securing of land; completion of feasibility, market and technical studies; signing of the power supply agreement with Saudi Electricity Company (SEC); and the signing of an offtake agreement with Vinmar International Ltd, Contax Partners believes that the FEBJP project has a high probability of going ahead as planned.

Contax Partners Opinion: Likelihood of Project Realisation – HighFor more information and access to these reports, please contact [email protected]

Source: Contax Partners, November 2009

Source: Contax Partners, November 2009

Key project details:

Project Name: First Energy Bank – Jubail Polysilicon Plant

Project Owners: First Energy Bank

Status: Planned

Location: Jubail Industrial City 2, Saudi Arabia

Contractors -

EPC Award Date: Q2 2010

Completion Date: Q2 2013 (Est.)

Project activity Proposed timeline/status

EPC ITB Issue Q4 2009

EPC ITB Submission Q1 2010

EPC Award Q2 2010

Completion Date Q2/Q3 2013

$1.2bn

project

Number Cruncher30


Downstream Data

Price on October,19th (US$ per share)

Price on Nov,19th(US$ per share)

Change %

Saudi Basic Industries Corporation (SABIC) 20.80 21.73 4.29

Saudi Arabian Fertilizer Company (SAFCO) 31.20 30.60 -1.96

Saudi Kayan Petrochemical Company (Kayan) 4.83 4.92 1.90

Rabigh Refi ning and Petrochemical Company (Petrorabigh) 10.11 9.97 -1.34

Yanbu National Petrochemical Company (YANSAB) 8.75 8.45 -3.47

National Industialization Company (TASNEE) 6.40 7.09 9.77

Saudi Industrial Investment Group (SIIG) 6.44 6.28 -2.55

Saudi International Petrochemical Company (SIPCHEM) 6.00 6.09 1.53

Sahara Petrochemical Company (SAHARA) 4.77 5.28 9.60

Advanced Petrochemicals Company (Advanced) 6.72 6.64 -1.20

Nama Chemicals Group (NAMA) 3.16 3.05 -3.49

Alujain Corporation (ALUJAIN) 5.09 4.55 -12.02

Methanol Chemicals Company (CHEMANOL) 4.32 4.27 -1.25

Petrochem 4.31 4.48 3.87



Change %

Qurain Petrochemical Industries Company (AL-QURAIN) 0.64 0.55 -16.13

Boubyan Petrochemical Company (BOUBYAN) 1.56 1.35 -15.26

Ikarus Petroleum Industries (IKARUS) 0.40 0.39 0.39


Price on Nov,19th (US$ per share)

Change %

Industries Qatar 32.09 31.29 -2.55


Price on Nov,19th (US$ per share)

Change %

Oman Chlorine S.A.O.G. (CHLORINE) 0.99 0.98 -0.86



Change %

Abu qir Fertilizers 39.79 40.37 1.46

Sidi Kerir Petrochemicals Company 2.27 1.95 -16.06

Number Cruncher30

Share prices of listed petrochemical companies in November witnessed a high volatility as unexpected shutdowns and technical problems affected operations

LISTED COMPANIES IN THE SAUDI STOCK MARKET

LISTED COMPANIES IN THE KUWAITI STOCK MARKET

LISTED COMPANIES IN THE QATARI STOCK MARKET

LISTED COMPANIES IN THE OMANI STOCK MARKET

LISTED COMPANIES IN THE EGYPTIAN STOCK MARKET


31Number Cruncher


31

Source: www.argaam.com

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Benzene: Prices rose to US$845 per tonne, the highest level in three months, due to the improving of demand and crude prices.

Ethylene: Continued its uptrend movement reaching $1010 per tonne for the fi rst time in eight weeks during November, due to the recent spike in feedstock naphtha values.

Propylene: Prices reached $1040 per tonne in November, the highest level in six weeks due to the increase of the feedstock value.

Polyethylene: Robust demand, interest from the Chinese market, plus rising costs of the ethylene and naphtha feedstocks all lent further support to prices which reached $1240 per tonne.

Polypropylene: A rise in propylene feedstock has lent further support to PP prices, which reached US$1160 per tonne last month.

PVC: Prices have softened due to the decline of demand, but they still remain at a largely stable level through from October.

MEG: The uptrend in monoethylene glycol prices continued throughout the whole November, due to the ongoing rise of crude oil and naphtha fi gures.

ALAN YEAPHEAD, POLYMERS SECTION, CJP INTERNATIONAL PTE

What are the main drivers of demand in the Asian marketplace?The two main drivers of demand for petrochemicals products are the high population in Asia coupled with the fact that petrochemicals products are replacing more traditional materials such as wood, metal and paper. For example, China has become the world’s manufacturing base so, despite the current fi nancial downturn, demand is still relatively high for petrochemicals products compared to the rest of the world. Also, as the population becomes more affl uent in Asia, domestic demand for consumer products is going to rise substantially in places like China and India. This is going to fuel demand even further in the coming years.

What will be the side effects of the huge expansion capacity from the region?With the Middle East experiencing a huge expansion of petrochemicals production, it needs to ensure that it has the supply chain in place to handle the additional volumes. If that doesn’t exist, then problems are going to rise with regard to shortages in terms of tankers and storage facilities as well as bottle-necks occurring at ports. So the main issue for the region will be augmenting the kind of effective supply chain management that will allow each company’s logistical operations to match the higher volumes being delivered.

subject to volatility and any potential glut of products on the world markets will obviously have an adverse effect on prices. However, global demand is going to differ signifi cantly from regional demand so what you may see is different prices for different markets across the world. Petrochemical prices in manufacturing hubs like China and India may well be higher than in the European markets, for example.

What sorts of challenges are you facing with regard to your current job?Between 2010 and 2015, a number of plants from the MENA and Asia region will go on stream; this is going to be a real challenge for us as a distributor of polymers in Asia. We are really looking forward to creating a solid supply chain management structure coupled with exceptional customer relationship management. As the middle man, we need to balance our relationships with long-term suppliers as well end-customers. I believe that the major petrochemicals players understand the risk related to the management issue, which is critical for the commodities business. It’s also true to say that market forces, such as supply and demand, the cost of production, social and political stability, and economic growth from both the regional and global perspective will all have both direct and indirect impacts on the petrochemicals business in the near future.

What are the reasons behind your visit to the Middle East region?We are here to look for reliable long-term suppliers. My company believes in long-term planning and I am here to help deliver that. We are not interested in short-term buying and selling because we believe that this will not help us to achieve our goals. So now we are looking towards 2010 and trying to put the groundwork in place now to enable us to

be in a strong position to take advantage of the higher volumes of petrochemicals products that will be available from both the Middle East and Asia. Getting the right suppliers in place will help us with our sales and our customer relationship management over the next 12 months.

How do you foresee the market in term of supply and demand, and prices?In the next three to four years, the boom in supply that will come from increased Middle East production is going to have a major impact on the market. The repercussions may be that petrochemicals prices will be

Alan Yeap, head of the polymers section at CJP International PTE, discusses the side effects of the surging capacities being witnessed in the Middle East market

“THE MAIN ISSUE FOR THE REGION WILL BE AUGMENTING EFFECTIVE SUPPLY CHAIN MANAGEMENT”

SOLVING THE SUPPLY CHAIN CONUNDRUM

Face to Face32


Petrochemicals ME - Dec 2009

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Transcript of Petrochemicals ME - Dec 2009