United Arab Emirates Petrochemicals Report Q3 2009

An ambitious programme of expansion at Abu Dhabi's Borouge complex is on course, with its backers pressing ahead with a third phase in the massive petrochemicals project even before the second phase is due for completion in 2010. This indicates that the development of the country's petrochemicals industry is robust in the face of a severe decline in global demand and remains attractive to investment due cheap and abundant feedstock resources, according to BMI's latest UAE Petrochemicals Report.

The Borouge 2 project is on schedule with operation due to begin in 2010. Borouge 2, located next to Borouge's existing petrochemical complex in Ruwais, will raise production capacity from the current 600,000tpa to 2mn tpa of polyolefins. It will include one 540,000tpa Borstar technology-enhanced PE unit and two 400,000tpa Borstar PP units. A proposed Borouge 3 was announced in April 2008. In the same month of 2009, Borouge announced plans to commission a front-end engineering and design study for the Borouge 3 project to boost total production capacity to 4.5mn tpa by Q413. It will comprise an ethane cracker and PP and PE units. According to Borealis, Borouge 3 will capture additional feedstock availability resulting from the upstream refinery and gas processing expansions of the Abu Dhabi National Oil Company (Adnoc). The PP plants are expected to consume propylene supplied by local refineries. The LDPE unit, Borouge's first, will supply the wire and cable infrastructure market. However, exact capacities, including the cracker, have not been disclosed, although BMI believes it will be as large as the Borouge 2 cracker, which has a production capacity of 1.5mn tpa. Combined polyolefins capacity will be 2.5mn tpa, of which BMI believes up to 1mn tpa will be PP. BMI has projected start-up for commercial production in Q114.

Another major upcoming development is the proposed 7mn tpa Abu Dhabi Chemicals Company (Chemaweyaat) Complex 1, which includes a 1.5mn tpa naphtha cracker, and aromatics, phenol and derivatives plants at Taweelah, to be completed in 2013-2014. It is envisaged the complex will be the world's largest grassroots integrated chemical project, although by end-2008 no further details were available on the complex's capacities. BMI believes it is unlikely that the cracker and related units will be completed before 2014. Ownership will be split between the International Petroleum Investment Company (IPIC) (40%), Abu Dhabi Investment Council (40%) with the remainder held by Adnoc.

In BMI's Middle Eastern Petrochemicals Business Environment Rankings matrix, the UAE has a score of 58.4 points, 5.8 points behind Qatar and 2.1 points ahead of Kuwait. The UAE's score has fallen 1.3 points this quarter due to deterioration in its country risk ratings. However, it has risen from fourth to third place as a result of a larger decline in Kuwait's score. The two states have jostled for third place in recent months, but Kuwait has suffered as a result of policy reversals in the refining and petrochemicals sectors which has adversely affected its market risk score, while its overall country risk rating as fallen, in line with global economic trends. BMI believes that it is unlikely the UAE will raise its ranking further with Saudi Arabia and Qatar continuing to lead the Middle East rankings over the next five years, even with the additional capacity provided by the second phase of the Borouge complex in 2010 However, it is likely to hold on to its third place, with the expansion of the Borouge complex and the proposed Chemaweyaat 1 bolster its petrochemicals capacities.