Qatar Petrochemicals Report Q2 2008

The expansion of Qatar's petrochemical industry is likely to meet delays, but the Gulf state continues to elicit foreign interest, according to BMI's latest Qatar Petrochemicals Report.

Qatar has plenty of gas available to produce ethylene for derivative production. Gas production of around 43bn cubic metres (bcm) per annum in 2007 is set to rise steadily as more reserves are exploited, reaching a possible 145bcm by 2012. The development of new liquefied natural gas (LNG) export trains from 2008 implies a much more rapid increase in production and exports. Gas consumption is rising broadly in line with the underlying rate of GDP growth, and is expected to reach 28bcm by 2012, providing around 67bcm of gas for export, largely as LNG.

In February 2008, a 70:30 joint venture between Qatar Intermediate Holdings, a subsidiary of Qatar Petroleum (QP), and Honam Petrochemical (Seoul) issued invitations to ethylene plant contractors to bid for a plant that will form part of the olefins complex at Mesaieed. The Mesaieed complex will feature a mixed-feed cracker able to consume ethane and naphtha with expected capacity of 800,000-900,000 tonnes per annum (tpa) of ethylene. However, it is likely to overshoot its originally scheduled deadline of 2011 and costs are set to rise well above the original estimate of US$2.6bn. Foster Wheeler is providing project and construction management for the complex and LyondellBasell is providing its technology for a 700,000tpa polypropylene complex. Lummus Technology is supplying its processes for a styrene plant with capacity for 600,000tpa and a polystyrene plant with capacity for 220,000tpa. In March 2008, India's Reliance Industries also expressed keen interest in setting up a world scale petrochemical complex in Qatar with QP. Polymer output from the complex would be exported to India.

Qatar moved from third to second place in BMI's rankings for Middle East and Africa with 64.3 points, up 0.5 points. This puts it 2.1 points ahead of Kuwait and 11.0 points behind Saudi Arabia. It is also 7.7 points ahead of the regional average of 56.6 points. The rise in Qatar's ranking was helped by a 1.8 point fall in Kuwait's score, as well as its imminent rise in capacity. Qatar's petrochemical-specific ratings are strong, with cracker capacity set to more than treble over the next five years and the country hosting the second-largest polyolefins production capacity in the Gulf Co-operation Council (GCC) after Saudi Arabia. Underpinned by one of the highest levels of GDP per capita in the world and no history of political tension, Qatar remains a bastion of stability in a highly turbulent region. Qatar's weakness is its relative lack of economic diversification compared with other countries in the region. This quarter's gains made by capacity increase have been mostly cancelled out by the impact of a sharp increase in long-term external risk on Qatar's country risk score.