Kuwait Petrochemicals Report Q2 2008

Upstream developments are providing a positive outlook for Kuwait's petrochemical industry, which is reliant on future gas and oil processing capacity to expand and compete, according to BMI's latest Kuwait Petrochemical Report. Kuwait was due to launch its first commercial production of nonassociated natural gas in March 2008. The first stage of a four-phase programme will produce 5mn cubic metres per day (Mcm/d) of free gas and 50,000b/d of light oil and condensate. Output was originally scheduled to begin in December 2007, but the project has been facing technical difficulties. Once output begins in earnest, Kuwait will be on its way towards becoming self-sufficient in gas, a scenario envisioned at the end of the third phase of the development in 2015. Meanwhile, Kuwait is preparing for the construction of the largest refinery in the Middle East. Kuwait Petroleum Corporation's (KPC) contract for the construction of the refinery was expected in March or April 2008, following delays due to rapidly escalating costs. More than 10 firms were bidding for the 615,000b/d Al-Zour refinery, which forms an important part of Kuwait's plans to boost refining capacity to 1.42mn b/d from the current 930,000b/d. Kuwait is also planning to boost the crude processing capacity of its Mina Abdullah refinery by 104,000b/d by mid-2012.

Upstream growth is fuelling investor interest in Kuwait's downstream activities. In December 2007, Dow announced plans to sell a 50% stake in several petrochemical businesses to Kuwait's Petroleum Industries Company (PIC). Dow and PIC plan to form a 50:50 joint venture that will have revenue of more than US$11bn. About 70% of Dow's ethylene supply will go into the joint venture, and the remaining 30% will feed Dow's remaining businesses, including the company's specialty chemicals operations. Dow and PIC are already partners in other petrochemical joint ventures. If the proposed petrochemical joint venture is combined with the Equate, MEGlobal, and Equipolymers businesses, the new entity would have sales of US$14bn, making it the world's largest polyolefins producer and largest EG, ethylene oxide and EO derivatives company.

Kuwaiti firms are actively investing in petrochemical projects outside Kuwait, particularly in China and India. In December 2007, KPC said it was exploring opportunities to build a refining and petrochemical complex in India. According to reports, KPC has held talks with Reliance Industries and state-owned IndianOil (New Delhi) on possible cooperation for the project. KPC's refinery in India would have a capacity of 150,000-400,000bpd and the petrochemical complex is likely to include an ethylene plant with capacity for 800,000 tonnes per annum (tpa). Petroleum and petrochemical products produced at the complex would be mostly exported from India. Meanwhile, KPC's feasibility study for a US$5bn refining and petrochemical joint venture with China's Sinopec at Nansha, Guangdong Province, is likely to be submitted to the Chinese authorities for approval in H208. The complex is expected to be built by a consortium of Sinopec and KPC, and most likely also including Dow Chemical and Shell Chemicals. The project would include a 1mn tpa ethylene plant. Start-up is expected in 2010-11.