Kuwait Petrochemicals Report Q1 2010

Levels of olefins and polyolefins capacities are unlikely to be increased before 2015 with the main expansion projects completed in 2009, according to BMI’s latest Kuwait Petrochemicals Report. By end- 2009, Kuwait had ethylene capacity of 1.7mn tpa feeding downstream units that included 825,000tpa linear low-density polyethylene (LLDPE). It also has 370,000tpa benzene, 822,000 tonnes per annum (tpa) xylenes, 1mn tpa ethylene glycol (EG), 765,000tpa ethylene oxide (EO) and 145,000tpa of polypropylene (PP) capacity. In the fertilizer sector, Kuwait has capacities of 1.04mn tpa urea and 885,000tpa ammonia.

KPC plans to invest KWD24bn (US$82.5bn) in 2009-14 on developing its upstream and downstream capacities. This includes KWD11.2bn on upstream projects, KWD12bn on downstream infrastructure, KWD209mn on petrochemicals projects and KWD712mn on other projects. With annual spending of KWD24-61mn on petrochemicals, KPC’s Petrochemical Industries Company (PIC) subsidiary is its least important spending priority. A subsequent decision to abandon the Al-Zour refinery project could lead to a revision in investment priorities.

In June, Equate Petrochemical started up a new HDPE/LLDPE unit which raised its total PE capacity to 825,000tpa. A large proportion of its output will be exported to China. The amount of capacity brought online and Equate’s competitive advantage in feedstock costs has prompted some traders and analysts to warn that it will put pressure on petrochemicals margins across Asia and could lead to cuts in cracker utilisation rates. Equate’s Kuwait Paraxylene Production Company (KPPC) planned to bring its 822,000tpa PX and 370,000tpa benzene plants at the Shuaiba Industrial Area online by end-2009. They form part of Equate’s activities, with 560,000tpa of by-products also to be produced at the site. The associated 450,000tpa ethylbenzene-styrene unit, operated by Equate affiliate Kuwait Styrene Company, was already running by Q209. The projects form part of the expansion of Equate’s facilities, which also include cracker capacity of 1.7mn tpa of ethylene, 1.15mn tpa of EG and 110,000tpa of PP. The Olefins II project is the major focus of the development of Kuwait’s petrochemicals industry. The Equate JV will double capacity of its Shuaiba operations, including the construction of an 850,000tpa ethylene plant, and downstream polymer, styrenic and aromatics units. The expansion projects are all being run as part of Greater Equate, which was to be operating at full capacity by end-2009. On the downside, PIC indicated in October 2009 that it was considering closing or selling off its fertiliser business to pursue more profitable petrochemicals ventures.

As a result of capacity growth in 2009, Kuwait’s score has climbed 6.8 points to 58.6 points, raising it from seventh to third place in the Middle East Petrochemicals Business Environment Rankings.

However, Kuwait’s score has been undermined by uncertainty over the future of the Al-Zour refinery, which has attracted considerable controversy over its tendering process. Kuwait’s score has also come under pressure in recent months due to deterioration in country risk caused by the economic downturn coupled with the declining investment environment following the cancellation of KPC’s planned JV with Dow, although its country risk ratings have rebounded as the country’s outlook has improved.