A huge cluster of chemical plants planned for Abu Dhabi will add as much to the emirate's wealth as increasing crude oil output by more than a third.
Chemicals complex to boost capital
A huge cluster of chemical plants planned for Abu Dhabi will add as much to the emirate's wealth as increasing crude oil output by more than a third, the head of the Government's flagship chemical firm said yesterday. Now set to begin production in 2015, a year later than had been planned as of May, the project's first stage will be built as one of the world's largest chemicals complexes to take advantage of the economies of scale, said Mohammed al Azdi, the chief executive of Chemaweyaat, the national chemicals firm.
"The plan is based on optimising the use of the emirate's valuable and abundant, nonetheless exhaustible, hydrocarbon [resource]," Mr al Azdi said. By 2030, the firm's plants "will yield similar or greater benefit" to increasing oil production capacity by 1 million barrels per day (bpd)", he said. Abu Dhabi has capacity to produce a little more than 2.8 million bpd. Chemaweyaat, jointly owned by the International Petroleum Investment Company (IPIC), the Abu Dhabi Investment Council and the Abu Dhabi National Oil Company (ADNOC), was created by Presidential decree last November.
The sector is considered a development priority as the Government looks to diversify the economy from crude oil revenues. Mr al Azdi, speaking at the World Refining Association's petrochemical conference in the capital, said a construction contract for the first stage of the project, called Tacaamol - Arabic for "integration" - will be awarded in 2011. In a statement yesterday, Chemaweyaat indicated IPIC's acquisition of the Canadian firm Nova Chemicals in February had stretched the project's timeline, as the company looked at ways to integrate the firm's technology.
"Acquisitions by IPIC certainly influence the original schedule," Chemaweyaat said. "We target the most robust and sustainable configuration, not an arbitrary - period to start operations." The firm aims to become one of the region's largest chemical firms, Mr al Azdi said, and together with IPIC's holdings in overseas chemical firms such as Nova, Austria's Borealis and Spain's CEPSA, eventually become "one of the top 10 chemical companies globally".
"These companies are expected to provide full support to Chemaweyaat," he said. Chemaweyaat will be fed by naphtha, a derivative of crude oil, instead of natural gas. Mr al Azdi said the decision to use naphtha was driven by both a coming surplus of the fuel from refineries and because of a scarcity of gas. Cheap ethane, a derivative of natural gas, has served as the foundation of the region's petrochemicals industry, but industry officials yesterday said it will not be available for new projects in the UAE, Saudi Arabia and Kuwait.
"The ethane era is finally coming to an end," said Syed Husain, the vice president of Al Azzaz, a Saudi chemicals consultancy. "The competitive advantage of this part of the world is going to change - these sorts of margins may not be available in the years to come." The enormous expansion of Saudi Arabia's petrochemical sector has been driven in large part by low prices for ethane. The government charges companies 75 US$0.75 per million British thermal units (BTUs), far below market rates.
But Mehdi Adib, a vice president at the Saudi International Petrochemical Company, expects prices to more than double within three years, to between $1.50 and $2. "We no longer believe we should count on having the availability of gas for our [new] operations," Mr Adib said. @Email:firstname.lastname@example.org