After focusing on LNG and GTL, Qatar is now aiming to spend $25 billion to double its gas-derived petrochemical output by 2020
Qatar's giant gas reserves have transformed the fortunes of the small Arabian peninsula state. The country has, by some metrics already become the richest place on earth.
Having mastered the upstream business, attentions are now being turned to its downstream dreams, a logical next step to further monetise its hydrocarbon riches, and diversify its economy beyond the cash-for-gas model.
"In the hydrocarbon area, we are now focusing on petrochemicals," says Abdulrahman al-Shaibi, managing director of the Qatar Financial Centre Authority. "We will spend $25 billion on creating additional petrochemical industries as an important feedstock for small and medium-sized companies," al-Shaibi adds.
As part of its ambitious petrochemical programme, Qatar aims to further expand its throughput by 2020. "We aim to more than double our annual petrochemical production capacity from currrent 9.2 million tonnes to 23 million tonnes by 2020," says Mohammed bin Saleh al-Sada, minister of energy and industry, managing director and chairman of the board of Qatar Petroleum (QP).
In this regard, Qatar Petroleum announced two ambitious downstream projects in joint venture with Royal Dutch Shell and Qapco, in December and February respectively.
In December 2011, QP signed a heads of agreement with Shell to develop a petrochemicals plant for an estimated cost of $6.5 billion.
The scope under consideration includes a world-scale steam cracker, with feedstock coming from natural gas projects in Qatar; a mono-ethylene glycol plant of up to 1.5 million tonnes per annum using Shell's proprietary OMEGA (Only MEG Advantaged) technology; 300 kilotonnes per annum of linear alpha olefins using Shell's proprietary SHOP (Shell Higher Olefin Process); and another olefin derivative.
The complex will produce cost-competitive petrochemicals products to be marketed primarily into Asian growth markets. Qatar Petroleum will have an 80% equity interest in the project and Shell 20%.
Shell has already invested about $21 billion in Qatar, the world's biggest LNG exporter. Its operations include the $19 billion Pearl gas-to-liquids plant and a 30% stake in the Qatargas 4 LNG project.
QP and Qapco recently signed a heads of agreement (HOA) with for the development of a new, mega-petrochemical complex in Ras Laffan Industrial City. The complex includes a world-scale steam cracker, with the feedstock coming from natural gas plants in Ras Laffan. The project is scheduled for completion in 2018. QP has an 80% equity interest in the project, with Qapco taking up the remaining 20% stake. QP and Qapco will jointly develop the petrochemical complex.
The plant will produce 1.4 million t/y of ethylene, 850,000 t/y of high-density polyethylene (HDPE), 430,000 t/y of linear low-density polyethylene, 760,000 of polypropylene, 83,000 t/y of butadiene. These products will be marketed primarily in high-growth markets in Asia, Africa and Latin America.
"This new project is a great example of implementing Qatar's long-term strategy. It is definitely a key milestone in our long journey to become a significant global petrochemicals producer from the GCC region," said Hamad Rashid al-Mohannadi, Chairman of Qapco.
In addition to the recently announced greenfield projects, Qapco has awarded a contract to The Shaw Group of the US to provide basic engineering services for the expansion of a 720,000 t/y ethylene plant in Mesaieed, Qatar. The project will provide the design needed in order to expand the plant's capacity by up to 25%.
"We have provided services to QAPCO at this plant for nearly 10 years. Most significantly, in 2002, we provided our proprietary technology and engineering for a successful, significant capacity expansion," says Lou Pucher, president of Shaw's Energy & Chemicals Group.
"Our long relationship and experience puts Shaw in a unique position to best serve QAPCO in this new expansion endeavor," Pucher adds.
Due to the importance of the Qatari downstream market, major international oil companies are competing to get a foothold in this ambitious sector.
Exxon is the largest investor in Qatari plants that liquefy gas for transport by ship, with partial ownership in 12 of the country's 14 LNG plants. Exxon is also an investor in the Laffan condensate refinery which was inaugurated in April 2010. Other international oil companies investing in Qatar include Total and ConocoPhillips.
Total owns stakes in four facilities that liquefy gas, and is a shareholder in Qatar Petrochemical and Qatofin Co.'s linear low-density polyethylene plant. Qatofin owns part of a new 1.3 million-tonne-a-year ethane cracker.
ConocoPhillips is involved in liquefied natural gas (LNG) and controls 30% of QatarGas 3 with a production capacity of 7.8 million t/y of LNG. Qatar is the world's largest producer of LNG producing 77 million tonnes per year.
In addition to LNG, Qatar has the world's largest Gas-to-Liquid (GTL) production facilities including Oryx, in joint venture with Exxon, with a capacity of 34,000 bpd, and the Pearl GTL in joint venture with Shell, with a production capacity of 140,000 barrel per day (bpd).
Qatar Fertliser Company (Qafco) is also increasing its investments in the fertilizer sector, and is set to be the largest fertilizer producer when it completes its expansion projects. "The completion of our fifth and sixth expansion projects will increase our ammonia production capacity by 67%, and urea by 85%," says Khalifa al-Sowaidi, managing director of Qafco.
Qafco controls 18% of the world's urea production, following the completion of its fifth facilities expansion programme, which was inaugurated in December 2011.
In addition to domestic projects, Qatar is also boosting its investments outside the State. In January, the international investment arm of QP, Qatar Petroleum International, signed an agreement with China National Petroleum Corp and Shell to implement a $10bn project in China, where Shell is looking to develop the country's huge Shale gas reserves. The project will include a 400,000 bpd refinery and 1.2 million t/y ethane cracker.
In Vietnam, QP will invest $4.5 billion in a petrochemicals complex in a joint venture (JV) with Thai-based Siam Cement Group and its Vietnamese partners, PetroVietnam (PVN) and Vinachem.
Qatar International Petroleum Marketing Company (Tasweeq), the exclusive marketer of regulated products from Qatar, has signed a long term feedstock agreement to supply the cracker with propane and naphtha.
Amid such activity, EPC firms and service providers are expected to witness a contracting bonanza in the years ahead.
"The dynamism led by the newly announced petrochemical projects in Qatar, will make it the new epicenter for EPC contractors from across the world," says Siddhath Wazir, director at Libra Techcon, a company that offers engineering services related to chemical and petrochemical companies. "We are sure that Qatar will be the next hub of petrochemical industry, after Saudi Arabia," he concludes.
Copyright 2012 ITP Business Publishing Ltd. Syndigate.info, Al bawaba.com. All Rights Reserved.
(Originally published April 4, 2012, on ArabianOilandGas.com.)