NPRA '07: Rising costs may delay projects - Qapco

26 March 2007 22:33  [Source: ICIS news]

By Abdul Hadhi

SAN ANTONIO, Texas (ICIS news)--Rising construction costs may delay some projects but that could be good for the sector, a senior official with Qatar Petrochemical Co (Qapco) said on Monday.

Still on higher costs, Hamad Rashid Al-Mohannadi , Qapco’s vice chairman and general manager, said it would slowly move away from using ethane as the sole feedstock as supply gets tighter.

“Construction costs have risen about 25% from two years ago,” he said in an interview on the sidelines of the NPRA’s 32nd International Petrochemical Conference.

“If the trend of higher costs continues, some projects, especially the big ones, will be delayed. But that may be good as it may delay the new capacity coming from 2008 and slow the expected downturn,” Al-Mohannadi said.

The Qatar-based firm itself was in the midst of expanding capacity.

Qapco was involved in expanding a 525,000 tonne/year cracker, building a new 250,000 tonne/year low density polyethylene (LDPE) unit and a 450,000 tonne/year linear low density PE (LLDPE) plant at Mesaieed. It was also building a 1.3m tonne/year ethane cracker in Ras Laffan.

Qapco, which has battled rising feedstock costs and maintained its profit margins over the last four years, expected another two profitable years. The project delays, if they occur, may add a “few more good years,” Al-Mohannadi said.

A shortage of ethane was also pushing Qapco away from its current total dependence on that feedstock.

“The cracker has to rely on a mixed feed. From 100% ethane currently, some projects will first use 70% ethane and 30% propane before moving to a 50:50 after 2010,” he said.

Faced with rising costs and greater competition in traditional markets, Qapco was exploring alternative sources of revenue.

Its sister company, QP International, formed in January and helmed by Nassir Jaida, has been tasked with exploring overseas investments for that purpose.

Qapco may participate in QP’s investments if they offered potential for integration, Al-Mohannadi said.

“We are keen on integration upstream and downstream, into oil and gas, and LNG terminals,” he said

QP International was still evaluating an invitation to bid for Turkish petrochemicals producer Petkim Petrokimya Holding.

“That is still in consideration. We should make a decision within two weeks,” Al-Mohannadi said.

State-run Petkim earlier this month invited companies to bid for a majority stake to revive its privatisation. Turkey’s privatisation board has set 15 June as the deadline.

Petkim makes a range of polyolefins, aromatics, chlor-alkali, purified terephthalic acid (PTA) and phthalic anhydride (PA) at its plants in Aliaga and Yarimka.

By: Abdul Hadhi
+65 6780 4359

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