Dow signs Ras Tanura MoU and studies China coal project

21 May 2007 00:00  [Source: ICB]

DOW Chemical has moved forward with plans to build an integrated petrochemicals complex at Ras Tanura, Saudi Arabia, and a coal-to-chemicals project in Shaanxi province, China.

It has signed a detailed memorandum of understanding (MoU) with Saudi Aramco for the two companies to construct, own and operate the Ras Tanura project, which will involve 30 worldscale petrochemicals plants.

"It's going to be the world's largest petrochemicals complex... 4m tonnes of upstream products, 7m tonnes of downstream products/year, 4,000 jobs, 30 worldscale petrochemical plants at the outset," said Andrew Liveris, Dow's chairman and CEO.

Dow has also signed a ­cooperation agreement with China's Shenhua Group to ­build a joint venture (JV) ­worldscale coal-to-chemicals complex in Shaanxi. A feasibility study for the project is expected to take about two years, the companies said.

The Ras Tanura project will be based on refinery and gas feedstock, while the Shaanxi project will use clean coal technologies that convert coal to methanol to produce ethylene and propylene.

Both complexes will take advantage of abundant salt availability to extend the derivatives product slate, Liveris said in an interview with ICIS Chemical Business.

The Shaanxi complex will include a chlor-alkali unit, enabling production of caustic soda, vinyl chloride monomer (VCM) and chlorinated organics. Other planned derivatives include glycols, amines, solvents, surfactants, acrylic acid and derivatives, as well as propylene derivatives.

DESIGNS COME TOGETHER

At Ras Tanura, upstream units will produce ethylene, propylene, aromatics and chlorine and downstream output will include polyethylene (PE), ethylene oxide (EO), ethylene glycol (EG), propylene oxide (PO), propylene glycol (PG), chlor-alkali, VCM, polyurethane (PU) components, epoxy resins, polycarbonate (PC), amines and glycol ethers.

The Ras Tanura complex will be integrated with Aramco's 550,000 bbl/day Ras Tanura refinery complex and its Ju'aymah gas processing plant.

"It's very rare", said Liveris, "that the world of petrochemistry and the world of inorganic chemistry can come together in one site which has a refinery of large scope - Ras Tanura - as well as gas processing plants which can extract key natural gas liquids, as well as available salt from sea water."

The cracker will have full feedstock flexibility, he said, so it can "take what it needs from the refinery and/or crack ethane and propane and whatever butane that comes out of the natural gas processing spec".

Aramco president and CEO Abdullah Jum'ah said the project "will leverage our largest refining asset and enhance its profitability by capitalising on the value addition opportunities and synergies existing between refining and petrochemicals".

Output from the JV "will help spawn other downstream chemical conversion industries", added Jum'ah at a ceremony to mark the MoU signing.

Dow and Aramco will now enter the final negotiation phase to create a JV company.

The companies did not disclose the investment cost, which has been estimated at more than $20bn (€14.8bn).

PROJECT TIMESCALE

Aramco and Dow will start off with each holding a 50% stake in the project, ahead of an expected initial public offering (IPO) to be determined between the two partners and the Saudi government in the next few years, said Liveris. "It starts 50:50 and then we'll pare down our respective shareholdings to make room for a public offering," said Liveris.

Dow estimates that the coal-to-chemicals project with Shenhua could come on stream in 2014. This project, also a 50:50 JV, lags behind the Ras Tanura project by about two years, said Liveris. Finalisation could take about two years and then construction another five, he estimated.

The project takes advantage of cheap and abundant coal resources, providing Dow with an alternative route for the production of commodity chemicals in China, he said. The company had investigated investing in commodities in Tianjin, but "we could never get there economically... There was no advantage versus building commodity products in the Middle East and importing them into China," added Liveris.

SITE ADVANTAGES

Output from the Ras Tanura and Shaanxi projects will be tailored to suit the two locations.

The product slates will vary initially, Liveris explained, because China has nearby value-added processing facilities, while output from the Middle East will be more suited to exporting. "We're building at the export location [in Saudi Arabia]... And then we're building in the market - in the China deal," continued Liveris.

In China, Dow can select products to suit the dynamics of that market and compare input costs versus output costs in the export location, Saudi Arabia, he added.

In Shaanxi, for example, output will include: glycol ethers and surfactants used in the manufacture of specialty shampoos ethylenamines and ethanolamines used in a range of products from cosmetics to agricultural intermediates and chlorinated organics used in air conditioners.

Over time, however, Liveris predicts that there will be a merger of the value chains as the Middle East invests in value-added processing. "The two complexes we've announced over time may end up doing the same things. But they'll start at different spots."

The Ras Tanura investment is one of many projects under consideration by Dow in the Middle East. The company, which already has production in Kuwait through its Equate JV, is studying projects in Oman (see box), Libya and Qatar. Equate is also considering building capacity in Egypt (see chart for details).

See page 13 for more on coal-to-chemical investments in China.

Dow Chemical projects in the Middle East

Name	Joint venture partners	Location	On stream date
Ras Tanura Integrated Project	Dow Chemical, Saudi ­Aramco	Ras Tanura, Saudi Arabia	2013
Oman Petrochemical Industries Co (OPIC)	Dow Chemical, Oman Oil, Oman government	Sohar, Oman	2011 or beyond
-	Dow Chemical, Libya's National Oil Corp (NOC)	Ras Lanuf, Libya	-
Equate	Dow Chemical, ­Petrochemical ­Industries Co (PIC), Boubyan ­Petrochemical Co, Qurain Petrochemical Industries Co	Shuaiba, Kuwait	Already on stream ­second cracker on stream in ­mid-2008
-	Equate, Egypt's state-owned oil and petro-chemicals company	Egypt	After 2010
-	Dow Chemical , Qatar Petroleum (QP)	Qatar	-SOURCE: ICIS

OMAN PROJECT ON STREAM 2011 OR BEYOND

Dow Chemical and its joint ­venture (JV) partners in Oman are ­continuing to evaluate their proposed joint ­venture polyethylene (PE) project at the Sohar industrial port zone in Oman.

Andrew Liveris, Dow's CEO, said the US group remains committed to the project, which has been delayed because of rising engineering, procurement and construction costs.

"We still intend to do the project," he said. "The two partners are in a re-evaluation phase to either bring the cost back down or change the scope so it becomes economic."

The Oman Petrochemical Industries Co (OPIC) JV cracker and PE project was originally scheduled to start up in 2009. "It's now 2011 or beyond," said Liveris.

Dow holds a 50% stake in OPIC, while the Oman government and Oman Oil Co (OOC) each hold a 25% share.

Dow and its partners are ­tracking the PE market to ensure that the project comes on stream during a period of positive market conditions.

"What you don't want to have is this plant starting up with too high a capital burden in the middle of a downturn in PE," said Liveris.

Instead, the JV partners need to wait for capital costs to become more affordable and for the start-up to take place in an up-turn environment, he added.

Dow can use its huge in-house engineering resource capabilities to cut the cost of its projects, Liveris explained.

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