03 December 2007 00:00 [Source: ICB]
As the Middle East petrochemical sector matures, producers are focusing more on safety, health and environmental issues and manpower, with the GPCA acting as a regional forum
John Baker/Dubai/Abu Dhabi
ANY MENTION of the Middle East and petrochemicals in a single breath inevitably conjures up images of massive production units and even more massive projects. There can be no doubt that from Egypt to Iran, and across most of the Gulf states, the industry is experiencing a renewed wave of investment.
Many plants are scheduled to come onstream between now and 2011. And these are no longer just the traditional ethylene cracker plus polyolefins and/or ethylene glycol (EG) complexes. There is a diversification of product slates under way, with many aromatics projects appearing and several major integrated refinery and downstream complexes planned, such as Saudi Aramco's joint ventures (JVs) with Sumitomo Chemical and Dow Chemical, at Rabigh and Ras Tanura.
The project scope for the latter includes no less than 28 products, including worldscale production units for polyethylene (PE), ethylene oxide (EO) and EG, propylene oxide (PO) and glycol, chlor-alkali, vinyl chloride monomer (VCM), polyurethane (PU) components, epoxy resins, polycarbonate (PC), amines and glycol ethers.
In aromatics, benzene capacity in the Middle East is expected to grow by 2.3m tonnes/year between 2007 and 2010, estimates UK consultancy Nexant ChemSystems. Paraxylene (PX) production is expected to grow by 2.6m tonnes/year over the same period, due to large projects in Iran, Kuwait and Oman. Much of the benzene will be used locally in additional styrene production, but PX exports will grow significantly.
But the scale and speed of the investment brings with it its own problems and issues, such as the tightness of feedstock availability and the shift from ethane to liquids and naphtha the shortage of skilled manpower - both to build the plants and to operate them the cost of construction and shortage of engineering contractor capacity.
Other issues are more recent, notably the turmoil in the financial markets and the fact that banks have become reluctant to extend credit until they have restored confidence in the system. There is also a growing interest in harmonizing safety, health and environmental (SHE) issues across the region.
Operators in the region generally have a good record on SHE performance, driven largely through self-regulation by the state oil companies but also by the high standards of local operators and their Western partners. But even if there is little public pressure or activism against the chemical industry in the Middle East, in contrast to Europe, the US and increasingly in Asia, there is a still a move to do better.
The recently formed Gulf Petrochemicals and Chemicals Association (GPCA) has set SHE as one of its priorities and has already confirmed an intent to join the industry's Responsible Care program. It sent an observer from the Abu Dhabi-based JV between ADNOC and Borealis, Borouge, to October's meeting of the International Council of Chemical Association's Responsible Care Leadership Group (RCLG) in Paris, France, and is preparing for official observer status prior to full membership, within two to three years.
With Russia joining the RCLG and Responsible Care at the same meeting, the Middle East and China are the only major regions missing from global coverage of the Responsible Care movement. Middle East membership has not been possible before, as the ICCA requires an independent national or regional trade association to represent producers on the RCLG. The GPCA now meets that requirement.
To progress the Responsible Care initiative and other environmental matters, GPCA moved quickly to establish a subcommittee on SHE, now under the chairmanship of Abdul Aziz al-Hajri, the new CEO of Borouge. Borouge has already taken a lead itself in Responsible Care by signing up to the ICCA Global Charter, the first company in the Middle East to do so.
Al-Hajri comments that a longer-term goal is to seek to harmonize environmental regulations across the Gulf Cooperation Council (GCC) countries. Gaurav Paul, on the GPCA executive, adds that next year, the association will start working with the GCC standards organization in Riyadh, Saudi Arabia. Meanwhile, "we will liaise with the ICCA and get to know Responsible Care better," he says.
Human resources issues are also high on the agenda at GPCA. Again, a subcommittee has been put in place quickly to address human resources development across the region. "With so many facilities coming onstream, human resources are a real challenge," he says.
Al-Hajri agrees manpower issues will become a real challenge for everyone. Even with the Borouge 2 expansion several years away from completion, the firm has established a people strategy to ensure it can attract the necessary personnel. He argues that the environment has to be right, with potential recruits not just sizing up the rewards package, but looking at the values of the company and the way it operates.
"We have been successful so far," he says. "Our main asset is our profile We are proud of being a young company." He is convinced that companies' attitudes to the environment are also an influencing factor in attracting the right staff.
"Image is very important [when] living in a global environment. Borouge is a responsible company and we live up to our values. We ensure that when we recruit we differentiate ourselves." He points to the use of energy-efficient technologies, and the ongoing improvements in environmental performance as positive factors.
On the issue of feedstock tightness, several people argue that current constraints may well prove to be temporary and will lead at most to a slowing of investment rather than its demise.
Speaking recently at an Arab-US policy bmakers' conference, Mike Dolan, head of ExxonMobil Chemical, argued that the world's drive to consume more energy will stimulate greater oil and gas production, and that growth in chemical demand will present major opportunities for the Middle East to upgrade these natural resources into higher-margin products.
"The Middle East enjoys an enviable and unparalleled advantaged energy and feedstock position, and the revenue from oil and gas production supports further investment and development," he explained. In short, "ExxonMobil remains highly optimistic about prospects in the region."
Dolan noted that global energy demand is expected to grow by 30% over today's levels by 2030, and that chemical demand is growing on average by about 5-6%/year, "or about triple the expected growth rate for all forms of energy." But, he added, "there are ample resources to meet growing oil demand well into the future."
Abdullah al-Hagbani, secretary-general of the GPCA, agrees that current feedstock tightness is largely a result of a lack of investment in recent years and that there is plenty of potential for more feedstock. In any event, he views the move over the years from ethane feed to mixed ethane/propane feeds and now increasingly liquid feeds and refinery naphtha, as positive.
The move, he argues, is leading to new products in the region, notably aromatics, which is opening up new investments in places such as Kuwait, Saudi Arabia, Qatar and the United Arab Emirates. "This will change the profile of chemical players, who will no longer rely on a single stream." Thus if prices suffer in one area, another will help ride out the cycle.
On the aromatics investment, he believes Middle East producers will want to add value and move down the chain, as far as, say, purified terephthalic acid (PTA). But he does not see any great move as far as polyester fiber production in the region as the processes are labor and water-intensive and the region is not close to the main markets.
PETRO RABIGH PRODUCTION SLATE
A high olefins-yield fluid catalytic cracker complex integrated with a worldscale, ethane-based cracker yields:
Ethylene 1.3m tonnes/year
Propylene 900,000 tonnes/year
Gasoline 60,000 bbl/day
Downstream petrochemical units:
Easy processing PE 250,000 tonnes/year
LLDPE 350,000 tonnes/year
HDPE 300,000 tonnes/year
PP Two x 350,000 tonnes/year
SOURCE: SUMITOMO CHEMICAL
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